8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR http://slidepdf.com/reader/full/inputs-and-materials-guideline-on-how-to-successfully-implement-special-economic 1/76 Regional Economic Cooperation and Integration in Asia INPUTS AND MATERIALS Guideline How to Successfully Implement Special Economic Zones in Lao PDR – A Global and Chinese Best Practice Approach
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Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
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8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
Regional Economic Cooperation and Integration in Asia
Contents
List of Abbreviations ..................................................................................................................................... i
Boxes & Tables ............................................................................................................................................... ii
I. Introduction ................................................................................................................................................ 3 2. Lao PDR’s National !" trate#$ % tatus uo' Pros(ects and )*allen#es ........................... +
2.1. Status Quo: Special Economic Zones in Lao PDR .............................................. .............................................. ..........
2.%. &uture SEZ Directions and 'ain (oals as Em)edded in t*e + t* &i"e ,ear Socio-Economic
De"elopment Plan ........................................................................................................................................................................ 1
3. ,ariet$ of (ecial !cono-ic "ones ..................................................................................................
%.2. 0!ne Si e Does ot &it All3 / 45pes o# SEZ ................................................... .............................................. .............. 16
%.2.1. &ree 4rade Zone 7Commercial &ree Zone8 ...................................................................................................... 1
%.2.2. 4raditional E9port Processing Zone .................................... .............................................. ................................. 1$
%.2.% 5)rid E9port Processing Zone .............................................. .............................................. ................................. 21
%.2.; Enterprise Zone< Empo=erment< >r)an &ree Zone .............................................. ........................................ 26
%.2. Single &actor5 E9port Processing Zone ..................................... .............................................. ........................... 2
/. !"s fro- an !cono-ic Pers(ective % 0unctions and 1b ectives ......................................... 2
6.1 EPZ / Impact on ational ?el#are ................................................................................................................................ 2$
Literature ...................................................................................................................................................... 7+
8I" 9Re#ional !cono-ic )oo(eration and Inte#ration in Asia :R)I;<=Pro#ra--e ............
• 4*e so-called Asian 0tigers3 Repu)lic o# orea< 4ai=an< Singapore and ong ong<=*ose e9port-led strateg5 started in t*e 1$ s<
• Sout*-East Asian nations liBe 'ala5sia< Indonesia and 4*ailand< =*ic* )egun in t*e1$+ s<
• #ollo=ed )5 Jiet am< Cam)odia< and< as an outstanding e9ample< t*e People s Repu)lico# C*ina during t*e 1$$ s and 2 s<
• @anglades* and India in Sout* Asia<
• in Latin America Costa Rica and C*ile<• and in A#rica @ots=ana< 'auritius and 4unisia.
Amongst t*e a#orementioned countries< e9port promotion policies pla5ed in most )ut not all
cases a crucial role in sustaining long-term gro=t* rates )5 #ostering seFuences o# in"estment<
inno"ation< and po"ert5 reduction< t*us ena)ling t*eir economies to pass t*roug* a transition
#rom dependenc5 on primar5 goods production to "ital manu#acturing e9porters. 4
1@*ag=atti< Hagdis*: In De#ense o# Capitalism< !9#ord 2 6< p. ;6.2@elloc< 'arianna: Sur"e5 o# t*e Literature on Success#ul Strategies and Practices #or E9port Promotion )5 De"elop-
