The success of freeports in growing local manufacturing and economies is exemplified by countries like Malaysia and Singapore. This success can be replicated in west Africa under the right conditions.

Creating a special regulatory regime in a physically or legally bounded economic space is intended to attract foreign direct investment into a country or encourage local businesses to operate in those designated areas.

The purpose is to manufacture goods using imports, add value, and re-export the finished product without paying the full tariff on the original import, whether it be raw material or semi-finished goods.

Research has shown a strong correlation between establishing freeports and strong export performance. According to the World Bank, exports from special economic zones accounted for 17% of Bangladesh exports in 2013, 44% in China (2012), 11% in South Korea (2007), 49% in the Philippines (2011) and 67% in Sri Lanka (2007). This is the result of export oriented policies. Other countries have experienced mixed results. The UK revoked the policy in 2012 but is having a go at it again.

Countries may set them up to boost employment, attract foreign direct investment or as part of an economy-wide reform experiment, like the gateway project in Ghana. Data on FDI inflows and annual exports is available for countries, but obtaining data specifically for FDI inflows and exports within the free zones themselves is more challenging. Even more challenging is to get data on employment creation, foreign exchange through exports, economic value added and technology transfer. In 2022, Senegal, Ivory Coast and Ghana were the top recipients of FDI in west Africa. Nigeria, usually a leader, experienced negative figures due to restrictions on repatriating dollars as a government policy. But these trends cannot solely be attributed to free zones. Similar challenges exist when analysing export figures. Several World Bank reports allude to the data challenges and the poor performance of African freezones compared to Asia, eastern Europe and to a lesser extent Latin America due to implementation challenges.

Jonas Aryee

Unfortunately emerging research at firm level is country based and does not compare countries.

The reasons for how long a firm stays can vary. They include factors such as the length of tax holidays, employment incentives, preferential corporate tax rates, building allowances, issues related to the repatriation of profits, and assessments of the business environment amongst others.

Some companies may also be taking advantage of trade agreements offered by foreign countries, such as the Africa Growth and Opportunity Act of the US or the European Union’s Economic Partnership Agreements, and their decisions may depend on the duration of these partnerships.

Ultimately, the performance of the free trade zone should have an impact on the larger economy at some point during its existence. 

The concept of a freeport – an area where normal tax and customs rules don’t apply – has existed for centuries.

Jonas Aryee, Lecturer in Management and Maritime Business,
University of Plymouth