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The Free Zone Concept
Free Zone as a Catalyst for Economic Growth
and Development.
Oil and Gas as Nigeria’s Area of Comparative
Advantage.
Oil and Gas Free Zones as a Panacea for Some
of Nigeria’s Immediate Problems.
The Role of The OGFZA
The Way Forward.
Conclusion.
Free Zone Concept
By definition, a Free Zone is described as a
designated enclave or a geographical
territory within a country which is
administratively deemed to be outside the
customs area, within which national
regulations related to trade, finance and
other economic activity may not be
applicable or partially applicable.
Free Zone Concept
Ingredients of Free Zones
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Incentives
Use of Area of Comparative Advantage.
Strong Infrastructural Base.
Consistency of Policy/Strong Legal Framework.
Clear and Unambiguous Government Intentions.
Free Zone Concept
General Incentives
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Tax Breaks
100% repatriation of capital investment
100% Remittance of profits and dividends
No import or export licenses required
100% of FZ goods can be sold in Nigeria
100 % foreign ownership of business allowed
Duty Free Stock * Equipment * Spare Parts * Pipes
Immigration Incentives
75% Duty Rebate
Etc .
 Based
on national or other interests,
certain incentives may be given to attract
specific types of investments. – The
infiniun example of malaysia.
Free Zone Concept
A Country’s assets best represents their area of
comparative advantage
 Most Countries globally have capitalised on using their
areas of comparative advantage in setting up Zones
 Examples include Nigeria focusing on oil and gas; South
Africa, Mauritius and Kenya with Free Zones focusing on
Textile – a primary agricultural produce; Kenya
additionally has Free zones focused on Tourism etc
 Several Countries including India, Ireland, Malaysia etc
have applied the Free zone concept to initiatives that
take advantage of an available, quality labour force
 Setting up any successful Free Zone initiative is a well
thought out and strategic process stating objectives and
a plan on how to achieve these objectives
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Free Zone Concept
STRONG
INFRASTRUCTURAL BASE
Power
Telecommunications
Transport
Network
(roads, rail,air)
Etc.
Free Zone Concept
CONSISTENCY OF POLICY/STRONG LEGAL
FRAMEWORK.
• Investor confidence is paramount in the
attraction of FDI, therefore consistency in
policy is important.
• Strong Legal Framework is a prerequisite for
consistency in policy.
• Therefore the role of Legislation can not be
overemphasized.
Free Zone Concept
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Attraction of Foreign Direct Investment (FDI)
Capital Growth
Employment Opportunities
Technology Transfer
Skills Acquisition
Revenue Generation
Increased exports
Trade facilitation and support
Industry diversification (primary industry attracts secondary
industries which support it’s operations)
• Promote Foreign Exchange Earnings
• Provision of Efficient and Cost Effective Services
• Act as a hub for Sub-Saharan African Region
Free Zone Concept
FACTORS INFLUENCING SUCCESS
OR FAILURE
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Leveraging on the comparative advantage a
Nation possesses within the global economy
when setting up any Free Zone initiative
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Policy and incentives framework
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A strong, sound legal and regulatory framework is
crucial
Consistency in policy required for Investor
confidence as FZ projects are typically long term
Government Support for project
THERE IS NO
DEVELOPMENT
WITHOUT
INVESTMENT
IMPORTANCE OF INVESTMENT
 Investments provide jobs and contribute
significantly to economic growth and
development
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Provides a needed platform for industrialisation
Technology transfer, skills acquisition,
capital
growth, infrastructure, use of local raw
materials,
 Government meeting all demands for job
opportunities is a myth without investment
 Every Nation need investments to grow and
prosper
 The most developed Nations are always in
competition to ensure inward investment flow
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Republic of Ireland
Singapore
Turkey
UAE
Malaysia
China
India
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Population
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4,460,000
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GDP 2008
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$ 226 billion
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GDP per capita:
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$51,128
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Total Land Area
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27,133 sqkm
Population
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4.49 million (2009 statistics)
GDP
2008
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S$ 239 billion
2009
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S$ 209 billion
GDP per capita: -
2006 S$ 51,226 (Highest in the world)
Annual growth -
7.9%
Home to Shell’s largest oil refinery = 450,000 b/d.
