WTCA: Development of free trade zones in PH, APAC will drive inclusive, sustainable growth

WORLD TRADE CENTERS ASSOCIATION (WTCA) sees the development of Free Trade Zones (FTZs) in more locations across the Asia Pacific region as a key driver for increased global trade and investments, and for creating inclusive and sustainable growth among local communities.

At the recent WTCA Asia Pacific Regional Meeting (APRM), hosted in Haikou, China by World Trade Center (WTC) Haikou, WTCA representatives highlighted the success of the Hainan Free Trade Port in China as a model for trade, innovation, and shared prosperity that can be replicated in other Asia Pacific countries.

“Haikou, as the gateway to the Hainan Free Trade Port, stands as a symbol of what can be achieved when we embrace open trade, innovation, and global collaboration,” said Crystal Edn, WTCA Executive Director–Member Services.

She added that the Hainan Free Trade Port is not just a strategic economic zone, but a model for the future of trade, where goods, services, and ideas flow freely across borders, driving prosperity for all stakeholders.

WTC Haikou is located on Hainan Island in China, the site of what is expected to be the largest Free Trade Port in the world when it launches independent customs operations at the end of 2025. Among WTC Haikou’s main objectives is to support the development of Hainan’s special economic zone as a hub for global investments.

The Philippines has tapped into the potential of FTZs, also known as Special Economic Zones (SEZs), to draw in foreign direct investment (FDI) and foster business growth in designated areas, thereby boosting the national economy.

The journey of developing ecozones in the Philippines began in the mid-1990s with the Special Economic Zone Act of 1995. This landmark legislation aimed to establish SEZs in strategic locations nationwide, implementing measures to attract legitimate and productive foreign investments.

Today, the Philippines boasts over 400 SEZs, managed by the Philippine Economic Zone Authority (PEZA) under the Department of Trade and Industry. Businesses operating within these zones enjoy customs tax exemptions, incentives, and other regulatory perks.

A study by the Hong Kong Trade Development Council (HKTDC) highlights the significant impact of these FTZs on the Philippine economy, accounting for about 56% of the country’s commodity and goods exports and over 16% of its gross domestic product (GDP).

Over the years, these trade zones have become magnets for FDIs, particularly in manufacturing, processing, assembling for export, and other export facilitation activities. Major investors include the Netherlands, Japan, Singapore, the U.S., and more recently, the Republic of Korea (South Korea).

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act of 2021 expanded the scope of activities within SEZs to cover everything under the Strategic Investment Priority Plan (SIPP), regardless of export orientation. Various SEZs now cater to different industry sectors within the PEZA network, including manufacturing, IT, and medical tourism.

In 2023, PEZA approved a total investment of %u20B1175.7 billion (USD 3.05 billion), marking a notable 24.9% year-on-year increase. Recently, PEZA reported approving %u20B161.69 billion (USD 1.11 billion) worth of investments in the first eight months of 2024, with these ventures expected to generate 31,827 new jobs and substantial export receipts.

“The establishment of FTZs across the region will continue to generate new business and foreign investments as the innovation, economic cooperation and ease of trade in these areas lead to more jobs and increased productivity for all countries involved,” said Scott Wang, WTCA Vice President, Asia Pacific.

He added that WTCA promotes international trade and investments into local FTZs through its world-class facilities and annual networking events such as the 2024 WTCA Member Forum from October 27 to 29, 2024 in New York City. The growth of FTZs will be a focus of discussions at the upcoming Forum, where founding member of the World Free Zones Organization Martin Ibarra will talk about how special economic zones present significant opportunities to connect manufacturing, logistics, services, and other businesses through international trade.