Free Zones Bill 2012 The Parliament of the Republic of Uganda passed a Free Zone Bill in December, 2013;

the main objective being for the modernization of the investment infrastructure in Uganda. A free trade zone is an area specially designated by the government where goods are manufactured or assembled and services are offered under special rules of practice that make the produce of such goods or services cheaper and more accessible. The Free Zone is defined by the Bill as a designated area where goods introduced into the designated area are generally regarded, so far as import duties are concerned, as being outside the customs territory and includes exports processing zones or free port zones. This means that the goods that land in that designated area, or are manufactured and sold or re-exported are not subjected to customs duties and other rules of production that would apply outside the zoned area. The free trade zones belong to a larger type of framework known as the Special Economic Zones (S EZs). There are 4 main frameworks of the SEZs: First the Export Processing Zones are areas zoned for exportoriented manufacturing or service provision. In the export processing zones, only production intended for export are supported. Raw materials for manufacture are not taxed; often the labor laws are more relaxed so that there is cheap labor for production that in turn makes the costs of the exports lower and more competitive. The second framework is the Manufacturing Under Bond also known as industrial estate or industrial park. These are areas zoned and planned for the purpose of industrial development regardless of whether the production is for export or domestic use. Thirdly the Technology Parks are gazette areas for development and/or manufacture of computer hardware and software. Lastly, Tourist Parks are those operated for the purpose of supplying tourist units for a fee. In general, SEZs are exempt from domestic laws that would apply to all manufacturing and production of goods and services in the country. For example, laws regarding domestic and import taxes may not apply in a SEZ. Tax breaks may also be given for manufactures or service providers operating in the zoned area; this encourages the set up of manufacturing plants in that area which in turn will increase development of that area. Many SEZs also have relaxed labor laws in order to promote employment in the area. With the increase of cheap labor, the production cost of manufacturers and service providers is considerably lower. Furthermore, many typical export processing zones are normally located near the transport nodal points for example, near a sea port. Raw materials intended to be used at that zone for re-export are not charged import taxes so the cost of the final product is lower. The SEZs in their traditional frameworks are quite restrictive; therefore the Free Zone Bill intends to create an umbrella (non-specific) zoning within a flexible framework that will encourage development, increase export

and provide employment as well. In particular, the Bill provides for two frameworks; the Export Processing Zones and the Free Port Zones. How it would work financially able developers make detailed proposals to the Bureau for a specific area that they would want to establish into either an export processing zone or a free port zone. The proposal would include the structures to be set up like ware houses, factory facilities for hire, security systems to mention but a few. Once the Bureau grants a license to one or two developers, the establishments are set up in the zoned area and licenses granted to every producer, exporter or business person looking to operate in the zoned area. In general the free zones can be in the form of agro-industrial, industrial, tourism, technology, banking or financial areas. The exemptions granted by the Bill would apply to the zone depending on the type of zone operated. The implications of the Free Zone Bill if passed into law are massive. The Bill provides that the free zone will be controlled both by a Bureau made up of the board of Uganda Investment Authority in collaboration with the Uganda Revenue Authority. This Bureau will set the operational rules of the zone, and the developers to ensure that the zones are operating in accordance with the set rules of procedure. Each zone will be established by a developer either a local or a foreigner but has to be a company incorporated in Uganda only for the purpose of developing a free zone. The Bureau grants each developer a license to establish the zone; the developer shall provide startup capital and assets for establishing the zone, commencement of activities as well as other conditions for the proper functioning of the zone. For example, facilities to protect environment, energy sources, a perimeter wall zoning the area and security. The developer undertakes to manage the zone at a fee paid by the investors and manufacturers. As managers of the zones, the developer(s) will grant licenses to operators. The operators are the business men and manufacturers who wish to run their business or production at the zones. All the activities of the zones will be subject to customs supervision by the officials of Uganda Revenue Authority. The tax laws of Uganda including the East African Community Customs Management Act shall provide the tax related incentives for operation of the zones. In conclusion, the Free Zone Bill will promote both domestic and foreign investment or establishments which will increase employment opportunities and household incomes in turn bringing about economic development internally, moreover increasing at the overall the countrys exports. Jacquiline Pimer - for comments jpimer@eactpol.org The writer is the Executive Director of the East African Center for Trade Policy and Law (eactpol). Eactpol is a trade policy think tank, whose objective is to encourage deeper and wider appreciation of the importance of trade and to bring East African perspectives and global insights to shape the landscape of Trade policy and Law.