Special economic zone

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A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. "Nationwide" laws may be suspended inside a special economic zone.

The category 'SEZ' covers , including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial parks or Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others.

Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).

Contents

[edit] Globally

In the People's Republic of China, Special Economic Zones were founded by the central government under Deng Xiaoping in the early 1980s. The most successful Special Economic Zone in China, Shenzhen, has developed from a small village into a city with a population over 10 million within 20 years. India has also played a significant role in the founding and establishment of Special Economic Zones. It has the largest outsourcing industry in Asia[citation needed].

Following the Chinese examples, Special Economic Zones have been established in several countries, including Angola, Bangladesh, Brazil, India, Iran, Jordan, Kazakhstan, Oman, Pakistan, the Philippines, Poland, South Korea, Russia, Ukraine, United Arab Emirates, Cambodia, North Korea. Currently, Puno, Peru has been slated to become a "Zona Economica" by its president Alan Garcia.

A single SEZ can contain multiple 'specific' zones within its boundaries. The most prominent examples of this layered approach are Subic Bay Freeport Zone in the Philippines, the Aqaba Special Economic Zone Authority in Jordan, Sricity Multi-product SEZ and Mundra SEZ in India and According to World Bank estimates of 2007 there are more than 3,000 projects taking place in SEZs in 120 countries worldwide.

SEZs have been implemented using a variety of institutional structures across the world ranging from fully public (government operator, government developer, government regulator) to 'fully' private (private operator, private developer, public regulator). In many cases, public sector operators and developers act as quasi-government agencies in that they have a pseudo-corporate institutional structure and have budgetary autonomy. SEZs are often developed under a public-private partnership arrangement, in which the public sector provides some level of support (provision of off-site infrastructure, equity investment, soft loans, bond issues, etc.) to enable a private sector developer to obtain a reasonable rate of return on the project (typically 10-20% depending on risk levels).

[edit] Angola

The Republic of Angola formalized the creation of the Luanda-Bengo EP Special Economic Zone in 2009, including 8000 hectares in the Luanda districts of Viana and Cacuaco and the northern Bengo province's areas of Ícolo e Bengo, Dande, Ambriz and Nambuangongo.[1]

[edit] Bangladesh

Several Export Processing Zones, or EPZs, have been established across Bangladesh since the 1980s, and have contributed tremendously to industrialization, boosting exports and substantially improving economic conditions in regions hosting the zones. The EPZs are administered by the Bangladesh Export Processing Zone Authority, or BEPZA. In 2010, FDi magazine ranked Chittagong EPZ as the fourth best in terms of economic potential and third most competitive special economic zone in the world.[2]

In 2009, the Bangladeshi government decided to establish SEZs across the country that target both foreign and local markets. In addition of the existing eight EPZs, a further seven SEZs are to be set up by 2013.[3] The government also intends to establish specialized SEZs for specific industries, particularly shipbuilding and pharmaceuticals. Private economic zones for country-specific foreign investors and expatriate Bangladeshis are also being established. A $1 billion Korean EPZ was set up by South Korean investors in Chittagong, while SEZs are planned for Indian,[4] German[5] and Turkish[6] investors.

[edit] List of SEZs in Bangladesh

[edit] China

Main article: Special Economic Zones of the People's Republic of China

Currently, the most prominent SEZs in the country are Shenzhen, Xiamen, Shantou, and Zhuhai. It is notable that Shenzhen, Shantou, and Zhuhai are all in Guangdong province, and all are on the southern coast of China where sea is very accessible for transportation of goods.

[edit] Democratic Republic of the Congo

Democratic Republic of the Congo plans to build its first Special Economic Zone in the Kinshasa district of N'Sélé. The SEZ would be operative in 2012 and dedicated to agro-industries.[7]

[edit] India

Considering the need to enhance foreign investment and promote exports from the country and realising the need that a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India had in April 2000 announced the introduction of Special Economic Zones policy in the country, deemed to be foreign territory for the purposes of trade operations, duties and tariffs. As of 2007, more than 500 SEZs have been proposed, 220 of which have been created. This has raised the concern of the World Bank, which questions the sustainability of such a large number of SEZs. The Special Economics in India closely follow the PRC model.

