Free Trade Zones in Asia

Free Trade Zones (FTZs) are a critical part of the commercial landscape in Asia. Each market has customs, financial regulations and restrictions that present obstacles in cross-border trade. To mitigate the negative effects of such restrictions, FTZs are created to encourage trade for favoured industries and generally bolster the market’s exports. The primary impact is on the underlying business, but in many cases FTZs are used to ease financial restrictions. FTZs are sometimes used as a test bed for regulatory liberalisation that may be rolled out nationwide after the regulators consider the pilot launch within the FTZ to be successful.

For the sake of clarity, it is worth differentiating the various types of FTZs. The World Bank defines free trade zones as "duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipment, and re-export operations." This is a narrow definition corresponding to a duty free zone akin to a bonded warehouse to facilitate exports; and input materials can be imported duty free for manufacture of exports.

Building on this basic duty-free status, many FTZs add ‘facilitation for manufacturing’ (such as easier capital rules and reduced income and other tax rates). The next step is the relaxation of financial regulations to facilitate such activities – this can take the form of relaxed capital controls, reduced or eliminated withholding taxes, etc. These benefits are attractive to treasurers. In FTZs where such wider benefits are provided, the zones are sometimes called special economic zones.

There are different levels of FTZs that have evolved, along with related incentives that governments can offer – normally to encourage export-oriented and favoured industries. These levels of FTZ can range from a simple bonded warehouse arrangement to special economic zones.


Bonded warehouse This can be a zone or a designated building or even a designated area within a building or zone. The basic idea is that goods can enter and leave the facility without entering or leaving the country from a customs perspective. Thus, the goods remain offshore and no duties nor taxes are paid on these goods. From a customs perspective, the bonded warehouse is foreign soil. The goods remain offshore. If they are brought onshore, duties and taxes normally apply. This corresponds to the World Bank’s definition cited above.
Free ports These are whole ports or port areas that are treated as bonded warehouses for customs purposes.
Free trade zones In addition to the above, these zones encourage manufacturing and processing of goods, not just logistics. These activities in turn generate more jobs, which is generally good for the country. Manufacturing and processing within such FTZs are generally exempt from duties and taxes and businesses often enjoy reduced or zero income tax, an easier company set up, and easier employment procedures.

An example of this type of FTZ is Shenzhen, China in the 1980s.

Special economic zones The above generally concerns the production and processing of physical goods. More recently, some markets have turned their attention to the services industries, and broader economic activities beyond manufacturing and exports. These markets set up special zones where regulations and taxes are lightened or eliminated to encourage local and foreign entities to develop wider businesses activities.

Examples of this type of FTZ include the Shanghai FTZ in China and Labuan in Malaysia.


This article will focus on the FTZs in Asia that offer benefits that are of interest to treasurers. In many markets, the basic duty-free status is available in bonded warehouse facilities nationwide, without the need for a FTZ.

The countries covered in this article include:

  • Australia
  • China
  • Dubai
  • Hong Kong
  • India
  • Indonesia
  • Japan
  • Korea
  • Malaysia
  • New Zealand
  • Philippines
  • Singapore
  • Taiwan
  • Thailand
  • Vietnam



Like many developed countries in Asia, Australia is sufficiently open and so FTZs are often unnecessary.

A Trade Development Zone (TDZ) in Darwin was established in 1985 to develop a manufacturing centre on Asia’s doorstep so that the Northern Territory could become the ‘Regional Gateway’ to the extensive Asian market. The TDZ was closed in 2003.



China established special economic zones (SEZs) in Shantou, Shenzhen, and Zhuhai in Guangdong Province and Xiamen in Fujian Province and designated the entire island province of Hainan as a special economic zone in the early 1980s.

China has used the SEZs and FTZs as economic laboratories to get comfortable with market forces and cross-border trade. For instance, Shanghai Pudong FTZ has been at the forefront of the internationalisation of the RMB, and many of the regulatory relaxations piloted there have gone nation-wide, often in a matter of months.

SEZs were used in the 1980s to pioneer China’s economic and commercial development. FTZs are a more recent arrangement used by the government to pilot different aspects of internationalisation and regulatory relaxation, e.g. easing cross-border trade and capital flows, easing company formation, and lower taxes and duties.

The Shanghai FTZ was founded in 2013 primarily to pilot measures to support the internationalisation of RMB and facilitate cross-border commerce and finance, as well as to facilitate foreign direct investments. The Shanghai FTZ is considered FTZ 1.0, the addition of three more FTZs in 2015 is considered FTZ 2.0, and an additional 7 FTZs in 2017 is FTZ 3.0, bring the total to 11 FTZs.

