Special Economic Zones Impact and Vulnerabilities CIIP - PowerPoint PPT Presentation

Special Economic Zones Impact and Vulnerabilities CIIP

Definitions of Special Economic Zones DEFINITION: • For the purpose of the empirical analysis, the definition of SEZs: o Includes - Traditional and Hybrid EPZs, Freeport/ SEZ, and Enterprise Zones o Does not include – Free Trade Zones, Free Enterprises, Technological and Science Parks CIIP 2

Th The popula larit ity of f SE SEZs has boomed sin since th the 90s Number of Special Number of Countries with Economic Zones Special Economic Zones World World 4000 140 3500 120 3000 100 2500 80 2000 60 1500 40 1000 20 500 0 0 1975 1986 2006 1975 1986 2006 Source: FIAS (2007) CIIP 3

Th The conceptual fr framework Nightlights as proxy for SEZ Performance SEZ performance SEZ Program SEZ Characteristics Contextual Factors • Maturity Incentives Package National and Regional • Fiscal and non fiscal • Size • Institutional quality/ Rule of Law • Operator Requirements • Access/ proximity to • Investment requirement • Location markets • Ownership requirement • Industry focus • Income level • Infrastructure Program characteristics • Human Capital • Independence of • Services offered • Population Density regulator • Time of program establishment Collecting through desk research, emails and follow up phone calls CIIP 4

23 237 7 SE SEZs in in 17 17 cou ountrie ies – 5 5 more countries ar are to o be ad added Included Being added CIIP 5

Findings fr Fin from th the data base ase Private SEZs are most common in LAC, while SEZs are largest in SSA and ECA public involvement is higher in Asia & SSA Zone operator Average size % of SEZs In ha 100% 400 343 90% 350 308 80% 300 70% 250 60% 204 50% 200 40% 117 150 112 30% 100 20% 50 10% 0% 0 SSA LAC EAP ECA SA SSA LAC EAP ECA SA Public PPP Private CIIP 6

Fin Findings fr from th the data base ase Corporate tax exemptions are most generous Independent regulators exist across all regions, in SSA, LAC and South Asia but are less frequent in SSA, LAC & EAP Corporate tax exemption Independence of zone regulator Average number of years with 100% exemption % of countries 16 14,6 100% 13,2 14 90% 12,5 80% 12 9,8 70% 10 60% 8 50% 40% 6 4,1 30% 4 20% 2 10% 0 0% SSA LAC EAP ECA SA SSA LAC EAP ECA SA Independent Not independent CIIP 7

SEZ grew on SE on average by y 9.9 9.9%, but t th there is is a a lar large var ariabili ility in in SE SEZ performance acr across zones SEZ performance 2007 - 2012 Number of SEZs SEZ performance 2007 – 2012: Average growth of 9.9% across SEZs, but median growth of only 2.4% and standard deviation of 21% suggest large spread in performance 104 103 30 Shrinking Stable Growing CIIP

Str Strongest growth in in SS SSA an and ECA, A, but t performin ing an and non on- performin ing zon ones can an be fou ound in in all all regions SEZ Performance by region Growing Stable Shrinking 100% 2% 13% 15% 90% 20% 31% 36% 80% 26% 70% 60% 54% 50% 40% 80% 67% 64% 30% 61% 20% 31% 10% 0% SSA LAC EAP ECA SA Average +17% +11% +6% +22% -1% growth CIIP

Few program an and SE SEZ ch characteristics ar are systematic icall lly correlated with ith SE SEZ performance SEZ program SEZ characteristics Contextual factors Proximity to large Years in operation Subsidized utilities markets Corporate tax exemption Focus on high-tech Pre-exiting industrial in wealthier regions base Differentiated labour Type of operator Regional GDP per capita regulations National one-stop-shop Size Regional educational level Foreign ownership Distance Port requirement Control of corruption Minimum Investment Distance largest city Requirement Regional population density Independence of zone One-stop-shop onsite regulator Power sub-station onsite Time policy introduced No correlation Positive impact Negative impact CIIP 10

Find indin ings fr from th the analy lytic ical l work rk • SEZ performance is highly context dependent – zone and program characteristics that may work in one context, may not in others. There are is still some common themes: • Contextual factors play a major role o Investors are looking for cheap locations o With proximity to large markets and ideally a proven track record of industrial production • Zone specific o Growth is difficult to sustain over time  SEZ programs can help to make an economy more dynamic in the short/ mid-term. o Upgrading the technological component or value-added through SEZs is challenging • Program specific o Utility subsidies most incisive part of incentive packages. o Corporate tax breaks only seems to make a difference in more developed countries. CIIP 11

Thank You CIIP