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47-797: The Bayan Lepas Free Industrial Zone (Bayan Lepas FIZ) is a free trade zone within George Town in the Malaysian state of Penang . Located adjacent to the Penang International Airport and 12 km (7.5 mi) south of the city centre , it is a high-tech industrial park widely regarded as the Silicon Valley of the East . Created in 1972 as Malaysia's first free trade zone, the Bayan Lepas FIZ played

94-642: A business, the right to import parts and equipment without duty, the right to keep and use foreign exchange earnings, and sometimes income or property tax breaks . There may also be other incentives relating the methods of customs control and filing requirements. The rationale is that the zones will attract investment, create employment, and thus reduce poverty and unemployment, stimulating the area's economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing, shoes, and electronics). Free-trade zones should be distinguished from free trade areas . A free trade zone

141-581: A critical role in Penang's economic diversification and is now home to various multinational corporations , including Bosch , Motorola , Dell , Intel and Hewlett-Packard . The 1,400-acre (5.7 km) Bayan Lepas FIZ was the brainchild of Lim Chong Eu , who served as the Chief Minister of Penang between 1969 and 1990, in response to Penang 's economic downturn at the time. George Town , Penang's capital city, had its free port status revoked by

188-514: A source of contention between the Penang and federal governments after Pakatan Rakyat (now Pakatan Harapan ) – which included the DAP – gained control of the state in 2008 . Calls by the Penang state government for further expansion of the PIA were ignored, even though passenger traffic quickly surpassed the airport's new capacity of 6.5 million. The then Chief Minister Lim Guan Eng raised concerns that

235-452: A stop at Phuket . However, the airline has no fifth-freedom rights to transport passengers solely between Penang and Phuket. PIA is the third busiest airport in the country in terms of passenger traffic after Kuala Lumpur International Airport (KLIA) and Kota Kinabalu International Airport (KKIA). The airport experienced its peak passenger traffic of 8.3 million in 2019, surpassing its annual capacity of 6.5 million passengers, before

282-546: Is a specific type of FTZ usually set up in developing countries by their governments to promote industrial and commercial exports. According to the World Bank, "an export processing zone is an industrial estate, usually a fenced-in area of 10 to 300 hectares, that specializes in manufacturing for export. It offers firms free trade conditions and a liberal regulatory environment. Its objectives are to attract foreign investors, collaborators, and buyers who can facilitate entry into

329-456: Is also the second busiest in the country by cargo handled and the highest in terms of export value, with RM365 billion in exports in 2023 . Additionally, the airport is the main hub for local budget airline Firefly and one of AirAsia 's operating bases. The airport, then named Bayan Lepas International Airport , was completed in 1935, when Penang was part of the British crown colony of

376-527: Is an international airport in George Town , the capital city of the Malaysian state of Penang . The airport is located at the southeastern tip of Penang Island , 16 km (9.9 mi) south of the city centre , and serves the country's second largest conurbation . As the main gateway into northwestern Malaysia, PIA is the third busiest airport in Malaysia in terms of passenger traffic, recording nearly 6.8 million tourist arrivals in 2023 alone. It

423-707: Is an incomplete list of multinational firms within the Bayan Lepas FIZ. In 2021 alone, the Bayan Lepas FIZ received almost RM71 billion of investments, about 93% of Penang's total investments that year. An estimated RM295,173 million worth of exports also passed through the Penang International Airport throughout 2021, the largest among all entry and exit points in Malaysia . Free-trade zone The World Bank defines free trade zones as "small, fenced-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

470-593: Is normally established in a single country, although there are a few exceptions where a free zone may cross a national border, such as the Syrian/Jordanian Free Trade Zone. Free trade areas are set up between countries; for example, the Latin America Free Trade Association (LAFTA) was created in the 1960 Treaty of Montevideo by Argentina , Brazil , Chile , Mexico , Paraguay , Peru , and Uruguay ; and

517-660: Is still in operation today. Other free zones to note are the Kandla Free Zone in India, which started in about 1960, and the Kaohsiung Export Processing Zone in Taiwan, which started in 1967. The number of worldwide free-trade zones proliferated in the late 20th century. Corporations setting up in a zone may be given a number of regulatory and fiscal incentives, such as the right to establish

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564-473: The Malaysian federal government in 1969, leading to massive unemployment which peaked at 16.4%. Lim identified the electronics sector as having the best potential to absorb the state's excess semi-skilled workforce. Nearly 1,000 acres (4.0 km) of land adjacent to the Penang International Airport were acquired for the construction of Malaysia's first free trade zone , as well as the adjacent township of Bayan Baru . The Penang Development Corporation (PDC)