Although there is much overlap, the priorities of the main national FTZs can be mapped as follows:

  • Shanghai FTZ (2013) had been used to test the implications of internationalising RMB,
  • Tianjin FTZ (2015) focused on leasing because of its sectoral focus on aviation,
  • Guangdong FTZ (2015) focused on shipping and links with Hong Kong and Macau (in what used to be called the Pearl River Delta and is now being called the Greater Bay Area), and
  • Fujian FTZ (2015) in Xiamen across the Taiwan Straits focused on “cross-straits trade” (i.e. trade with Taiwan).

The other FTZs tend to have regional objectives such as developing western China and attracting investment away from the traditional eastern and southern seaboard.

Some FTZs are also used for special purposes such as the Singapore-Zhejiang Economic and Trade Council (SZETC) which facilitates commercial and investment links between Singapore and China.

The development of the China’s FTZs follows the country’s economic and developmental progress:

  • FTZ 1.0 in 2013 – internationalisation of CNY
    • Shanghai FTZ
  • FTZ 2.0 in 2015 – SARs and adjacencies
    • Guangdong FTZ (Hong Kong and Macau)
    • Fujian FTZ (Taiwan)
    • Tianjin FTZ (port city)
    • FTZ 3.0 in 2017 – opening interior, west and setting foundations for the Belt Road Initiative (BRI)
      • Liaoning Free Trade Zone
      • Zhejiang Free Trade Zone
      • Hubei Free Trade Zone
      • Sichuan Free Trade Zone
      • Shaanxi Free Trade Zone
      • Chongqing Free Trade Zone

Although the FTZs act as pilots zones for the testing of opening measures and pioneered innovations, initiatives such as cross-border pooling and relatively free FX management have substantially gone nationwide. Chinese President Xi JinPing’s November 2018 comments about expanding FTZs indicates that China still sees the need to contain experimentation in FTZ ‘laboratories’ for the foreseeable future. This is consistent with China downplaying the plan to make Shanghai an international financial centre by 2020.

The primary aims of the 11 FTZs are investment and trade facilitation, as well as the provision of sustainable financial services. They facilitate company formation – “In the case of any sectors not specified on the negative list, the current practice of advance approval for foreign-invested projects, as well as the established process of examining and approving any foreign-invested enterprise’s contracts and articles of association, is replaced by filing requirements more in line with the system specified for domestic investors.”

Broadly, all FTZs share three main themes:

  1. To facilitate foreign investment with easier company set up (for industries not on the negative list).
  2. To facilitate international commerce with improved customs processing, bonded warehouses, and reduced duties.
  3. To facilitate internationalisation of RMB (and international finance) with more liberal regulation and easier cross-border flows.

Setting up a foreign owned company that is not on the ‘negative list’ requires the same registration requirements as domestic companies. The “Negative List of the Pilot Free Trade Zone” is divided into 15 categories, 50 items and 122 special management measures according to the National Economic Industry Classification (GB/T4754—2011). Among them, special management measures include specific industry measures and level measures applicable to all industries.

From a treasurer’s perspective, all FTZs offer similar financial incentives for cross-border capital and trade flows. As an example, cross-border CNY cash pooling went from Shanghai to nationwide within a few months. The FTZ version is a little more liberal, for example, allowing smaller and newer companies to pool cash and removing sweep size limits; the nationwide scheme is probably sufficient for most MNCs and setting up a FTZ entity solely for cash pooling is probably not worth the trouble. Although all FTZs offer the same benefits, in practice, Shanghai – and to a lesser extent the three FTZ 2.0 zones (Guangdong, Tianjin, and Fujian) – has the most experience which translates to greater comfort and speed from both regulators and banks.

The FTZs have also been extensively used for cross-border e-commerce because retail e-commerce payments are generally small in value, hence the customs clearance is transferred to the consumer via local post offices, making cross-border payments easier.


Shanghai Free-Trade Zone

Founded in 2013, the Shanghai FTZ was the first of the current generation of special zones in China. Its official name is the China (Shanghai) Pilot Free-Trade Zone (Chinese: 中国(上海)自由贸易试验区), giving a clear indication of its purpose as a commercial and financial laboratory for China as a nation.

From a treasurer’s perspective, the Shanghai FTZ has been a pilot for the evolution of cross-border capital flows and pooling into and out of China. SAFE (State Administration for Foreign Exchange) has experimented with hard currency cross-border flows and PBOC (People’s Bank of China) has experimented with cross-border CNY flows in the context of the internationalisation of CNY. SAFE is a department of PBOC, and in practice it regulates hard currencies quite separately from the way PBOC regulates CNY. Hence cross-border CNY is in fact easier (less documentation and faster) than cross-border hard currency.)

In early 2014, China launched a pilot programme to enable cross-border CNY cash pooling in the Shanghai FTZ. In November 2014, PBOC’s Notice Regarding Centralised Cross-border RMB Operation by MNCs (Circular 324) took cross-border CNY cash pooling nationwide. In 2016/2017, responding to pressure on CNY and fear of capital flight, PBOC restricted cross-border flows with ‘window guidance’ to banks but did not actually repeal the regulations.

