Free zones are a proven development tool

Wednesday April 21 2021
By Guest Writer

At a time when the global economy is facing a confluence of threats such as the unprecedented Covid-19 pandemic, an escalation of trade disputes, an abrupt tightening of global financial conditions and intensifying climate risks, the global policy climate for trade and investment has not been as kind as it was in the heydays of export-led growth and development. 

Yet the need to attract investment, support industrialisation and promote exports, economic diversification and structural transformation is as great as ever for developing countries, including Uganda.

It is in this context that several countries have adopted free zones as an industrial policy and a response to this increasing competition for internationally mobile investment and offered attractive fiscal and non-fiscal incentives and infrastructure within those geographically delineated areas to win the investment.  

Free Zones offer fiscal incentives, relief from some customs duties and tariffs; business-friendly regulations with respect to land access, permits and licences or employment rules; and administrative streamlining and facilitation. Free Zones offer both static and dynamic benefits. 

Uganda has provided both fiscal and non-fiscal incentives to the developers and operators of free zones to aid export-oriented manufacturing and trade. The incentives include:

 i) Exemption from taxes and duties on all export processing zone imported inputs that are for the exclusive use in the development and production output of the business enterprise (raw materials, plant and machinery, spare parts and intermediate goods);


 ii) Exemption from all taxes, levies and rates on exports from the free zones; and iii) 10 year exemption for a developer with leasing facilities in a free zone with capital of at least $50 million for a foreigner and 10 million for a citizen; iv) 10 year income tax exemption for free zone operators investments whose capital is $300,000 for a citizen investing elsewhere and $ 150,000 for a citizen investing upcountry and v) Withholding tax exemption on supply and importation of plan and machinery, among other incentives.

In addition, developers and operators of free zones enjoy: i) Access to physical amenities within the Free Zone; ii) Business facilitation and dedicated aftercare services in acquisition of secondary licences from other government agencies; iii) Logistical flexibility as goods may be transferred from the port of entry directly to the Free Zone for onsite custom clearance and iv) Centralised Customs inspection of buildings, premises, vehicles, vessels entering and leaving the Free Zone.

b.Physical design, development, and management practices: well sited Zones that are stocked with onsite and offsite infrastructure connectivity and competitive policies, especially in Public Free Zones are more competitive globally.

Uganda Free Zones Authority (UFZA)  is constructing a public free zone adjacent to Entebbe International Airport New Cargo Terminal. The free zone will create about 240 direct jobs and over 1,000 indirect jobs upon completion. The target sectors include: food processing (fish, beef and dairy); horticulture (flowers, fruits and vegetables); Mineral processing and logistics (cold storage, warehousing, food irradiation facilities and transhipment). Relatedly, UFZA also acquired 109 acres of land in Entebbe and 54 acres in Kabaale Industrial Park in Hoima for establishment of Free Zones. They will be serviced with industrial infrastructure and utility services to attract investment in export-oriented manufacturing.  

Having adopted the Free Zones scheme only six  years ago, the country has had the opportunity to learn from other well established Zones to ensure Uganda’s scheme is on the right track from inception. 

Ms Doreen Kembabazi  is  a public relations executive at Uganda Free Zones Authority.