ing Countries< in: International (ro=t* Centre< ?orBing Paper 11G 26 7Hune 2 118< p. %.3 rueger< Anne !.: 4rade Policies in De"eloping ations< in: and)ooB o# International Economics< ?as*ington 1$ ;<
p. ;1$-; $ 7p. 2 84> C4AD: E9port Competi"eness and De"elopment in LDCs / Policies< Issues and Priorities #or Least De"eloped
Countries #or Action During and @e5ond > C4AD KII< e= ,orB and (ene"a 2 < p. 1.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
Regional Economic Cooperation and Integration in Asia 6
!ne 0"e*icle3 #or acti"e participation in t*e international trade s5stem< and t*ere#ore #or out-
=ard-oriented e9port dri"en gro=t*< is setting-up special economic ones 7SEZ8. 5 !"er t*e past
% 5ears< t*e success o# a num)er o# SEZs in de"eloping countries *as inspired ot*er de"eloping
countries to turn to SEZs as a =a5 o# maBing t*eir de"elopment strategies more out=ard-
oriented. o=e"er< de"eloping countries *a"e *ad "aried results =it* t*is strateg5: Some SEZs*a"e emerged as d5namic engines o# gro=t*< =*ile ot*ers *a"e created little )ene#it< and turned
out to )e net drains on go"ernment resources. Suc* contrasting outcomes demonstrate t*e need
#or #urt*er e9amination into t*e #actors t*at determine t*e success or ot*er=ise o# suc* ones. 6
4*e Lao People s Democratic Repu)lic 7Lao PDR8 is one o# t*ose countries< =*ic* recentl5< in
t*e 5ear 2 11< adopted a national SEZ strateg5. Against t*e )acBground o# Lao s on-going e##orts
to en*ance its national SEZ strateg5< t*e primar5 o) ecti"e o# t*e *ere presented stud5 is to
*a"e a close looB at t*e success #actors and pit#alls o# international SEZ e9perience in general
and t*e C*inese case S*en *en in particular< su)seFuentl5 deri"ing polic5 implications #or suc-
cess#ull5 esta)lis*ing SEZs in Lao PDR.
4*e paper is structured as #ollo=ing: C*apter t=o =ill pro"ide an o"er"ie= o# Lao s SEZ strateg5<
its accomplis*ments< and )ottlenecBs. C*apter t*ree =ill scrutini e t*e SEZ concept< its de#ini-
tions< and "arious real t5pes in practice. @ased on t*e pre"ious #indings< c*apter #our =ill dra=
insig*ts #rom t*e "arious strands o# =orld=ide academic and practical SEZ literature in order to
s*ed lig*t on t*e underl5ing economic concept as =ell as potential polic5 implications #or
ac*ie"ing SEZ speci#ic polic5 o) ecti"es. @ased on a literature re"ie= and pre"iousl5 conducted
on t*e Endorsement t*e Decree on Special and Speci#ic Economic Zones in Lao PDR3 7 o: 6+GSC<
2 .1 .2 1 8< 0Decree on Special and Speci#ic Economic Zones in Lao PDR3 7 o: 66%GP'<
2 .1 .2 1 8 and on t*e 0Proposal Letter o# t*e C*airman o# ational Committee #or Special and
Speci#ic Economic Zone 7 o: G CSEZ< ;. 6.2 1 8.
Em)edded in t*e long-term 0Se"ent* &i"e-,ear ational Socio-Economic De"elopment Plan
72 11-2 1;83< Lao s SEZ polic5 / as set out )5 t*e a#orementioned strateg5 paper o# t*e leading
aut*orit5 National )o--ittee on (ecial !cono-ic "one in Lao PDR :N) !"; / stri"es to
pursue #i"e core macroeconomic o) ecti"es:
• Contri)uting to rapid socio-economic de"elopment<
• Integrating t*e Lao econom5 in regional and international marBets<
• Promoting economic re#orm )ased on marBet mec*anism<
• @uilding industrial #oundations<
7@ertelsmann 4rans#ormationsinde9 7@4I8: L ndergutac*ten / JolBsrepu)liB Laos< 2 12< p. 1;#.84*e Secretariat to t*e ational Committee #or Special and Speci#ic Economic Zone: De"elopment Strateg5 #or Special
and Speci#ic Economic Zone in t*e Lao PDR< 2 11 / 2 2 <*ttp:GG===.sncse .go".laGimagesGLegalDocumentsGse Mde"elopmentMstrateg5Meng.pd#< p. i.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
Regional Economic Cooperation and Integration in Asia
• 'oderni ing t*e econom5 )5 trans#orming land into capital 9
2.*. tatus uo+ (ecial !cono,ic "ones in Lao PDR
4*e national one programme =as launc*ed )5 a SEZ #easi)ilit5 stud5 pro ect along t*e 2 nd Lao-
4*ai &riends*ip @ridge in Sa"annaB*et pro"ince in cooperation =it* Hapan International Coop-
eration Agenc5 7HICA8 in 2 < =*ic* led to t*e appro"al o# Lao s #irst e9perimental economic
one Sa"an-Seno SEZ in 2 2. 4oda5< it co"ers ten appro"ed SEZs and se"eral more =*ic* are
still in t*e earl5 planning stage 7see ta)le 18. 10 In order to *a"e a clear understanding o# t*e
ac*ie"ements and issues o# t*ese ones< t*ree alread5 e9isting ones< =*ic* are according to t*e
Secretariat to t*e Lao ational Committee #or Special Economic Zone 7S- CSEZ8 most pro-
gressed 11 < =ill )e discussed )elo=.
