Special Economic Zone - Wikipedia, the free encyclopedia Page 1 of 9

Special Economic Zone

From Wikipedia, the free encyclopedia

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 direct investment by foreign investors, typically an international
business or a multinational corporation (MNC).

In the People's Republic of China, Special Economic Zones were founded by the central government
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.India has also played a significant role in the founding and establishment of Special Economic
Zones. It has the largest outsourcing industry in Asia.

Following the Chinese examples, Special Economic Zones have been established in several
countries, including Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland, South
Korea, Russia, Ukraine, United Arab Emirates, Cambodia, North Korea. 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 most prominent
examples of this layered approach are Subic Bay Freeport Zone in the Philippines, the Aqaba Special
Economic Zone Authority in Jordan, Sricity Multi-product SEZ and Mundra SEZ in India and
According to World Bank estimates 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).

Contents
 1 China
 2 India
 2.1 SEZs in India

 3 Indonesia
 4 Iran
 5 Kazakhstan
 6 Malaysia
 7 Myanmar
 8 North Korea
 9 Pakistan
 9.1 List of SEZs in Pakistan

 10 Philippines
 10.1 List of SEZs in the Philippines

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 11 Poland
 12 Republic of Korea (South Korea)
 13 Russia
 13.1 Technical/Innovational Zones
 13.2 Industrial/developmental Zones
 13.3 Tourist Zones

 14 Ukraine
 15 U.S.S.R.
 16 References
 17 External links

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

Currently, the most prominent SEZs in the country are Shenzhen, Xiamen, Shantou, and Hainan
Province. It is notable that Shenzhen, Shantou, and Zhuhai are all in Guangdong province, and all are
on the southern coast of China where sea is very accessible for transportation of goods.

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 s in India closely
follow the PRC model.

India passed special economic zone act in 2005. In India, the government has been proactive in the
development of the SEZs. They have formulated policies, reviewed them occasionally and have
ensured that ample facilities are provided to the developers of the SEZs as well as to the companies
setting up units in the SEZs.

SEZs in India

In India, SEZs are the special zones created by the Govt and run by Govt-Private or solely Private
ownership, to provide special provisions to develop industrial growth in that particular area. Govt of
India launched its fir SEZ in 1965, in Kandla, Gujarat. The incentives and facilities offered to the
units in SEZs for attracting investments into the SEZs, including foreign investment include:-

* Duty free import/domestic procurement of goods for development, operation and maintenance of S
* 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax
next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
* Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
* External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturit
banking channels.
* Exemption from Central Sales Tax.
* Exemption from Service Tax.
* Single window clearance for Central and State level approvals.
* Exemption from State sales tax and other levies as extended by the respective State Government

The major incentives and facilities available to SEZ developers include:-

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* Exemption from customs/excise duties for development of SEZs for authorized operations approve
* Income Tax exemption on income derived from the business of development of the SEZ in a block
Section 80-IAB of the Income Tax Act.
* Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
* Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
* Exemption from Central Sales Tax (CST).
* Exemption from Service Tax (Section 7 26 and Second Schedule of the SEZ Act)

Currently there are 114(as on Oct 2010) SEZs operating throughout India in the following states.[3]
Karnataka - 18; Kerala - 6; Chandigarh - 1; Gujarat - 8; Haryana - 3; Maharashtra - 14; Rajastan - 1;
Orissa - 1 TamilNadu - 16; Utter Pradesh - 4; West Bengal - 2.

Additionally, more than 500 SEZs are formally approved (as on Oct 2010) by the Govt of India in
the following states.[4] Andhra Pradesh - 109; Chandigarh - 2; Chattisgarh - 2; Dadra Nagar Haveli -
4; Delhi- 3; Goa - 7; Gujarath - 45; Haryana - 45; Jharkand - 1; Karnataka - 56; Kerala - 28; Madhya
Pradesh - 14; Mahrashtra - 105; Nagaland - 1; Orissa - 11; Pondicherry - 1; Punjab - 8; Rajasthan - 8;
TamilNadu - 70; Uttarankhand - 3; Utter Pradesh - 33; West Bengal - 22;

There are no rules or benefits explicitly mentioned favorable for Laborers working inside these
SEZs. Existing Labour / Union Rules applicable for India or any State within India are not applicable
to SEZs within India.

