Shannon Free Zone, Ireland:the World’s First Free Trade Zone

□ Article/ Xu Sheng Tr. by He Jing

Shannon Free Zone, Ireland:the World’s First Free Trade Zone

□ Article/ Xu Sheng Tr. by He Jing

On February 18, 2012, President Xi Jinping visited the Shannon Free Zone located in western Ireland. His Excellency commented that the Shannon Free Zone is one of the earliest and most successful economic development zones in the world. For decades, it has made a salient contribution to Ireland’s economic development as well as provided a conducive reference for the pushing-forward in the same direction of many countries across the globe. China’s construction of Shenzhen Special Economic Zone,Shanghai Pudong New Area, Tianjin Binhai New Area and the like have borrowed a great amount of useful experience from Shannon.Over the past years, many Chinese delegations that paid visits to this Mecca are also left with a deep impression, which has played a positive role in broadening their horizons, opening up new channels of thinking and boosting economic development. China and Ireland have their own economic edges respectively. Both sides should reinforce exchanges and learn from each other, and deepen mutually bene fi cial cooperation so as to make unremitting efforts for the long-term, positive and stable development of the relations between the two countries.

Founded in 1959, the Shannon Free Zone boasts as the fi rst free trade zone in the world. Located in the west of Ireland, it covers an area of 2.43 square kilometers, some 200 kilometers away from Dublin, the capital.

Origin

Back then, where the Shannon Town and Shannon Free Zone lies today was no more than a small hamlet sleeping on the northern bank of the Shannon estuary. Before the advent of jet aircraft,longer fl ights such as those between the United States and Europe need to be recharged by ground fuel supplies. In 1930, the Irish government asked a U.S. pilot to map out and build an airport in western Ireland, where the aviator chose Shannon, a sheltered estuary, as a good place to commence the great cause; as luck would have it, it was just on the central axis of North America and Europe. After the completion of Shannon Airport in 1942, fl ights to and from North America and Europe could be refueled here. As such, Shannon’s aviation service industry boomed rapidly and rose to be a crucial transit port and air carrier operation base. In 1947,Shannon Airport launched a ground-breaking duty-free operation at the counter of tobacco and alcohol, which then evolved to be the world’s fi rst airport duty-free shop.

However, with the advancement of aviation technology such as the improvement of aircraft manufacturing technology and the substantial lift of endurance capacity, flights on the transatlantic routes need to refuel at Shannon Airport no longer so that the economic development driven by the airport came to an impasse.Shut-down or transformation? At that time, Brendan?O?Regan, the then-manager of Shannon Airport, submitted a proposal to the Irish government to set up a regional manufacturing park with special tax incentives, which would create more job opportunities and air transport to and from Shannon Airport.

In 1959, the Irish government unveiled the Shannon Free Airport Development Company, which was to be located adjacent to Shannon Airport. In 1960, the corporation established the worldfirst free trade zone mainly for export processing industry. With its tax-free incentives and low-cost edges, it has attracted foreign investment, especially that of U.S. companies. In the ensuing years,the region expanded. Owing to the natural ties between Ireland and the United States, as well as its privileged status as euro-zone country backed by the grand EU market, a host of U.S. companies prioritize pooling their investment here. As the world’s first dutyfree industrial zone, the Shannon Free Zone has successfully attracted a large number of foreign-funded enterprises.By this approach, a small, remote airport that has been outdated its transit service has successfully transformed itself into a thriving industrial zone thanks to technological thrust.

Secret of Success

A right path for the success of the Shannon Free Zone is that, the Shannon Free Airport Development Company has successfully adjusted its development strategy and promoted the industrial restructuring in accordance with the strategic planning of the Irish government in different phases. All these endeavors made its development sustainable.

In 1968, the Irish government authorized the Shannon Free Airport Development Company with full charge of the all-encompassing economic development featuring industry and local tourism.

In the seventies and eighties of the last century, the Irish government steered the Shannon Free Airport Development Company to focusing on the development of science and technology industries and the increase in foreign investment. In 1972, the University of Limerick was established to equip the region with its own educational and research services to facilitate the further development. With the establishment of Limerick University and Limerick Institute of Technology, the region has gradually explored a good tradition of combining scienti fi c research with industry,providing high-quality professional work-forces to enterprises in the development zone. In 1980, in order to upgrade the improvement of the technological level of local enterprises, it established an innovation center for local high-tech companies. In 1984, the company established Shannon National Technology Park in Limerick, driving the transformation of the local industry from labor-intensive to technology-intensive by the support of scienti fi c and technological forces.

After the 1990s, with the surge of high-tech industries and under the guidance of the Irish government, the Shannon Free Airport Development Company once again geared the development direction of the region and gradually shifted it to the development of service industries and knowledge-based industries, and built up Kerry Technology Park, Tipperary Technology Park,Information Age Park Ennis and Bore Tech Center.

In 2001, Shannon Free Zone had broadband network connection linked with Europe and North America,setting up an e-commerce environment and played an important role in ushering Ireland into the forefront of the world’s software exporters.