Table *. (ecial and (ecific "ones in Lao P.D.R
No "one Location 1b ective tatus Develo(er
A((roved
1 Sa"an-Seno SEZ Sa"annaB*etpro"ince
Industr54radeSer"iceLogistics
Appro"al2 2
Lao (o"ern-ment
2 @oten @eauti#ulLand SEZ
Luangnamt*apro"ince
Logistics4radeCommercial4ourism
Appro"al2 1
PR C*ina
% (olden 4riangleSEZ
@oBea pro"-ince
4ourism4radeSer"ice
Appro"al2 1
PR C*ina
6 P*ouB*5o SEZ *ammouanepro"ince
4radeSer"iceIndustr5
Appro"al2 1
Lao (o"ern-ment
; Jientiane Industrialand 4rade SEZ
Jientianecapital
Industr54radeSer"ice
Appro"al2 11
PR C*ina74ai=an8
; Jientiane Industrialand 4rade SEZ
Jientianecapital
Industr54radeSer"ice
Appro"al2 11
PR C*ina74ai=an8
$Prime 'inister s !##ice Lao PDR: Decree on Special Economic Zone and Speci#ic Economic Zone< Jientiane !cto)er2 1 < p. 6.
1 4*e Secretariat to t*e ational Committee #or Special and Speci#ic Economic Zone 7S- CSEZ8: De"elopment Strate-g5 #or Special and Speci#ic Economic Zone in t*e Lao PDR< 2 11 / 2 2 <*ttp:GG===.sncse .go".laGimagesGLegalDocumentsGse Mde"elopmentMstrateg5Meng.pd#< p. 6.
11 I)id< p. 16.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
$ Regional Economic Cooperation and Integration in Asia
mitories< a )ricB #actor5< a small airport as =ell as electricit5< =ater and telecommunication
suppl5 s5stems. e9t to t*e )uild-up o# in#rastructure in t*e one< t*e de"eloper also pro"ided
#inancial support #or t*e construction o# a road #rom am eung to 'om "illage and 1 sc*ools
in #our ort*ern pro"inces. ,et< despite smoot* in"estment operations on t*e side o# t*e de"el-
oper< t*e one is still #acing di##iculties. Amongst ot*ers< t*ese include social pro)lems< =*ic*=ere created )5 t*e entertainment site< e"entuall5 leading to an en"ironment percei"ed as un-
sa#e< a lacB o# coordination and implementation in regards to la)our polic5 issues< as =ell as t*e
#ailure in creating economic linBages to areas surrounding t*e one. 15
2.2. -verall Issues of !" Pro#ra,,e
4*e reasons #or t*e per#ormance gap o# Lao s SEZ programme range / according to S- CSEZ s
o=n statements / #rom institutional pro)lems< suc* as a lacB o# resol"e in terms o# conception<
e9ecution< and responsi)ilit5 o# SEZ aut*orities< to implementation issues< =*ic* include in es-
sence t*e interruption o# one constructions due to insu##icient de"eloper )udgets< as =ell as
legal and land related issues. &urt*ermore< t*e t*ree alread5 constructed ones did not succeed
in esta)lis*ing linBages =it* t*e surrounding econom5< or in *a"ing a su)stantial impact on t*e
emplo5ment rate o# Lao citi ens due to de"eloper s pre#erence to emplo5 #oreign sta##. 16
In sum< underl5ing issues #or t*e a#orementioned de#ects can )e summari ed as #ollo=ing 17 :
• SEZ de"elopment is regarded as a ne= e9perience #or t*e go"ernment.