Currently, cross-border CNY cash pooling is largely free, subject to specific requirements tabulated below:


  Nationwide Shanghai FTZ
Approval Approval from a PBOC local Branch No approval
Eligibility All parties must be majority owned parts of an MNC group All parties must be majority owned parts of an MNC group
Header A group entity A group entity in Shanghai FTZ


SAFE has also piloted cross-border hard currency cash pooling in the Shanghai FTZ and subsequently taken it nationwide. All hard currency cross-border pooling requires SAFE approval. However, in general, the restrictions once approved are more liberal than PBOC’s for CNY cross-border cash pooling.

The Shanghai FTZ has four subzones:

  1. The FTZ Bonded Area comprises Waigaoqiao Bonded Area, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port Area and Pudong Airport Comprehensive Bonded Area.
  2. Lujiazui Financial Area covers the Lujiazui financial district, the World Expo site and Qiantan. It forms the core of Shanghai's international financial centre, the high-end services cluster of Shanghai's international shipping centre as well as the modern commercial hub of Shanghai's international trading centre.
  3. Jinqiao Development Zone is Shanghai's important core functional area for advanced manufacturing, hub for producer services, pilot area for strategic emerging industries, and demonstration area for ecological industries.
  4. Zhangjiang High-Tech Park is Shanghai's core base for the innovation-oriented national strategy covering integrated circuits, software, and biotech.


Tianjin Free-Trade Zone

Founded in 2015, the Tianjin Free-Trade Zone includes three areas — Tianjin Airport Economic Area, Dongjiang Free Trade Port Zone and Binhai New Area Central Business District.

Tianjin FTZ has many facets, including a focus on aerospace. It also has financial facilitation. Pilot operations have been conducted on market-based interest rates, cross-border RMB use, foreign exchange controls, etc. Initial achievements have been made in the business of centralised operations of the foreign exchange funds of MNCs, foreign exchange rent in financial leasing, certificate of deposits, voluntary settlement of foreign exchange capital of foreign investors and cross-border RMB use, etc. For example, MNCs in TJFTZ are allowed to conduct intra-group two-way cross-border RMB pooling business. By the end of October 2016, 23.82 billion RMB was pooled by eligible MNCs in TJFTZ. Leasing companies in TJFTZ are allowed to receive rent in foreign currency.

The Tianjin FTZ comprises three zones:

  1. Located at the northeastern part of Tianjin FTZ, the Tianjin Dongjiang Bonded Port Area consists of three major areas, namely a terminal operation area, a logistics processing area and a comprehensive services area.
  2. The Tianjin Airport Area of TJFTZ consists of the Tianjin Port Free Trade Zone and the Tianjin Airport Economic Area which aims to build itself into an eco-friendly, modernised industrial park along the lines of internationalised, people-centric and ecologically balanced development.
  3. The Binhai CBD Area straddles both banks of Hai River’s lower reaches, and forms the overall layout of “one river, two banks and six areas”.


Guangdong Free-Trade Zone

Founded in 2015, the Guangdong FTZ connects the major manufacturing, logistics, and financial centres of the Pearl River Delta (now known as the Greater Bay Area). Therefore, it includes Guangdong’s capital city Guangzhou, as well as Shenzhen near Hong Kong, and Zhuhai near Macau. The Guangdong FTZ leverages the openness of Hong Kong and Macau to make the Pearl River Delta region even more competitive.

The Guangzhou Branch of the People’s Bank of China (PBOC) has issued a circular on supporting expanded cross-border use of RMB in the Guangdong Pilot Free Trade Zone (FTZ). The five points highlighted in the circular are:

  • handling cross-border RMB business under the current account or direct investment account for individuals in the FTZ,
  • lowering the entry threshold for multinational corporations in the FTZ to conduct two-way cross-border RMB capital pooling,
  • facilitating financial institutions and enterprises operating in the FTZ to repatriate RMB funds raised from issuing bonds offshore,
  • allowing domestic use of capital raised by Panda bonds issued by the overseas parent company of enterprises in the FTZ,
  • and encouraging banks in the FTZ to extend RMB loans offshore.

The Guangdong FTZ comprises of three zones corresponding to the three main cities of the Pearl River Delta – Guangzhou, Hong Kong, and Macau:

  1. Nansha New Area, or GDFTZ (Nansha), is blessed with the policy advantages of being a state-level new area, state-level economic and technological development zone, bonded port area, and new and high-tech development zone. It includes the Nansha New Area which is one of the country’s three shipbuilding bases, a national auto and spare parts manufacturing and export base, as well as a nuclear power equipment manufacturing base in the Pearl River Delta region.
  2. Qianhai-Shekou Area leverages on the close cooperation in modern services between Shenzhen and Hong Kong, and taking advantage of Hong Kong’s rule of law and level of internationalisation as well as its advanced port development.
  3. Hengqin Area of Zhuhai focuses on tourism, leisure and health, building on its proximity to Macau.


