World Free Zones Organization chairman sees strength in certainty

Q: The global investment environment is challenging at the moment with political uncertainties in many key markets. How is this affecting free zones? And how should they respond? 

A: We agree these uncertainties are a challenge for free zones but free zones can convert these challenges into opportunity. In fact, free zones can become more attractive in these environments, and contribute to the move from uncertainty to certainty. 

While free zones cannot stay completely insulated from such uncertainties, they are less insecure and [these uncertainties] are likely to impact free zones less severely given that free zones are often special enclaves and generally enjoy governments’ policy support and fiscal support.

Moreover, free zones have the ability to convert these challenges into opportunities. In fact, by attracting investments, free zones’ impact on economic development is significant and thereby contributes to moving from uncertainty to certainty. 

Q: What other major global trends do you see impacting free zones currently?

A: Technology will certainly top the list of growth areas of the future. It is technological innovation and technology adoption that will drive future growth of most kinds of businesses. Through innovation, ways of doing business are changing rapidly and becoming more transparent. The border between the free zone and the host economy is changing; technology is removing it.

So, for governments, it would make sense to establish free zones that promote tech-intensive activities that will benefit the largest number of people. This requires thinking beyond incentives. 

The other major trend impacting free zones is in the area of clean energy. Clean energy clusters can play a significant role to ensure energy security and stability and at the same time reduce the adverse effects of climate change, especially in tropical regions that are more vulnerable to the consequences of global warming.

Governments would do well to establish free zones and clusters that research ways and means to address the climate issue from a long-term perspective. Green Zone certifications that we offer through our Free Zones of the Future programme help encourage and support these efforts. 

Q: Free zones are at many different stages of development. What can emerging zones learn from their more developed peers?

A: Free zones are a part of the global value chain and are susceptible to changes in the global growth pattern. Because change is the only constant, emerging free zones have to be on a constant quest to innovate, stay relevant and strategically shift gears to meet future needs. This comes through networking and the transfer of knowledge between zones at differing levels of development.

Technology adoption is surely one that the emerging free zones can learn from the well-developed zones. Energy efficiency is becoming increasingly critical. For developed zones it is a case of ‘learn from me but don’t copy me’. You have to tailor what you learn to suit your unique needs. 

Sustainability is another paradigm. Apart from traditional financial incentives, emerging free zones need to learn and adapt to fewer forms of incentives to attract as well as retain incentives.