Page 1 A Presentation of Special Economic Zones (SEZs) By Yonghua Ding China Railway Construction...

A Presentation of Special

Economic Zones (SEZs)

By Yonghua Ding

China Railway Construction Corp. LTD. (CRCC)

March, 2014

CONTENTS

Overview of China’s SEZs


China’s Overseas Trade and Economic Cooperation Zones

Advice to create a SEZs

◆◆◆

What is Special Economic Zone?

Special Economic Zones (SEZs) are -

◆ Located in a geographically delimited area of a country,

◆ Administered by a single autonomous body ,

◆ Offering certain incentives and preferential policies for businesses that are located and operating within the zone,

◆ Characterized typically by more liberal laws and economic policies than a country’s general economic laws,

◆ Encouraging industry, manufacturing, and services for export,



Special Economic

Zones (SEZs)

Brief history and types of China’s SEZs

Economic & Technological Development Zones (ETDZ):

Located in broadly defined zones with wide spectrum of investors

High-tech Industrial Development Zones (HIDZ):

Encourage investment in high-tech businesses by offering incentives to enterprises/investors

Free Trade Zones (FTZ): Encourage investment by

bringing down tariff barriers

Export Processing Zones

(EPZ): Eliminate or streamline

most customs procedures

for business


Major Contributions

Contribution to FDI In Billion USD

Contribution to Employment

The total employment of the SEZs, ETDZs & HIDZs account for 4% of China’s national em-ployment.

Contribution to High Technology

Until 2011, the HIDZs had accounted for half of China’s high-tech gross industrial output and export with another 1/3 made by the ETDZs.

1978 1988 1998 2008

78

45

30.5

Contribution to GDP

The total GDP of the major state-level SEZs, ETDZs, HIDZs, EPZs & FTZs accounted for roughly 21.8% of China’s national GDP in 2007.


A. Strong commitment to reform from the top leadership

Successful Experience of China’s SEZs

◆ Strong commitment to reform and pragmatism from top leadership,

◆ SEZ policy backed by different levels of national, provincial and local governments & authorities, and

Taking pragmatic approach towards economic reforms.

B. Preferential policies and institutional autonomy

◆ Preferential policies and incentives legally enacted and implemented for zones,

◆ legislative authority to establish and issue municipal laws and regulations under the basic lines of the national laws,

◆ Highly efficient administrative services, including rapid customs clearance to create a business-friendly environment,


C. Strong support & pro-active participation of the Government

◆ Government to build a sound legal and safe business environment for the investors in the zones,

◆ Hardware: good infrastructure - roads, water, electricity, gas, sewerage, telecommunication, etc.

◆ Software: “ one-stop service “ centre for administrative & business services , such as accounting, legal, business planning, marketing, import-export assistance, personnel training, management consulting, etc.



D. Introduction of FDI and investment from overseas Chinese


SEZs are the attraction of FDI and investments from Overseas Chinese leading to significant technology transfer and learning spillovers.

E. Technology learning, innovation , upgrading and strong links with Domestic Economy

◆ Concentration of professionals and skilled people, including many R&D personnel,

◆ Being centers of knowledge and technology generation, adaptation, diffusion and innovation,

◆ closely linked to the domestic enterprises through supply chains or value chains, helping achieve economies of scale and business efficiency,


F. Innovative cultures


Large number of professionals in the SEZs as immigrants from across China and overseas to form a strongly motivated migrant community helping generate an innovative and entrepreneurial culture.

G. Clear objective, benchmarks, and intense competition

China’s SEZs are set up with clear objectives and targets for economic growth, exports, employment and investment, etc. The large number of SEZs would compete with each other for investments based on quality of services and infrastructure offered to investors.


H. Location advantages

The SEZs usually located in the coastal region or in the region with good access to major infrastructure such as, roads, ports, airports and railways and links to international markets and historical trading relationships.


