UK freeports failed 30 years ago, and they may well fail today. Prime minister Boris Johnson believes they could create thousands of jobs and “turbocharge” the economy, particularly in the north of England. This might just be electioneering, however. Freeports are no silver bullet for an economy that, despite elements of success, faces chronic productivity problems. However, they can be part of a concerted solution to reboot its business proposition. From that perspective, design will be key. There are thousands of freeports (or free zones) across the globe, and gaining a competitive edge over competitors has never been harder. Mr Johnson must think outside the box, and he may find valuable food for thought right at the heart of the Amazon jungle.
Established in 1967, the Manaus Free Trade Zone (MFTZ) offers investors preferential access to the Brazilian market, particularly in the form of up to 88% exemption on import taxes on raw materials for industrialisation, and exemption on a tax on industrialised products bound to the domestic market. Fifty years on, the MFTZ generated revenues for 81.94bn reais ($20.2bn). Its tenant list features the likes of Coca-Cola, Samsung, and Honda, all manufacturing goods in an area that used to be considered a no-go for industrial development, mainly for geographical reasons.
Manaus is an unconventional blueprint for the UK government to follow. Export-oriented UK freeports will struggle to compete with more convenient and better developed and located free zones in Central and Eastern Europe. However, if policymakers design freeports with a clearer domestic mandate, investors will be keen to consider areas offering preferential access to the sixth largest market in the world. Besides, Mr Johnson and his team can learn from the experience of dozens of other free zones across the globe to pilot the development of goods and services able to meet the needs of industry 4.0, ecommerce, the internet of things and sustainable development within freeports. Top-notch UK universities and research institutions will feed the human capital necessary for them to become cradles of innovation like it is happening in free zones in Shanghai, Dubai and Bogotá.
The UK will have to reboot its investment offering once it leaves the EU. Resuscitating UK freeports alone will not be enough, unless Mr Johnson draws from international experiences to find their right value proposition. The example of Manaus can point him in the right direction, but it will take political effort to explore that unlikely Brazilian connection and adjust it to the reality of the north of England. Mr Johnson has never shied away from bold statements. His post-Brexit policymaking must be equally bold.
Jacopo Dettoni is deputy editor of fDi Magazine. Email: firstname.lastname@example.org