611-734: The North American Free Trade Agreement was established between Mexico, the United States, and Canada. In free trade areas, tariffs are only lowered between member countries. They should also be distinguished from customs unions, like the former European Economic Community, where several countries agree to unify customs regulations and eliminate customs between the union members. Free-trade zones have more recently been also called special economic zones in some countries. Special economic zones (SEZs) have been established in many countries as testing grounds for

658-486: The Samurai Eight —were the first multinational companies to set up factories within the zone, followed by several other firms including Motorola and Dell . These firms are also supported by smaller, local-owned enterprises and startups , such as Piktochart . Consequently, the manufacturing sector became one of Penang's largest economic sectors, while the zone itself has been described by the international press as

705-690: The Silicon Valley of the East . The Bayan Lepas FIZ lies next to the Penang International Airport , allowing for ease of exports. This elevated George Town as the top exporter among Malaysian cities . In addition, the FIZ is also connected to the city centre , the Penang Bridge and the Second Penang Bridge via the Tun Dr Lim Chong Eu Expressway and the pan-island Malaysia Federal Route 6 . The following

752-464: The Snake Temple . Phase 3 was partially built on reclaimed land, while Phase 4, the largest and final phase, was completed by the 1990s. The FIZ proved successful in attracting multinational firms and its creation played a vital role in reversing Penang 's economic crisis. Intel , AMD , Hewlett-Packard , Clarion , National Semiconductor , Hitachi , Osram , and Bosch —collectively known as

799-635: The Steelyard in London. The Steelyard, like other Hansa stations, was a separate walled community with its own warehouses, weighing house, chapel, counting houses , and residential quarters. In 1988, remains of the former Hanseatic trading house, once the largest medieval trading complex in Britain, were uncovered by archaeologists during maintenance work on Cannon Street Station. Shannon , Ireland ( Shannon Free Zone ), established in 1959, has claimed to be

846-626: The Straits Settlements . Governor of the Straits Settlements Cecil Clementi had overseen the nascent aviation development in Malaya . Under his administration, aerodromes were built at Bayan Lepas and Kallang , Singapore . The Bayan Lepas airport was constructed on mudflats , which necessitated the installation of concrete runways to ensure all-weather operational capabilities. Kallang airport

893-513: The outbreak of COVID-19 caused global disruptions in air travel. In 2023, PIA recorded nearly 6.8 million passengers, compared to 4.275 million in 2022. The PIA–KLIA route is one of the busiest air corridors in Malaysia, having flown 2.2 million passengers in 2019. Additionally, the PIA– Changi corridor is estimated to be the third busiest among Malaysia's ASEAN routes, with around 300,000 passengers flown throughout 2022. While it processes

940-683: The Alternative Site Framework (ASF) should be considered. The ASF may be an appropriate option for certain Foreign-Trade Zone projects, but the decision of whether to adopt the new framework and what the configuration of the sites should be requires careful analysis and planning. Regardless of the choice to expand the FTZ project, the sites should be selected and the application drafted in such a manner as to receive swift approval while maximizing benefit to those that locate in

987-506: The Seberang Perai airport. Fearing potential backlash from local civil societies and the opposition Democratic Action Party (DAP), Mahathir later relented, stating that the PIA would "still be maintained if investors need it". The PIA was expanded in 1998 to accommodate 3.5 million passengers yearly. The airport was further expanded in 2012, increasing its capacity to 6.5 million passengers per year. Nonetheless, it remained

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1034-530: The UAE. In these Free Zones, investors benefit from maintaining full business ownership and receiving tax exemptions. Some of the benefits of setting up business in UAE Free Zones are: Some Free Zones in UAE are: Kuwait's free trade zone (FTZ) was formally established in 1999 to expand businesses and lure the export industry. The zone was located in the western part of the commercial port of Shuwaikh . It

1081-399: The United States have recently been making use of the flexible opportunities offered by the Alternative Site Framework (ASF) program. The ASF program is designed to serve zone projects that want the flexibility to both attract users/operators to certain fixed sites but also want the ability to serve companies at other locations where the demand for FTZ services will arise in the future. FTZ 32

1128-889: The United States, the Foreign-Trade Zones Board (FTZB), established under the Foreign-Trade Zones (FTZ) Act of 1934, is led by the Secretary of Commerce and the Secretary of the Treasury . In January 2009, the Foreign-Trade Zones Board adopted an FTZ Board staff proposal to make what it called the Alternative Site Framework (ASF) as a means of designating and managing general-purpose FTZ sites through reorganization. The ASF provides Foreign-Trade Zone grantees greater flexibility to meet specific requests for zone status by utilizing