Fujian Free Trade Zone

Founded in 2015, the Fujian FTZ focuses on developing trade with Taiwan. Like other second stage FTZs, Fujian FTZ covers three areas of development:

  • Foreign Investment Admission by implementing the national treatment plus a negative list management model for foreign investment prior to entry, and a record system for those outside the negative list – business registration fully applies the service mode of "one declaration form, one window for all procedures, one license and code, one stamp needed for approval, one day end". The duration for business registration is shortened from the original 29 days to 1 day.
  • Learning from Singapore's experience, Fujian Free Trade Zone builds the "single window" network system in China's forefront of international trade. The import trade declaration data only needs to be entered on a window of network, and then it will be transferred to the port supervision department of customs, inspection and quarantine, maritime affairs, border defense, so as to finish the customs clearance procedures
  • International financial business including cross-border RMB business, interest rate liberalisation, foreign exchange management system and cross-strait security business cooperation - making international financing more convenient.

The Fujian FTZ comprises three zones:

  1. Fuzhou Area focuses on the maritime silk road
  2. Xiamen Area focuses on trade with Taiwan
  3. Pingtan Area focuses on tourism with Taiwan


Liaoning Free Trade Zone

Founded in 2017, the Liaoning Free Trade Zone aims to transform the northeastern region’s economic growth model, while enhancing its general economic development. It comprises three zones:

  1. Dalian Area specialising in port and shipping logistics, the site will also focus on finance/trade, high-tech equipment manufacturing, high and new technology, and the circular economy.
  2. Shenyang Area focusing on the advanced manufacturing sector, particularly with regard to equipment, automobiles/automotive parts and aeronautical equipment, and with an emphasis on finance, technology and logistics.
  3. Yingkou Area focusing on professional services in the fields of commercial logistics, cross-border e-commerce and finance, as well as next-generation information technology and high-end equipment manufacturing.


Zhejiang Free Trade Zone

Founded in 2017, the Zhejiang Free Trade Zone focuses on commodity trading (especially petrochemicals) and some high-end industry, notably aviation. Boeing delivered its first “made in China” 737-800 airplane from Zhejiang FTZ in 2018.

Zhejiang FTZ comprises of three zones:

  1. Zhoushan Outlying Islands Area focuses on developing a state-of-the-art world-class green petrochemical base,
  2. Northern Zhoushan Island Area focuses on commodity trading, primarily with regard to oil and related products, and
  3. Southern Zhoushan Island Area focuses on commodity trading, aeronautical manufacturing and spare parts logistics, as well as R&D and design work related to a number of ancillary industries.


Henan Free Trade Zone

Founded in 2017, the Henan Free Trade Zone was established to function as a transportation and logistics hub serving the Belt, Road Initiative.

Henan Free Trade Zone comprises of three zones:

  1. Zhengzhou Area focuses on the development of advanced manufacturing industries, including intelligent terminals, high-end equipment, automobile production and biomedicine.
  2. Kaifeng Area focuses on developing the service sector, including service outsourcing, medical tourism, design, cultural media facilities, cultural finance services, fine art trading and logistics.
  3. Luoyang Area focuses on the development of high-end manufacturing industries, including equipment manufacturing, robotics and the use of innovative materials.


Hubei Free Trade Zone

Founded in 2017, the Hubei Free Trade Zone is in the traditional centre of China, and is designed to draw high-end industries into the interior and away from the more developed coastal cities. Wuhan is a city of 11 million people spread across the Yangtze and Han rivers, which have long been axes of commerce.

Hubei Free Trade Zone comprises of three zones:

  1. Wuhan Area focuses on the development of a number of strategic and emerging industries, including next-generation information technology, life sciences, health and smart manufacturing.
  2. Xiangyang Area focuses on high-end equipment manufacturing, new-energy vehicles, big data, cloud computing, commercial logistics and inspection/testing.
  3. Yichang Area focuses on high technology industries, especially advanced manufacturing, biomedicine, electronic information and new materials as well as services including R&D/design, headquarters economy and e-commerce.


Sichuan Free Trade Zone

Founded in 2017, the Sichuan Free Trade Zone is based around Sichuan capital Chengdu. The Sichuan FTZ is also expected to play a lead role in the development of an inland open economic highland, while being a key advocate for the managed evolution of both the wider western region and the Yangtze River Economic Belt.

The Sichuan Free Trade Zone comprises of three zones:

  1. Chengdu Tianfu New Area focuses on the development of a modern services sector, high-end manufacturing, cutting-edge technology, airport-related economic development and port services.
  2. Chengdu Qingbaijiang Railway Port Area develops port services – including international commodity distribution/transshipment, distribution/exhibitions, bonded logistics warehousing, international forwarding, automobile imports and specialist financial instruments. This site will play a pivotal role in the establishment of the west-facing trade corridors that will link the inland regions with the Silk Road’s Economic Belt.
  3. Chuannan Lingang Area develops a range of high quality professional services, including shipping logistics, port trade, education and medical support.

