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 increasing 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.
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]
Definition
editThe 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."[5]
History
editThe United States has long applied special economic rules to its outlying territories for the purpose of economic development. Section 936 corporate tax exemptions for Puerto Rico began with Operation Bootstrap in the 1940s and ended in 2006.[6] The federal minimum wage for U.S. territories has in the past been lower than in the states, and as of 2024, American Samoa is still adjusting upward to the nation-wide minimum.[7]
Modern SEZs appeared from the late-1950s in industrial countries. The first was in Shannon Airport in County Clare, Ireland.[8] Some tax-free jurisdictions such as the Cayman Islands offer technology companies a way to keep their IP offshore in a Special Economic Zone (see Cayman Enterprise City).
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.[9]: 50–51 These zones attracted investment from multinational corporations[1] and allowed export-oriented Chinese businesses to respond quickly to demand in foreign markets.[9]: 50 China continues to maintain Special Economic Zones and certain open coastal areas. Most of China's SEZs are located in former treaty ports and therefore have symbolic significance in demonstrating a "reversal of fortunes" in China's dealings with foreigners since the century of humiliation.[9]: 51 Researcher Zongyuan Zoe Liu writes that "[t]he success of these cities as 'red' treaty ports represented another step in China's overall reform and opening-up plan while legitimizing the leadership of the CPC over the Chinese state and people."[9]: 51
Numerous African countries have set up SEZs in connection with China,[2] including over the period 1990 to 2018 establishing SEZs in Nigeria (two), Zambia, Djibouti, Kenya, Mauritius, Mauritania, Egypt, and Algeria.[10] Generally, the Chinese government takes a hands-off approach, leaving it to Chinese enterprises to work to establish such zones (although it does provide support in the form of grants, loans, and subsidies, including support via the China Africa Development Fund).[10] The Forum on China-Africa Cooperation promotes these SEZs heavily.[10]
As of at least 2024, there is a trend of southeast Asian countries to develop and increase their SEZs.[11]: 55 Since 2015, Thailand developed ten SEZs.[11]: 55 As of 2024, Indonesia has 13 SEZs, the Philippines has 12 SEZs, and Cambodia has 31 SEZs.[11]: 55
Types
editThe term special economic zone[12][13] can include:[1][14]
- Free-trade zones (FTZ)
- Export processing zones (EPZ)
- Free economic zones (FZ/ FEZ)
- Industrial parks / estates (IE)
- Free ports
- Bonded logistics parks (BLP)
- Urban enterprise zones
| Type | Objective | Size | Typical Location | Typical Activities | Markets |
|---|---|---|---|---|---|
| FTZ | Support trade | <50 hectares (120 acres) | Port of entry | Entrepôts and trade related | Domestic, re-export |
| EPZ (traditional) | Export manufacturing | <100 hectares (250 acres) | 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 (250 acres) | None | Manufacturing, processing | Export, domestic |
| Free port/SEZ | Integrated development | >1,000 hectares (2,500 acres) | None | Multi-use | Internal, domestic, export |
| Urban enterprise zone | Urban revitalization | <50 hectares (120 acres) | Urban/rural | Multi-use | Domestic |
Challenges
editSEZs do not differ from other facilities in industrializing economies. As with any technique administered used by a globalized economy there are oversights by actors that are not domestic. Transnational criminal organizations and terrorist groups have taken advantage of Special Economic Zones and their lack of regulations.[15]
See also
editReferences
edit- ^ a b c d "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.
- ^ a b Woolfrey, Sean (2013). "Special economic zones and regional integration in Africa" (PDF). Trade Law Center. Retrieved 25 May 2014.
- ^ "Goldman Sachs says reforms to create 110 mn jobs for economy in 10 yrs". Business Today. 29 March 2014.
- ^ Watson, Peggy (23 July 2012). "Sackings expose the harsh reality of Poland's junk jobs". The Guardian.
- ^ a b "Zone Definition", Special Economic Zone: Performance, Lessons Learned, and Implication for Zone Development, Washington DC: World Bank, 2008, pp. 9–11
- ^ Zadia M. Feliciano; Andrew Green (August 2017). "US Multinationals in Puerto Rico and the Repeal of Section 936 Tax Exemption for U.S. Corporations". National Bureau of Economic Research. doi:10.3386/w23681.
- ^ Federal Minimum Wage in American Samoa by Industry
- ^ "Political priority, economic gamble". The Economist. 4 April 2015
- ^ a b c d Liu, Zongyuan Zoe (2023). Sovereign Funds: How the Communist Party of China Finances its Global Ambitions. The Belknap Press of Harvard University Press. doi:10.2307/jj.2915805. ISBN 9780674271913. JSTOR jj.2915805.
- ^ a b c Murphy, Dawn C. (2022). China's rise in the Global South : the Middle East, Africa, and Beijing's alternative world order. Stanford, California: Stanford University Press. p. 177. ISBN 978-1-5036-3060-4. OCLC 1249712936.
- ^ a b c Han, Enze (2024). The Ripple Effect: China's Complex Presence in Southeast Asia. New York, NY: Oxford University Press. ISBN 978-0-19-769659-0.
- ^ 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.
- ^ Masaev S. Destruction of the Resident Enterprise in the Special Economic Zone with Sanctions. Publisher: IEEE. 2019
- ^ Economic Zones in the ASEAN (PDF), United Nations Industrial Development Organization, 2015, p. 26, archived from the original (PDF) on 30 September 2020, retrieved 16 September 2016
- ^ Latin American Special Economic Zones and Their Impacts on Regional Security (Report).
Further reading
edit- 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
- Jarosław M. Nazarczuk, Stanisław Umiński, (2019) Foreign Trade in Special Economic Zones in Poland, UWM w Olsztynie, Olsztyn link pdf
- Xiao, F., Zhou, Y., & Huang, Y. (2023). Old Wine in a New Bottle: Understanding the Expansion of the Shenzhen Special Economic Zone in China. Journal of Urban Planning and Development, 149(4), 02523001.
External links
edit- Шмонов Н.Н. «Историческое исследование проблем развития особых экономических зон»
- Bangladesh Export Processing Zone Authority BEPZA
- South Kazakhstan "Ontustyk" special economic zone
- Indian Special Economic Zones
- Export Processing Zones Authority Pakistan
- PEZA Philippines website
- India Special Economic zones map
- Open Joint Stock Company "Special Economic Zones" (Russia) Archived 28 January 2010 at the Wayback Machine
- U.S.S.R. Special Economic Zones [1]
- India: Citizens group demand moratorium on SEZs OneWorld South Asia