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 A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal person, legal entity) by a governmental organization in order to fund government spending and various public expenditures (regiona ...

, trading, quotas,

customs Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs ...

and

labour regulations Labour laws (also known as labor laws or employment laws) are those that mediate the relationship between workers, employing entities, trade unions, and the government. Collective labour law relates to the tripartite relationship between employee, ...

. Additionally, companies may be offered

tax holiday A tax holiday is a temporary reduction or elimination of a tax. It is synonymous with tax abatement, tax subsidy or tax reduction. Governments usually create tax holidays as incentives for business investment. Tax relief can be provided in th ...

s, 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 A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct co ...

(FDI). The benefits a company gains by being in a special economic zone may mean that it can produce and trade

goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not t ...

at a lower price, aimed at being globally competitive. In some countries, the zones have been criticized for being little more than

labor camps A labor camp (or labour camp, see spelling differences) or work camp is a detention facility where inmates are forced to engage in penal labor as a form of punishment. Labor camps have many common aspects with slavery and with prisons (espec ...

, with workers denied fundamental labor rights.

Definition

The definition of an SEZ is determined individually by each country. According to the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...

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."

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 Shannon Airport ( ga, Aerfort na Sionainne) is an international airport located in County Clare in the Republic of Ireland. It is adjacent to the Shannon Estuary and lies halfway between Ennis and Limerick. The airport is the third busiest ai ...

in Clare,

Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...

."Political priority, economic gamble"
''

The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Econo ...

''. 4 April 2015 Some tax-free jurisdictions such as the

Cayman Islands The Cayman Islands () is a self-governing British Overseas Territory—the largest by population in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac and Little Cayman, which are located to the ...

offer technology companies a way to keep their IP offshore in a Special Economic Zone (see

Cayman Enterprise City Cayman Enterprise City is a development project which consists of three special economic zones focused on attracting knowledge-based and specialized-services businesses to set up a physical presence in the Cayman Islands. It is a government initi ...

). From the 1970s onward, zones providing labour-intensive manufacturing have been established, starting in

Latin America Latin America or * french: Amérique Latine, link=no * ht, Amerik Latin, link=no * pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived f ...

and

East Asia East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms. The modern states of East Asia include China, Japan, Mongolia, North Korea, South Korea, and Taiwan. China, North Korea, South Korea and ...

. The first in China following the opening of China in 1979 by

Deng Xiaoping Deng Xiaoping (22 August 1904 – 19 February 1997) was a Chinese revolutionary leader, military commander and statesman who served as the paramount leader of the People's Republic of China (PRC) from December 1978 to November 1989. After CC ...

was the

Shenzhen Special Economic Zone The Shenzhen Special Economic Zone () is a special economic zone (SEZ) of China. One of four special economic zones (SEZ) established in May 1980, it was the first SEZ created by Deng Xiaoping, and, like the other three zones, was modeled after Ir ...

, which encouraged foreign investment and simultaneously accelerated industrialization in this region. These zones attracted investment from multinational corporations. China continues to maintain Special Economic Zones and certain open coastal areas. Numerous African countries have set up SEZs in connection with China, including over the period 1990 to 2018 establishing SEZs in Nigeria (two), Zambia, Djibouti, Kenya, Mauritius, Mauritania, Egypt, and Algeria. 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). The Forum on China-Africa Cooperation promotes these SEZs heavily.

Types

The term special economic zone can include: *

Free-trade zone 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 cus ...

s (FTZ) *

Export processing zones 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 cu ...

(EPZ) *Free zones/

Free economic zone 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 co ...

s (FZ/ FEZ) *

Industrial park An industrial park (also known as industrial estate, trading estate) is an area zoned and planned for the purpose of industrial development. An industrial park can be thought of as a more "heavyweight" version of a business park or office park ...

s / industrial estates (IE) *

Free ports Free may refer to: Concept * Freedom, having the ability to do something, without having to obey anyone/anything * Freethought, a position that beliefs should be formed only on the basis of logic, reason, and empiricism * Emancipate, to proc ...

Bonded logistics park A bonded logistics park is a type of special economic zone. Trade arrangements are similar to that of a bonded warehouse but over a specific geographic area. Sometimes with international port capabilities. Goods may be stored, manipulated, or und ...

s (BLP) * Urban enterprise zones The World Bank created the following table to clarify distinctions between types of special economic zones:

References

External links

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)

India: Citizens group demand moratorium on SEZs OneWorld South Asia
{{Authority control Special economic zones, Foreign direct investment Commercial policy Economic development policy

Definition

History

Types

See also

References

Further reading

External links