Home to numerous refineries and petrochemical industries
(Jurong Island).
Trillion dollar economy
 Stable currency – Rupee becoming stronger
 9.4 % GDP growth
 Per capita Income Rs. 29382
 Life expectancy - 65 years
 Foreign exchange reserves – over $ 200 billion
 Literacy rate - > 67%
 25% growth on IT Sector exports
 Potential R & D hub
 Fastest growing outsourcing Industry
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Malaysia: Economic Growth
Independence
- 1957
Natural resources
– oil, gas, tin, timber, rubber,
palm oil.
GDP growth
– 5.8%
Export of manufactured goods – 76.7% of total
exports
Adopted a New Economic Policy utilizing Free Zone
concept in 1982.
Aspiring to be First World Nation by 2020.
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The growth of customs-supervised zones in China is
the significant part of China’s economic development.
In 2006, the total import & export values
accomplished by free zones, export processing zones
and bonded logistics zones in China amounted to
US$205.26 billion, with per area import & export
volumes touched US$2.57 billion. There are 724,800
personnel being employed. They have grown to be the
most active areas in terms of foreign trade.
One of the most successful SEZ – Shenzhen of China
(1980s) has developed from a small village into a city
with a population of over 10 million within 20 years.
GDP annual growth rate exceeding 10%. In 2006,
China’s GDP ranked the fourth in the world, and the
import & export values reaching US$1760 billion,
ranking the third globally.
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According to the International Monetary Fund (IMF) and the Bank for International
Settlements:
◦ the UAE economy now ranks the second largest economy in the Arab region,
larger than that of either Egypt or Algeria.
◦ Only the gross domestic product (GDP) of Saudi Arabia outweighs that of the
UAE.
Diversified economy to diminish reliance on oil revenue.
Has developed into region’s Premier International Business Centre.
Serves as the biggest re-exporting exporting centre in the Middle East.
Third largest export & re-export centre after Hong Kong & Singapore.
Three highly successful, specialized Free Zones of international distinction.
Success of Jabel Ali Free Zone (hosts largest man-made port) allowed the city to
replicate its model to develop clusters of new Free Zones.
In more recent years, they have become a major venue for a number of growing,
profitable industries & activities such as meetings, conferences, exhibitions,
tourism, banking, finance, Industrial Consultation, information & communication
technology, light & medium manufacturing.
GDP 2006: USD 46 billion
Economy built on the back of oil & gas but currently oil & gas accounts for less
than 3% of the Emirates revenue.
Increasingly developing as a hub for service industries such as IT & Finance with
the establishment of a new Dubai International Financial Centre (DIFC).
Government has set up industry specific free zones throughout the city including
Electronic Commerce & Media Free Zone Authority which houses IT firms such as
Oracle Corporation, Microsoft, IBM & Media firms such as CNN, Reuters, MBC.
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Nigeria is the world’s seventh largest oil
exporter.
With oil reserves of about 40 billion barrels.
Gas reserves estimated to be in excess of 180
trillion cubic feet.
What impact has producing oil and gas had
on the living standards of the people in the
region?
OIL AND GAS AS NIGERIA’S AREA
OF COMPARATIVE ADVANTAGE (CONT.)
Nigeria expends between $10-$15billion USD annually
in the exploration and exploitation of oil and gas.
 Even today with the Nigerian/local content policy of
Government less than 25% of this is retained within
the Nigeria economy (NNPC figures).
 The oil and gas industry employs less than 3% of the
Nigerian labour force.
 Government target for Nigerian content are 45% by
2006 and 70% by 2010.
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OIL AND GAS AS NIGERIA’S AREA
OF COMPARATIVE ADVANTAGE (cont.)
 Downstream:
 Petroleum Marketers Association
 USD10b expended annually importing PMS
alone
 Only oil producing nation in the world
that imports refined products
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A visit to the Oil and Gas Free Zone in Onne
will convince skeptics that the Free Zone can
help resolve some of our immediate problems.
Over 140 companies currently do business in
Free Zone.