Indonesia
Main article: Batam Island#SEZ - Special Economic Zones

Iran
 Arg - e - Jadid Special Economic Zone: Vehicle Manufacturing Hub.
 PetZone: Petrochemical special economic Zone, Mahshahr.
 Kish: Kish island special economic zone.
 Sarakhs
 Sirjan
 Shahid Rajaee Port [5]
 Amirabad Special Economic Zone [6]
 Bushehr Port
 Payam Special Economic Zone, closest SEZ to the capital city Tehran, with 3600 hec. area
within 10000 hec. of Payam International Airport territory established in Karaj for
development of air cargo and postal transportation, storage of goods, cold store, packing
services, goods productivity, perishable and time sensitive goods export. Payam is the only
SEZ in the region with the privilege of its own airport and airline. Adjacent to industrial,
economical and agricultural center of Tehran, with easy access to railroad, underground and
other related highways. In order to attract FDI Payam has created equal opportunity and
possibility of investment for Iranian and foreign subjects on every scale of partnership, in
addition guarantee foreign investment according to attraction and protection law of foreign
investments and freedom of invest transfer and obtained income of it, with no administrative
encumbrance laws. Further more there is free entrance, without customs duties for goods,
machinery and row material until it has been stationed in the zone, with possibility to export
goods from zone without customs formalities.[7]

Kazakhstan
 Astana

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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.

Malaysia
Malaysia launches East coast Economis Region SEZ[1] in August 2009. The country’s first Special
Economic Zone are expected to contribute RM23 billion to the national GDP and create 220,000
new jobs in the ECER.

Myanmar
Special economic zones, which offer tax exemptions for different sectors (5 years for production, 8
years for high-tech, 2 years for agriculture, livestock breeding and forestry, and 1 year for banking)
are undergoing preliminary construction in Sittwe Township and Kyaukpyu Township in Rakhine
State.[2] An international standard airport is also to be constructed. The six free trade zones will be
Thilawa Port in Yangon, Mawlamyine in Mon State, Myawaddy and Hpa-an in Kayin State,
Kyaukphyu in Rakhine state and Pyin Oo Lwin in Mandalay Region.[3]

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.

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.

List of SEZs in Pakistan

 Karachi Export Processing Zone, Karachi, Sindh

 Risalpur Export Processing Zone, Risalpur
 Sialkot Export Processing Zone, Sialkot, Punjab
 Gujranwala Export Processing Zone, Gujranwala, Punjab

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Philippines
Philippine economic zones (ecozones) are collections of industries, brought together geographically
for the purpose of promoting economic development. These ecozones were established through
Republic Act No. 7916, otherwise known as "The Special Economic Zone Act of 1995" as amended
by Republic Act No. 8748.[4]

Philippine Ecozones are generally administered by the Philippine Economic Zone Authority through
a Board (PEZA Board), attached to the Department of Trade and Industry. The PEZA Board sets the
general policies on the establishment and operations of the Ecozones, industrial estates, export
processing zones, free trade zones, and the like.[5] They also review proposals for the establishment
of Ecozones, which they subsequently endorse to the President of the Republic of the Philippines. In
addition, the PEZA Board regulates and undertakes the establishment, operation and maintenance of
utilities, other services and infrastructure in the Ecozone, such as heat, light and power, water supply,
telecommunications, transport, toll roads and bridges, port services, and the like.[6]

Several incentives are granted to business establishments operating within Philippine Ecozones,
particularly those found in the Omnibus Investments Code of 1987.[7] These incentives include
income tax holidays; zero percent (0%) duty on importation of capital equipment, spare parts, and
accessories; exemption from wharfage dues and export tax, impost or fees; and the simplification of
customs procedures, among others.[8] In addition, The Special Economic Zone Act of 1995 exempts
business establishments operating within Ecozones from all taxes. In lieu of paying all other taxes,
business establishments are only required to pay five percent (5%) of their gross income to the
national government.[9][10]