1175-684: The Zone. Successful zone projects are generally the result of a plan developed and implemented by individuals who understand all aspects of the FTZ program. The FTZB approves the reorganization of Foreign Trade Zone (FTZ) 32 under the alternative site framework. The application submitted by its grantee, the Greater Miami Foreign Trade Zone was approved and officially ordered by the FTZB on January 8, 2013. From California to Oklahoma, North Carolina, and New York State, FTZs all across

1222-415: The airport's expansion. In 2024, it was announced that the PIA's expansion will entail the addition of new infrastructure and an upgrade of the main terminal. The expansion aims to increase the aircraft capacity from 16 to 28 at any given time. The Mutiara line , a proposed light rail system expected to be completed by 2030, will also incorporate a station at the airport. : This flight operates with

1269-416: The domestic government pays part of the initial cost of factory setup, loosens environmental protections and rules regarding negligence and the treatment of workers , and promises not to ask payment of taxes for the next few years. When the taxation-free years are over, the corporation that set up the factory without fully assuming its costs is often able to set up operations elsewhere for less expense than

1316-592: The federal government lacked urgency regarding the issue, as it was still considering the proposal for a new airport in Kedah. It was not until 2017 when the federal government announced plans to expand the PIA to accommodate 12 million passengers per year by 2028. While the planned expansion met with delays due to the COVID-19 pandemic , in 2023, the federal government approved an allocation of RM93 million to facilitate land acquisition and infrastructure development for

1363-530: The first "modern" free trade zone. The Shannon Zone was started to help the city airport adjust to a radical change in aircraft technology that permitted longer range aircraft to skip previously-required refueling stops in Shannon. It was an attempt by the Irish government to maintain employment around the airport so that the airport would continue to generate revenue for the Irish economy. It was hugely successful and

1410-578: The first Export processing zones in 1988, aiming to fight the unbalances in the country. First EPZ area in operation was located near of the Port of Pecém in Ceará . Companies in these areas are benefited from tax exemptions and incentives at the ICMS Tax (State Value-Added Tax). Some Brazilian states offer other regional incentives. Companies also can take advantage of a Foreign exchange treatment supported by

1457-506: The implementation of liberal market economy principles. SEZs are viewed as instruments to enhance the acceptability and the credibility of the transformation policies and to attract domestic and foreign investment. The change in terminology has been driven by the formation of the World Trade Organization (WTO), which prohibits members from offering certain types of fiscal incentives to promote the exports of goods, thus why

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1504-971: The import of raw materials or components and the export of factory products, but this is a dated definition as more and more free-trade zones focus on service industries such as software, back-office operations, research, and financial services. Free-trade zones are referred to as "foreign-trade zones" in the United States (Foreign Trade Zones Act of 1934), where FTZs provide customs-related advantages as well as exemptions from state and local inventory taxes. In other countries, they have been called "duty-free export processing zones," "export-free zones," "export processing zones," "free export zones," "free zones," "industrial free zones," "investment promotion zones," "maquiladoras," and "special economic zones". Some were previously called "free ports". Free zones range from specific-purpose manufacturing facilities to areas where legal systems and economic regulation vary from

1551-467: The independence of Malaya , transportation infrastructure throughout the new federation falls under the purview of the federal government . In 1967, the federal government announced an allocation of $ 2.3 million ( Malaya and British Borneo dollar ) to expand the Bayan Lepas airport. The expansion was carried out in the 1970s, during which a terminal building of Minangkabau architecture was built and

1598-560: The law that created the EPZ and proximity of Custom authorities with offices inside the EPZ. China has specific rules differentiating an EPZ from a FTZ. For example, 70% of goods in EPZs must be exported, but there is no such quota for FTZs. The world's first-documented free-trade zone was established on the Greek Island of Delos in 166 BCE. It lasted until about 69 BCE when the island

1645-522: The minor boundary modification process. The theory of the ASF is that by more closely linking the amount of FTZ-designated space to the amount of space activated with Customs and Border Protection, Zone users would have better and quicker access to benefits. When an FTZ grantee evaluates whether or not to expand its FTZ project in order to improve the ease in which the Zone may be utilized by existing companies, as well as how it attracts new prospective companies,

1692-454: The normal provisions of the country concerned. Free zones may reduce or eliminate taxes, customs duties, and regulatory requirements for registration of business. Zones around the world often provide special exemptions from normal immigration procedures and foreign investment restrictions as well as other features. Free zones are intended to foster economic activity and employment that could occur elsewhere. An export-processing zone ( EPZ )

