Uganda mulls free zones to stem rising unemployment

As Ugandan government mulls tackling the rising youth unemployment and roping in more people into the money economy, it is looking at free zones to reach this target.  And in a bid to establish 10 free zones by 2020, it is burning the midnight oil to finalize a strategic plan that will guide the implementation of the zones.

“Our target is to set up two public free zones and to lead the private sector in establishing eight more by 2020. These free zones will have a cumulative capacity to generate $1 billion a year and $100m in exports. In addition, the free zone will boost the country’s capacity to create jobs by enabling the creation of 2500 new direct jobs while facilitating the creation of an additional 500,000 jobs indirectly,” said Richard Jabo, the Executive Director, Uganda Free Zones Authority.
A free zone is an area within a country where licensed manufacturers and or trader’s imported goods can be stored or processed without being subjected to import or export duty.

Jabo said the free zones, for the case of Uganda, will be suited in customs areas within the country and that 80% of what is produced in the Free Zone will be for exports.  The free zone will among other things provide for a comprehensive package of incentives for holders of Free Zone Developer, Operator or Manager Licenses which include: exemption from taxes and duties on all export processing imported raw materials and intermediate goods, machinery and equipment, spare parts, for exclusive use in the development and production of output for the business enterprise.

In addition, the Free Zone will provide unrestricted remittance of profit after tax, tax holiday for 10 years on finished consumer and capital goods, 100% exemption from tax on income from agro-processing, 100% exemption on income derived from the operation of aircrafts in domestic and international traffic or the leasing of aircraft, exemption on plant and machinery used in the free zones for 5 years and 1 day from Customs duty upon disposal, exemption from all taxes, levies and rates on exports from the free zones namely excise duty and Customs taxes; 100% exemption from tax on income of a person offering Technical Assistance under a Technical Assistance Agreement; Exemption from import duties and taxes on all goods entering a free port zone; VAT exemption on supply of selected services e.g. medical services, social welfare services, power generated by solar; Exemption of Withholding Tax on petroleum, petroleum products, plant and machinery, human or animal drugs and supply/importation of raw materials.

Jabo said these incentives will allow investors to produce and or, process large quantities and better quality goods at a relatively competitive lower cost for the export market. In the process, this will promote export growth and diversification by creating forward and backward linkages, enhance technology transfer and skills development, accelerate economic growth, facilitate job creation, as well as boost investment.