Free Trade Zone

Free Trade Zone (FTZ) is a special designated area within a country where normal trade barriers like quotas, tariffs are removed and the bureaucratic necessities are narrowed in order to attract new business and foreign investments.

The Free Trade Zone can be defined as a labor-intensive manufacturing hub, which involves the import of components and raw materials, and the produced goods are exported to different countries.

The Free trade zones are located in the developing countries. Outsourcing the zone to the FTZ operator minimizes the bureaucracy and the businesses established in that zone may be given tax benefits. One of the main purposes of the free trade zones is to develop the economy of that location by providing more job opportunities, business options, manufacturing options, etc.

These zones are mostly used by transnational corporations for establishing factories for the manufacturing of several goods. The goods depend on the availability of the raw material, skilled labor, and well-equipped technical staff. Some of the oldest Free Trade Zones in the world are found in South America. Free trade regulations were endorsed in Uruguay and Argentina, as early as 1920. During the 60s and the 70s there was a rapid surge in the development of FTZs across the world.

There were around 3000 free trade zones across 116 countries in the year 1999, where nearly 43 million people were working. These FTZs produce various goods such as shoes, clothes, sneakers, toys, convenient foods items, electronic goods, etc. The other important purposes of such trade zones are the development of export-oriented units, increase in the foreign exchange earnings, and generation of employment opportunities.