• A certain proportion o# national and local go"ernment representati"es lacB compre*en-si"e understanding o# t*e concept.
• Land identi#ication and allocation #or t*e initial set-up o# ones *ad )een inappropriate.
• Limited or insu##icient go"ernment #unds #or crucial in#rastructure pro ects< suc* asroad s5stems< telecommunication< electricit5 and =ater suppl5 s5stems< as =ell as re-compense o# land use rig*ts.
and to create an ena)ling )usiness climate )5 setting-up additional ones. eig*)ouring coun-
tries liBe PR C*ina< 4*ailand< Jiet am< as =ell as ot*er ASEA mem)er states are t*erein re-
garded as Be5 sources #or marBets and #oreign in"estment. Amongst ot*er targeted sectors< t*e
primar5 #ocus o# Lao s SEZ strateg5 =ill )eat t*is point e9port-processing industries 19 :
• Boten !" s*all #unction as a commercial e9port centre< in =*ic* e9ports s*ould )e cus-tomi ed to meet t*e demands o# C*inese and ot*er #oreign marBets.
• Ton(*eun# !" =ill )e turned into an all-round speci#ic economic one #or e9port in-dustries< commerce< #inance< and tourism.
• avan= eno !" is supposed to )ecome an economic cooperation centre #or e9port in-dustries< commerce< #inance< ser"ices< and modern tec*nolog5.
• @enet*ao' Non#*at' @*a-Eeut*' T*aEeE' Dansavan* < and ot*er areas s*all )ecome
)order economic cooperation areas and )order trade centres to attract in"estors #romSout*east Asia and ot*er regions to manu#acturing e9port products< de"eloping lig*t in-dustries< and producing *ouse*old goods #or t*e domestic marBet.
• SEZs in P*ouEeua' DarEtaorE' DaEc*eun#' and P*ouvon# are supposed to #unction asintegral part o# t*e Cam)odia< Laos< and Jiet am 7CLJ8 0triangle de"elopment area3.
18 +t* &i"e ,ear Plan< p. 1 6.19 I)id< pp. 1+ -1+2.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
in detail. 4*e #irst su)-section pro"ides an o"er"ie= o# t*e "arious approac*es to de#ine SEZs
since t*e earl5 1$ s. Su)seFuentl5< t*e second su)-section o##ers a compre*ensi"e description
o# currentl5 implemented t5pes o# SEZs =orld=ide.
20 'ann< 4*eodore: >sing Special Economic Zones to Dri"e Economic De"elopment< in: CDI Roundta)le< 2 12 7p. 118.21 Stolten)erg< Cl5de D.: C*ina s Special Economic Zones / 4*eir De"elopment and Prospects< in: Asian Sur"e5< Jolume
26< um)er 71$ 68< pp. %+- ;6 7 % 8.22 &arole< 4*omas: Special Economic Zones / ?*at *a"e =e learned < in: J!K online Edition< Septem)er 2 11<
*ttp:GG===."o9eu.orgGarticleGspecial-economic- ones-=*at-*a"e-=e-learned23 'adani< Dorsati: A Re"ie= o# t*e Role and Impact o# E9port Processing Zones< ?as*ington DC 1$$$< p. 12.24 @o5enge< Hean-Pierre Singa: IL! Data)ase on E9port Processing Zones< IL! ?orBing Paper< 2 +< p. 1.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
12< um)er 6 71$$;8< pp. % +-6 2 7p.% +8.28 @aissac< Claude: @rie# istor5 o# SEZs and !"er"ie= o# Polic5 De)ates< in: &arole< 4*omas: Special Economic Zones
in A#rica / Comparing Per#ormance and Learning #rom (lo)al E9perience< ?as*ington DC< 2 11< pp. 2%-;% 7p. 268.29 I)id.30 is*itateno< SonoBo: C*ina s Special Economic Zones / E9perimental >nits #or Economic Re#orm< in: International
and Comparati"e La= Quarterl5< um)er %271$ %8< pp. 1+;-1 ; 7p. 1+ 8.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
33 @usc*< @ert*old: OSonder=irtsc*a#ts onen als Instrument der S5stemtrans#ormation< in: @eitr ge ur ?irtsc*a#ts-und So ialpolitiB< Jolume % 71$$28< p. .