India passed special economic zone act in 2005. In India, the government has been proactive in the development of the SEZs. They have formulated policies, reviewed them occasionally and have ensured that ample facilities are provided to the developers of the SEZs as well as to the companies setting up units in the SEZs.

[edit] SEZs in India

Introductionmost important country acording special economic zone

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. In order to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.

The SEZ Act, 2005, was an important bill to be passed by the Government of India in order to instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through their establishment, a comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10 February 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. The remaining part of India, not covered by the SEZ Rules, is known as the Domestic tariff area.

The objectives of SEZs can be clearly explained as the following: (a) generation of additional economic activity (b) promotion of exports of goods and services; (c) promotion of investment from domestic and foreign sources; (d) creation of employment opportunities; (e) development of infrastructure facilities.

The major incentives and facilities available to SEZ developers include:-

  • Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.
  • Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.
  • Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
  • Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
  • Exemption from Central Sales Tax (CST).
  • Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

Currently there are 114 SEZs (as of October 2010) operating throughout India in the following states[8]: Karnataka - 18; Kerala - 6; Chandigarh - 1; Gujarat - 8; Haryana - 3; Maharashtra - 14; Rajasthan - 1; Tamil Nadu - 20; Uttar Pradesh - 4; West Bengal - 2: Orissa - 1.

Additionally, more than 500 SEZs are formally approved (as on October 2010) by the Government of India in the following states[9]: Andhra Pradesh - 109; Chandigarh - 2; Chattisgarh - 2; Dadra and Nagar Haveli - 4; Delhi - 3; Goa - 7; Gujarat - 45; Haryana - 45; Jharkhand - 1; Karnataka - 56; Kerala - 28; Madhya Pradesh - 14; Maharashtra - 105; Nagaland - 1; Orissa - 11; Pondicherry - 1; Punjab - 8; Rajasthan - 8; Tamil Nadu - 70; Uttarkhand - 3; Uttar Pradesh - 33; West Bengal - 22. [10]

[edit] Indonesia

Main article: Batam Island#SEZ - Special Economic Zones

[edit] Iran

  • Arg - e - Jadid Special Economic Zone: Vehicle Manufacturing Hub.
  • PetZone: Petrochemical special economic Zone, Mahshahr.
  • Kish: Kish island special economic zone.
  • Sarakhs
  • Sirjan
  • Shahid Rajaee Port [7]
  • Amirabad Special Economic Zone [8]
  • Bushehr Port
  • Payam Special Economic Zone, closest SEZ to the capital city Tehran, with 3600 hec. area within 10000 hec. of Payam International Airport territory established in Karaj for development of air cargo and postal transportation, storage of goods, cold store, packing services, goods productivity, perishable and time sensitive goods export. Payam is the only SEZ in the region with the privilege of its own airport and airline. Adjacent to industrial, economical and agricultural center of Tehran, with easy access to railroad, underground and other related highways. In order to attract FDI Payam has created equal opportunity and possibility of investment for Iranian and foreign subjects on every scale of partnership, in addition guarantee foreign investment according to attraction and protection law of foreign investments and freedom of invest transfer and obtained income of it, with no administrative encumbrance laws. Furthermore, there is free entrance, without customs duties for goods, machinery and row material until it has been stationed in the zone, with possibility to export goods from zone without customs formalities.[9]
  • Abadan

[edit] Kazakhstan

Multiple Economic zones created by the mandate of the President. Each zone has a different focus. South Kazakhstan "Ontustyk" special economic zone is dedicated to the development of the textile industry in Kazakhstan.

[edit] Malaysia

Malaysia launches East coast Economis Region SEZ[11] in August 2009. The country’s first Special Economic Zone are expected to contribute RM23 billion to the national GDP and create 220,000 new jobs in the ECER.

[edit] Myanmar

Special economic zones (Burmese: အထူးစီးပွားရေးဇုန်), which offer tax exemptions for different sectors (5 years for production, 8 years for high-tech, 2 years for agriculture, livestock breeding and forestry, and 1 year for banking) are undergoing preliminary construction in Sittwe Township and Kyaukpyu Township in Rakhine State.[12] An international standard airport is also to be constructed. The six free trade zones will be Thilawa Port in Yangon, Mawlamyine in Mon State, Myawaddy and Hpa-an in Kayin State, Kyaukphyu in Rakhine State and Pyin Oo Lwin in Mandalay Region.[13] According to the country's Special Economic Zone Law's Act 7, Section 36, homes and farming properties located on a proposed SEZ must be duly relocated and reimbursed.[14]

