A tool for rapid industrial growth?
IN the race for economic growth in a short time, developing countries of Asia, Africa and Latin America are increasingly looking towards solutions that will foster investment activities insulated from the quagmire of infrastructural and environmental bottlenecks.
Special Economic Zones (SEZ) are one such solution. SEZs are now looked upon as engines for economic growth supported by quality infrastructure and complemented by an attractive fiscal package with the minimum possible regulations.
Recent analyses by the World Bank Group and others have identified key constraints to private sector competitiveness. They are (i) inadequate and poor quality infrastructure and energy supply, (ii) difficulty in obtaining landespecially serviced land, (iii) poor access to finance, and (iv) cumbersome and inefficiently implemented regulatory and administrative procedures.
At the same time, in an increasingly competitive world, countries like Bangladesh need a paradigm shift in their competitive strategy, from the historical approach of price-based competition based on low labour costs and managed trade (such as the MFA for the textile and garment sector) to inclusion of non-price factors being demanded by the markets around the world, including quality, timeliness and production based on compliance with good social standards.
Against this backdrop, formation of SEZs can pave the way for more productive use of land, labour, capital and infrastructure, leading to greater investment, economic growth and social development in the country.
Features of SEZs
SEZs can deal with infrastructural deficiencies and bureaucratic hassles such as complex regulations and inefficient customs procedures in these countries. SEZs provide for:
SEZs have been expanding globally at a phenomenal pace. According to estimates of the South Asia Foreign Investment Advisory Services (FIAS) there were 80 free zone projects in 30 countries in the '70s, which accounted for $6 billion in exports and around one million direct job creation. Today, SEZs operating in over 120 countries have over 2000 projects accounting for over a staggering $600 billion in export earnings and 50 million direct jobs: China alone boasts of over 30 million jobs in SEZs. Many countries across the world, including China, Jordan and the Philippines, have attained excellent economic growth through such economic zones. Mass production made possible through economic zones dramatically transformed the jewellery industry in India, from its cottage-industry status into a mechanised modern one. Spillover effects of SEZs
Well-planned SEZs have multiple spillover effects. Some examples are: The 420 square kilometer Subic Bay free-port in the Philippines, administered by the Subic Bay Metropolitan Authority, is home to 3,000 residents and includes a deep-water port, an international airport and air cargo hub, and a nature preserve. The free port has attracted private investment in residential and retirement communities, marinas, a technology park, and two industrial parks. The port is being upgraded. The 375 square kilometer Aqaba Special Economic Zone in Jordan, administered by the Aqaba SEZ Authority, is home to 80,000 residents. The zone includes the facilities of three ports and an international airport, and hosts private investors in an IE, a logistics park, and two master-planned tourism/residential communities. Two new logistics facilities and two tourism areas are under development. The 2,020 square kilometer Shenzhen SEZ in China is home to over 4 million residents. The zone has attracted both tourism and industrial investment, and includes a port, an airport, 130 hotels, and several industrial zones. Management of SEZs
The above examples make it evident that success of SEZs is essentially linked to the way they are located, developed and managed. In Bangladesh, harnessing such programs with the national objectives of economic development and poverty alleviation would require translating broad policy objectives into institutional, legal and physical development frameworks required for implementation of these zones. This requires some sort of consensus on the direction of future economic zone programs. Experts on SEZs have suggested some options, which include (a) rehabilitating and commercialising existing properties; (b) implementing new BOT projects under current regimes; (c) modernising existing regimes, and implementing new PPP and private-sponsor projects; (d) introducing a master-developed, contiguous SEZ and (e) introducing a regional, multi-project SEZ program. However, choosing the appropriate option would entail a realistic perception of factors such as implementation costs, the absorption capacity of the economy and socio-economic factors such as public support to new projects, and reaction of local communities and civil society. The economic zone policy regime should specifically address methods for implementing both public-private partnerships (PPPs) by specifying the areas of their contribution, or fully private initiatives (including single factory zones). This should include procedures for project identification, identification of potential public parties to the PPP, and the division of responsibilities between the Economic Zones Regulator and public asset owners. Although there is some debate on the effect of SEZs in accelerating overall growth in an economy, the truth remains that the success of a zone depends on how it is designed, developed, and managed. Zones in the Dominican Republic, for instance, account for over 80 percent of total exports, while they employ millions of people in China. Special Economic Zones today are evolving towards large, integrated economic communities. They are looked on as catalysts for ushering in rapid economic development to an economy in a world of competitiveness and changing external scenarios.
