Free Zones Programme

Infrastructure

There are over 3,000 free zones in over 130 countries throughout the world in Asia, Europe, the Middle East, the Americas and the Caribbean.

Free zone infrastructure (developed land and buildings) has traditionally been provided by Governments at substantial cost.

The Trinidad and Tobago Programme is different in that the private sector has provided the free zone facilities at a cost of hundreds of millions of dollars.

Reason for Programme

The large energy projects have come to Trinidad and Tobago to access Trinidad and Tobago’s energy resources and the special incentives offered by the Government.  Such projects cannot access free zone incentive.

Traditional non-energy manufacturing projects have been established in Trinidad and Tobago principally to serve the relatively small Trinidad and Tobago and CARICOM markets on a preferential basis.

The Free Zones Programme has been able to attract manufacturing projects dedicated to extra regional exports (e.g., tuna fish processors) and international traders dedicated to entrepôt trade (i.e., regional distribution) as well as service enterprises (e.g., developing computer software for the North American health care market).

The international traders import full container loads of products from other countries into Trinidad and Tobago for distribution to over 26 countries in the region.  This activity contributes to establishing Trinidad and Tobago as a preferred source of products in the South, as Miami with its foreign trade zone has been in the North.

Benefits which are derived from the Programme

Free Zone Enterprises:

• create significant numbers of good quality jobs
• develop new skills
• provide new investment
• provide access to overseas markets

In addition, the Programme results in a substantial volume of trade passing through Trinidad and Tobago which would go to other countries if the Programme did not exist.  For example, in 2008 US$185 million in products were exported through Trinidad and Tobago by free zone enterprises.

This increased throughput of trade contributes to increased shipping frequency and reduced shipping costs to Trinidad and Tobago businesses and consumers.

The smaller countries in the region cannot afford to import full containers of single products and are increasingly looking to Trinidad and Tobago free zones to supply them with containers of mixed foreign and local products at competitive prices.  This could result in increased export opportunities for local manufacturers (subject to removal of CARICOM COTED restrictions).

Incentives

The free zone projects are treated for duty and tax purposes as being transshipment or effectively, off-shore projects.  As such, they do not pay duties as the imported products which are for re-export and taxes are waived on the basis that in the absence of the Programme, the projects would not have come to Trinidad and Tobago  and taxes would not have accrued.

However, significant financial benefits are derived by Trinidad and Tobago from the Programme:

The Programme is self-financing as the Free Zones Company’s operations are funded by licence fees paid by free zone enterprises.

Since the start of the Programme in 1994, free zone enterprises have purchased over 41 million US dollars worth of goods and services in Trinidad and Tobago.  The companies which supplied these goods and services have paid taxes on the profits which were made.  In addition, payroll taxes and licence fees are paid by free zone enterprises.

The free zones therefore provide a net financial benefit to Trinidad and Tobago and provide a service to the local manufacturers and to the smaller CARICOM countries.

Objective: