Special economic zone

Last updated

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.

Contents

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.[ citation needed ]

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]

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).

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] ObjectiveSizeTypical LocationTypical ActivitiesMarkets
FTZSupport trade<50 hectaresPort of entryEntrepôts and trade related Domestic, re-export
EPZ (traditional)Export manufacturing<100 hectaresNoneManufacturing, processingMostly export
EPZ (single Unit/free enterprise)Export manufacturingNo minimumCountrywideManufacturing, processingMostly export
EPZ (hybrid)Export manufacturing<100 hectaresNoneManufacturing, processingExport, domestic
Free port/SEZIntegrated development>1000 hectaresNoneMulti-useInternal, domestic, export
Urban enterprise zoneUrban revitalization<50 hectaresUrban/ruralMulti-useDomestic

See also

Related Research Articles

Economy of Kazakhstan National economy

The economy of Kazakhstan is the largest in Central Asia in both absolute and per capita terms, but the currency saw a sharp depreciation between 2013 and 2016. It possesses oil reserves as well as minerals and metals. It also has considerable agricultural potential with its vast steppe lands accommodating both livestock and grain production. The mountains in the south are important for apples and walnuts; both species grow wild there. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources.

Economy of Bangladesh National economy

The economy of Bangladesh is characterised as a developing market economy. It's the 37th largest in the world in nominal terms, and 31th largest by purchasing power parity; it is classified among the Next Eleven emerging market middle income economies and a frontier market. In the first quarter of 2019, Bangladesh's was the world's seventh fastest growing economy with a rate of 8.3% real GDP annual growth. Dhaka and Chittagong are the principal financial centers of the country, being home to the Dhaka Stock Exchange and the Chittagong Stock Exchange. The financial sector of Bangladesh is the third largest in the Indian subcontinent. Bangladesh is one of the world's fastest growing economies.

A free-trade zone (FTZ) is a class of special economic zone. It is a geographic area where goods may be imported, stored, handled, manufactured, or reconfigured and re-exported under specific customs regulation and generally not subject to customs duty. Free trade zones are generally organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade.

Free economic zones (FEZ), free economic territories (FETs) or free zones (FZ) are a class of special economic zone (SEZ) designated by the trade and commerce administrations of various countries. The term is used to designate areas in which companies are taxed very lightly or not at all to encourage economic activity. The taxation rules are determined by each country. The World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM) has content on the conditions and benefits of free zones.

Tamil Nadu Industrial Development Corporation Government agency in Tamil Nadu, India

Tamil Nadu Industrial Development Corporation (TIDCO) is a governmental agency in the state of Tamil Nadu, India. It is responsible for the development of industries in the state by formulating policies that help industry growth, and by establishing industrial estates. It often partners with TANSIDCO. TIDCO has established the Tidel Park in Chennai and Tidel Park in Coimbatore for information technology companies, and Ticel Park in southern Chennai for chemical companies.

Special economic zones of China

Special economic zones (SEZs) in mainland China are granted more free market-oriented economic policies and flexible governmental measures by the government of China, compared to the planned economy elsewhere. This allows SEZs to utilize economic management which is more attractive to foreign and domestic businesses. In SEZs, "...foreign and domestic trade and investment are conducted without the authorization of the Chinese central government in Beijing" with "tax and business incentives to attract foreign investment and technology".

The Shenzhen Special Economic Zone, was established in May 1980, and is the first special economic zone in the People's Republic of China. Five other special economic zones have since been established.

An urban enterprise zone is an area in which policies to encourage economic growth and development are implemented. Urban enterprise zone policies generally offer tax concessions, infrastructure incentives, and reduced regulations to attract investments and private companies into the zones. They are a type of special economic zone where companies can locate free of certain local, state, and federal taxes and restrictions. Urban enterprise zones are intended to encourage development in deprived neighborhoods through tax and regulatory relief to entrepreneurs and investors who launch businesses in the area.

Bangladesh Export Processing Zone Authority

The Bangladesh Export Processing Zones Authority (BEPZA) is an agency of the Government of Bangladesh and is administered under the jurisdiction of the Prime Minister's Office. Its objective is to manage the various export processing zones in Bangladesh. BEPZA currently oversees the operations of eight export processing zones (EPZ). A ninth zone is scheduled to open in the future. Recently government has announced that in 15 years 100 new EPZ and SEZ will be established.