Singapore has an MOU with Chengdu FTZ to promote trade, logistics, and financial services to support Chengdu FTZ’s role as the coordinating gateway between coastal and inland China.


Shaanxi Free Trade Zone

Founded in 2017, the Shaanxi Free Trade Zone is the gateway to western China with a mission to facilitate the West Development by leveraging the Belt, Road initiative to expand the opening-up of gateway cities in western China, and to further explore new modes of economic cooperation and cultural exchanges with other countries along the Belt, Road region.

The Shaanxi Free Trade Zone comprises of three zones:

  1. Central Area focuses on developing a number of strategic emerging industries and the high-tech sector, with a particular emphasis on high-end manufacturing, aviation logistics and trade/finance.
  2. Xi’an International Port Area focuses on developing international trade, modern logistics, financial services, tourism, convention and exhibition services and e-commerce.
  3. Yangling Demonstration Area focuses on agricultural science and technology with added emphasis on innovation, demonstration and promotion.


Chongqing Free Trade Zone

Founded in 2017, the Chongqing Free Trade Zone looks to advance the opening up of the western region’s gateway cities, while bringing to full fruition the priorities identified as part of the wider western region development initiative. Chongqing is one of four municipalities, along with Beijing, Shanghai, and Tianjin, that are under direct central party control, rather than under a provincial authority.

The Chongqing Free Trade Zone comprises of three zones:

  1. Liangjiang Area focuses on nurturing a cluster of high-end industries, with a particular emphasis on high-end equipment, core electronic parts, cloud computing and biomedicine.
  2. Xiyong Area focuses on the transformation and upgrading of trade processing.
  3. Guoyuangang Area focuses on multi-modal logistics transshipment as well as on developing a range of related services.


Dubai / United Arab Emirates

The UAE has a number of free zones across Dubai, Abu Dhabi, Sharjah, Fujairah, Ajman, Ras al-Khaimah and Umm al-Quwain. Free zones include seaport free zones, airport free zones, and mainland free zones. Free-trade zone exemptions are:

  • 100% foreign ownership of the enterprise
  • 100% import and export tax exemptions
  • 100% repatriation of capital and profits
  • Corporate tax exemptions for up to 50 years
  • No personal income taxes
  • Assistance with labor recruitment, and additional support services, such as sponsorship and housing.

FTZs in UAE are not subject to normal corporate laws and have their own regulations, making it easier for businesses. FTZs have been set to address the needs of a wide variety of different business segments, including finance (Dubai International Financial Centre).


Jebel Ali Free Zone (Jafza)

Jebel Ali Free Zone (Jafza) is a FTZ located in the west of Dubai. Jafza was created under a Ruler's Decree in 1985 and subsequently expanded. It is the world’s largest free zone with over 7,000 global companies and 32% of UAE’s FDI. Jafza typically contributes to 21% of Dubai’s GDP, and more than 144,000 people work there.


Dubai International Financial Centre (DIFC)

The Dubai International Financial Centre (DIFC) is a special economic zone in Dubai, established in 2004. It is a financial hub for the Middle East, Africa and South Asia (MEASA) markets. DIFC has its own independent, international regulatory and judicial system, common law framework, global financial exchange, tax-friendly regime, and a large business community. The district is governed by a common-law framework distinct from the UAE legal system, with laws and regulations issued in English. DIFC offers clients a 50-year guarantee of zero taxes on corporate income and profits, complemented by the UAE’s network of double taxation avoidance treaties.

Many multi-national corporations manage their Middle East and Africa (MEA) treasury (or some part of it) from Dubai. No particular treasury status is required for treasury operations since Dubai has no withholding taxes, and the FTZ status brings zero or low income tax rates. FTZ entities are not subject to regulations impeding treasury operations.


Free trade zones in UAE:

Abu Dhabi

  • Abu Dhabi Airport Free Zone (ADAFZ)
  • Abu Dhabi Global Markets (ADGM)
  • Khalifa and Industrial Zone Abu Dhabi (KIZAD)
  • Twofour54
  • Industrial City of Abu Dhabi
  • Higher Corporation for Specialized Economic Zones
  • Masdar City Free Zone



  • Dubai Airport Free Zone
  • Dubai Auto Zone
  • Dubai Cars and Automotive Zone
  • Dubai Design District
  • Dubai Flower Centre
  • Dubai Gold and Diamond Park
  • Dubai Healthcare City
  • Dubai Industrial City
  • Dubai International Academic City
  • Dubai International Financial Centre
  • Dubai Internet City
  • Dubai Knowledge Park
  • Dubai Logistics City
  • Dubai Maritime City Authority
  • Dubai Media City
  • Dubai Multi Commodities Centre
  • Dubai Outsource Zone
  • Dubai Science Park
  • Dubai Silicon Oasis
  • Dubai Studio City
  • National Industries Complex
  • Dubai Textile City
  • Energy and Environment Park
  • International Humanitarian City
  • Jebel Ali Free Zone Authority
  • Jumeirah Lakes Towers Free Zone
  • Dubai Production City