SEZs can deal with infrastructural deficiencies and bureaucratic hassles such as complex regulations and inefficient customs procedures in these countries. SEZs provide for:
- Simplified procedures for setting up units and conducting business in SEZs;
- Single window clearance for setting up a unit in a Special Economic Zone;
- Simplified procedures for operation and maintenance of the SEZs.
SEZs have been expanding globally at a phenomenal pace. According to estimates of the South Asia Foreign Investment Advisory Services (FIAS) there were 80 free zone projects in 30 countries in the '70s, which accounted for $6 billion in exports and around one million direct job creation. Today, SEZs operating in over 120 countries have over 2000 projects accounting for over a staggering $600 billion in export earnings and 50 million direct jobs: China alone boasts of over 30 million jobs in SEZs. Many countries across the world, including China, Jordan and the Philippines, have attained excellent economic growth through such economic zones. Mass production made possible through economic zones dramatically transformed the jewellery industry in India, from its cottage-industry status into a mechanised modern one. Spillover effects of SEZs
Well-planned SEZs have multiple spillover effects. Some examples are: The 420 square kilometer Subic Bay free-port in the Philippines, administered by the Subic Bay Metropolitan Authority, is home to 3,000 residents and includes a deep-water port, an international airport and air cargo hub, and a nature preserve. The free port has attracted private investment in residential and retirement communities, marinas, a technology park, and two industrial parks. The port is being upgraded. The 375 square kilometer Aqaba Special Economic Zone in Jordan, administered by the Aqaba SEZ Authority, is home to 80,000 residents. The zone includes the facilities of three ports and an international airport, and hosts private investors in an IE, a logistics park, and two master-planned tourism/residential communities. Two new logistics facilities and two tourism areas are under development. The 2,020 square kilometer Shenzhen SEZ in China is home to over 4 million residents. The zone has attracted both tourism and industrial investment, and includes a port, an airport, 130 hotels, and several industrial zones. Management of SEZs
The above examples make it evident that success of SEZs is essentially linked to the way they are located, developed and managed. In Bangladesh, harnessing such programs with the national objectives of economic development and poverty alleviation would require translating broad policy objectives into institutional, legal and physical development frameworks required for implementation of these zones. This requires some sort of consensus on the direction of future economic zone programs. Experts on SEZs have suggested some options, which include (a) rehabilitating and commercialising existing properties; (b) implementing new BOT projects under current regimes; (c) modernising existing regimes, and implementing new PPP and private-sponsor projects; (d) introducing a master-developed, contiguous SEZ and (e) introducing a regional, multi-project SEZ program. However, choosing the appropriate option would entail a realistic perception of factors such as implementation costs, the absorption capacity of the economy and socio-economic factors such as public support to new projects, and reaction of local communities and civil society. The economic zone policy regime should specifically address methods for implementing both public-private partnerships (PPPs) by specifying the areas of their contribution, or fully private initiatives (including single factory zones). This should include procedures for project identification, identification of potential public parties to the PPP, and the division of responsibilities between the Economic Zones Regulator and public asset owners. Although there is some debate on the effect of SEZs in accelerating overall growth in an economy, the truth remains that the success of a zone depends on how it is designed, developed, and managed. Zones in the Dominican Republic, for instance, account for over 80 percent of total exports, while they employ millions of people in China. Special Economic Zones today are evolving towards large, integrated economic communities. They are looked on as catalysts for ushering in rapid economic development to an economy in a world of competitiveness and changing external scenarios.
For all latest news, follow The Daily Star's Google News channel.
Comments