Case of Shenzhen Special Economic Zone

Area: 396 KM2

Established in 1980, the first SEZ in China


Main Changes from 1980—2007

1980 2007Annual rate of increase

Population 320,000 12,000,000

GDP $ 32,131,147 $110,908,360,655 31.20%

GDP per capita

$99.3 $12,987 17.64%

Import and Export

$ 17,000,000 $ 287,500,000,000 38.34%

Accumulative Contribution to Central Government

$ 60,049,180,327

Case of Shenzheng Special Economic Zone

Main Task

1. Development of infrastructure and service facilities.

2. System Innovation

Salary System, Construction System, Labour System,

Price System, Enterprise Structure, Insurance System

Government Structure, etc.

Development in Stages

Initial stage (1980—1985）


3. Establishment of “open” area like Shoukou Industrial Zone and some ports.

4. Some foreign banks attracted to settle down in the Zone.

5. “Shenzhen Speed”

Building up the conception “ Time is money, efficiency is life”

It was a great challenge to the traditional planned economy system.

Main Achievements

1. Export- oriented and Open-door policy Utilization of foreign fund and technique for infrastructure Attraction of foreign investment for industry Active development of international trade and transit trade

Overall Development Stage(1986—1992）


Ending the deficit situation of Export & Import trade In 1987. The total trade value ranks first among the cities in China since

1992.

2. Market Economy Policy

A. Creation of state-own enterprises system, joint-stock system, the contract system, the transfer of property rights and bankruptcy.

B. The establishment of nonferrous metal futures market and Shenzheng Stock Exchange.

C. The establishment of new administrative system of the state-owned land. Bidding system for the land.


D. The establishment of contract system and social security systems for labours.

A. Good investment & innovation environment established,

Good infrastructure, good service.

B. Upgrade the economic development model

High-tech enterprise and research institution are encouraged.

C. Gradual reduction of incentives and foreign investors enjoys the same national treatment.

D. High level of international economic cooperations.

New Development Stage (1993—now）


Wise resolution of the Central Government to set up Shenzhen SEZ.

The success of Shenzhen SEZ broke the myth that modernization could be realized only in capitalistic system.

To open the mind and insisting on reform is the soul of economic development.

Enlightenment from Shenzhen SEZ


Incentives of Shenzhen Special Economic Zone


A. For foreign-invested enterprises, corporate income tax rate is decreased from the original 30% down to the present 15%.

B. Foreign-invested manufacturing enterprises can enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 3 years according to the regulations of the tax law. Certified export-oriented enterprises at the expiration of tax exemption and reduction period enjoy a reduced rate of 10% for corporate income tax provided the export volume accounts for 70% or above of the total industrial output. Certified manufacturing enterprises using state-of-the-art technologies at the expiration of tax exemption and reduction period are entitled to a reduced tax rate of 10% for a 3-year extension.

Incentive for General industries


C. Half of the land use fee for the land for industrial use utilized by certified export-oriented enterprises will be exempted. Half of the land use fee for the certified enterprises using state-of-the-art technologies will be exempted for 5 years.

D. The foreign-invested enterprises engaged in the service sector with an investment of over US$ 5 million and operation duration of over 10 years can enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years.

E. Sino-foreign equity joint ventures engaged in port and dock construction projects with operation period of over 15 years may enjoy the exemption of corporate income tax for the first 5 years from profit-making year and half reduction thereof for ensuing 5 years after their applications are approved.

Case of Suzhou Industrial Park

◆ To develop into a hi-tech industrial park with international competitiveness◆ To develop into an innovation eco-township of internationalized, modernized,

information-based happy district of Suzhou

◆ SIP covers a total jurisdiction area of 288 sq km, among which 80 sq km area belongs to

China-Singapore Cooperative Zone.

◆ Starting with west-most parcel and moving eastwards.

◆ Projected population of 600,000, including a workforce of about 360,000.


The Phase II area is about 23 sq km and will be turned into a high-tech industrial district with waterfront features.

