Free Trade Zone

Free Trade Zone(FTZ)

A free trade zone (FTZ), also called foreign-trade zone, formerly free port, is an area within which goods may be landed, handled, manufactured or reconfigured, and re ex ported without the intervention of the customs authorities. This is not to be confused with an "Export Processing Zone" (EPZ) which is actually a type of free trade zone (FTZ), set up generally in developing countries by their governments to promote industrial and commercial exports. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free-trade zones are organized around major seaports, international airports, and national frontiers areas with many geographic advantages for trade.

The world's first Free Trade Zone was established in Shannon, Ireland (Shannon Free Zone). This was an attempt by the Irish Government to promote employment within a rural area, make use of a small regional airport and generate revenue for the Irish economy.

Malaysia 's objectives in negotiating FTZ are to:

1.       Seek better market access by addressing tariffs and non-tariff measures.

2.       Further facilitate and promote trade, investment and economic development.

3.       Enhance the competitiveness of Malaysian exporters.

4.       Build capacity in specific targeted areas through technical cooperation and collaboration.

 Malaysia has established FTZ with the following countries:

1.       Japan

2.       Pakistan

3.       New Zealand

4.       India

5.       Chile

6.       Australia.

Malaysia has 11 free-trade zones, established as areas where manufacturing companies can produce and/or assemble imported products. Customs controls in these zones are minimal, and all machinery and raw materials and components used in the manufacturing process may be imported duty free.

Of the 11 zones, four are in the state of Penang, three in Selangor, two in Melaka, and two in Johor. They are administered by the states within which they are located. In order to operate in a zone, a company must export at least 80 percent of its output.

Malaysia also has two free ports, Labuan Island, off the coast of the state of Sabah, and Langkawi Island, off the coast of the state of Kedah. Labuan is the location of several industries based on the petroleum industry; Langkawi's development is based primarily on tourism. In 1989, the Malaysian government made Labuan a tax haven and international offshore center, thus making the island a center for off shore banking and insurance, trust fund management, offshore investment holding and licensing companies, and other offshore activities carried out by multinational corporations, excluding dealings in petroleum or shipping. Income from offshore non trading activities is tax exempt, and taxes on income from trading activities based there is taxed at a rate of three percent of net profits or Rm20,00000 million maximum per year.

Free Trade Zone In Malaysia:

·         Johor Port

·         Tanjung Pelepas Port

·         Pelabuhan Kuantan

·         Tanjung Keling

·         Batu Berendam

·         Teluk Panglima Garang

·         Ulu Klang

·         Sungai Way

·         Prai Whraf

·         Prai

·         Bayan lepas