34 A*rens< Hoac*im and 'e5er-@audecB< Astrid: Special Economic Zones / S*ortcut or Rounda)out ?a5 4o=ardsCapitalism < in: Intereconomics< Jolume % < um)er 271$$;8< pp. +-$ 7p. 8.
35 &IAS: Special Economic Zones / Per#ormance< Lessons Learned< and Implications #or Zone De"elopment< ?as*ing-ton DC 2 < p. ;1.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
1. Zones are< primaril5< #ormall5 delimited portions o# t*e national territor5 and< se-condaril5< legal spaces pro"ided =it* a set o# in"estment< trade< and operating rules
t*at are more li)eral and administrati"el5 e##icient t*an t*ose pre"ailing in t*e resto# t*e national territor5. Zones are t*ere#ore de#ined )5 a s(ecific re#ulator$ re=#i-e . 4*is regime ma5 )e contained in one or se"eral dedicated la=s or t*roug* aset o# measures contained in a num)er o# te9ts.
2. 4*e administration o# t*e regime usuall5 reFuires a dedicated #overnance struc=ture < centrali ed or decentrali ed. 4*e attri)utes o# t*is structure "ar5 according tot*e nature o# t*e one regime< t*e pre"alent administrati"e culture< t*e num)er o#e9isting ones< t*e role o# t*e pri"ate sector in de"eloping and operating ones< andman5 ot*er #actors. 4*e purpose o# t*is structure is =*at matters: It is to ensure e#-#icient management o# t*e regime and ensure t*at in"estors )ene#it #rom its pro"i-sions.
%. Zones are usuall5 pro"ided =it* a p*5sical in#rastructure supporting t*e acti"ities o#t*e #irms and economic agents operating =it*in t*em. 4*e in#rastructure usuall5 in-cludes real estates< roads< electricit5< =ater< and telecommunications. 4*e in#rastruc-ture is usuall5 composed o# industrial or -ixed=use activit$ (arEs and Be5 trans-port in#rastructure connecting t*e one to its sources< marBets and economic "icini-t5. E"en in countries =*ere ones are legal spaces< industrial or mi9ed-use acti"it5parBs usuall5 e9ist to *ost #irms.
7E9tract #rom @aissac< Claude: i)id< p. 2;8
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
1$ Regional Economic Cooperation and Integration in Asia
.2.2. Traditional !x(ort Processin# "one
Hason A))ott de#ined traditional e9port processing ones 74EPZ8 as 4e7port enclaves within
which special economic concessions apply including an e7tensive package of incentives and veryoften e7emptions from certain kinds of legislation which do not apply outside the 5ones.0
44 De-
signed to #acilitate t*e de"elopment o# e9port industries< 4EPZs normall5 encompass clearl5
delimited industrial estates< in =*ic* e9tensi"e industrial in#rastructure and ser"ices are de-
signed to #acilitate t*e manu#acturing sector. 45 Amongst ot*er #eatures< incenti"es usuall5
include: Lo=-costGrent )uildings< roads< po=er supplies< as =ell as transport #acilities. 46
Zororo 'uranda emp*asi ed in *is =orB t*at t*e most common t5pe o# 4EPZ is )5 #ar t*e
Regional Economic Cooperation and Integration in Asia 2
Box .+ ;arac)i !x(ort Processin# "one in Pa<istan
A#ter #ollo=ing a long pat* o# import su)stitution< PaBistan s go"ernment attempted to
re"erse t*e trend )5 ad usting its de"elopment and industrialisation strateg5 to a moree9port oriented polic5 #rame=orB )5 li)erali ing t*e trade regime )eginning #rom t*e
1$ s. Part o# t*e li)erali ation attempt =as a nation=ide EPZ programme. In 1$ 1< ara-
c*i E9port Processing Zone 7 EPZ8 *ad )een t*e #irst one to )e esta)lis*ed under t*e
ne=l5 introduced regime.
