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EXPOUNDING THE DEFINITION OF FREE TRADE ZONE.



Calabar Free Zone in Calabar, Nigeria

Before we start delving into other areas of important facts on Free Trade Zone, like linking the Free Trade Zones/ Special Economic Zones to local industries, and critical analysis of the ecosystem of the scheme, Let us further expound the definition of Free Zone for the benefit of other significant publics that may not be well knowledgeable about the scheme but have part to play in the development and growth of the scheme in Africa.

FREE ZONES have existed for several centuries. They were established to encourage centre pot trade, mostly in the form of city wide zones located on international trade routes. Examples cited by experts include: Gibraltar (1704), Singapore (1819), Hong Kong (1848), Hamburg (1888), and Copenhagen (1891).

The World Bank publication on Special Economic Zones (2008) stated that the modern Free Zones are variants of these traditional, commercial zones. The principles underlying the basic concept of a Free Zone include:

·         Geographically delimited area, usually physically secured

·         Single management/administration

·         Eligibility for benefits based upon physical location within the Zone

·         Separate customs area (duty-free benefits) and streamlined procedures.


The fundamental concept of a Zone is that it is an alternative policy framework, developed by government, to promote policy objectives of government. Sometimes this involves a specific geographical region, often involves specific industry such as banking or insurance, or companies with some common behavior such as export orientated, high technology content.

Free Trade Zones are generally established within a country, although there are few examples of cross border zones, where free trade areas are established between countries.

The Free Zones of today are quite different from the Free Zones of the past. Although they serve a largely similar purpose, they have grown increasingly complex and are thus involved with an increasing volume and variety of economic transactions. Contrary to the view of the Trade Bureaucrats and Liberal Trade economists, the liberalization of trade has not eliminated the need for Free Zones, but rather expanded their roles. As globalization takes place the formation of Free Zones continues at an increasing rate (Robert Haywood, 2000). It encourages export manufacturing.

As was stated in our first post and for matter of emphasis, Free Zones are defined as “outside the customs territory” for the purposes of the assessment of import duties and taxes. Free Zones typically allow for duty-and tax-free imports of raw and intermediate materials and, in many cases capital equipment. This is to lower the cost of production so as to enable the product compete favourably at the international market.