Activities Eligible for PEZA Registration and Incentives include but are not limited to (1) Export
Manufacturing; (2) Information Technology Service Export; (3) Tourism; (4) Medical Tourism; (5)
Agro-industrial Export Manufacturing; (6) Agro-industrial Bio-Fuel Manufacturing; and (7)
Logistics and Warehousing Services.[11]

Although designed to operate separately from the political and economic milieu of surrounding
communities, Philippine economic zones do in fact interact with their neighbors. As of 31 May 2010,
there were more than 200 Ecozones in the Philippines. Of these more than 200 Ecozones, seven (7)
are Agro-Industrial Economic Zones, 134 are Information Technology Parks and Centers, 65 are
Manufacturing Ecozones, two (2) are Medical Tourism Parks/Centers, and nine (9) are Tourism
Economic Zones. 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. Some of the more well-known Economic zones are the Clark
Special Economic Zone, and Subic Economic Zone, former military bases of the United States of
America.

List of SEZs in the Philippines

Some of the over 200 SEZs in the Philippines are as follows:

 Subic Bay Metropolitan Authority (76.59 hectares)

 Clark Special Economic Zone (29,365 hectares)
 Bataan Export Processing Zone (1,733.37 hectares)
 PHIVIDEC Industrial Authority
 Zamboanga City Special Economic Zone
 Cagayan Special Economic Zone
 Aurora Special Economic Zone

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 Light Industry & Science Park I, II, & III (272.22 hectares)
 Laguna Technopark (289.95 hectares)
 Laguna International Industrial Park (34.88 hectares)
 Hermosa Ecozone Industrial Park (142.04 hectares)
 Keppel Philippines Marine Special Economic Zone (22.92 hectares)
 Filinvest Technology Park - Calamba (51.07 hectares)[12]

Poland
There are 14 Special Economic Zones in Poland[13]

 Kamiennogórska SSE
 Katowice Special Economic Zone
 Kostrzyńsko-Słubicka SSE
 Krakowski Park Technologiczny
 Legnicka SSE
 Łódzka SSE
 SSE EURO-PARK MIELEC
 Słupska SSE
 SSE Starachowice
 Suwalska SSE
 Pomorska SSE (Pomeranian Special Economic Zone)
 Tarnobrzeska SSE
 Wałbrzych Special Economic Zone "INVEST-PARK"
 Warmińsko-Mazurska SSE

Republic of Korea (South Korea)

The Daegu-Gyeongbuk Free Economic Zone (DGFEZ) is located in the Daegu-Gyeongbuk region,
Southeastern part of South Korea. It encompasses four parts of Daegu including Dong-gu, Suseong-
gu, Nam-gu, and Dalseong-gun, and four parts of Gyeongsangbuk-do (Gyeongbuk) including Gumi,
Pohang, Gyeongsan, and Yeongcheon. In total there are 11 specialized districts spanning 39.54 km2.
DGFEZ is a Knowledge-Creative Free Economic Zone with 7 of the districts specialized on
knowledge-based service industries and 4 for knowledge-based manufacturing industries.

Russia
Russia currently has 16 federal economic zones and several regional projects.

As of March 2010 Russia's federal special economic zones host 207 investors from 18 countries.
There are major MNCs among investors to Russia's SEZ, such as Yokohama, Cisco, Isuzu, Air
Liquide, Bekaert, Rockwool and many others.

Russia’s 15 existing and to-be federal special economic zones are managed by OJSC "Special
Economic Zones". OJSC "SEZ" was founded in 2006 to accumulate and implement world's best
practices in developing and managing SEZ and promote Foreign direct investment (FDI) in the
Russian economy.

It is fully owned and funded by the Russian state.

Federal economic zones in Russia are regulated by Federal Law # 116 FZ issued on July 22, 2005.