1b ectivesF6ission4
In order to create o) opportunities #or PaBistan s la)our #orce< #oster tec*nological pro-
gress< and attract #oreign direct in"estments< t*e main de"elopment o) ecti"es o# EPZare 18 acceleration o# t*e national pace o# industrialisation and 28 increase o# e9port "ol-
ume. Accordingl5< it is EPZ aut*orit5 s mission e"er since4[to] mo ili5e and promote
utilisation of the nation:s resources for social and economic development of the country0 )5
creating an ena)ling )usiness en"ironment #or in"estors< =*o seeB to set-up inno"ati"e
and am)itious e9port-oriented pro ects.
P*$sical )*aracteristics4
EPZ *ad )een set up ne9t to Land*i Industrial Area< =*ic* is 1 Bilometres a=a5 #romQuaid-e-A am International Airport< 2 Bilometres #rom Port Quasim< and %; Bilometres
#rom t*e recentl5 moderni ed arac*i Seaport. Additionall5< it is =ell connected to t*e
national *ig*=a5 net=orB. ConseFuentl5< t*e strategic maritime and continental location
o##ers )usiness #rom A#rica< America< Europe< &ar East< and 'iddle East access to t*e di-
"erse marBets o# Central Asian countries.
!li#ible Activities4
EPZA is #ocussing on #i"e priorit5 sectors< in =*ic* companies can in"est: ig*-tec* indus-
tr5< gem and e=eller5< so#t=are< in#ormation tec*nolog5 )ased industries< and processed
engineering.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
According to 4*omas &arole< *5)rid EPZs represent a su)-di"ided "ariant o# traditional EPZs<
)ecause t*is Bind o# one is usuall5 separated into t=o parts. !ne area is a more general one<=*ic* is open #or all industries< independent o# =*et*er t*e5 are e9port oriented or not. 4*e
ot*er area constitutes a detac*ed EPZ< usuall5 #enced-in and designed #or registered e9port-
oriented EPZ-enterprises. 48 In compliance =it* o)ser"ations made )5 t*e ?orld @anB< t*is
Bind o# *5)rid one is pre#erred )5 man5 Latin American< t*e ma orit5 o# East European< as
=ell as )5 a num)er o# Asian countries. ?*ile in Asian countries< #or instance t*e P*ilippines
and 4*ailand< EPZs are reFuired to constitute a #enced-in area =it*in t*e *5)rid one< man5
countries in Latin America< suc* as 'e9ico and Costa Rica< on t*e contrar5 allo= EPZ-
registered enterprises to )e located ne9t to companies< =*ic* are registered under di##erent
48&IAS: i)id< p. 1 .
Incentives
• &reedom #rom national importrestrictions
• Relie# #rom dou)le ta9ations su)-ect to )ilateral agreement
• Dut5 #ree imports o# mac*iner5<eFuipment and material
• &reedom #rom national importrestrictions
• &ree mo"ement o# capital • o minimum limit #or in"est-ment
• Relie# #rom national #oreign e9-c*ange control regulations
• o sales ta9 on electricit5 andgas )ills
• !)soleteGold mac*iner5 can )esold in PaBistan s domestic mar-
Bet a#ter pa5ment o# applica)leduties and ta9es
• Production oriented la)our la=are solel5 regulated )5 t*e au-
t*orit5
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
2; Regional Economic Cooperation and Integration in Asia
Box @+ C)ica#o !,(o er,ent "one
Introduced in 1$$;< t*e C*icago Empo=erment Zone 7CEZ8 is one o# t*e a=arded cities
under t*e #ederal empo=erment onesGenterprise communities programme. 4*e pro-gramme constitutes a t*ree-tier go"ernment strateg5 / #ederal< state and local le"el /
comprising o# partners*ips #or stimulating social de"elopment and social gro=t* in dis-
tressed ur)an centres and rural parts o# t*e >nited States.
