World Special Economic Zone
Description
Special economic zones are typically created in order to facilitate rapid economic growth by leveraging tax incentives to attract foreign investment and spark technological advancement. While many countries have set up special economic zones. China has been the most successful in using SEZs to attract foreign capital. More than 1,000 zones were created in the last five years, and at least 500 more are in the pipeline for the coming years. A new wave of industrial policies and increasing competition for international investment has sparked a boom in the establishment of special economic zones (SEZs), according to UNCTAD’s World Investment Report 2019. The global tally of zones has increased to nearly 5,400, up from 4,000 five years ago, and more than 500 new SEZs are in the pipeline. The industrial zones, which offer fiscal incentives and streamlined regulations to attract foreign direct investment (FDI), are common in most developing and many developed economies. More than 145 economies operate such zones today.
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The report also flags new challenges for SEZs: The need for modern SEZs to make a positive contribution to the environmental, social and governance (ESG) performance of countries’ industrial base. This can be done through services (e.g., inspectors, health services, waste management and renewable energy installations) that can be provided more easily and cheaply in the confined areas of SEZs. The need for SEZs to adapt in the digital economy, by improving access to skilled resources, high levels of data connectivity and relevant technology service providers. SEZs may also have new opportunities to target digital firms. The current challenging global policy environment for trade and investment, with rising protectionism, and shifting trade preferences. International cooperation on zone development is likely to become increasingly important. Finally, the report shows how the 2030 Agenda to achieve the Sustainable Development Goals (SDGs) provides an opportunity for the development of SDG model zones. Such zones would seek to attract investment in SDG-relevant activities, adopt the highest levels of ESG standards and compliance, and promote inclusive growth through linkages and spillovers.