  • Hamriyah Free Zone
  • Sharjah Airport International Free Zone
  • U.S.A. Regional Trade Center (USARTC) Free Zone
  • Sharjah Media City (SHAMS)
  • Ajman Ajman Free Zone


Ras Al Khaimah

  • RAK Investment Authority Free Zone
  • Ras Al Khaimah Free Trade Zone
  • Ras Al Khaimah Media Free Zone
  • RAK Maritime City
  • Fujairah Fujairah Free Zone
  • Creative City Fujairah


Umm Al Quwain

  • Umm Al Quwain Free Trade Zone (UAQFTZ)


Hong Kong

Hong Kong is known for low tax and being duty-free, so in a large part, the market can be considered as a FTZ. Hong Kong is a free port. There are no customs tariff on goods imported into Hong Kong and no sales tax nor value added tax in Hong Kong. The HKSAR Government collects an excise duty on only four types of goods irrespective of whether they are imported or locally manufactured, namely, tobacco, hydrocarbon oil, alcoholic beverages and methyl alcohol. Hong Kong, nonetheless, operates bonded warehouse arrangements for transshipment of goods.

Hong Kong is closely integrated into the Guangdong Free-Trade Zone which covers both east (Hong Kong and Shenzhen) and west (Macau and Zhuhai) sides of the Pearl River Delta with Guangzhou to the north.



Historically, India had a number of export processing zones (EPZs). Following China’s success with Special Economic Zones (SEZs), India introduced SEZs in 2000 to stimulate both foreign and domestic investment, boost India’s exports, and create new employment opportunities. The Special Economic Zone Act of 2005 converted its EPZs to SEZs, with notable zones including:

  • Santa Cruz (Maharashtra state),
  • Cochin (Kerala state),
  • Kandla and Surat (Gujarat state),
  • Chennai (Tamil Nadu state),
  • Visakhapatnam (Andhra Pradesh state),
  • Falta (West Bengal state),
  • Noida (Uttar Pradesh state), and
  • Indore (Madhya Pradesh state).

New SEZs have been approved by the Indian Board of Approval. There are now over 200 SEZs in operation.

SEZs are more trade-focused than finance-related, and they bring some of the following benefits (though these can vary by state):

  • Duty free import and domestic procurement.
  • 100 percent income tax exemption on export income for first five years, 50 percent for five years thereafter, and 50 percent of the export profit reinvested in the business for the next five years.
  • Exemption from the Goods and Services Tax (GST) and levies imposed by state government.
  • Permission to manufacture products within a sector qualifying for 100% FDI.

India plans to build a new city in Gujarat, called the Gujarat International Finance-Tech City (GIFT City), in order to give global investors greater access to its growing economy.



Indonesian SEZs are held back by lack of infrastructure, 30% corporate income tax, as well as limited duty exemptions. Exemption from import and export duties is limited in scope and subject to government approval.

Industrial SEZs in Indonesia are set up mainly for the following primary industries:

  • SEZ Sei Mangkei - palm oil and rubber
  • SEZ Tanjung Api-Api - seed rubber, palm oil, and coal
  • SEZ Maloy Batuta Trans Kalimantan (MBTK) - oil palm, oil, gas, minerals, and coal
  • SEZ Palu - rubber, cocoa, rattan, seagrass, nickel, gold, iron ore, and lead
  • SEZ Bitung - fisheries, oil industry, and other logistics
  • SEZ Morotai - World War II airport with huge runway capacity
  • SEZ Sorong - fishery and marine transportation

In late 2017, Indonesia converted the Batam FTZ (established in 1970s) into a SEZ, and replaced the management team with senior civil servants from Jakarta. This was in response to poor performance of Batam (its 2% annual growth is less than Indonesia national average of 5%).



Japan has some FTZs in Okinawa to draw investment to the remote southern islands and leverage their proximity to Taiwan and China. However, few benefits and its distance from major economic centres have limited their success.



Korea has had three phases of SEZs. The first being the Foreign Investment Zones in 1988, second being the Free Trade Zones in 2000, and the third being the Free Economic Zones in 2003. All of these are designed to facilitate and induce foreign investment.

There are over 100 Foreign Investment Zones. They offer 100% national tax reduction in the first three years and 50% national tax reduction in the following two years. Local taxes are often exempted for 15 years.

There are 13 Free Trade Zones. FTZs offer reduction of national tax in proportion to the foreign investment ratio for the first three years, then 50% of the ratio for the following 2 years. Local taxes are exempted for 15 years. They also offer rent free land for invested facilities.

