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The term "free zone" refers to designated areas in which companies are taxed very lightly and it enhances global market presence by attracting new business and foreign investments. For over a century, governments around the world have sought to boost and exploit the economic power of their particular regions and zones by designating them as "special" or "free" economic zones. The trend of establishing such zones or areas have gained momentum in the last four or five decades with countries accounting for small businesses and millions of direct or indirect jobs. The Middle East, especially the countries in the Persian Gulf, for some and other reasons, have particularly embarked on such a trend. The current paper tries to highlight benefits and challenges faced by free trade zones in Iran, Turkey and the United Arab Emirates, taking into account recent global financial crises. [ABSTRACT FROM AUTHOR]

Since the late 1980s, Iran has pursued a policy of attracting foreign investment and fostering regional trade by granting favored status to the so-called “Free Trade-Industrial Zones” (FTZs) and “Special Economic Zones” (SEZs). To date six FTZs and sixteen SEZs have been set up throughout Iran. The FTZs are strategically positioned for their potential international links and have their eyes on markets beyond Iran, and the SEZs for their value in serving main industries and for improving the country's distribution system and supply network. This paper examines the experience of these zones in Iran in the context of Iran's contradictory and ambivalent approach to international economic integration in general. It is shown that liberal policies pursued in the free zones have been in marked contrast to the approach in the mainland, which has been generally inward-looking in much of the post-revolutionary period. We examine first the rise of free zones as a global phenomenon followed by an overview of Iran's zones and their characteristics. It is argued that serving mainly as “back doors” to the international economy, Iran's free zones have stalled mainly because their promotion has been decoupled from, if not at odds with, official attitudes to the international economy at large. As a result, the zones' ability to attract investment has been limited by both adverse external perceptions of Iran as an investment destination and internal complexities discouraging such investment. [ABSTRACT FROM PUBLISHER]