SEZ's

2. What is SEZ ?
Special Economic Zone (SEZ) – These are an extension of
the Export Processing Zone scheme with added benefits and
fewer bureaucratic hassles. But these zones do not restrict
themselves to export promotion only . They provide all
facilities and infrastructure necessary for the development of
the industries in the region. They are normally huge in size
and hence are suitable for mass-production of commodities,
which can be sold domestically, as well as internationally. For
Example: Shenzhen Special Economic Zone (Shenzhen SEZ),
China
2

3. Brief History of SEZ
SEZ:
 Geographically Delimited areas
 Different incentives to businesses
First established by the Peoples Republic
of China in 1980 in Guangdong Province.
(Yeung, Lee, and Kee, 2009)
Shenzhen
Zhuhai
Shantou
Support government’s efforts to:
Promote Investment
Create Employment
Generate Export
3

4. Fundamentals of SEZs
 SEZs (special economic zones) are fundamentally
different from the traditional free zones.
 They are much larger in size; offer broader range of
activities such as
 a single-window management,
 streamlined procedures,
 duty-free privileges,
 also access to the domestic market on a duty-paid basis.

5. Main objectives of the SEZ
generation of additional economic activity;
promotion of exports of goods and services;
promotion of investment from domestic and foreign
sources;
creation of employment opportunities;
development of infrastructure facilities

6. Strategic Location
 Easily accessible
by land, air and
sea. Practically
half of the
world’s
container fleet
passes by its
doorway.

7. Example : Subic Bay Freeport Philippines

8. Subic Bay

9. Brief History of SEZ
 The World Bank databases (2009):
 3000 kinds of zones in 135 countries
 $500 billion of direct trade industry.
Figure 1: Foreign direct investment’s increase in China from 1978 to 2008
(Wang, 2009 )
As a result:
9

10. Economic impacts of SEZ: positive effects
Direct Employment Impact of Special Economic
Zones
Direct
employment
(millions
people)
Percentage of
national
employment
Global 68.441 0.21
Asia and the Pacific 61.089 2.3%
Americas 3.084 1.15%
Western Europe .179
Central and East Europe
and Central Asia
1.590 0.001%
Middle East and North
Africa
1.458 1.59%
Sub-Saharan Africa 1.040 0.20%
10
• Employment generation
• One of the key objectives
for zone development
Table 1: Direct Employment Impact of Special Economic Zones
Adapted from FIAS, 2008.
 Employment in the
Dominican Republic’s
industrial free zones rose
from 500 in 1970 to
almost 200,000 today.
(FIAS, 2008)
 The share of zone
employment of national
employment in the Arab
Emirates 25% (FIAS,
2008)

11. Impact of zone on export
(US$ millions) of
Exports percentage of export
Asia and the Pacific 5,10,666 41.00%
Americas 72,636 39.00%
Central and East Europe and Central
Asia 89,666 38.70%
Middle East and North Africa 1,69,459 36.40%
Sub-Saharan Africa 8,605 48.70%

12. Direct Employment Impact of Special
Economic Zones
Employment
Percentage of
Employment
National
(millions)
Global 68.441 0.21%
Asia and the Pacific 61.089 2.30%
Americas 3.084 1.15%
Western Europe 0.179
Central and East Europeand Central Asia 1.59 0.00%
Middle East and North Africa 1.458 1.59%
Sub-Saharan Africa 1.04 0.20%
12

13.  In the Philippines the share of FDI flows going to the country’s eco-
zones increased from 30 percent in 1997 to over 81 percent in 2000
(UNCTAD, 2003). In Bangladesh, $103 million of the $328 million of
FDI inflows were registered in EPZs.
 In Mexico, the share of annual FDI accounted for by maquiladora
operations increased from 6 percent in 1994 to 23 percent in 2000
(Sadni-Jallab and Blanco de Armas, 2002). And in China, SEZs account
for over 80 percent of cumulative FDI.
13

14. Economic impacts of SEZ: positive effects
 Employment generation
Philippine eco-zones’ direct employment
14
91,860
1994
2008 608,387
2004 406,752
Figure 2. Adapted from Lima, 2009

15. Economic impacts of SEZ: positive effects
 Export development
Major share of exports in 2005:
Americas:
• Nicaragua (79.4 %);
• the Dominican Republic(77%);
• Panama (67 %). (FIAS, 2008)
Asia and the Pacific:
• Bangladesh (75.6 %);
• Sri Lanka (67.1 %);
• the Philippines (78.2 %);
• Pakistan (50.3 %).(FIAS, 2008)
Middle East and North Africa:
• Lebanon (36.3 %);
• Bahrain (68.9 %);
• Morocco (61 %). (FIAS, 2008)
Sub-Saharan Africa:
• Ghana (22.4 %);
• Madagascar (80 %);
• Mauritius (34.4 %).(FIAS,2008)
 in the Philippines the eco-zones’
share of national merchandise
exports increased from 22 % in 1995
to 78.2 % in 2005 (FIAS, 2008)
 in Kenya the share increased from
3.5 % in 1997 to 19.3 % in 2003(FIAS,
2008)

