How free zones can unlock new benefits in the post-Covid trade economy

How free zones can unlock new benefits in the post-Covid trade economy

DP World Group Chairman and CEO shares his view on how free zones can be the step-up countries need, from emerging markets to more established economies, to stay resilient and drive growth in the post-COVID trade economy.

The combined pressures of the coronavirus pandemic and geopolitical trade tensions are holding up a mirror to the resilience of global supply chains. Staring back is a vulnerable economic picture. GDPs are suffering sharp declines. Globalisation is reeling. The clothing, textile, and automotive sectors are feeling the heat.

In the wake of the pandemic, countries around the world have begun closing ranks with new trading partners that are closer to home, as demonstrated by the Regional Comprehensive Partnership (RCEP) talks and the Comprehensive Progress Agreement for Trans-Pacific Partnership.

As the economic picture toughens and trade flows re-centre themselves, it’s essential that countries are setting themselves up for success in the new global trade economy. Free zones could be part of the answer.

Unlocking new growth

Free zones can be the step-up countries need, from emerging markets to more established independent economies. They boost trade, jobs, and investment, and have the potential to enhance the attractiveness of a country to inward capital and prospective trading partners.

We know this from the successes we have seen at the Jebel Ali Free Zone in Dubai, which allows 100% foreign ownership, 0% import or re-export duties, 0% personal income tax, no currency restrictions, no restriction on foreign talent, and no restriction on capital repatriation. This has helped the city rely less on its natural resources and become the largest industrial zone in the region, facilitating trade worth more than $93 billion annually, and benefitting more than 560 companies from 70 countries.

Similarly, in the Dominican Republic, our DP World Caucedo marine terminal and free zone has enabled the country to emerge as a strong competitor in international markets, helping to serve as a roadmap for its neighbours and the region.

Port-centric, but not port-only supply chains

Free zones are considerably under-valued when they are thought of as just add-on features to a port or terminal. Covid has confirmed to us that ports can no longer rest on the laurels of their location; they must do more than merely handle and move cargo.

Instead, companies are seeking shorter supply chains and diversified routes, which sophisticated economic and logistics zones surrounding a port or terminal make possible. They optimize how cargo is moved through intermodal connectivity, hinterland networks, robust inland storage facilities, and provide ready access to international shipping, manufacturing capability, and domestic urban zones.

In other words, free zones are opportunities for companies looking to move and store their eggs into smarter, more resilient baskets that go beyond the port itself.

At a glance: Free zones in the UK

The potential power of free zones is particularly strong in ‘shovel ready’ markets, where our existing sites are primed for expansion into even more sophisticated economic and logistics zones, like our London Gateway terminal on the River Thames estuary. Over the next 10 years we have earmarked around £1 billion for investment into the site.

The UK cannot aim for the protectionist ambitions of the U.S. and others, because unlike its peers, the UK’s trade muscles have been flexed via the EU’s negotiators for the past 40 years. Rather, the economic boost that free zones could bring to the country will be critical if it is to come close to keeping pace with countries more experienced at competing independently on global trade.

Regardless of whether you view the UK’s previous trade bloc membership as a help or hindrance, the country now has an opportunity to position itself as a key player in the post-Covid trade economy. The need for focused, sophisticated, and business-friendly trade zones has never been greater, as companies look for new ways of getting closer to their customers, optimizing their trade flows, attracting inward investments, and diversifying into new trade markets.

Navigating the new trade economy

Free zones are not a universal remedy, but a critical component in how countries can diversify their trade flows and opportunities for inbound investment.

We’re already focused on how we can partner with governments to maximise the strategic benefits of the logistics parks and terminals we’ve already established on their shores to so that they continue to keep trade flowing during the pandemic and beyond.