Special Economic Zones (SEZs) are specific geographical regions that have economic laws different from and more liberal than a country's typical economic laws. The goal is usually an increase in foreign direct investment (FDI) in the country.
There is a clear understanding that a well-implemented and designed SEZ can bring about many desired benefits for a host-country: increases in employment, FDI attraction, general economic growth, foreign exchange earnings, international exposure, and the transfer of new technologies and skills. Hence, many developing countries are also developing the SEZs with the expectation that they will provide the engines of growth for their economies to achieve industrialization. But for this to be successful their governments need to enact legislation, create a focused administrative infrastructure to govern special economic zones, offer highly attractive incentives and locate zones in the best possible locations. Overall investment climate (infrastructure, governance) in a country matters in the success of its special economic zones in terms of competitiveness.
One of the earliest and the most famous Special Economic Zones were founded by the government of the People's Republic of China under Deng Xiaoping in the early 1980s. The most successful Special Economic Zone in China, Shenzhen, has developed from a small village into a city with a population over 10 million within 20 years. Following the Chinese examples, Special Economic Zones have been established in several other countries.
In the face of fierce regional competition, South Korea is also showing strong economic performance and can boast a highly skilled labor force. It has started working strategically towards attracting investment, including the establishment of its first special economic zone, called The Incheon Special Economic Zone and so look set to transform the country into a regional hub from which foreign companies can expand into other parts of Asia.
The Incheon special economic zone in the north revolves around the international airport, the creation of an international financial services district and Songdo’s “intelligent city”, which will include a 60-storey world trade centre, 60 office buildings, deluxe hotels, shopping malls and a golf course, due to be completed by 2008.
These economic zones are a strategy to make Korea (http://korea.ixs.net/) more attractive in the eyes of foreign investors and to draw them to the country.
The project includes a technology complex to house research centers and venture start-ups alongside the Korean Institute of Technology. Two more complexes, for biotechnology and for knowledge and information will be built by 2008.
These projects, which have high-level political backing, are supported by a package of generous financial incentives. Other incentives include simplified administrative procedures, heavily subsidized land leases on government owned land, tax breaks and linguistic support.
Tags: Special Economic Zone
