Supplying services: the shift from tangible to intangible goods
By Anika in Business opportunities, Free Zone Aruba News, Members on 20. Apr, 2018No Comments
Traditional manufacturing and international trade in goods are the most well-known types of free zone activities. Large trading companies make use of the benefits offered by free zones to efficiently store and distribute, and maximize their sales in different regions in the world. Handling the trade in tangible goods from small islands is in general more expensive than using the larger free zones in bigger countries, especially due to the volume of goods being traded and the availability of cost-effective air and sea transportation.
From tangible to intangible
Besides international trade in tangible goods, trade in intangible goods, or services, on an international scale is increasing. The operational costs and labor force that are required in the services sector is totally different than the trade sector. In general trade and manufacturing activities require a large labor force where higher education is not always necessary. While trading in intangible goods often requires a smaller labor force and highly educated employees with specialist backgrounds. In Aruba we can’t compete with the lower wages in the region, however our educated labor force and multilingualism give us a unique competitive edge when it comes to services. That is why the Aruba free zone is more focused on attracting companies that are trading intangible goods and bring new knowledge into our economy.
In recent years we have been noticing significant changes within the trade sector. A good example is e-commerce combined with drop shipment. Instead of shipping all the goods to your warehouse, you can make use of drop shipment facilities offered by third parties and ship the goods directly to your international customers. The goods do not have to physically go through the free zone to be considered as an export activity. This makes international business more attractive, due to time and cost savings. In the free zone of Aruba we notice that many companies are increasingly making use of our free zone for their e-commerce and drop-shipment activities.
Intangible goods supply in Aruba
Due to these global changes, the free zone in Aruba made some significant changes during the past years. To follow the international trends in the services sector, Aruba’s free zone became one of the first in the region with an open and friendly environment for service companies. Besides that, we have a transparent and efficient free zone. Many free zones around the world still focus on traditional trade in tangible goods and aim to attract large multinationals to create more jobs, especially in developing countries. In many countries, the free zone incentives are only valid for a limited time and many of these companies leave when these incentives come to an end. Besides that, in most free zones it is still not allowed to sell intangible goods.
In contrast to these free zones, we offer a different approach in which we are focused on smaller quality- and knowledge-driven service companies. The companies established in the Aruba free zone make use of the benefits and incentives as long as they are admitted to the free zone and meet the requirements.
There are many opportunities in the following sectors:
-Green technology: building knowledge. Aruba is an attractive hub to promote green technologies on an international scale.
-Maritime and logistics: well positioned as logistic hub. In comparison with other islands in the region, Aruba is well connected with different international markets.
-Creative industries: opportunities for creative entrepreneurship. The popularity of this sector is growing.
-Value added tourism: integration of knowledge to diversify our tourism product. All above sectors can be used to add value to tourism.
As a small free trade zone, it is easier to adapt to international business trends and make changes in the areas where new opportunities appear. A good example of some recent changes that are made is the establishment outside the free zone. You can run your free zone business from anywhere on the island, if there is no flow of tangible goods that needs to be controlled by customs. Companies that are trading tangible goods are required to establish in a customs-controlled free zone area.
In the zone facts
If you want to establish in the free zone you need to incorporate a NV or VBA that is designed for free zone activities. Different successful business that sell intangible goods make use of Aruba’s free zone. Basically, the only limit is the entrepreneur’s creativity. Did you know that:
-One of world’s biggest music producers is established in the free zone?
-That many domain names were sold from Aruba?
-The solar park at the airport is using Aruba’s free zone?
-International business makes use of a free zone company in Aruba for intellectual property registration?
-Engineering consultants can make use of the excellent air connections to visit their clients?
-International medical consulting services are offered via Aruba?
-International application development companies have interest in establishing here?
We are open to explore international business opportunities with you. If you think your business has potential for international expansion, feel free to contact us.