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A Presentation of Special Economic Zones (SEZs) By Yonghua Ding China Railway Construction Corp. LTD. (CRCC) March, 2014 Page 1 CONTENTS ◆ ◆ ◆ Overview of China’s SEZs China’s Overseas Trade and Economic Overview of China’s SEZs Cooperation Zones Advice to create a SEZs Page 2 Overview of China’s SEZs What is Special Economic Zone? Special Economic Zones (SEZs) are ◆ Located in a geographically delimited area of a country, ◆ Administered by a single autonomous body , ◆ Offering certain incentives and preferential policies for businesses that are located and operating within the zone, ◆ Characterized typically by more liberal laws and economic policies than a country’s general economic laws, ◆ Encouraging industry, manufacturing, and services for export, Page 3 Overview of China’s SEZs Brief history and types of China’s SEZs Economic & Technological Development Zones (ETDZ): High-tech Industrial Development Zones (HIDZ): Located in broadly defined zones with wide spectrum of investors Special Economic Zones (SEZs) Export Processing Zones (EPZ): Eliminate or streamline most customs procedures for business Encourage investment in hightech businesses by offering incentives to enterprises/investors Free Trade Zones (FTZ): Encourage investment by bringing down tariff barriers Page 4 Overview of China’s SEZs Contribution to GDP Major Contributions The total GDP of the major state-level SEZs, ETDZs, HIDZs, EPZs & FTZs accounted for roughly 21.8% of China’s national GDP in 2007. Contribution to Employment The total employment of the SEZs, ETDZs & HIDZs account for 4% of China’s national em -ployment. Contribution to FDI In Billion USD 78 45 Contribution to High Technology Until 2011, the HIDZs had accounted for half of China’s high-tech gross industrial output and export with another 1/3 made by the ETDZs. 3 0.5 1978 1988 1998 2008 Page 5 Overview of China’s SEZs Successful Experience of China’s SEZs A. Strong commitment to reform from the top leadership ◆ Strong commitment to reform and pragmatism from top leadership, ◆ SEZ policy backed by different levels of national, provincial and local governments & authorities, and Taking pragmatic approach towards economic reforms. ◆ Preferential policies and incentives legally enacted and implemented for zones, B. Preferential policies and institutional autonomy ◆ legislative authority to establish and issue municipal laws and regulations under the basic lines of the national laws, ◆ Highly efficient administrative services, including rapid customs clearance to create a businessfriendly environment, Page 6 Overview of China’s SEZs Successful Experience of China’s SEZs C. Strong support & pro-active participation of the Government ◆ Government to build a sound legal and safe business environment for the investors in the zones, ◆ Hardware: good infrastructure - roads, water, electricity, gas, sewerage, telecommunication, etc. ◆ Software: “ one-stop service “ centre for administrative & business services , such as accounting, legal, business planning, marketing, import-export assistance, personnel training, management consulting, etc. Page 7 Overview of China’s SEZs Successful Experience of China’s SEZs D. Introduction of FDI and investment from overseas Chinese SEZs are the attraction of FDI and investments from Overseas Chinese leading to significant technology transfer and learning spillovers. ◆ Concentration of professionals and skilled E. Technology learning, innovation , upgrading and strong links with Domestic Economy people, including many R&D personnel, ◆ Being centers of knowledge and technology generation, adaptation, diffusion and innovation, ◆ closely linked to the domestic enterprises through supply chains or value chains, helping achieve economies of scale and business efficiency, Page 8 Overview of China’s SEZs Successful Experience of China’s SEZs F. Innovative cultures G. Clear objective, benchmarks, and intense competition Large number of professionals in the SEZs as immigrants from across China and overseas to form a strongly motivated migrant community helping generate an innovative and entrepreneurial culture. China’s SEZs are set up with clear objectives and targets for economic growth, exports, employment and investment, etc. The large number of SEZs would compete with each other for investments based on quality of services and infrastructure offered to investors. Page 9 Overview of China’s SEZs Successful Experience of China’s SEZs H. Location advantages The SEZs usually located in the coastal region or in the region with good access to major infrastructure such as, roads, ports, airports and railways and links to international markets and historical trading relationships. Page 10 Case of Shenzhen Special Economic Zone Area: 396 KM2 Established in 1980, the first SEZ in China Page 11 Case of Shenzhen Special Economic Zone Main Changes from 1980—2007 Annual rate of increase 1980 2007 Population 320,000 12,000,000 GDP $ 32,131,147 $110,908,360,655 31.20% GDP per capita $99.3 $12,987 17.64% Import and Export $ 17,000,000 $ 287,500,000,000 38.34% Accumulative Contribution to Central Government $ 60,049,180,327 Page 12 Case of Shenzheng Special Economic Zone Development in Stages Initial stage (1980—1985) Main Task 1. Development of infrastructure and service facilities. 