There are 8 Free Economic Zones including over 200 companies of which 10% are foreign invested. FEZs offer reduction of national tax in proportion to the foreign investment ratio for the first three years, then 50% of the ratio for the following 2 years. Local taxes are exempted for 15 years. They also offer rent free land for invested facilities.

The eight FEZs primarily serve these industries:



Malaysia offers several free zones with different focuses and incentives. Some of the most popular zones include:

FTZs in Malaysia are governed by the Free Zones Act 1990 and they facilitate customs processing as well as providing bonded warehousing for transshipment. There is no general exemption from customs duties. Goods in FTZs are exempt from Sales and Services Tax but services are subject to Sales and Services Tax according to Malaysian Customs.

In 2017, and with support from Alibaba, Malaysia launched a digital free trade zone (DFTZ) as a strategic initiative to intensify Malaysia in cross-border e-commerce, with the objective of establishing Malaysia as a regional e-commerce e-fulfilment hub, and of driving exports of Malaysian SMEs via e-commerce. DFTZ isn’t designed to come with special or customised incentives. Instead, businesses are advised to consider and leverage on existing applicable regulatory framework and incentives.

For example:

(1) MSC Status which comes with pioneer status or investment tax allowance under the Promotion of Investments Act 1986.
(2) Incentives for SMEs offered by SME Corp and MATRADE.
(3) Regulatory framework under the Free Zones Act 1990, which among other things, allows goods that were brought into Free Commercial Zones and re-exported or transhipped, to not be subjected to import duty and GST, as such goods are not considered as having been imported into Malaysia.
(4) Existing incentives offered by MIDA such as Pioneer Status, Investment Tax allowance, and International Integrated Logistics Status (IILS), Integrated Logistics Status (ILS) or the Digital International Integrated Logistics Status (DIILS) towards obtaining customs agent license for logistics companies.
Malaysia also has a finance focused FTZ in Labuan, an island off Eastern Malaysia (part of Borneo). Labuan is primarily focused on financial services, wealth management, and trading. Like many FTZs, it is from a regulatory perspective outside of Malaysia, and therefore, it is free from constraints such as needing Malaysian nationals as directors, exchange controls, most income taxes, withholding taxes, sales and services tax.
Labuan offers easier employment passes for non-Malaysian employees and 50% reduction of their personal income tax. It also offers greater privacy.

Some of the types of companies available in Labuan include:

  • Trading Companies: Import/export can be done directly without transshipment by a Labuan company and benefit from Labuan’s low income tax rate on trading activities.
  • Investment Companies: returns on invested funds benefit from low income tax and zero capital gains tax under Labuan’s offshore jurisdiction.
  • Holding Companies: A Labuan holding company can extend some of its tax benefits to operating subsidiaries and there are no legal requirements for dividends to be declared or paid.
  • Probate and Privacy: Wealth management for high net worth individuals with properties or assets in a number of countries.
  • Property Owning Companies: Avoid inheritance tax and capital gains tax, as well as lower transaction costs.
  • Professional Service: Individuals that receive substantial amount of fees can use Labuan companies to lower their income tax liability.
  • Shipping Companies: Labuan shipping companies are utilised to eliminate direct or indirect taxation on income derived from shipping activities.
  • Patent, Copyright and Royalty Companies: A Labuan company can purchase or be assigned the rights to use a copyright, patent, trademark or know-how and benefit from low income tax on the income derived therefrom.

Labuan is not used much by non-bank corporates outside of the areas mentioned above, other than for Malaysian specific transactions such as funding Malaysian operations.


New Zealand

New Zealand is a very liberal economy with many FTAs and as such, it does not need free trade zones.



Philippine Economic Zone Authority (PEZA) operates over 400 economic zones, primarily in the manufacturing, IT, tourism, medical tourism, logistics/warehousing, and agro-industrial sectors.

Economic zones offer simplified import and export procedures and easier employment of foreign nationals as well as income tax exemption for 4 years (6 years for pioneer projects) and after the tax holiday a flat 5% turnover tax and exemption from local taxes and exemption from import duties.

Some of the most popular FTZs include:



Singapore offers low tax, but it does have some duties and GST. Therefore, Singapore has Free Trade Zones (FTZs) primarily used for the temporary storage of goods and to facilitate entrepôt trade, as duties and Goods and Services Tax (GST) on cargo within these zones are suspended.

FTZs are governed by the Free Trade Zones Act of 1966 last updated in 2014. Singapore has three Free Trade Zone (FTZ) authorities, namely:

  • PSA Corporation Ltd,
  • Jurong Port Pte Ltd and the
  • Changi Airport Group (Singapore) Pte Ltd.

The eight FTZs are:

  • Brani Terminal,
  • Keppel Distripark,
  • Pasir Panjang Terminal,
  • Sembawang Wharves,
  • Tanjong Pagar Terminal,
  • Keppel Terminal,
  • Jurong Port,
  • Airport Logistics Park of Singapore and the
  • Changi Airport Cargo Terminal Complex.

