Leading Examples of Free Trade Zones in Developing Countries (with an in-depth perspective upon Algeria)

Abstract

This chapter has endeavoured to highlight the significant aspects of Algerian economy through a detailed overview from different angles. An insight into the socio-political and economic scenario of the country has been carefully and elaborately discussed, with an aim to find out obstacles which led the government to postpone the idea of introducing FTZs in the country. Furthermore, this chapter gradually and systematically shifts its focus on the core idea of this thesis and that is ―to encourage the Algerian government to have a relook on its policies and introduce FTZs while learning from successful examples as discussed in the thesis‖. Although there had been some progress towards the FTZ program in the past, there is still need by Algeria to identify more specific zones for tax breaks and other incentives to allow more foreign investments in the country. This is necessary given to what happened to the Algeria-China Jiangling Free Trade Zone, which stalled because of the law that requires joint partnerships with locals. Their investment policy still needs to be more open and to create more incentives in attracting investors in the country. It is through such an open policy that they will implement their policies on FTZS and spur industrial development in the country On one hand the Algerian government started many industrial export strategies through the Ministry of Industry. This was aimed at re-industrialization policy as well as boosting and diversifying the exports outside hydrocarbons so that they would bring in more foreign reserves. And on the other hand, the industrial structure is currently old fashioned with the new technological advancement including industrialization. For this purpose, in various sectors, Algeria should invest in industrial development and improve local market productivity and exports. The existence of natural resources is a key advantage for Algeria‘s economy. The country‘s natural resource endowments like oil, gas and others that are largely not fully exploited especially phosphates and iron ore is a component of business interest for external investors, and Algeria is ranked as the third biggest provider of natural gas globally and as the fourth energy provider to the European Union (EU). Therefore, if it combines this with its geographic location of being situated at the middle of the Maghreb nations it can make them a good selling point for any future FTZ The most important of the scenarios that Algeria should tackle and try to curb the pandemic of corruption in the country by enforcing harsher and more severe punishment for the perpetrators. In this way, the businesses and the prevalent problems can be lessened. At the same time, the government should quickly take on the necessary steps that will diversify the economy. For instance, they should improve on their agricultural industry and fulfil their needs as per the requirements. As a whole, the diversification can improve their ranking in the global competitiveness and thus improve on the situations like the rising unemployment. This chapter focuses on emphasizing need of introducing effective, viable and competitive FTZs in order to address these problem areas. It is quite evident from the fact that since 2013, numbers of free zones around the world (especially in the developing countries) have increased by approximately 18 times the figure before 2013. Such is the growing impact of FTZs on the economies of the host countries that almost every country is trying to establish maximum possible zones inside their territory to benefit their economy in multiple spheres. An endeavour has been made to motivate Algerian Government by illustrating rationale based on International experiences that why reversion towards a FTZ model is important for Algerian economy to prosper. Benefits of the zones on the local economy in terms of raising FDIs, human resource development, diversification of economy and numerous socio-cultural impacts have been elucidated to support the point of view. This entire discussion entails inbuilt points which allude towards how Algeria might have been at loss by not embracing the idea. Consequent to above, an effort has been made to render recommendations / steps which Consequent to above, an effort has been made to render recommendations / steps which Algeria can learn specifically from the countries discussed as case studies in the previous chapters. Different initiatives introduced by these countries like setting up a peculiar administrative / legal frame work peculiar to the zones, how the zones have been managed to yield the desired end results, special incentive regimes like exemptions / reductions on taxes, duties…. .etc. and other measures which Algeria may adopt in case it decides to opt for an FTZ model have also been discussed. In a nutshell, taking into account the financial considerations attained by Algeria throughout the previous years, it can be summarized that the commercial and financial situation is increasing effectively and that this contribution shows that Algerian market is committed and prepared to allow foreign businesses, involving FDI throughout top economically active areas. Thus, it can be summarized that overall economic situation in Algeria is ripe for reinvigoration of an effective FTZ program to boost its economy.