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 entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...
, 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).
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 ...
at a lower price, aimed at being globally competitive.
In some countries, the zones have been criticized for being little more than
labor camps, 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 Inte ...
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 in
Clare Clare may refer to:
Places Antarctica
* Clare Range, a mountain range in Victoria Land
Australia
* Clare, South Australia, a town in the Clare Valley
* Clare Valley, South Australia
Canada
* Clare (electoral district), an electoral district
* Cl ...
,
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"](_blank)
''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 Econ ...
''. 4 April 2015 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
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 ...
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 ...
. 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 China, People's Republic of China (PRC) from December 1978 to November 1989. Aft ...
was the
Shenzhen Special Economic Zone, which encouraged foreign investment and simultaneously accelerated industrialization in this region. These zones attracted investment from multinational corporations.
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 China-Africa Development Fund, more commonly known as CAD Fund, is a Chinese private equity fund solely funded by China Development Bank, a Chinese government policy bank. The aim of the fund is to stimulate investment in Africa by Chinese co ...
).
The
Forum on China-Africa Cooperation
Forum or The Forum (plural forums or fora) may refer to:
Common uses
*Forum (legal), designated space for public expression in the United States
*Forum (Roman), open public space within a Roman city
**Roman Forum, most famous example
*Internet ...
promotes these SEZs heavily.
Types
The term special economic zone can include:
*
Free-trade zones (FTZ)
*
Export processing zones (EPZ)
*Free zones/
Free economic zones (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
*
Bonded logistics parks (BLP)
*
Urban enterprise zones
The World Bank created the following table to clarify distinctions between types of special economic zones:
See also
*
List of special economic zones by country
*
Exclusive economic zone
*
Urban enterprise zone
*
Four Asian Tigers
The Four Asian Tigers (also known as the Four Asian Dragons or Four Little Dragons in Chinese and Korean) are the developed East Asian economies of Hong Kong, Singapore, South Korea, and Taiwan. Between the early 1960s and 1990s, they underwent ...
*
Free economic zone
References
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 Pape
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
External links
Шмонов Н.Н. «Историческое исследование проблем развития особых экономических зон»Bangladesh Export Processing Zone Authority BEPZASouth Kazakhstan "Ontustyk" special economic zoneIndian Special Economic ZonesExport Processing Zones Authority PakistanPEZA Philippines websiteIndia Special Economic zones mapOpen 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