Unilever named most successful brand among FT500

Revamping investment opportunities in Free Trade Zones

As Nigeria continues to remain a top investment destination for companies looking for placement in the continent’s fast-growing emerging markets, exploiting inherent potential in the various Free Trade Zones in the country will not only facilitate inflow of Foreign Direct Investments (FDIs) but also will boost technology transfer, writes Alexander Chiejina



In recent times, economic and investment opportunities in Nigeria have become a destination of choice for most of Africa ’s key markets. With Nigeria still a top investment destination for companies and venture capitals looking for placement in the continent’s fast-growing and emerging markets, the country also hosts a host of non-oil  industries, driven by expanding consumer markets and rising demand for new goods and services.

While some of the world largest multinationals keep expanding existing operations and many more global companies seeking acquisitions, investments and corporate stake in the nation’s economy, the need to exploit export potentials informed the decision of the Federal Government (FG) to embark on the establishment of free trade zones across the country.

Free Trade Zones (FTZs), according to industry analysts, are special industrial and commercial zones set up by governments to facilitate inflow of Foreign Direct Investment (FDIs) and encourage the manufacturing of goods for export, boost technology transfer and create jobs. 19 years after the establishment of FTZs in the country, much is yet to be desired as recent reports appear the objectives of the initiatives have not delivered many gains.

It is pertinent to say that the FTZ scheme intends to encourage industrial production, offshore banking, international stock, commodities and mercantile exchanges, agriculture and agro-allied industry, international tourist resort development and operations, sadly, only 12 out of the 28 FTZs licensed by the Federal Government are operational.

Even as economies such as United Arab Emirates (UAE), China, South Korea and most other Asian Tiger Economy are made today through the advantage of free trade zones, analysts are of the opinion that pragmatic steps must be put in place to ensure these Free Trade Zones not only create jobs and wealth, but also attain their potentials.

In an interview with newsmen, Mark Iloh, Registrar International Logistics and Administration, revealed that Nigeria is secure for FDI notwithstanding recent bombings in some parts of the country. While noting that investments made by business firms are governed by the desire to maximise profit in the long-run, major factors determining foreign investments destinations are size of the market, incentives and operating conditions.

“Some studies found Gross Domestic Product (GDP) growth rate to be a significant explanatory variable for sub-Saharan Africa as a whole. GDP is a major factor. Only three countries in the sub-Saharan African low-income countries are among the nine main recipients of FDI flow in recent years, and Nigeria is close to being classified as a large market according to United Nations Conference on Trade and Development  (UNCTAD)  benchmark of $36 billion GNP (Gross National Product), indicating that small market size needs not be a constraint in the case of resource endowed, export-oriented economies,” iloh stated.

Aerial view of Tinapa Business Resort, Calabar, Cross River State

Iloh added that “open door policy and enhanced incentives for investors in a special economic zone contributes to the initial influx of FDI in a particular country, but lack of transparency in investment approval procedures and extensive bureaucratic system are still deterring foreign investors. When these bottlenecks are addressed, investments will flourish in the country”.

Adesina Agboluaje, Managing Director, Nigerian Export Processing Zone Authority (NEPZA), says the slow level of work at some free trade zones is due to political reasons.

Making this assertion during recent visit by Olusegun Aganga, Minister for Trade and Investment to calabar to establish Export Free Zones Desk offices, Agboluaje noted that programmes of most state Governors as one of the setbacks in the development of free trade zones across the country.

“When an incumbent government starts a free zone and the next government may not want to go into that immediately even though he knows it is important. That also is a political reason why some of these zones are not fast developing,” he said.

He maintained the gestation period of a free zone takes long time which needs continuity, adding that unlike federal government owned zones which are provided for in the budgets, private zones undergoes a lot of processes before it comes on stream.

For Adeyemo Thompson, deputy managing director, Lekki Free Trade Zone, the delay in the take-off of the free trade zone was caused by problems of logistics. Thompson stated that absence of infrastructure at the site, which has been a major challenge, was already being addressed, with 70 companies already indicating interest to invest.

The deputy managing director stated that companies which have shown interests in the zone are into agro-processing, clothing and textiles, food and beverages, forestry, mining, pharmaceuticals, housing and tourism.

“Although the project is currently not ready for use as a result of inadequate infrastructure, there are indications that some industries from China may begin operation here soon,” Thompson stated.

While observing that the first phase of the project would cost about 1.5 billion dollars while the entire project would gulp over five billion dollars, he revealed that the first phase of the project, covering 350 hectares, would have its own independent power plant even as Oando Nigeria Plc plans to build a refinery with capacity to refine 360,000 barrels of crude oil daily in the zone.

Minister of Trade and Investment, Dr Olusegun Aganga,

 
While the Minister of Trade and Investment Olusegun Aganga, came out recently to announce government plan to carry out a comprehensive review and restructuring of the operation of FTZs by setting up Export Free Zones desk offices to remove the bureaucratic bottleneck that impedes easy access for foreign investors in the country, one of the major challenges facing the nation’s FTzs is the non- appreciation of products churned out of these economic zones by Nigerians.

Sadly, some Nigerians still feel that items produced in Nigeria are inferior to the ones imported into the country even as it seems easier to export their goods outside the shores of the country rather than selling them in-country.

Interestingly, according to the Nigeria Free Zone Act No. 63 of 1992, investors at the nation’s FTZs are to enjoy incentives such as tax holiday relief, unrestricted repatriation of foreign capital investments along with capital appreciation of such investments, non-compulsory import or export licences, rent-free land during construction of factory premises, up to 100 per cent foreign ownership of enterprises in Export Processing Zones (EPZs), no quotas on products to the European Economic Community and the United States of America, abundant supply of skilled labour at very competitive rates, etc.

With free trade zones which leads to industrialization and export diversification, as many of the export processing zones engage in labor intensive manufacturing, and create jobs which have the potentials of mitigating unemployment in developing countries.

For example, free trade zones established in countries like South Korea , Taiwan , Hong Kong and Singapore have created plenty of jobs and economic growth that helped lift millions of people up from the poverty line. Likewise, free trade zones in Central America and the Caribbean helped to shift away from traditional exports to diverse manufactured products.

In recognition of this fact, the World Bank urged the various countries across the globe to embrace the Free Trade Zone scheme and take advantage of its benefits to address the problems of poverty, unemployment, technology transfer, etc.

With the government’s agenda to optimize the sources of economic growth that will bring about increase productivity and competitiveness, operational review of the FTZs will go a long way in contributing significantly towards the nation’s economic growth and development as well as facilitate inflow of FDI in -country. Everything should be done to ensure that these economic zones take off properly in order to grow the real sector of the economy.

It is noteworthy to state that Ras Al Khaimah Free Trade Zone (RAK FTZ) is one of the fastest-growing and most cost-effective free trade zones in the United Arab Emirates (UAE). With a reputation for affordability, flexibility and broad geographical reach, RAK FTZ is rapidly emerging as the preferred business hub in the region, from which investors can easily access and branch into the emerging markets.

Since its establishment in 2000, with only a handful of staff and a few offices, the free zone has grown by leaps and bounds and is now home to some 5,000+ active companies from 106 countries around the globe, employs more than 350 fulltime staff, operates business and promotion centres in four locations in the UAE and has an expanding international presence, with liaison offices in Germany, Turkey, India and the USA.