Special Economic Zones (SEZ) are delimited regions in a country that offer special tax breaks and other incentives to attract investors and promote trade, innovation, and development. SEZs are usually established to boost exports, create jobs, increase investments, and enhance competitiveness of domestic industries. SEZs can have different types and characteristics depending on the country’s objectives and policies. Some common types of SEZs are Free Trade Zones (FTZ), Export Processing Zones (EPZ), Freeports, Industrial Parks, etc.
SEZs have been widely adopted by many countries across the world as a tool for economic growth and development. According to the United Nations Conference on Trade and Development (UNCTAD), as of 2019, 147 countries had established some kind of SEZ, with the total number of SEZs worldwide nearing 5,400[^5^][5]. Some of the most successful examples of SEZs are China’s Shenzhen, India’s Noida, Singapore’s Jurong Island, Dubai’s Jebel Ali Free Zone, etc.
The benefits of SEZs for businesses and locals can be manifold. Some common advantages include:
- Tax incentives: The government offers various tax exemptions or concessions for companies and businesses established in SEZs. For example, in India, SEZ units enjoy 100% income tax exemption on export income for first five years, 50% for next five years thereafter and 50% of the ploughed back export profit for next five years. In China, SEZ enterprises enjoy preferential corporate income tax rates ranging from 15% to 25%, compared to the standard rate of 33%.
- Land and infrastructure: The government provides easy access to land and infrastructure facilities such as roads, ports, airports, power supply etc. for SEZs. For example, in Singapore’s Jurong Island SEZ, which is dedicated to chemical industries, the government has reclaimed land from sea and developed world-class infrastructure such as pipelines network system.
- Labor: The government relaxes labor laws or regulations for SEZs to allow more flexibility in hiring skilled workers or foreign professionals. For example, in Dubai’s Jebel Ali Free Zone which hosts over 7,000 companies from various sectors such as logistics,
manufacturing etc., there is no restriction on foreign ownership or employment. - Trade facilitation: The government simplifies customs procedures or reduces tariffs or non-tariff barriers for goods entering or exiting SEZs. For example,
in China’s Shenzhen which is one of the largest manufacturing hubs in the world,
there is no import duty on raw materials or intermediate goods used for export production.
However, SEZs also face some challenges or criticisms such as environmental degradation, social inequality, labor exploitation, tax evasion, etc.[6][10].Therefore, it is important for governments to design and implement SEZ policies in a balanced and sustainable way that maximizes the benefits and minimizes the costs of SEZs.