Management contract:

Definition
Agreement between investors or owners of a project, and a management company hired for coordinating and overseeing a contract. It spells out the conditions and duration of the agreement, and the method of computing management fees.

A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of doing things (as with franchising or licensing) but involves actually doing them. A management contract can involve a wide range of functions, such as technical operation of a production facility, management of personnel, accounting, marketing services and training. In Asia, many hotels operate under management contract arrangements, as they can more easily obtain economies of scale, a global reservation systems, brand recognition etc. It is not unusual for contracts to be signed for 25 years, and having a fee as high as 3.5% of total revenues and 610% of gross operating profit. The Marriott International Corporation operates solely on management contracts.
Management contracts have been used to a wide extent in the airline industry, and when foreign government action restricts other entry methods. Management contracts are often formed where there is a lack of local skills to run a project. It is an alternative to foreign direct investment as it does not involve as high risk and can yield higher returns for the company. The first recorded management contract was initiated by Qantas and Mr Duncan Upton in 1978. EX:

Taj enters into management contract with Morocco's JK Hotels

Press Trust of India / Mumbai May 26, 2011, 17:16 IST

Taj Hotels Resorts and Palaces today said it has entered into a management contract with Morocco's JK Hotels to manage 'Taj Palace Marrakech', which will increase the company's global portfolio to 17 hotels.

With this, the Taj Group has now established its presence in North Africa and will now manage Taj Palace Marrakech, which is set to launch in autumn 2011, the company said in a statement here.

"Taj Palace Marrakech, is our latest venture into the African continent and is in sync with our strategy to continue our vision of growth in key international destinations," Indian Hotels Managing Director and Chief Executive Officer Raymond N Bickson, said. This hotel will fit perfectly into the company portfolio with its meticulously crafted and vivid blend of Moroccan, Indian and Asian themes, he said. "Taj Hotels' is a legendary chain and we are delighted with this association. Under the Taj management, our guests will experience the most exacting standards of world class hospitality. We look forward to a mutually rewarding relationship," owner of JK Hotels Jaouad Kadiri said

FREE TRADE ZONE: A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country where some normal trade barriers such as tariffs and quotas are eliminated and bureaucratic requirements are lowered in hopes of attracting new business and foreign investments. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Free trade zones can be defined as labor intensive manufacturing centers that involve the import of raw materials or components and the export of factory products. The world's first Free Trade Zone was established in Shannon, Co. Clare, Ireland Shannon Free Zone.[3] This was an attempt by the Irish Government to promote employment within a rural area, make use of a small regional airport and generate revenue for the Irish economy. It was hugely successful, and is still in operation today. Most FTZs are located in developing countries: Brazil, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, and Madagascar have EPZ programs.[4] In 1997, 93 countries had set up export processing zones (EPZs) employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people. Free Trade Zones are also known as Special Economic Zones in some countries. Special Economic Zones (SEZs) have been established in many countries as testing grounds for the implementation of liberal market economy principles. SEZs are viewed as instruments to enhance the acceptability and the credibility of the transformation policies and to attract domestic and foreign investment.

In 1999, there were 43 million people working in about 3000 FTZs spanning 116 countries producing clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities.

Objective:

1. 2. 3. 4. 5.

Encourage and generate the economic development Encourage Foreign Direct Investments (FDI) To channel the sources of foreign exchange within the system in a phased manner Foster the establishment and development of industrial enterprises within the said zones Encourage and generate wider economic activities by encouraging foreign investments for the development of the zones 6. To channel the foreign exchange earnings for the further development of these zones and explore new areas for the development of Indian exports 7. Encourage establishment and development of Indian industries and business enterprises and facilitate with proper infrastructure Generate employment opportunity 8. Upgrade labor and management skills 9. Acquire advanced technology for increased productivity 10. Ensure world class quality of products

Export Processing Zones in India

1. 2. 3. 4. 5. 6. 7. Kandla Free Trade Zone (KAFTZ), Kandla, Gujarat Santa Cruz Electronic Export Processing Zone (SEEPZ), S. Cruz, Maharashtra Cochin Export Processing Zone (CEPZ), Cochin, Kerala Falta Export Processing Zone (FEPZ), Falta,West Bengal Madras Export Processing Zone (MEPZ), Madras, Tamil Nadu Noida Export Processing Zone (NEPZ), Noida, Uttar Pradesh Visakhapatnam Export Processing Zone (VEPZ), Visakhapatnam, Andhra Prades