The Rason Special Economic Zone, earlier called the Rajin-Sonbong Economic Special Zone, was established in the early 1990s by the North Korean government near Rason to promote economic growth through foreign investment. It is similar to the Special Economic Zones set up by the People's Republic of China and elsewhere to pilot market economics in a designated controlled area. It is near the border with China and Russia and is a warm-water port for both countries.

Trade is a key factor of the economy of China. In the three decades following the Communist takeover in 1949, China's trade institutions developed into a partially modern but somewhat inefficient system. The drive to modernize the economy that began in 1978 required a sharp acceleration in commodity flows and greatly improved efficiency in economic transactions. In the ensuing years economic reforms were adopted by the government to develop a socialist market economy. This type of economy combined central planning with market mechanisms. The changes resulted in the decentralization and expansion of domestic and foreign trade institutions, as well as a greatly enlarged role for free market, s in the distribution of goods, and a prominent role for foreign trade and investment in economic development.

SEEPZ neighbourhood in Mumbai Suburban, Maharashtra, India

Santacruz Electronics Export Processing Zone (SEEPZ) is a Special Economic Zone in Mumbai, India. Situated in the Andheri East area, it is subjected to liberal economic laws as compared to the rest of India to promote rapid economic growth using tax and business incentives and attract foreign investment and technology. Seepz was created in 1973 and was seen as export processing zone. Since then many other SEZ's have been created in rest of India. SEEPZ mainly houses electronic hardware manufacturing companies, software companies, and jewelry exporters of India. More than 40 percent of India's total jewelry exports out of $5,210.69 million during year 2006-2007 came from units within SEEPZ.

Economy of Guangdong

The Economy of Guangdong is one of the most prosperous in China. Guangdong is located in southern China, bordering on Fujian Province to the east, Hunan Province to the north, Guangxi Autonomous Region to the west and the special administrative regions of Hong Kong and Macau to the south. It is also the 1st economy of a sub-national entity in terms of GDP US$1.7 trillion in all of Asia and 4th largest sub-national entity in the world.

Software industry in Chennai

Chennai is the second largest software exporter in India, next only to Bangalore. India's largest IT park is housed at Chennai. Software exports from Tamil Nadu during 2017–2018 rose 8.6% per cent to touch 1,11,179 crore, involving a workforce of 780,000, and the city is the hub for deep tech startup companies. Many software and software services companies have development centres in Chennai, which contributed 14 percent of India's total software exports of 14,42,140 lakh during 2006–07, making it the second largest Indian city software exporter following Bangalore and the city is the home for 7 top rated IT companies out of 15 in India. The Tidel Park in Chennai was billed as Asia's largest IT park when it was built. Major software companies have their offices set up here, with some of them making Chennai their largest base.Chennai is the largest hub for e-publishing, as there are 67 e-publishing units registered with the STPI and many Rs.8300-Cr data centers, digital hubs are in the process of development. A major reason for the growth of the Software industry are the top engineering colleges in Tamil Nadu, of which Chennai is a major contributor, have been a major recruiting hub for the IT firms. According to estimates, these engineering colleges and universities consistently generate about 50 per cent of the human resource requirements for the IT and ITES industry was being sourced from the state, particularly from Chennai.

Zone for Employment and Economic Development is the name of a new type of administrative division in Honduras that is subject under the national government and provides a high level of autonomy with its own political system, at a judicial, economic and administrative level.

Special Economic Zones of Cambodia

Special Economic Zones of Cambodia are geographical areas within Cambodia's borders that have been specially designated by the national government in which business and trade regulations differ from those that apply to the rest of the country. Special economic zones, in general, are common in various economies around the world and are established to meet the needs of the specific business environment of each host country, ranging from encouraging foreign investment to job creation to streamlined administration of multinational ventures.

Bangladesh Economic Zones Authority

Bangladesh Economic Zones Authority or BEZA is a centralized economic zones authority of Bangladesh which was instituted by the government in November 2010 under Bangladesh Economic Zones Act, 2010. The organisation is responsible for establishing and managing of SEZs of Bangladesh. It is run from Prime Minister's Office of Bangladesh.

References

  1. 1 2 3 4 "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. 1 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" [ permanent dead link ]. Nowe Peryferie.
  6. 1 2 "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

Further reading