Free Zone Focus: the evolution of free zones

Recent studies have indicated that free-trade zones are the best-known mechanisms to reduce costs in processes, customs formalities and logistics in international trade, since they are flexible and have the ability to stay current with the latest technologies. Right now, free zones all over the world are evolving to improve their processes on three different fronts.

First, through the use of blockchain technology and Industry 4.0, free zones are adopting digital supply chains that can reduce up to 50% of their manufacturing costs, up to 20% of procurement processes costs, and increase their revenues by at least 10%.

The World Trade Organisation claims that digital technologies will help increase global trade growth by one-third in the next 15 years, making global value chains quicker, less costly and more productive. In this environment, free-trade zones are the perfect locations to boost the benefits of digital supply chains by adding tax exemptions on equipment and stock and eliminating unnecessary formalities.

Second, free zones will be key to promoting the circular economy and transforming industrial, logistics and services parks into zero-environmental-impact zones, by generating their own sustainable energy, reducing waste to the minimum, owning wastewater and residue treatment plants within free zones, and installing LED electricity.

Third, the World Free Zones Organization (WFZO) is collaborating actively with the OECD through the Safe Free Zones Programme to verify that free zones from all over the world meet the standards to guarantee product traceability, fight illicit trade practices and protect intellectual property rights for goods and services.

This ambitious security programme was released at the 5th WFZO Annual International Conference & Exhibition that took place in Barcelona, in an open dialogue with the OECD’s highest level officials.

Three first pilots of the Safe Free Zones Programme (developed at the Dubai, Bogotá and Luxembourg free zones) were presented at the conference. The results were a clear observation of product traceability and positive records of user companies and their employees.

The new global economy, powered by global technologies such as blockchain and automation, requires an ethical approach to globalisation, where transparency is a fundamental component.  

Martín Ibarra Pardo is vice-chairman of the World Free Zones Organization and chairman of Araujo Ibarra & Asociados, a law firm based in Bogotá, Colombia.