16. Economic impacts of SEZ: positive effects
 Foreign direct investment
In the Philippines, for example, the
share of FDI flows going to the
country’s eco-zones increased from
30 percent in 1997 to over 81 percent
in 2000 (UNCTAD, 2003).
In Mexico, the share of annual FDI
accounted for by maquiladora
operations increased from 6 percent
in 1994 to 23 percent in 2000 (Sadni-
Jallab and Blanco de Armas, 2002).
In China, SEZs account for over 80 % of
cumulative FDI.
PEZA
1995 - 2008
$ 30 T
EPZA
1981 –1994
$778 B
38
Times
Bigger
14-YEARECONOMIC ZONE INVESTMENTSIN PHILIPPINES
Source Lima, 2009

17. Economic impacts of SEZ: negative effects
 Suppression of labor standards and core labor rights
The International Labor Organization improved labor policies and practices
within zones, nevertheless, significant issues remain with some countries:
 Restrictions on the freedom of association and collective bargaining (in
Bangladesh, the Dominican Republic, Nigeria, Pakistan, Panama, Sri lanka,
Egypt)
 Bans on the right to strike (in Bangladesh, Namibia, Zimbabwe, Nigeria,
Panama, Turkey)
 Non-observance of national labor legislation within zones (in Islamic Republic
of Iran, Sudan). (FIAS, 2008 )

18. SWOT
Analysis for Indian
SEZs

19. :
Strengths
 Skilled Manpower – knows English
 Worldwide acceptance of capabilities in fields like
 Pharmaceutical manufacturing & research
 Clinical trials
 Manufacturing auto parts
 Engineering designing & consultancy, IT & ITES
 Entertainment etc etc
 Financial & other institutional Networks like Stock
Exchanges, Insurance Companies, Educational Institutes
 Attraction of a large ‘Indian’ market:
 growing middle class with purchase power

20. SWOT Analysis for Indian SEZs
▪ Weakness:
▪ Infrastructure bottlenecks –connecting infrastructure
like Roads leading to SEZs.
▪ Political changes(political risk)
▪ Convertibility of Currency on Capital A/c
▪ Labour reforms
▪ Zones by & large are still zones not smart cities.
▪ Inappropriate locations
▪ Long gestation period 4 to 5 years in absence of
infrastructure development.

21. SWOT Analysis for Indian SEZs
▪ Opportunities:
▪ An alternative manufacturing base, particularly
compared to Chinese SEZs.
▪ Services SEZs do not require movement of input and
output physically and hence, surrounding
infrastructure may not matter much.
▪ For multi-product SEZs, almost 23 ports are available.
Most of them are likely to be EDI compliant.
▪ New small ports & airports are also being developed
keeping SEZ concept in mind.

22. SWOT Analysis for Indian SEZs
▪ Threats:
▪ Loosing edge of low labour costs - many countries
are competing.
▪ Formation of economic blocks, Effect on Government
Revenues.
▪ Negotiations for FTAs with many countries may erode
competitiveness.
▪ The pattern of buying & selling may not continue.
With relocations of industries in other third world
countries, new competitors will emerge.

23. Conclusion
 Positive effects:
 Creation of employment
opportunities
 Export development
 Promotion of foreign
direct investment
 Negative effects:
 Suppression of labor
standards and core labor
rights
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Economic impact of Special Economic Zones can be as positive as negative.

24. Conclusion
o Positive effects outweigh negative ones.
o Negative effects are caused only by employment
generation.
o Suppression of labor standards and core labor rights
was met only in some countries.
Therefore, economic impact of Special Economic
Zones is positive.
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25. Reference listAggarwal, A. 2007. Impact of Special Economic Zones on Employment, Poverty and Human development. Indian council
for research on international economic relations (194): 7-9. EBSCOhost database. http://www.ebscohost.com
(accessed March 25).
FIAS. 2008. Special Economic Zones: performance, lessons learned, and implications for zone development. EBSCOhost
database. http://www.ebscohost.com (accessed March 25).
Jahan, S. 2003. Reorienting development: Towards an Engendered Employment Strategy. Gender Poverty Summit. Quoted
in Aggarwal, 2007, 9.
Lima, L. 2009. PEZA. Department of International Development Working Paper No. 49, University of Oxford. Quoted in
FIAS, 2008, 37.
Sadni-Jallab, M. and E. B. Armas. 2002. A Review of the Role and Impact of Export Processing Zones in World Trade: The
Case of Mexico. Institute of Development Studies, Brighton. Quoted in FIAS, 2008, 64.
Wang, J. 2009. The economic impact of Special Economic Zones: Evidence from Chinese Municipalities. Job Market Paper.
EBSCOhost database. http://www.ebscohost.com (accessed March 25).
Wong, K. 1987. China’s Special Economic Zone Experiment: An Appraisal. Geografiska Annaler Series B, Human Geography
69 (1):27-40. Quoted in Yeung, Lee, and Kee, 2009, 223.
World Bank. 2009. The World Bank.
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(accessed March 22, 2011).
Yeung, Y., J. Lee, and G. Kee. 2009. China's Special Economic Zones at 30. Eurasian Geography and Economics 50 (2): 222-
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26.  http://www.caymanenterprisecity.com/highlights/acc
ess-to-global-markets/
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