They provide a wide range of facilities and services for storage and re-export of dutiable and controlled goods.

Goods can be stored within the zones without any customs documentation until they are released in the market and they can also be processed and re-exported with minimum customs formalities.

GST is suspended for imported goods deposited in a FTZ and will only be payable upon removal from the FTZ for local consumption. GST is not payable on supply made in FTZ if the goods supplied are meant for transshipment or re-export.

The FTZs at the port facilitate entrepot trade and promote the handling of transshipment cargo. They offer free 72-hour storage for import/export of conventional and containerized cargo and 140-day free storage for transshipment/re-export cargo.



Taiwan implemented legislation for free trade zones in 2003. There are now 7 harbor areas in operation as authorized by the Executive Yuan, including 6 sea harbors and 1 air harbor:

  • - Keelung Port Free Trade Zone,
  • - Taipei Port Free Trade Zone,
  • - Taichung Port Free Trade Zone,
  • - Kaohsiung Port Free Trade Zone,
  • - Su-ao Port Free Trade Zone,
  • - An-ping Port Free Trade Zone and
  • - Taoyuan Air Cargo Park Free Trade Zone.

Taiwan has relaxed restrictions on the movement of merchandise, capital, and personnel into and out of these zones. As part of a broader restructuring and to increase the competitiveness of Taiwan’s ports, the Ministry of Transportation and Communication established the Taiwan International Ports Corporation (TIPC) in 2012 to manage commercial activities of Taiwan’s ports and free trade zones. TIPC facilitates cooperation with foreign shipping operations and related businesses. In addition to preferential tariff and fees, FTZ businesses may increase the proportion of foreign laborers to up to 40% of their employees.

FTZs are exempt from customs duties, commodity tax, business tax, trade promotion service fees and harbor service fees on commodities and equipment. To invigorate the supply chain, business tax rate is reduced to zero for transactions of commodities, equipment and services between FTZs and domestic taxed areas or bonded areas.

19 industries are allowed in FTZs including trade, storage, logistics, cargo management, transshipment, transfer, outsourced delivery, custom declaration, fabrication, reassembly, packaging, repair, assembly, processing, manufacturing, inspection, testing, exhibition and technical services. Enterprises can operate in the areas in the form of subsidiary companies, operating offices or departments.



Thailand provides several free zones, locally known as “special economic zones” (SEZ), enabling foreigners to register companies in the country, while enjoying simpler registration procedures, full foreign ownership and generous tax incentives. These free zones tend to be on the country’s borders to facilitate trade.

Incorporating a company in an SEZ is easier that doing it at a nationwide level. Many companies also seek BOI (Board of Investment) approval to avail additional tax exemptions but the SEZ can also accord tax exemptions for preferred industries. Typical incentives include up to eight years of tax holiday and reduced or zero customs duties.

Some of the most popular SEZs include:

  • Nong Khai – agriculture and textile
  • Kachanaburi – automotive
  • Tak – agriculture and light industry
  • Sa Kaeo – chemical and light industry
  • Songkhla – manufacturing
  • Trat – agriculture and tourism
  • Mukdahan – agriculture and industry



Vietnam runs over 250 industrial and export processing zones, split into four areas – North, Central, South, and Mekong.

For approved industries, these offer benefits including a reduced 10% corporate income tax rate and 50% reduction on employees personal income tax. Other benefits may include free land for approved projects and cheap local labour.

Vietnam has a series of incentives in place that encourage both domestic and foreign investment. Tax incentives include exemptions or reductions of Corporate Income Tax (CIT), Value-Added Tax (VAT) and import tariffs for specific periods, and are granted based on the business lines and location of the FIE. Regulated encouraged sectors include education, healthcare, sports, culture, high technology, environmental protection, scientific research, infrastructural development, and software manufacturing. Administrative divisions or locations with investment incentives include disadvantaged or extremely disadvantaged areas, industrial parks, export-processing zones, hi-tech zones, and economic zones.

Corporate income tax (CIT) rates were reduced to 20 percent as of 1 January 2016. Preferential CIT has been set at 10 percent for a 15-year period for new investment projects in areas with difficult socio-economic conditions, in economic zones, and in high-tech zones. The preferential CIT is applicable for the entire operational period for companies operating in the sectors of education and training, occupational training, health care, culture, sport and the environment. Other reduced CIT slabs include 15 percent and 17 percent for enterprises involved in farming, breeding, processing of agriculture and aquaculture products. Large manufacturing projects with investment capital of VND 6,000 billion or more with minimum revenue of VND 10,000 billion per annum for at least 3 years after the first year of operations or employing at least 3,000 people after 3 years of operation, also qualify for CIT incentives.

Additionally, exemptions from import duty and incentives on land rental are also offered to investors. Such incentives and exemptions depend on the industry and the location of investment.

Some popular zones include:


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