1739-410: The runway extended to accommodate Boeing 747s , then the largest passenger jet aircraft. Upon the completion of the expansion works in 1979, the airport was renamed Penang International Airport (PIA). The airport's new terminal increased its annual passenger capacity to 1.5 million. The development of the adjacent Bayan Lepas Free Industrial Zone enhanced the PIA's role as a logistics hub. However,

1786-540: The surging cargo tonnage resulting from industrial demand prompted the Penang state government , under Chief Minister Koh Tsu Koon , to propose a new, larger airport in Seberang Perai in 1993 to accommodate the increase in air traffic. In 1997, then Malaysian Prime Minister Mahathir Mohamad announced plans to build a new airport in neighbouring Kedah and close the PIA, overlooking Koh's earlier proposals for

1833-668: The taxes to be paid, giving it leverage to take the host government to the bargaining table with more demands, but parent companies in the United States are rarely held accountable. Political writer Naomi Klein has also criticized the transient nature of FTZs, noting the factory closures connected to the 1997 Asian financial crisis . She criticized the low wages and long hours, citing workdays of twelve or more hours in Indonesia, Philippines, Southern China, and Sri Lanka circa 2000. Penang International Airport Penang International Airport ( PIA ) ( IATA : PEN , ICAO : WMKP )

1880-463: The term Export Processing Zone (EPZ) is no longer used with newer zones. For example, India converted all of its EPZs to SEZs in 2000. In 1999, there were 43 million people working in about 3,000 FTZs spanning 116 countries and producing clothes , shoes , sneakers , electronics , and toys . The basic objectives of economic zones are to enhance foreign exchange earnings, develop export-oriented industries, and generate employment opportunities. In

1927-663: The time, the airport served both civilian air traffic and the Royal Air Force (RAF). At the onset of World War II , the Straits Settlements imposed regulations to manage air traffic in Penang, designating specific corridors for aircraft overflying the colony. The Bayan Lepas airport, along with the Butterworth air base , was subjected to aerial attacks by Japanese forces in December 1941. Following

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1974-889: The world market for some of the economy's industrial goods, thus generating employment and foreign exchange". Most FTZs are located in developing countries ; Brazil , Colombia , India , Indonesia , El Salvador , China , the Philippines , Malaysia , Bangladesh , Nigeria , Pakistan , Mexico , the Dominican Republic , Costa Rica , Honduras , Guatemala , Kenya , Sri Lanka , Mauritius , and Madagascar all have EPZ programs. In 1997, 93 countries had set up export processing zones, employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people. In Brazil, 25 Export-Processing Zones have been authorized in 17 states, and 19 of them have been implemented. Brazilian government launched

2021-555: Was founded in 1979 and processes over $ 1 billion in goods with products from more than 65 countries and exported to more than 75 countries worldwide with speed and efficiency. According to the official order from the FTZB, FTZ 32 existing site 1, Miami Free Zone, will be classified as a magnet site. Due to growing business opportunities in the United Arab Emirates (UAE), the UAE government has introduced 'Free Zones' to make it easier for foreigners to invest and operate in

2068-621: Was overrun by pirates. The Romans had many civitas libera , or free cities, some of which could coin money, establish their own laws, and not pay an annual tribute to the Roman Emperor . These continued through at least the first millennium CE. In the 12th century, the Hanseatic League began operating in Northern Europe and established trading colonies throughout Europe. These Free Trade Zones included Hamburg and

2115-459: Was regarded as the "finest" in the Far East at that time, while the Bayan Lepas airport was perceived as Malaya's "second airport", enjoying advantages such as closer proximity to Indochina and East Asia compared to Kallang. As early as 1938, the Straits Settlements government estimated that an additional 10 acres (4.0 ha) was necessary for the expansion of the Bayan Lepas airport. At

2162-705: Was tasked with the construction of both the zone and the township. To attract multinational corporations to the zone, the Free Trade Zones Act was enacted by the Malaysian federal government in 1971 and pioneer tax incentives were offered. The first phase of the FIZ, covering an area between the airport, Jalan Sultan Azlan Shah and the Keluang River, was opened in 1972. The zone has since been expanded and developed in phases. Phase 2 encompasses an area between Jalan Sultan Azlan Shah, Bukit Gedung and

2209-501: Was the only free trade zone in the country. In 2019, the Council of Ministers cancelled the free-zone, leaving Kuwait without a special economic zone. Aberdeen Group research published in 2013 noted that best-in-class companies make strategic use of free-trade zones as a means of reducing inbound trade costs, shortening import timescales, and optimising the balance of their corporate sourcing and operational activities. Sometimes

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