The Myanmar Port Authority has been involved in facilitating contracts to develop Myanmar's Special Economic Zones, including a USD $8.6 billion deal to develop a deep sea port at Dawei, by Italian-Thai Development).[15]

[edit] North Korea

The Rajin-Sonbong Economic Special Zone was established under a UN economic development programme in 1994. Located on the bank of the Tuman River, the zone borders on the Yanbian Korean Autonomous Prefecture (or, Yeonbyeon in Korean) of the People's Republic of China, as well as Russia. In 2000 the name of the area was shortened to Rason and became separate from the North Hamgyeong Province.

[edit] Pakistan

Taking the example of the Chinese success with their SEZs, China is helping Pakistan develop the RUBA SEZ on the outskirts of Lahore. RUBA SEZ PVT LTD is a subsidiary of RUBA Group of Companies and was expanded from existing Haier – RUBA Economic Zone. http://ruba-sez.com.pk/


Other economic zones include the China-Pakistan economic zone open only to Chinese investors and also the future crown jewel of Pakistan, Gwadar.

There are also talks of creating a Japanese city for foreign investors from Japan only.

There has also been new SEZ proposed on the currently under construction Sialkot-Lahore motorway, Qatar has proposed an investment for $1 billion in a new SEZ along the motorway.

There is also a new zone under construction in Faislababd, which will be the biggest industrial estate of Pakistan when complete, it has sections for each country and the first phrase is already complete with a special Chinese zone in it.

[edit] List of SEZs in Pakistan

[edit] Philippines

Philippine economic zones (ecozones) are collections of industries, brought together geographically for the purpose of promoting economic development. These ecozones were established through Republic Act No. 7916, otherwise known as "The Special Economic Zone Act of 1995" as amended by Republic Act No. 8748.[16]

Philippine Ecozones are generally administered by the Philippine Economic Zone Authority through a Board (PEZA Board), attached to the Department of Trade and Industry. The PEZA Board sets the general policies on the establishment and operations of the Ecozones, industrial estates, export processing zones, free trade zones, and the like.[17] They also review proposals for the establishment of Ecozones, which they subsequently endorse to the President of the Republic of the Philippines. In addition, the PEZA Board regulates and undertakes the establishment, operation and maintenance of utilities, other services and infrastructure in the Ecozone, such as heat, light and power, water supply, telecommunications, transport, toll roads and bridges, port services, and the like.[18]

Several incentives are granted to business establishments operating within Philippine Ecozones, particularly those found in the Omnibus Investments Code of 1987.[19] These incentives include income tax holidays; zero percent (0%) duty on importation of capital equipment, spare parts, and accessories; exemption from wharfage dues and export tax, impost or fees; and the simplification of customs procedures, among others.[20] In addition, The Special Economic Zone Act of 1995 exempts business establishments operating within Ecozones from all taxes. In lieu of paying all other taxes, business establishments are only required to pay five percent (5%) of their gross income to the national government.[21][22]

Activities Eligible for PEZA Registration and Incentives include but are not limited to (1) Export Manufacturing; (2) Information Technology Service Export; (3) Tourism; (4) Medical Tourism; (5) Agro-industrial Export Manufacturing; (6) Agro-industrial Bio-Fuel Manufacturing; and (7) Logistics and Warehousing Services.[23]

Although designed to operate separately from the political and economic milieu of surrounding communities, Philippine economic zones do in fact interact with their neighbors. As of 31 May 2010, there were more than 200 Ecozones in the Philippines. Of these more than 200 Ecozones, seven (7) are Agro-Industrial Economic Zones, 134 are Information Technology Parks and Centers, 65 are Manufacturing Ecozones, two (2) are Medical Tourism Parks/Centers, and nine (9) are Tourism Economic Zones. Of the 41 private economic zones, the biggest exporter is Gateway Business Park in General Trias, Cavite and the second biggest private ecozone is Laguna Technopark Inc. The four governmentally owned are Cavite Economic Zone, Bataan Economic Zone, Mactan Economic Zone and Baguio City Economic Zone. Some of the more well-known Economic zones are the Clark Special Economic Zone, and Subic Economic Zone, former military bases of the United States of America.