2. System Innovation Salary System, Construction System, Labour System, Price System, Enterprise Structure, Insurance System Government Structure, etc. Page 13 Case of Shenzhen Special Economic Zone 3. Establishment of “open” area like Shoukou Industrial Zone and some ports. 4. Some foreign banks attracted to settle down in the Zone. 5. “Shenzhen Speed” Building up the conception “ Time is money, efficiency is life” It was a great challenge to the traditional planned economy system. Overall Development Stage(1986—1992) Main Achievements 1. Export- oriented and Open-door policy Utilization of foreign fund and technique for infrastructure Attraction of foreign investment for industry Active development of international trade and transit trade Page 14 Case of Shenzhen Special Economic Zone Ending the deficit situation of Export & Import trade In 1987. The total trade value ranks first among the cities in China since 1992. 2. Market Economy Policy A. Creation of state-own enterprises system, joint-stock system, the contract system, the transfer of property rights and bankruptcy. B. The establishment of nonferrous metal futures market and Shenzheng Stock Exchange. C. The establishment of new administrative system of the state-owned land. Bidding system for the land. Page 15 Case of Shenzhen Special Economic Zone D. The establishment of contract system and social security systems for labours. New Development Stage (1993—now) A. Good investment & innovation environment established, Good infrastructure, good service. B. Upgrade the economic development model High-tech enterprise and research institution are encouraged. C. Gradual reduction of incentives and foreign investors enjoys the same national treatment. D. High level of international economic cooperations. Page 16 Case of Shenzhen Special Economic Zone Enlightenment from Shenzhen SEZ Wise resolution of the Central Government to set up Shenzhen SEZ. The success of Shenzhen SEZ broke the myth that modernization could be realized only in capitalistic system. To open the mind and insisting on reform is the soul of economic development. Page 17 Case of Shenzhen Special Economic Zone Incentives of Shenzhen Special Economic Zone Logistics Software industry Finance Integrated circuits industry General industries Venture investment Industry Policies Processing with imported material Page 18 Case of Shenzhen Special Economic Zone Incentive for General industries A. For foreign-invested enterprises, corporate income tax rate is decreased from the original 30% down to the present 15%. B. Foreign-invested manufacturing enterprises can enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 3 years according to the regulations of the tax law. Certified exportoriented enterprises at the expiration of tax exemption and reduction period enjoy a reduced rate of 10% for corporate income tax provided the export volume accounts for 70% or above of the total industrial output. Certified manufacturing enterprises using state-of-the-art technologies at the expiration of tax exemption and reduction period are entitled to a reduced tax rate of 10% for a 3year extension. Page 19 Case of Shenzhen Special Economic Zone C. Half of the land use fee for the land for industrial use utilized by certified export-oriented enterprises will be exempted. Half of the land use fee for the certified enterprises using state-of-the-art technologies will be exempted for 5 years. D. The foreign-invested enterprises engaged in the service sector with an investment of over US$ 5 million and operation duration of over 10 years can enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years. E. Sino-foreign equity joint ventures engaged in port and dock construction projects with operation period of over 15 years may enjoy the exemption of corporate income tax for the first 5 years from profit-making year and half reduction thereof for ensuing 5 years after their applications are approved. Page 20 Case of Suzhou Industrial Park ◆ To develop into a hi-tech industrial park with international competitiveness ◆ To develop into an innovation eco-township of internationalized, modernized, information-based happy district of Suzhou ◆ SIP covers a total jurisdiction area of 288 sq km, among which 80 sq km area belongs to China-Singapore Cooperative Zone. ◆ Starting with west-most parcel and moving eastwards. ◆ Projected population of 600,000, including a workforce of about 360,000. Page 21 Case of Suzhou Industrial Park The 8 sq km-Phase I area, adjacent to the Old City, will be built into a central district of industry and commerce integrating finance and