At the dawn of the 21st century, as foreign companies shifted their manufacturing base to cheaper Eastern European and Asian countries, and other countries in the world increased investment in science, technology and innovation and developed a knowledge-based economy, the prospect of the Shannon Free Zone once again faced a huge challenge. Against this backdrop,since January 1, 2006, the Irish government had devolved the duties of attracting foreign investment for the Shannon Free Zone to the Irish Department of Investment and Development (IDA), while the Shannon Free Airport Development Company were still in charge of the operation and management of this region. In the following years, an important move initiated by the company was to exploit the advantages of local cultural heritage and natural scenery to vigorously develop the tourism industry. As its subsidiary, the Shannon Heritage owns a range of popular tourism projects such as the Medieval Dinner at Bunratty Castle and the Folk Park. These tourism products enrich the economic diversity of the Shannon region, giving the region an annual direct economic return of 15 million euros.

New Transformation

In May 2012, the Irish government decided to reorganize the state-owned operations of the Shannon Free Zone with the goal of creating a world-class aviation industry agglomeration area. In December of that year, Shannon Airport was separated from the DAA and began operating independently. In the first half of 2013, the Shannon Free Airport Development Company was restructured to retain the major property assets and renamed as Shannon Commercial Properties, which was incorporated into Shannon Group as a subordinate enterprise, while it took over other operation and management businesses from the local authorities.

Shannon Airport was in the hope of regaining the past glory, to become an important regional airport between Europe and the United States. With the Irish government abolishing the travel tax in April 2014, it hopes to encourage more passengers who travel from the United Kingdom to the United States to fl y via Shannon Airport.According to the statistics released in 2014, take a family of four for example, if fl ying directly from the UK to the US, they will pay an airfare tax of ￡248, while the tax would be slashed to as low as ￡52 if they transfer from the Shannon airport.

Also, a component of the Shannon Group’s ambitious development plan is the Shannon Forneys Port Company (SFPC), the port management fi rm. The Irish government hopes to build Shannon into a sea-air harbor that connects the westernmost point of Europe and the easternmost point of the United States in that Shannon enjoys great strengths in local aviation and shipping. With its 30m water depth, it is suitable for large vessels to anchor, which is quite a rarity across the whole Europe. According to the long-term plan,Shannon strives to build the port as a regional hub for the shipping industry to attract large Asian vessels to this port and divert them to other smaller ports in Europe. Following the opening of the Arctic route, large vessels from Asia to Europe do not need to bypass the Mediterranean Sea, and the Shannon port would shorten their sailing duration.

Under its plan to be an international aviation service center, the Shannon Group is actively seeking new businesses in the areas of composite materials, assembly completion, airline network,cargo, leasing, pilots and technical training. With the transformation and development in recent years, there are currently about 130 companies in the Shannon Free Zone, creating more than 7,000 job opportunities, yielding a total exporting volume up to billions of euros each year, and owning Ireland’s largest aerospace industrial cluster. The air cluster encompasses Aercap, the world’s largest aircraft leasing company, Eirtech Aviation, the world’s biggest aircraft painting company, Engine Lease Finance, an airline leasing financial services company, GE Capital, Irish Aviation Authority,Lufthansa Technique, Magellan Group. Other industrial clusters within the Shannon Free Zone include shared services, back-of fi ce operations, fi nancial services insurance, supply chain management,computer services, pharmaceuticals and medical apparatus manufacturing. Companies in these areas include: EI Electronics,Element 6, EMC, Extreme Networks, GE Sensing, Genworth Insurance, Ingersoll Rand, Intel, John Crane Group, Molex, UCB Pharma, TNT International Express, and Zimmer Group.

Continuously Enticing Investment Environment

Young, well-educated and creative workforce—Irish young workforce is professionally capable, adaptable, flexible and entrepreneurial. More than 50% of the population is under 35,which guarantees the dependency ratio in Ireland the most favorable in Europe. According to the IMD World Competitiveness Report, Ireland ranks fi rst in the world in terms of skills and fourth in terms of the quality of the education system. Unveiled by the 2014 IMD World Competitiveness Report, Ireland had one of the best higher education systems and ranked 15th in the world. A total of four prestigious universities and colleges are distributed in the Shannon Free Zone, namely, UL, LIT, UCG and GMIT.

Corporate tax rates in Ireland are among the lowest in Europe—for more than 30 years, one of the major advantages of Ireland’s good business environment is corporate tax rates. The Irish tax system is open and transparent, fully in line with the OECD guidelines and the EU competition law.

Highly developed infrastructure—Over the past two decades, the Irish government has implemented a continuous infrastructure development and investment program. The National Transport Investment Program has rapidly bettered Ireland’s road and motorway networks, boosted the sustainable growth of the nation’s economy and employment, and at the same time enhanced Ireland's international competitiveness. The transportation infrastructure in Shannon is highly developed, which can be manifested by the daily flights linking Shannon Airport to Britain,Europe and North America. The routes to North America connects Shannon with Boston, Chicago, New York (Newark Airport and JFK Airport) and Philadelphia. Ireland’s rail network runs across the island and the M7 and M18 freeway systems connect to Limerick,Dublin and Galway. The N20 / M20 offers direct access to Cork and Kerry.

Providing Property Solutions for Investors—Shannon Commercial Properties under the Shannon Group is the No.1 commercial property specialist in western part of Ireland. The fi rm can provide both new and existing investors with a complete commercial property solution that covers leasing, selling, developing and managing industrial, commercial and office buildings as well as providing new pieces of lands for investment with full supporting services. The company’s service portfolio encompasses a wide range of options, including new investment plots, state-of-the-art manufacturing facilities and a complete of fi ce solution.

(The writer is with the Asian Division, Chongqing Municipal Foreign and Overseas Chinese Affairs Of fi ce.)