[edit] List of SEZs in the Philippines

Some of the over 200 SEZs in the Philippines are as follows:

[edit] Poland

There are 14 Special Economic Zones in Poland[25]

  • Kamiennogórska SSE
  • Katowice Special Economic Zone
  • Kostrzyńsko-Słubicka SSE
  • Krakowski Park Technologiczny
  • Legnicka SSE
  • Łódzka SSE
  • SSE EURO-PARK MIELEC
  • Słupska SSE
  • SSE Starachowice
  • Suwalska SSE
  • Pomorska SSE (Pomeranian Special Economic Zone)
  • Tarnobrzeska SSE
  • Wałbrzych Special Economic Zone "INVEST-PARK"
  • Warmińsko-Mazurska SSE

[edit] Republic of Korea (South Korea)

There are 6 Free Economic Zones in Korea. The first 3 zones were created in 2003 and 3 more were created in 2008.

  1. Busan-Jinhae Free Economic Zone (BJFEZ)
  2. Daegu-Gyeongbuk Free Economic Zone (DGFEZ)
  3. Gwangyang Free Economic Zone (GFEZ)
  4. Incheon Free Economic Zone (IFEZ)
  5. Saemangun Free Economic Zone (SGFEZ)
  6. Yellow Sea Free Economic Zone (YESFEZ)

[edit] Russia

Russia currently has 16 federal economic zones and several regional projects.

As of March 2010 Russia's federal special economic zones host 207 investors from 18 countries. There are major MNCs among investors to Russia's SEZ, such as Yokohama, Cisco, Isuzu, Air Liquide, Bekaert, Rockwool and many others.

Russia’s 15 existing and to-be federal special economic zones are managed by OJSC "Special Economic Zones".

OJSC "SEZ" was founded in 2006 to accumulate and implement world's best practices in developing and managing SEZ and promote Foreign direct investment (FDI) in the Russian economy. It is fully owned and funded by the Russian state.

Federal economic zones in Russia are regulated by Federal Law # 116 FZ issued on July 22, 2005.

[edit] Technical/Innovational Zones

[edit] Industrial/developmental Zones

  • “Alabuga” (special economic zone)
  • Lipetsk

[edit] Tourist Zones

[edit] Ukraine

Special Economic Zones existed in Ukraine until March 31, 2005. The first created was the Nouth-Crimean Experimental Economic Zone Syvash (since 1996). From 1998 to 2000 11 new zones were created.

Name Location Area Established Time limit*
NCEEZ Syvash Autonomous Republic of Crimea 1996 5 years
Slavutych Slavutych, Kiev Oblast 2,000 ha 30.06.1998 until 01.01.2020
Azov Mariupol, Donetsk Oblast 315 ha 21.07.1998 60 years
Donetsk Donetsk, Donetsk Oblast 466 ha 21.07.1998 60 years
Zakarpattia Uzhhorodskyi Raion and Mukachivskyi Raion, Zakarpattia Oblast 737 ha 09.01.1999 30 years
Yavoriv Yavorivskyi Raion, Lviv Oblast 116,000 ha 17.02.1999 until 01.01.2020
Interport Kovel Kovel, Volyn Oblast 57 ha 01.01.2000 20 years
Kurortopolis Truskavets Truskavets, Lviv Oblast 774 ha 01.01.2000 20 years
Mykolaiv Mykolaiv, Mykolaiv Oblast, shipyard territory, and adjoining area 865 ha 01.01.2000 30 years
Port Krym Kerch, Autonomous Republic of Crimea 27 ha 01.01.2000 30 years
Porto-Franco Odessa, part of Odessa Trade Sea Port's territory 32 ha 01.01.2000 25 years
Reni Reni, Odessa Oblast 94 ha 17.05.2000 30 years
* Initially planned time of operation given. All zones were shut down on March 31, 2005.

NCEEZ — Nouth-Crimean Experimental Economic Zone.

Sources: [10] [11] [12] and Пехник А.В., Іноземні інвестиції в економіку України. Навчальний посібник, Вид. «Знання», Київ 2007, pages: 49, 310–319

[edit] U.S.S.R.

As for Finland[citation needed] and Yugoslavia, the reason for their rapid economic growth was the Soviet Union’s policy of treating those states as special economic zones, through which it gained access to technologies and the know-how of the West. Export of such products to the USSR was often prohibited due to their dual purpose. (U.S.S.R. Special Economic Zones)

[edit] Zambia

Zambia is home to two Chinese-supported Special Economic Zones. One sits just outside of Lusaka and the other is in the copper rich town of Chambishi.[26] The zones combine expedited customs and administration procedures with tax incentives, to increase investment.[27]

[edit] See also

[edit] References

  1. ^ [1] Angola: Government Formalises Special Economic Zone, allafrica.com, July 29, 2009.
  2. ^ http://www.thedailystar.net/newDesign/news-details.php?nid=156868
  3. ^ http://bangladesheconomy.wordpress.com/2011/04/24/7-special-economic-zones-under-way/
  4. ^ http://www.thedailystar.net/newDesign/news-details.php?nid=185041
  5. ^ http://www.thedailystar.net/newDesign/news-details.php?nid=163666
  6. ^ http://www.financialinfobd.com/index.php?option=com_content&view=article&id=476:minister-hints-at-sez-for-turkish-investors&catid=139:general-news&Itemid=369
  7. ^ [2] Le "paradis" où le droit fera la loi, L'Echo, novembre 2010.
  8. ^ [3]
  9. ^ [4]
  10. ^ www.sezindia.nic.in
  11. ^ [5] Read more: SEZ set to fire up economic growth
  12. ^ "စစ်တွေနှင့် ကျောက်ဖြူမြို့တို့တွင် အထူးစီးပွားရေးဇုန် တည်ဆောက်သွားမည်ဟု သိရ" (in Burmese). Weekly Eleven News. 2010-08-22. http://www.news-eleven.com/index.php?option=com_content&view=article&id=4450:2010-08-25-06-29-57&catid=45:2009-11-10-07-45-41&Itemid=113. Retrieved 2010-08-28. 
  13. ^ "Roundup: Myanmar on road to establishing special economic zones". Xinhua (People's Daily). March 13, 2007. http://english.peopledaily.com.cn/200703/13/eng20070313_357029.html. Retrieved 10 July 2011. 
  14. ^ "ထားဝယ်ရေနက်ဆိပ်ကမ်း စီမံကိန်း ဧရိယာရှိ ရွာများကို လျော်ကြေးပေးရန် မြေတိုင်းတာ" (in Burmese). Weekly Eleven News. 13 June 2011. http://www.news-eleven.com/index.php?option=com_content&view=article&id=8892:2011-06-12-20-34-06&catid=45:2009-11-10-07-45-41&Itemid=113. Retrieved 10 July 2011. 
  15. ^ Aye Thidar Kyaw; Stuart Deed (7 February 2011). "SPDC signs Special Economic Zone law into effect on Jan 27". Myanmar Times. http://www.mmtimes.com/2011/business/561/biz56102.html. Retrieved 23 August 2011. 
  16. ^ The text of The Special Economic Zone Act of 1995 is found at http://www.peza.gov.ph/index.php?option=com_content&view=article&id=97&Itemid=55 or http://www.chanrobles.com/specialeconomiczoneact.htm
  17. ^ The Special Economic Zone Act of 1995, sec. 12
  18. ^ Id.
  19. ^ The Special Economic Zone Act of 1995, sec. 23.
  20. ^ Omnibus Investments Code, art. 39.
  21. ^ The Special Economic Zone Act of 1995, sec. 24.
  22. ^ See also Fiscal Incentives to PEZA-Registered Economic Zone Enterprises available at http://www.peza.gov.ph/index.php?option=com_content&view=article&id=112&Itemid=154
  23. ^ http://www.peza.gov.ph/index.php?option=com_content&view=article&id=111&Itemid=153
  24. ^ a b http://www.peza.gov.ph/index.php?option=com_content&view=article&id=116&Itemid=161
  25. ^ [6] SEZ in Poland-Source-Govt of Poland
  26. ^ http://www.bbc.co.uk/news/world-africa-14952240
  27. ^ http://vle.worldbank.org/bnpp/en/publications/trade/china-s-investment-african-special-economic-zones-prospects-challenges-and-opport
  • Chee Kian Leong, 2007, A Tale of Two Countries: Openness and Growth in China and India [13], Dynamics, Economic Growth, and International Trade (DEGIT) Conference Paper.

[edit] External links

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