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Establishing a free zone within a developing country is not for the faint-hearted as anyone who has tried and survived will tell you. Typically, endless streams of well-intentioned expert organisations provide an eager technical review service to governments advising them how to set up their Free Zone or Export Processing Zone or Special Economic Zone. But relying on a wellwritten manual on 'How to Run a Free Zone' in most cases will fall at the first hurdle. All too often, ministers in developing countries pride themselves on the array of bound volumes of so-called strategic studies they have on their bookshelves. And consultants these days often cash in on quantity rather than quality of submissions.

Envious references are made to the success of Dubai's Jebel Ali Free Zone normally followed by comments such as "that's what we want". Little do they realise that Dubai and its dynamic Free Zone Management is driven by two very go-ahead individuals, namely Shaikh Mohammed Bin Rashid (Dubai's Crown Prince) and Sultan Bin Sulayem (Chairman of Dubai Ports, Free Zones & Customs). Dubai's success, and others' failures, are due to the inability of new and emerging free zones to make on the spot decisions. Harry Potter has more chance of getting these free zones to work than international management expertise. Changing traditional mindsets requires major surgery resulting, in most cases, in well intentioned concepts failing as they get caught up in a swamp of legislation and lack of proper decision making processes.

Foreign governments see the success and rewards gained by countries such as the UAE, and more specifically Dubai, where its total reliance on oil revenues in the late seventies and mid eighties has now been reduced to a mere 3%. The creation of much needed jobs around a well developed logistics infrastructure such as the port and/or airport, is essential to the successful equation. Likewise, a government that is willing to take decisions - a very rare quality in this day and age. What can't be decided today can be put off and put off, resulting in complete inertia.

THE MAGIC FORMULA A combination of regional self interest plus a dose of corruption dictates the result in the free zone game where there are more losers than winners. Those that are successful have become suspicious of so called friendly visits by emerging free zone states wishing to acquire the secret knowledge of what makes a free zone work. But even free zones such as Jebel Ali are reluctant to reveal the Magic Formula.

For those of us fortunate to have been on the winning team it is all too obvious who will win and lose. Having been involved in many free zone start-ups around the world it is easy to tell governments how well they are doing but rarely do they accept constructive criticism.

It is sad to report that free zones that should have held out so much hope in providing much needed jobs and boosting the local economy, fail miserably due to poor bureaucratic decision making, lack of vision and bad good business practices. This is not just a lost opportunity for economic growth but a crime in itself as high levels of corruption prevail where government officials are more interested in lining their own pockets at the local community's expense.

Nowadays, those of us involved in free zone development feel an almost missionary zeal. Can we convert governments to our way of thinking and thereby help the local community? Sadly though governments and ministries often eye free zones with suspicion. Why should we allow Foreign Direct Investment into our country without them having to pay tax or take a local partner?

Those governments rarely deliver what is needed to complete the legislation to approve a package of benefits and incentives that would really provide a competitive edge and interest the floating investor.

Utilities such as power, gas and water are all crucial elements in putting the package together. The Emirates offer a power delivery rate of around 5cents per kwh yet Western Australia offers an even better deal at 3 cents per kwh.

GRABBING THE BATON Other emerging free zones are well off the mark not realising that sometimes there's no gain without pain. Job creation and reducing large numbers of unemployed nationals carries a cost which has to be weighed against offering a package of incentives to investors willing to locate to a particular region and create those new job opportunities.

Without doubt, free zones are the fastest way of developing a regional economic impact that will kick-start a growth cycle. Even better results can be seen if associated with a logistical and strategic location such as port, airport or frontier road crossing.

More recently areas affected by the 26 December tsunami are failing to see the benefits in diversifying their total reliance on a particular economic sources (India and Sri Lanka: fishing; Phuket: tourism). National and regional governments are painfully slow in picking up the free zone baton and providing alternative employment opportunities.

Huge sums are not needed to start a free zone (though they may help things move faster). Examples of low investment start-up free zones can even be seen within the Emirates with locations such as Ajman and Ras Al Khaimah which have been very successful in securing significant market share with very little investment.

Tony Restall is managing director of Development Services International Ltd (Free Zone Consultants).