| by Tanza McAlmontGlobally, Special Economic Zones (SEZs) are nothing new; countries in Asia, Europe, Africa and Latin-AmericaTanza McAlmonthave all experimented with this model of development. Some are called free trading zones, some processing-exporting zones and some tax-free trading zones.Practices vary between countries. It has worked successfully in some areas and fared poorly in other regions but nowhere has the model been successfully replicated than in China, where the country’s remarkable rise as the second largest economy in the world is owed hugely to its SEZs.SEZs are set up when a country delimits a special area where, through exemption of customs duty, it formulates various preferential conditions and provides public facilities so as to attract foreign investors to set up factories whose finished products are mainly for export.As the new government rolls out its decentralization programme (the creation of capital towns) to harness the economic potential of the various regions for the overall economic growth of the country,NFL Jerseys Supply, it is only befitting that it considers learning from countries where SEZs have achieved high success rates in attracting Foreign Direct Investments.China’s system of government may be different from what we practise but equally both our countries are seeking better living standards for the general populace. The Chinese model of SEZs is worth considering.The ascent of China as an economic superpower has often been wrongly attributed mostly to its cheap labour by most analysts. What is often missing is the country’s special attention to economic development zones first popularized by Deng Xiaoping in the late 1970’s.SEZs in China have contributed more to the lifting of perhaps more than 300 million people out of extreme poverty to middle income status than its reliance on cheap labour. In what has been described as an economic miracle, the country’s economy has been predicted to either overtake the US or roughly the same size as the US or the European Union by 2020.In the late 1970s,Cheap Jerseys From China, China’s State Council gave approval for small-scale SEZs experiments in four remote southern cities, including Shenzhen, Zhuhai and Shantou in Guangdong Province,China NFL Jerseys, as well as Xiamen in Fujian Province.To fully comprehend why SEZs have worked well in China, one must first understand the country’s administrative system which is based on five hierarchical levels of government including i) Central; ii) Provincial; iii) Municipal; iv) County and v) Township.The SEZs are established in the municipalities. Considering the fact that China started with virtually zero foreign direct investment and almost negligible trade before 1978, these zones were used as incubators for liberalization of trade, tax and other policies that were then gradually applied to the rest of the economy.In August 1980 the People’s Congress in Guangdong Province passed the first legal rule on the SEZs- the Regulation for Guangdong SEZs.This regional law was the first of its kind to be tested. It was drafted with the help of legal experts sent from the central government and the law explicitly provided the following packages for foreign investors.Private Property Rights ProtectionThe SEZs encourage foreign citizens, overseas Chinese, compatriots from Hong Kong and Macau and their companies and enterprises (investors) to open factories and set up enterprises and other establishments with their own investment or in joint ventures with Chinese.The SEZs guarantee to protect their assets, accruing profits and other rights in accordance with the law.Tax incentivesForeign investors enjoy a reduced rate (15-24%) of corporate income tax compared to 33% paid by domestic firms. They bear virtually zero custom duties and can enjoy duty free allowances for production materials.There are income tax exemptions for foreigners working in SEZs as well.Land use policyUnder Chinese law, all land is under state ownership. Foreign investors may lawfully obtain the rights for land development, use and business. They may also transfer and lease land rights,Wholesale Authentic Jerseys, or put them up for mortgage in accordance with the law within the stipulated purposes and terms of the use.When foreigners invest in projects encouraged by the State for an operation term of more than 15 years, the construction land is exempt from land use fees for five years starting from the day when the enterprise obtains the use right.The fee is collected at half price in the following five years. The land use right is guaranteed for projects that have a total investment of US$10 million, or that are technologically advanced and have a major influence on the local economic development despite total investment being below US$10 million.Liberal economic and labor lawsThere are limited restrictions on foreign ownership. Foreign invested firms have the power to hire and fire their employees. The government made clear the targets of SEZs described by four principles including;1. Construction primarily relies on attracting and utilizing foreign capital.2. Primary economic forms are sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises.3. Products are primarily export-oriented.4. Economic activities are primarily driven by market forces.Lessons from the initial achievements of the first group of SEZs in 1984, led the central government to expand the SEZ experiment to 14 other coastal cities.From 1985 to 1988,NFL Jerseys Outlet, the central government further included more municipalities along the coastal areas into the SEZ experiment. The Pudong New Zone in Shanghai was officially opened to foreign investment, as well as more cities in the Yangzi River Valley.The pattern of granting SEZ status in earlier years was not purely random, according to state-council documents (1980-1990), the central government chose municipalities to be granted with the SEZ status based on better geographical location, industrial condition and human capital.To date the country has established hundreds of economic zones including state-level economic and technological development zones, and high-tech industrial development zones in large and medium-sized cities.What this means in the case of Guyana is for the government to identify the regions with the highest potential of having a trickle down impact on the rest of the regions.As exemplified in the China model, coastal regions in Guyana should lead the way as incubators to support the export driven nature of SEZs.The gains for Guyana, as experienced in other regions including China and countries like Japan and Singapore are the introduction of advanced scientific technology, increased FDIs and significant reductions in unemployment rate in the regions and country as a whole.As pointed out by many analysts, it would be impossible for SEZs to develop without the support of the interior regions. Only when they operate in cooperation with the interior can the special zones gain necessary materials.Such cooperation should be based on mutual benefit. And it can be successful only when the special zones produce commodities needed by the interior.To that effect,Authentic Jerseys From China, the new government can set up a special consultative team or think tank to study the framework of SEZs in China and that of other countries where the model has been expertly executed. |