Over 30,000 people are employed directly and
indirectly by the activities of these companies.
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It is a specialised Free Zone dedicated to the
oil and gas industry.
Combines effectiveness of private sector with
support from the Federal Government.
It is designed to maximize the comparative
advantage of Nigeria to FDI in the oil and gas
sector.
It is also a launching pad for growth in other
sectors of the economy.
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It is today recognised as a key incubator of
the Nigerian content policy.
It is key to the following:
Job Creation
Transfer of Technology
Acquisition of Skills
Promotion of Export and Foreign Exchange
Earnings
Etc.
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It is therefore a solution to some of the most
pressing problems of Nigeria today.
As a country of over 150,000,000 people with
institutions graduating well over 200,000
youths annually who are thrown into the job
market it is important that interventionist
measures are taken to create jobs for these
teaming youths.
The Free Zone Concept as applied to Oil and
Gas is one of these measures.
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The Niger-Delta problem which has taken
centre stage today is primarily as a result of
youth unemployment.
If the Free Zone Concept is properly applied
to Oil and Gas it will retain a sizeable chunk
of the $10-$15 billion USD that is taken out
of our economy annually thereby increasing
our local content and injecting desperately
needed funds into our economy.
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Nigeria’s biggest problem today is the huge
percentage of our income that is spent
importing refined petroleum products.
Unknown to many of us Oil and Gas is a very
important raw material and its use is not
limited to powering generators and driving
cars.
Oil and Gas Free Zones as a Panacea for
Some of Nigeria’s Immediate Problems
(cont.)
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Over 6,000 products can be identified as
made from petroleum
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Exportation of mineral resources in it’s raw
form
– Undermines industry
– Undermines job creation
– Undermines the availability of raw materials for
secondary industries
– Undermines transfer of technology
– Contributes to fuelling social ills
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Our goal should therefore be to add value to
our greatest resource which is one of the
most important raw materials known to man.
The quantum effect of this will totally
transform our economy in little or no time
and help to resolve most of the problems we
are experiencing as a nation .
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We at the Oil and Gas Free Zone Authority
have coined the phrase “small is good for
Nigeria”.
That is reference to the establishment of
modular refineries which we believe will help
to reduce our dependence on imported
refined products.
Role Of The Oil & Gas Free Zone Authority
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In the Management of Free Zone growth
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Providing strategic direction for investments into oil & gas
free zones ( Onne and Warri ).
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Propose incentives and advantages relative to the current
business climate to facilitate the attraction of investments
Prescribe activities which may be carried on at the Zone
Ensure job creation
Promotions/Marketing (Investment Drive)
• Promoting the Nigerian economy as a suitable destination
for FDI
• Promoting Nigerian Oil & Gas Free Zones as
professionally serviced business/industrial sites with the
right investment climate
Role Of The Oil & Gas Free Zone Authority
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Administration
 Ensure Free Zone advantages/privileges reach Clients in
the Zone
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Interface between Free Zone Clients and other
Government Agencies
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Provision of utilities, access roads, security
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Resolution of disputes
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Liaison between Investors & Community
The Way Forward
The Vision
 Ikpokiri Island as a Giant Industrial City
 The State’s new industrial base.
 A one-stop-shop location comprising industries and
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factories, offices, conference location/summit centres.
Providing linkages from oil & gas to other sectors of
industry.
Support the thriving of small & medium sized enterprises.
Hotel Services
Residential Services
Recreational facilities
Sports Centre
Shopping Malls
Offshore Banking.
The Way Forward
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Land Acquisition to be completed to enable
master planning and interested investors
start off developmental plans
Access Bridge for Ikpokiri to be put on
Federal Government budget
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The Oil and Gas Free Zone Onne is recognised world
over as one of the most successful in the application
of Free Zone concept.
It has impacted positively on the Nigerian economy.
However, opportunities exist for even greater
achievements/successes.
Opportunities exist to utilise the Free Zone Concept to
further improve on the Nigerian Content in the Oil and
Gas Industry thereby increasing employment of our
teeming youths in this sector.
Value addition as discussed above is the key to
Nigeria’s economic transformation.
Thank You