The first phase of a Chinese-built Free Trade Zone – billed as Africa’s largest – opened Thursday in Djibouti. The nearly 50sqkm zone will house manufacturing and warehouse facilities, an export-processing area and a services centre.
It’s expected to handle trade worth $7 billion within two years, and create 15,000 jobs when complete. With a strategic location on the Gulf of Aden, Djibouti already handles most imports for neighbouring Ethiopia, and aims to become a gateway to South Sudan, Somalia and the Great Lakes region.
The zone forms part of China’s new chain of infrastructure investments in 60 countries. China already has a military base in Djibouti, as does the United States.
What is a Free Trade Zone?
A free-trade zone (FTZ) is a specific class of special economic zone. It is a geographic area where goods may be landed, stored, handled, manufactured, or reconfigured, and re-exported under specific customs regulation and generally not subject to customs duty. Free trade zones are generally organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade.
The World Bank defines free trade zones as “in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipment, and re-export operations.” Free-trade zones can also be defined as labor-intensive manufacturing centers that involve the import of raw materials or components and the export of factory products, but this is a dated definition as more and more free zones focus on service industries such as software, back-office operations, research, and financial services.