World FZO Conference: Domestic Companies must be Well-integrated into Global Value Chains for Greatest Impact

Drawing government officials, policy makers, global economic experts and academics, a discussion on Governance in Global Value Chains began the panel sessions at the 2nd annual World Free Zone Organization Conference and Exhibition taking place under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.

The panel discussion focused on the evolution of Global Value Chains (GVC) in an increasingly interdependent world. 

Moderated by Patrick Low, Professor, The Asia Global Institute, Hong Kong, the session drew the participation of Ahmed Al Ansari, Deputy Chief Operating Officer, Dubai South, Robert Koopman, Chief Economist and Director of the Economic Research and Statistics Division, World Trade Organization, Karina Fernandez Stark, Senior Research Analyst, Duke University and Henry Yeung, Professor of Economic Geography, National University of Singapore.

Opening the session, moderator Patrick Low said: “Free zones are like a turbo charged open investment policy. As a focused, location-specific incentivized business environment, a free zone seeks to attract export-oriented investment through measures and facilities such as limited or zero restrictions on equity ownership, privileged fiscal treatment, including possibly zero indirect and direct taxation, minimal procedural red tape and high quality infrastructure, among other things - making it an ideal candidate for engagement in GVCs.”

The session panelists agreed that in order for free zones to effectively contribute to GVCs, it is crucial for domestic firms to be integrated into these free zones to the extent possible. 

Speaking on the topic, Henry Yeung said: “There needs to be a focus on the idea of strategic coupling, which is to think of how domestic firms can couple with the competitive imperatives of global firms in global production networks. It is equally important to encourage the collaboration between foreign firms and domestic firms. These linkages need to be developed as they grow local SMEs into significant players in the global economy.” 

Yeung cited production platforms, industrial specialization of free zones, and government investment to grow specific domestic firms as methods to develop the position of domestic firms within GVCs.

Concurring with the viewpoint, Karina Fernandez said: “These free zones are a laboratory, a tremendous opportunity for domestic firms to link with GVCs. If done well, this is an opportunity and platform for local companies to be engaged in the global value chain in a way that they have not been able to in the past.” Arguing that domestic firms do not always have access to the same resources and knowledge as global firms, which can set them back, she suggested this could be rectified through government incentives and programs that help domestic firms to engage at the same levels as their global counterparts.

Elaborating on this point, Robert Koopman spoke about the role of free zones within the larger economy. He said: “One of the important aspects is to not treat trade zones as separate from the rest of the economy. You want to be able to have the entire domestic economy benefit from these lower trade costs. The World FZO is very focused on integrating the free zones with the domestic economy and effects of reducing those trade costs in free zones in order to have a positive impact on the economy as a whole.”

Ahmed Al Ansari cited Dubai as an example of an economy that has successfully integrated domestic firms into GVCs through effective free zones. He said: “There is a lot of collaboration between the domestic firms and free zones in Dubai - we are doing really well in this field.”

Speaking about the conditions that have fostered the success of the Dubai’s Free Zones, Al Ansari said: “To begin with, our geographical location is ideal for attracting investment to the UAE. In addition, we have a strong physical infrastructure in terms of airports and sea ports that significantly aids in reducing trade times for companies. Along with this, the amount of clemency and transparency provided for any company that wants to set up here facilitates the ease of doing business. We listen carefully to our customers and understand that time, cost and infrastructure are very important for them and our model is all about this time and cost saving.” 

The conference and exhibition runs until May 11 at the Grand Hyatt Dubai. The 2016 edition has attracted the participation of international free zones, multi-lateral and commercial organizations and will facilitate an open dialogue, towards developing a vision for the free zone of the future.

The three-day conference and exhibition includes five panel discussions and six workshops. The discussions focus on key challenges facing free zones today and the most significant opportunities they have ahead of them towards shaping a dynamic environment that supports the growth of this pivotal economic sector. Prominent topics of discussion include beyond best in class practices, policies and their implications in global value chain, as well as the opportunities in global value chain for free zone of the future and the perspective of multinational corporations with regard to global value chain, among others.