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GLOBAL OUTLOOK NEWS


Indonesian zone ‘could pull $17bn’


In June, the Indonesian govern- ment officially designated the Java Integrated Industrial and Port Estate, an industrial area in east Java, a special economic zone in a bid to attract interna- tional investment. Nowcalled the Gresik Special


Economic Zone (SEZ), the zone covers 3000 hectares and is divided into an industrial estate, a port estate and a residential estate. It has been designed as a green project with zero emission in its utility facil- ities and as an industry 4.0 hub. Haryanto Adikoesoemo, president director at PT AKR Corporindo, a logistics firm that supported the creation of the zone, told Bloomberg on July 5 that the SEZ has the poten- tial to attract as much as $17bn in foreign direct investment.■ SETHO’FARRELL


AddisAbaba tobuildSEZ in2022


The Addis Ababa City Administration Bureau of Mega Projects has unveiled plans to develop a special economic zone (SEZ) in the country’s capital in 2022, according to an article in the Ethiopian Herald published on July 13. The local newspaper reported


that the economic zone will be built near Gotera interchange in the south of the city, covering 34 hectares of land, in partnership with the Chinese government. The project is expected to accelerate Addis Ababa’s economic activities, and it would be one of the largest in Africa. Set to be built next year, the zone


will be integrated into existing infra- structure and facilities and will provide different services, a source told the Ethiopian Herald, adding that the total cost of the project is under review.■ SETHO’FARRELL


August/September 2021 www.fDiIntelligence.com FREE ZONE FOCUS


Thenewfrontierof theSaudi–UAEfeud


rules of originonimports fromotherGulfCooperation Councilcountrieshasraised


S


thestakeswithintheregion,asitgoes head-to-headwiththeUAEincompet- ingforthepositionastheregion’s tradingandbusinesshub. Thecountryintroducedfurther


caveats regarding the ability to claim alocal national origin—mostnotably anationalisation rate of at least25% —whichis vital forimportedgoodsto enjoyadiscountedrate (usually 0%). Further,andpotentiallymoreimpor- tantlyfor thosewithbusinessesin the UAE,goodsleaving fromafreezone willnolongerbeconsideredlocally produced,andarethereforeineligible for the tariff reduction. Giventhat theUAEis Saudi


Arabia’ssecond-largest tradingpart- ner, this isgoing tohavemassive reverberationsacrossthebusiness world,notonlyamongthecompanies tradinggoodsfromfreezonesin the UAE.Companies with their regional manufacturingcapabilities locatedin oneof theUAE’s freezoneswillnow haveto re-examineboththeir clients andoperations tocalculate thepoten- tialimpact thischangewillhave. Thenewrules also target the set


of agreements signedbetweenthe UAEandIsrael inMay2020,whichhas resultedin increasedtradebetween thetwocountries.Unfortunately for


audiArabia’sannounce- mentinJuneregarding


both,anygoodswithcomponents producedin Israel—orownedfully or partiallybyIsraeli investors—will alsobedeemedoutside of the scope for preferential tariff rates. Thecountryalsoannouncedin


February2021that,by2024, only thosecompanies witharegionalhead officeinSaudiArabiawillbeeligible to bid on,andbeawardedgovernment contracts. Thefullimpact of the tariff restric-


tions isyet tobeascertained—asis theUAE’s response. Itcouldwellbe expected that therewillbeadditional incentivesonoffer tobothattractand retaincompanies to thefree-zone jurisdictions. Consideringthe level of capital investment thatsomemulti- nationalmanufacturershaveinvested into areassuchasJebal Ali FreeZone, it is difficult to imaginethemprovid- ingaknee-jerkreactionandrelocating theiroperations. While thisannouncementis still


fresh, the potentialimpact is quite far- reaching for thoseoperating from withintheUAEfreezoneregime.The onlycertainty hereis thatmore announcementswillbeexpectedas boththeUAEandSaudiArabiadiver- sifyawayfromtraditional oilandgas revenues,andcompeteto attract muchsought-after foreign invest- mentinother sectors.■


ScottCairnsismanagingdirectorof CreationBusinessConsultants.


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