Special Economic Zone

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A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws. The category 'SEZ' covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign investment. One of the earliest and the most famous Special Economic Zones were found by the government of the People's Republic of China 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. Following the Chinese examples, Special Economic Zones have been established in several countries, including Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland, Russia, and Ukraine. North Korea has also attempted this to a degree, but failed[citation needed]. 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 two most prominent examples of this layered approach are Subic Bay in the Philippines and the Aqaba Special Economic Zone in Jordan.

In a recent comprehensive econometric study[1] on the SEZ policies in China and India, Leong (2007) investigates the impact of opening up the Chinese and Indian economy on economic growth in these countries using new panel data sets for both the national economies and the regional economies of China. The policy change to a more liberalized economy is explicitly identified using instrumental variables. The results provide support that export growth does have a positive and statistically significant effect on economic growth in these countries. However, the growth rates of these countries are export and FDI inelastic, in the sense that a one percentage point increase in growth rate of export or FDI will have a less than one percentage point increase in economic growth rate of these countries. In the case of the Chinese regions, the presence of export processing zones may exert positive effect on the regional growth rate but the increase in regional growth is even more export inelastic than at the national level. The result dispel the popular view that adopting a policy of more openness in the economy has a “multiplier” effect on economic growth. Of the two phases of liberalization in both countries, the second stage is statistically significant. One possible reason is that the scale of liberalization is greater in the second phase. Additionally, increasing the number of SEZs has very negligible effect on economic growth. Taken together, these results suggest that what contributes to greater growth is a greater scale of liberalization, rather than increasing the number of SEZs.

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According to World Bank estimates, as 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] China

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

Currently, the most prominent SEZ's in the country are Shenzhen , Xiamen, Shantou, Zhuhai and Hainan Province.

[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 Economic Zones in India closely follow the PRC model. India passed special economic zone act in 2005

[edit] List of SEZs in India

The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones. Accordingly, the Government has converted Export Processing zones located at

Currently, India has 1022 units in operations in 9 functional SEZs, each an average size of 200 acres (0.81 km2). 8 Export Processing Zones (EPZs) have been converted into SEZs. These are fully functional. All these SEZs are in various parts of the country in the private/joint sectors or by the State Government. But this process of planning and development is under question, as the states in which the SEZs have been approved are facing intense protests, from the farming community, accusing the government of forcibly snatching fertile land from them, at heavily discounted prices as against the prevailing prices in the commercial real estate industry. Also some reputed companies like Bajaj and others have commented against this policy and have suggested using barren and wasteland for setting up of SEZs.

Attempts to set up a Special Economic Zone in Nandigram have led to protests by villagers in the area. A Parliamentary Committee to study and give recommendations on SEZs has said that no further SEZs be notified unless the existing law is amended to incorporate the changes related to the land acquisitions.

Genpact has announced its plans to expand its presence in Hyderabad by setting up a Special Economic Zone (SEZ) across 50 acres (200,000 m2) in the city at Jawahar Nagar.

PointIndu has inaugurated Hyderabad by setting up a Special Economic Zone (SEZ) across 150 acres (0.61 km2) near Shamshabad close to airport.

[edit] Indonesia

Main article: Batam Island#SEZ - Special Economic Zones

[edit] Iran

[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] 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 Haier-Ruba economic zone on the outskirts of Lahore.

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] Philippines

Philippine economic zones (ecozones) are collections of industries, brought together geographically for the purpose of promoting economic development. Although designed to operate separately from the political and economic milieu of surrounding communities, Philippine economic zones do in fact interact with their neighbors. There are 41 private-owned economic zones and 4 government owned economic zones in the Philippines. 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. Thus it is a useful act for the growth of economic zone of the country.

[edit] List of SEZs in the Philippines

[edit] Poland

There are 14 Special Economic Zones in Poland[1]:

[edit] Russia

[edit] Technical/Innovational Zones

[edit] Industrial/developmental Zones

[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 till 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 till 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: [4] [5] [6] and Пехник А.В., Іноземні інвестиції в економіку України. Навчальний посібник, Вид. «Знання», Київ 2007, pages: 49, 310–319

[edit] References

  1. ^ http://www.mg.gov.pl/Specjalne+strefy+ekonomiczne/Wykaz+SSE/
  • Chee Kian Leong, 2007, A Tale of Two Countries: Openness and Growth in China and India [7], Dynamics, Economic Growth, and International Trade (DEGIT) Conference Paper.

[edit] External links

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