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Technical/Innovational Zones

 Dubna
 Zelenograd
 Neudorf (Russian: Нойдорф) - industrial and business park in special economic zone in
Strelna near Saint Petersburg, Russia
 Novo-Orlovskoye (Russian: Ново-Орловское) - SEZ territory in Saint Petersburg, Russia
 Tomsk

Industrial/developmental Zones

 “Alabuga” (special economic zone)

 Lipetsk

Tourist Zones

 Krasnodar Krai
 Stavropol Krai
 Kaliningrad Oblast (Yantar, Kaliningrad Special Economic Zone)
 Altai Krai
 Altai Republic
 Irkutsk Oblast
 Buryatia
 Vladivostok

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
till
Slavutych Slavutych, Kiev Oblast 2,000 ha 30.06.1998
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
Uzhhorodskyi Raion and
Zakarpattia Mukachivskyi Raion, Zakarpattia 737 ha 09.01.1999 30 years
Oblast
116,000 till
Yavoriv Yavorivskyi Raion, Lviv Oblast 17.02.1999
ha 01.01.2020
Interport Kovel Kovel, Volyn Oblast 57 ha 01.01.2000 20 years
Kurortopolis
Truskavets, Lviv Oblast 774 ha 01.01.2000 20 years
Truskavets
Mykolaiv, Mykolaiv Oblast, shipyard
Mykolaiv 865 ha 01.01.2000 30 years
territory, and adjoining area

Kerch, Autonomous Republic of

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Port Krym Crimea 27 ha 01.01.2000 30 years

Odessa, part of Odessa Trade Sea
Porto-Franco 32 ha 01.01.2000 25 years
Port's territory
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: [8] [9] [10] and Пехник А.В., Іноземні інвестиції в економіку України. Навчальний
посібник, Вид. «Знання», Київ 2007, pages: 49, 310–319

U.S.S.R.
As for Finland and Yugoslavia, the reason for their rapid economic growth was the Soviet Union’s
policy of treating those states as special economic zones, through which it gained access to
technologies and the know-how of the West. Export of such products to the USSR was often
prohibited due to their dual purpose. (U.S.S.R. Special Economic Zones)

References
1. ^ [1] Read more: SEZ set to fire up economic growth
2. ^ "Burmese:
" (in Burmese). Weekly
Eleven News. 2010-08-22. http://www.news-eleven.com/index.php?
option=com_content&view=article&id=4450:2010-08-25-06-29-57&catid=45:2009-11-10-07-45-
41&Itemid=113. Retrieved 2010-08-28.
3. ^ http://english.peopledaily.com.cn/200703/13/eng20070313_357029.html
4. ^ The text of The Special Economic Zone Act of 1995 is found at http://www.peza.gov.ph/index.php?
option=com_content&view=article&id=97&Itemid=55 or
http://www.chanrobles.com/specialeconomiczoneact.htm
5. ^ The Special Economic Zone Act of 1995, sec. 12
6. ^ Id.
7. ^ The Special Economic Zone Act of 1995, sec. 23.
8. ^ Omnibus Investments Code, art. 39.
9. ^ The Special Economic Zone Act of 1995, sec. 24.
10. ^ See also Fiscal Incentives to PEZA-Registered Economic Zone Enterprises available at
http://www.peza.gov.ph/index.php?option=com_content&view=article&id=112&Itemid=154
11. ^ http://www.peza.gov.ph/index.php?option=com_content&view=article&id=111&Itemid=153
12. ^ http://www.peza.gov.ph/index.php?option=com_content&view=article&id=116&Itemid=161
13. ^ [2] SEZ in Poland-Source-Govt of Poland

 Chee Kian Leong, 2007, A Tale of Two Countries: Openness and Growth in China and India
[11], Dynamics, Economic Growth, and International Trade (DEGIT) Conference Paper.

External links
 South Kazakhstan "Ontustyk" special economic zone
 Indian Special Economic Zones
 Export Processing Zones Authority Pakistan
 PEZA Philippines
 India Special Economic zones map
 Open Joint Stock Company "Special Economic Zones" (Russia)
 U.S.S.R. Special Economic Zones

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