The vast land of Phase III, totaling 32 sq km, is close to Shanghai

and expected to become a base of technology-intensive manufacturing and

processing industries.

Phase I

Phase II

Phase III

The 8 sq km-Phase I area, adjacent to the Old City, will be built into a central district of industry and commerce integrating finance and tourism.Double cities and double flanking zones


RMB 133 billion of GDP, USD 18.9 billion of accumulated utilized foreign capital and RMB 197.2 billion of accumulated registered domestic capital.

With only 3.4% of the total land and 5% of the total population of Suzhou, SIP contributes around 16% of Suzhou's GDP.

79 Fortune 500 companies have made investment in SIP with a total of 125 projects.

Achievements

China’s Overseas Economic & Trade Cooperation Zones (OETCZ)

Three types of OETCZ

Manufacturing, processing and assembling

Resource exploitation

Integration of manufacturing, trade,logistics, real estate, tourism, etc.

In the mid-1990s, the Chinese Government adopted the policy of “ Going Global”, encouraging Chinese companies to target new markets, build global relationships, and invest abroad. It is also the commitment from Chinese Government to help African countries develop their economies by creating SEZs

Introduction of the zones

Facts about the zones

单击添加单击添加单击添加单击添加


24 zones approved by the Chinese Ministry of Commerce

Total investment of $2.9b

Total output of $8.4b

Total tax paid of $265m

17865 jobs been created

237 enterprises entered the zones

Lekki Free Zone Pictures

SEZ as a part of national economic growth strategy, SEZ’s master plan as a sub-plan of regional general plan

Lekki Free Zone

New port

Lekki Airport

Lekki-Epe

Expressway

Seashore

Expressway

APAPA Port

LAGOS Airport

CBD Manufacturing Proces

sing

Residential Estate

Commerce

& Logistics

Tank Farm

Lekki Free Zone

Master Plan of Lekki Free Zone

Preferential and Incentive Policies in Lekki Free Trade Zone

Complete tax holiday from all Federal, State and Local Governments rates, taxes, Custom Duties and Levies;

One-stop approval for all permits, Operating License and Incorporation Papers;

Duty-Free and Tax-Free importation of raw materials and components for goods destined for re-export;

Permission to sell 100% of manufactured assembled of imported goods into the domestic Nigeria market. When selling into the domestic market, the amount of import duty on goods manufactured in the Free Trade Zone is calculated only on the basis of the value of the raw materials or components used in assembly, not on the finished products;

Preferential and Incentive Policies in Lekki Free Trade Zone

100% foreign ownership of investments; 100% repatriation of capital, profits and dividends to the country of

origin; Waiver of all import and export License; Waiver on all expatriate quotas for companies operating in the

zones; Prohibition of strikes and lockouts for the first 10 years of operation

of a free zone.


Why should I use the word “create”

Main points to create a SEZs

SEZs

Type of SEZs to Decide


Type of Administration and Investment

A. Invested, operated and administrated by the Government

B. Invested, operated and administrated by PPP

Under the control of the high committee

C. Invested and administrated by the Government

and operated by an expert team


Selection of the Location

Near Ports, Airport or Railway; Good Infrastructure & Services


.

Preferential policies and incentives legally

enacted and implemented for Zone

Incentives is the key to attract the domestic and foreign investment


Master Plan for the Zones

The overall arrangement and layout in space and time for the

development of land use, industrial structure ,traffic organization,

infrastructure, environment protection of the Zone


Construction

To follow the Regulatory Plan and Site Plan To follow the Municipal Project Plan To follow the Engineering Design


Administrative Service & Marketing

To built a centre for administrative & business services

To make a marketing promotion worldwide


To establish attractive & friendly investment environment

“Open-door” Policy & Opening your mind

Why do investors invest in the Zone?


Key Points to Operation

Incentives legally enacted

Implementation & Continuity

High efficient administration services, especially a rapid

customs clearance (one-stop service)

Land compensations & friendly community relationships

Good Security

Thank You !

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