Download Special Economic Zones

Key Term Geography
Special Economic Zones
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Special Economic Zone = modern economic zone where business and trades laws differ from the rest of the country
(financially libertarian, market-free orientated policies) generally within the borders of a country
Driven by the supply-side theory assuming that employers, investors, will respond positively to incentives regarding
taxation, trading quotas, customs, labour or environmental regulations...
Policies within economic zones differ for each country
Aims at boosting the economy with:
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Increase in trade
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Increase in investment, FDI
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Job creation
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Effective administration
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Lower prices, higher competitiveness
Policies regarding investment, taxation, trading, quotas, customs, labour regulation
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tax holidays = exemption from taxes for a limited period of time
Controversial regarding the workers’ condition
Different forms of SEZs (from least to most open, conciliatory):
Urban enterprise Zone = for small-scale local businesses, to develop blight neighbourhoods
Located in the US and the UK mostly
Limits: it is mostly large corporations that benefit
Business/Office parks = for light industry development, with good transportation access including road and rail
Industrial Park Area = for heavyweight industrial development, with good transportation access including road and rail
Ex: London Thames Gateway
Limits: public transportation options may be limited or non-existent, no or few special environment safeguards
Export-Processing Zone = for processing-based manufacturing companies and their forwarders and warehousing services,
70% of products required for export
Ex: Rason Special Economic Zone in North Korea near the border with Russia and the PRC; use of foreign currency
allowed, three ports in the area, renovation of the Trans-Siberia Railway linked to the Pyongra Line in Rason
Free Economic Zone = for any company, taxed very lightly or not at all (free-trade zone)
Free Trade Zone = for any company, goods may be landed, handled, manufactures or reconfigured and re-exported
without the intervention of customs authorities, only when the goods are moved to consumers within the country
outside the zone do they become subject to prevailing customs duties
¾ countries have at least one SEZ
4,300 SEZs in 2015
Accounts for 2% of India’s GDP
Not always successful e.g. India, Africa
On top of tax incentives, one needs:
o Domestic investment
o Connection to a global market
o Other criteria such as power supply, transports hubs (port...)
Problems of SEZs:
o Created distortion within an economy
o The required costs for infrastructure investment, forgone tax revenues doesn’t outweigh boosts in jobs and
trade