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22 May 2013

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Asia-Pacific Publications Catalogue 2011

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Free Trade Zone and Port Hinterland Development

Author(s): Transport Division (TD)

Economic Sector(s): (1) Transport policies and planning; (2) Water transport and shipping

ESCAP Reference No.: ST/ESCAP/2377

Division/Office: Transport

Published Date: 2005

Country: {Non-country Specific Publication}

Hard Copy Price: Free

The roots of Free trade zones (FTZs) can be traced back to more than 2,000 years ago, today there are over 850 zones and the number continues to increase. Their main role can be summarized as: to attract foreign direct investment (FDI) to pay for the construction cost and salaries of its citizens to build and service business.

With the advent of globalisation and the movement of goods and services to the place of least cost, countries need to find ways of attracting new businesses whilst retaining existing clients.

Logistics centres are a means to achieving this. This report looks at examples of FTZ from around the world and sees how the concept of logistics centres can be applied in practice. A through overview of the port industry is given as well as recent trends in logistics.

The report concludes that the traditional import/export port needs to move into one of two markets, or a combination of both; these markets are transhipment or logistics centres. The report identifies that an optimum enabling environment needs to be created that is service orientated, largely free of bureaucracy and has excellent connectivity both physically and electronically between all stakeholders. Where the optimum enabling environment cannot be implemented nationwide, the creation of a FTZ is a first step to attracting funds necessary to finance this change.

The report concludes with a summary of the key guidelines for policy makers to consider in the transition from an traditional import/export port to a logistics centre port.

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Executive Summary			ix
Chapter 1		Introduction	3
	1.1	Background of the study	3
	1.2	Objectives	4
	1.3	Report structure and contents	4
Chapter 2		General concepts: FTZ and port hinterland	5
	2.1	Historical background and evolution	5
	2.2	The free trade zone: Terminology and definitions	5
	2.3	The primary goals of free trade zones	7
	2.4	Categorizing free trade zones	8
	2.5	Characteristics of FTZs	9
	2.6	Definition of port hinterland	14
	2.7	Port and port hinterland development models	17
	2.8	External environment for development of the port and logistics industry	18
	2.9	Implications of logistics-oriented FTZs and port hinterland development	21
	2.10	FTZs and other special zones for economic development	25
Chapter 3		The port industry	27
	3.1	Challenges and emerging issues in port development	27
	3.2	Development of container ports	27
	3.3	Hub and spoke network in liner service	28
	3.4	Port reforms, privatization, new roles	31
	3.5	Emergences of global container terminal operators	35
	3.6	Hub ports and logistics centres	37
Chapter 4		Recent developments in FTZs and port hinterlands in Asia and Europe	45
	4.1	FTZs in Asia	45
	4.2	Singapore	46
	4.3	China	50
	4.4	Introduction to bonded logistics zones	65
	4.5	The Republic of Korea	68
	4.6	Europe in general	72
	4.7	Case Study: Belgium	77
	4.8	Case Study: The Netherlands	81
Chapter 5		Implications of WTO’s agreement for logistics FTZs	87
	5.1	Overview of WTO agreements	87
	5.2	The SCM Agreement (Definition of subsidy)	88
Chapter 6		Strategic practices in business	95
	6.1	Globalization	95
	6.2	Creating competitive advantages: Order qualifiers and winners	96
	6.3	Locating businesses	98
	6.4	Managing the modern supply chain	102
	6.5	21st Century taxation and supply chain management	105
	6.6	Reverse logistics	106
	6.7	Conclusions	106
Chapter 7		Best practices and policy guidelines	109
	7.1	Introduction	109
	7.2	Some arguments used against FTZs	109
	7.3	Arguments in favour of FTZs	110
	7.4	Planning for success – policy guidelines	114
	7.5	Strategy for establishing government policy on logistics FTZs	120
	7.6	Conclusion	123

References			125

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