The idea of free ports comes from overseas. Governments in various countries have created special economic zones with a maximum degree of openness in order to achieve certain policy goals. Some even consider free ports to be beyond the national territory, or have created special laws which place these zones outside domestic law, and especially outside of domestic tax and customs regulations. When you add in the fact that they offer greater efficiency in warehousing and shipping of goods, and can also handle basic manufacturing and processing, the zones, though small, can meet many of the needs of the industrial supply chain. The following examples from overseas are certainly worth taking into account:

Marc Laperrouza, a researcher on Asia-Pacific industry for the IMD in Switzerland, states that when he began studying geographic shifts in the technology industry in the Asia-Pacific region, he originally assumed that no country in Southeast Asia would be lucky enough to not lose its tech industries to the "magnet effect" of mainland China. But he found that the Philippines has been able to attract and keep regional firms by using the free port concept and various other incentives (such as in taxation and human resources) to create Asia-Pacific logistics centers. "Gradually an industrial conglomeration has taken shape which has kept the local information industry in place."

The purpose of establishing free ports in the Philippines was to create Asia-Pacific logistics centers, i.e. bases for international corporate operations. The special features of their development include the following:

1. Provision of tax incentives and low-cost labor as well as simplification of customs procedures, in order to encourage foreigners to come to the Philippines to establish or utilize economic zones.

2. Simplification of the functions of economic zones into logistics platforms handling import, export, and transshipment of goods, with the ability to undertake packaging, printing, warehousing, and simple processing of goods within the economic zone.

The ROC Council for Economic Planning and Development (CEPD) notes that free ports in the Philippines are protected under special legislation passed in 1995. There is a single government organization to manage (or to contract out management of) economic zones. Moreover, with regard to Philippine products destined for export, once they enter an economic zone, they are seen as having already been exported, so they can avoid or get rebates on customs duties and income taxes. Most interesting is that foreign investors in such zones, as well as their families, are treated as permanent residents, and they need not apply for visas to enter the country. As of 2000, the Philippines had four state-run economic zones and more than 100 privately run economic zones.

Known as the gateway to Europe, the Netherlands, like Taiwan, is a small and densely populated country with an outstanding geographic position. Most important is that the Netherlands is located at the economic heart of Europe, with 160 million consumers living within 500 kilometers of the country's commercial center, Amsterdam. It also has a highly efficient customs service and bonded warehouse industry.

The Netherlands Foreign Investment Agency (NFIA) says that the nation's advanced logistical structure and broad international vision are key factors stimulating the stable growth of manufacturing. Currently more than 6900 foreign enterprises of various sizes have established European sales centers, distribution warehouses, assembly or manufacturing operations, technical support or R&D centers, financial centers, or European headquarters in the Netherlands. These foreign firms provide 350,000 jobs, equivalent to 20% of the Dutch workforce.

The NIFA, noting that many American and Japanese companies have distribution and warehouse centers in various places in Europe, says that of these 49% of the American firms and 42% of the Japanese firms have established centers in the Netherlands. These include multinational giants like IBM and Canon. Many Taiwan firms-including Acer, ADI, First International Computer, and Giant-have also elected to establish distribution centers in the Netherlands.

According to the CEPD, Dutch distribution and warehouse companies have already established a complete "value-added warehousing and logistics operations system" to meet the rapidly changing demands of the market. They've strengthened various services to their customers, including sorting products for reshipment, repackaging, quality control, testing, and maintenance.

CEPD vice chairwoman Ho Mei-yueh is especially enthusiastic about Amsterdam's Schiphol Airport. There are frequent daily flights to small local airports throughout the Netherlands, and passengers and goods can be safely and quickly shipped to more than 200 cities around the globe. Schiphol is Europe's third busiest cargo airport.

In addition, Rotterdam is the world's busiest seaport, providing regularly scheduled shipping, container handling, sorting and repackaging, and other services. Over 55% of the goods handled by the port of Rotterdam are transshipped to other European countries. Within the scope of its customs law, the Dutch government does whatever it can to meet the needs of warehouse service companies. The complete facilities offered by import-export companies, warehouse companies, and marketing companies testify to the fact that the Netherlands is at the cutting edge in terms of free port functions.

The following are some of the important characteristics of bonded warehouses in

the Netherlands:

1. They have simplified customs procedures, using company bookkeeping systems and inventory information instead of customs inspections.

2. There are two sets of customs provisions. One is European "Community Provisions," which define identification numbers, related regulations, and application forms for various products. There are also "National Provisions," which define the governing agencies, the security systems for bonded warehouses, and punishments for violations.

3. Bonded warehouses can be set up anyplace in the Netherlands, and are not limited to specific locations.

4. Goods can be brought in 24 hours a day.

5. There is a comprehensive and integrated customs process. For example, products can be first brought into the warehouse and then reported to customs, or reported on a monthly basis or by shipment, depending upon need. This means that company shipping procedures are not adversely affected by customs procedures.

Hong Kong is geographically close to Taiwan and is the main competitor in terms of sourcing of goods. To understand Hong Kong is to know the main enemy.

From its very origins Hong Kong has been built as an international logistics center, and all of Hong Kong is like a bonded zone. There are no customs duties, and customs procedures are cheap and easy. This means that Hong Kong's logistics industry is highly efficient. In fact, Hong Kong's harbor fees, warehouse costs, and docking costs are the lowest in the entire world.

Moreover, the governing authorities in Hong Kong have simplified the functions of Hong Kong's free port area to make it a logistics center handling imports, exports, and transshipment of goods. They now use an electronic customs reporting service, run by a private company contracted by the government. Businesses can use the very convenient electronic method to send their customs reports directly to the relevant government authorities.

Hong Kong also has special regulations to promote air cargo transshipment, which have liberalized many former restrictions on the import and export of airborne cargo. The government does not even need to take a hand, nor establish any port authority. All port facilities are privately owned and operated, to encourage benign competition in which the more efficient companies will win out.

In Spring of 2002 Hong Kong began implementation of "electronic visas," which allow a person to enter HK twice within two months, for stays of up to 14 days each time. The immigration department collects a fee equal to about US$6 from airlines. Even though one must also add fees paid to the airlines or travel agencies to the costs of an electronic visa, it still works out to be cheaper and faster than the standard business visa.

It is understood that Hong Kong's immigration authority has already signed contracts with Cathay Pacific, China Airlines, Eva Airlines, and Dragon Airlines, connecting the immigration authority up to the airlines (or to travel agencies designated by the airlines) by computer. All that is needed is for the passenger's data to be entered into the computer, and they can receive an immediate confirmation. When they arrive at Hong Kong airport, they can pick up their electronic visa at the designated location. This should make moving in and out of Hong Kong even easier for the commercial traveler.