tourism. Double cities and double flanking zones The Phase II area is about 23 sq k m and will be turned into a hightech industrial district with waterfront features. The vast land of Phase III, totaling 32 sq km, is close to Shanghai and expected to become a base of technologyintensive manufacturing and processing industries. Phase III Phase I Phase II Page 22 Case of Suzhou Industrial Park Page 23 Case of Suzhou Industrial Park Achievements RMB 133 billion of GDP, USD 18.9 billion of accumulated utilized foreign capital and RMB 197.2 billion of accumulated registered domestic capital. With only 3.4% of the total land and 5% of the total population of Suzhou, SIP contributes around 16% of Suzhou's GDP. 79 Fortune 500 companies have made investment in SIP with a total of 125 projects. Page 24 China’s Overseas Economic & Trade Cooperation Zones (OETCZ) Introduction of the zones In the mid-1990s, the Chinese Government adopted the policy of “ Going Global”, encouraging Chinese companies to target new markets, build global relationships, and invest abroad. It is also the commitment from Chinese Government to help African countries develop their economies by creating SEZs Three types of OETCZ Manufacturing, processin g and assembling Resource exploitation Integration of manufacturi ng, trade,logistics, real estate, tourism, etc. Page 25 China’s Overseas Trade and Economic Cooperation Zones Page 26 China’s Overseas Trade and Economic Cooperation Zones Facts about the zones 24 zones approved Total by the 单击添加 investment Chinese of $2.9b Ministry of Commerce Total Total tax 单击添加 单击添加 output of 单击添加 paid of $8.4b $265m 17865 jobs been created 237 enterprises entered the zones Page 27 Lekki Free Zone Pictures Page 28 Lekki Free Zone Pictures Page 29 Master Plan of Lekki Free Zone SEZ as a part of national economic growth strategy, SEZ’s master plan as a sub-plan of regional general plan Residential Estate Lekki Free Zone CBD Lekki Airport LAGOS Airport Manufactur ing Proces sing Seashore Expressway Commerce Tank Farm & Logistics APAPA Port Lekki-Epe Expressway Lekki Free Zone New port Page 30 Preferential and Incentive Policies in Lekki Free Trade Zone Complete tax holiday from all Federal, State and Local Governments rates, taxes, Custom Duties and Levies; One-stop approval for all permits, Operating License and Incorporation Papers; Duty-Free and Tax-Free importation of raw materials and components for goods destined for re-export; Permission to sell 100% of manufactured assembled of imported goods into the domestic Nigeria market. When selling into the domestic market, the amount of import duty on goods manufactured in the Free Trade Zone is calculated only on the basis of the value of the raw materials or components used in assembly, not on the finished products; Page 31 Preferential and Incentive Policies in Lekki Free Trade Zone 100% foreign ownership of investments; 100% repatriation of capital, profits and dividends to the country of origin; Waiver of all import and export License; Waiver on all expatriate quotas for companies operating in the zones; Prohibition of strikes and lockouts for the first 10 years of operation of a free zone. Page 32 Advice to create a SEZs Main points to create a SEZs Why should I use the word “create” Type of SEZs to Decide EPZ ETDZ HIDZ SEZs ADA FTZ Page 33 Advice to create a SEZs Type of Administration and Investment A. Invested, operated and administrated by the Government B. Invested, operated and administrated by PPP Under the control of the high committee C. Invested and administrated by the Government and operated by an expert team Page 34 Advice to create a SEZs Selection of the Location Near Ports, Airport or Railway; Good Infrastructure & Services Page 35 Advice to create a SEZs Preferential policies and incentives legally enacted and implemented for Zone . Incentives is the key to attract the domestic and foreign investment Page 36 Advice to create a SEZs Master Plan for the Zones The overall arrangement and layout in space and time for the development of land use, industrial structure ,traffic organization, infrastructure, environment protection of the Zone Page 37 Advice to create a SEZs Construction To follow the Regulatory Plan and Site Plan To follow the Municipal Project Plan To follow the Engineering Design Page 38 Advice to create a SEZs Administrative Service & Marketing To built a centre for administrative & business services To make a marketing promotion worldwide Page 39 Advice to create a SEZs To establish attractive & friendly investment environment Why do investors invest in the Zone? “Open-door” Policy & Opening your mind Page 40 Advice to create a SEZs Key Points to Operation Incentives legally enacted Implementation & Continuity High efficient administration services, especially a rapid customs clearance (one-stop service) Land compensations & friendly community relationships Good Security Page 41 Thank You ! 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