Types of Free Zones

Types of Free Zones

Source: adapted from World Bank (2008) Special Economic Zones: Performance, Lessons Learned, and Implications for Zone Development, Washington, DC: The World Bank.

There are four major types of free zones:

  • Free ports are considered to be the broader term of a free zone as they include a rather large area and can cover a wide range of activities and incentives to promote economic development and trade. They can include several free zones or be constituted of a single one.
  • Free trade zones (FTZ) are considered to be enclosed duty-free areas for the purpose of providing warehousing and distribution facilities supporting trade, particularly re-exports. They are commonly near a point of entry, such as a port, an airport or a land border. The focus is on commerce, such a finished and semi-finished goods.
  • Export processing zones (EPZ) are offering incentives for manufacturing and related activities with a particular focus on exports, although several such zones allow non-exporting activities.
  • Special economic zones (SEZ) are a free port paradigm that has been particularly applied to the Chinese context as a tool to promote foreign direct investments in well-defined areas. The main purpose is to import parts and raw materials and process them into goods to be exported to international markets.