Pgbarranca's Blog

May 26, 2010

Free Trade Zones (FTZ)

Filed under: Uncategorized — by pgbarranca @ 10:05 pm

Definition

A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country where some normal trade barriers such as tariffs and quotas are eliminated and bureaucratic requirements are lowered in hopes of attracting new business and foreign investments. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Free trade zones can be defined as labor intensive manufacturing centers that involve the import of raw materials or components and the export of factory products.

Most FTZs are located in developing countries: Brazil, Indonesia, El Salvador , China, the Philippines, Malaysia, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, and Madagascar have EPZ programs. In 1997, 93 countries had set up export processing zones (EPZs) employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people.

Corporations setting up in a zone may be given tax breaks as an incentive. Usually, these zones are set up in underdeveloped parts of the host country; the rationale is that the zones will attract employers and thus reduce poverty and unemployment, and stimulate the area’s economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing or shoes).

I found a video about Lekki FTZ (Nigeria)

FTZ sources

Purpose of International Free Trade Zones

The main idea behind creation of free trade zones is to facilitate cross-border trade by removing obstacles imposed by customs regulations. Free trade zones ensure faster turnaround of planes and ships by lowering custom related formalities. FTZs prove to be beneficial both for the importers and exporters, as these zones are designed to reduce labor cost and tax related expenditures. Free trade zones help the traders to utilize the available business opportunities in the best possible way. FTZs promote export-oriented industries. These zones also help to increase foreign exchange earnings. Employment opportunities created by free trade zones help to reduce unemployment problem in the less developed economies.

Source

Advertisements

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Create a free website or blog at WordPress.com.

%d bloggers like this: