Special economic zone

A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increased trade balance, employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.

"SEZ" redirects here. For the airport, see Seychelles International Airport.
Not to be confused with Exclusive economic zone.

The creation of special economic zones by the host country may be motivated by the desire to attract foreign direct investment (FDI).[1][2] The benefits a company gains by being in a special economic zone may mean that it can produce and trade goods at a lower price, aimed at being globally competitive.[1][3] In some countries, the zones have been criticized for being little more than labor camps, with workers denied fundamental labor rights.[4][5]

Definition

The definition of an SEZ is determined individually by each country. According to the World Bank in 2008, the modern-day special economic zone typically includes a "geographically limited area, usually physically secured (fenced-in); single management or administration; eligibility for benefits based upon physical location within the zone; separate customs area (duty-free benefits) and streamlined procedures."[6]

History

Free zones and entrepôts have been used for centuries to guarantee free storage and exchange along trade routes.

Modern SEZs appeared from the late-1950s in industrial countries. The first was in Shannon Airport in Clare, Ireland.[7]

From the 1970s onward, zones providing labour-intensive manufacturing have been established, starting in Latin America and East Asia. The first in China following the opening of China in 1979 by Deng Xiaoping was the Shenzhen Special Economic Zone, which encouraged foreign investment and simultaneously accelerated industrialization in this region. These zones attracted investment from multinational corporations.[1]

A recent trend has been for African countries to set up SEZs in partnership with China.[2]

Types

The term special economic zone[8] [9] can include:[1][10]

The World Bank created the following table to clarify distinctions between types of special economic zones:

Type [6] Objective Size Typical Location Typical Activities Markets
FTZ Support trade <50 hectares Port of entry Entrepôts and trade related Domestic, re-export
EPZ (traditional) Export manufacturing <100 hectares None Manufacturing, processing Mostly export
EPZ (single Unit/free enterprise) Export manufacturing No minimum Countrywide Manufacturing, processing Mostly export
EPZ (hybrid) Export manufacturing <100 hectares None Manufacturing, processing Export, domestic
Free port/SEZ Integrated development >1000 hectares None Multi-use Internal, domestic, export
Urban enterprise zone Urban revitalization <50 hectares Urban/rural Multi-use Domestic

Special economic zones by country
Main article: List of special economic zones

Bangladesh
Main article: Bangladesh Economic Zones Authority

Cambodia
Main article: Special Economic Zones of Cambodia

Cayman Islands
Main article: Cayman Enterprise City

China
Main article: Special economic zones of China

India
Main article: List of special economic zones in India

SEZs were introduced to India in 2000, following the already successful SEZ model used in China. Prior to their introduction, India relied on export processing zones (EPZs) which failed to make an impact on foreign investors. By 2005, all EPZs had been converted to SEZs. As of 2017, there are 221 SEZs in operation, with a further 194 approved for 2018. For developers to establish an SEZ in India, applications can be made to the Indian Board of Approval. Companies, partner firms, and individuals may also apply by completing Form-A which is available on the Department of Commerce's website. There are four types of SEZs in India, which are categorised according to size: Multi-sector (1,000+ hectares); Sector-specific (100+ hectares); Free Trade & Warehousing Zone (FTWZ) (40+ hectares); and Tech, handicraft, non-conventional energy, gems & jewellery (10+ hectares).[11]

Saudi Arabia

The Red Sea Project, a luxury tourist destination currently under construction, will "operate as a Special Economic Zone with its own laws and regulatory framework, specially created to encourage investment opportunities and commercial activities".[12]

See also

References
  1. "Special Economic Zones Progress, Emerging Challenges, and Future Directions" (PDF). Washington DC: The International Bank for Reconstruction and Development/The World Bank. 2011. Retrieved 25 May 2014.
  2. Woolfrey, Sean (2013). "Special economic zones and regional integration in Africa" (PDF). Trade Law Center. Retrieved 25 May 2014.
  3. "Goldman Sachs says reforms to create 110 mn jobs for economy in 10 yrs". Business Today. March 29, 2014.
  4. Watson, Peggy (July 23, 2012). "Sackings expose the harsh reality of Poland's junk jobs". The Guardian.
  5. Młodawska, Agata (March 8, 2012). "Maciejewska: Kobiety w strefie pracowniczego bezprawia". Nowe Peryferie.
  6. "Zone Definition", Special Economic Zone: Performance, Lessons Learned, and Implication for Zone Development, Washington DC: World Bank, 2008, pp. 9–11
  7. "Political priority, economic gamble". The Economist. April 4, 2015
  8. УПРАВЛЕНИЕ ОСОБЫМИ ЭКОНОМИЧЕСКИМИ ЗОНАМИ СУБЪЕКТА РФ Масаев С.Н. В сборнике: XIII Всероссийское совещание по проблемам управления ВСПУ-2019 Труды. Под общей редакцией Д.А. Новикова. 2019. С. 1773-1778.
  9. Masaev S. Destruction of the Resident Enterprise in the Special Economic Zone with Sanctions. Publisher: IEEE. 2019
  10. Economic Zones in the ASEAN (PDF), United Nations Industrial Development Organization, 2015, p. 26
  11. "India's Special Economic Zones: A Primer". india-briefing.com. 25 Apr 2018.
  12. "Saudi Arabia Investment | The Red Sea Development Company". www.theredsea.sa. Retrieved 2020-02-18.

Further reading
  • Chee Kian Leong, (2007) A Tale of Two Countries: Openness and Growth in China and India, Dynamics, Economic Growth, and International Trade, DEGIT Conference Paper pdf
  • Chee Kian Leong, (forthcoming) Special economic zones and growth in China and India: an empirical investigation, International Economics and Economic Policy. link
  • Thomas Farole, (2011) Special Economic Zones in Africa: Comparing Performance and Learning from Global Experiences, Washington, DC, World Bank
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