6ana#e-ent Bod$4
4*e cit5 go"ernment o# C*icago is responsi)le #or operating as =ell as implementing t*e
programme. A state agenc5 called 0EZGEC Coordinating Council3 7EZECCC8 *as )een as-
signed as leading aut*orit5 #or one de"elopment< distri)ution o# #unding and a=ardingpro ects. EZECCC consists o# %$ mem)ers< =*ic* represent communities in t*e one< )usi-
nesses< as =ell as o##icials #rom all t*ree go"ernment le"els and related neig*)our*oods.
1b ectivesF6ission4
!##ering a "ariet5 o# in"estment incenti"es #or )usinesses< =*ic* are located =it*in t*e
)oundaries o# t*e one< CEZ targets at tacBling po"ert5 and *ig* unemplo5ment rates< )5
seeBing to re"itali e t*e econom5.
P*$sical )*aracteristics4
?it* a com)ined population o# 1$$<$% citi ens and a geograp*ical sur#ace co"ering %
sFuare Bilometres< CEZ co"ers t*irteen communities and neig*)our*oods on t*e =est and
sout* side o# C*icago.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
Single &actor5 E9port Processing Zones are a su)-t5pe o# traditional EPZs. 4*e5 #ollo= a com-
para)le logic and incenti"e sc*eme< )ut are onl5 designed to ser"e t*e needs o# indi"idual
enterprises. >suall5< t*is Bind o# one is not located in dedicated areas< )ut is rat*er set-up
regardless o# t*e location. 57
57 'uc*linsBi< Peter: Special Economic Zones / A Polic5 4ool in Searc* o# a e= Agenda < in: Carter< Connie andarding< Andre=: Special Economic Zones in Asian 'arBet Economies< e= ,orB 2 11< pp. 1;-%+ 7p. 1+8.
Incentives
• CEZ s incenti"e sc*eme includes
ta9 relie#s liBe =age credits< de-ductions and in"estment stimuli
• Annual ta9 credit o# up to W%<#or emplo5ees< =*o li"e and=orB in CEZ
• 4a9 credit o# up to W2<6 #or
eac* ne= emplo5ee aged 1 to%$ 5ears old< =*o =orBs andli"es in CEZ
• Allo=s )usiness o=ners to re-co"er all or parts o# certainpropert5 costs up to a speci#iclimit
• Allo=s CEZ )usinesses to rollo"-er certain gains #rom Fuali#iedCEZ asset sales
•
Lo= interest CEZ #acilit5 )ondsare issued )5 local or a nationalgo"ernments CEZ )usiness inorder to #inance Fuali#ied onepropert5
•
Quali#ied Zone Academ5 @ondsallo= state or local go"ernmentsto issue no interest )onds to0Fuali#ied one academics3 inCEZ
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2+ Regional Economic Cooperation and Integration in Asia
>. !"s fro, an !cono,ic Pers(ective % /unctions and -b ectives
4In this current era of glo alisation, e7port promotion is seen as an impor-
tant policy for economic growth in developing countries. ;arious measures
are eing adopted to promote e7port competitiveness y governments in
these countries. /s a policy means of achieving this goal, the concept of e7-
port processing 5ones "+< s( has gained noticea le significance in recent
years.0
"/rahdna /ggarwal, %&&=( 58
4*e accessi)le SEZ literature< dealing =it* di"erse aspects and attri)utes o# "arious national
one programmes and t*eir respecti"e positi"e and negati"e impacts on o"erall economic
de"elopment o# *ost economies< is di"erse and mani#old. Considered as 4 eing among the pri-
mary forces of e7port-oriented growth in recent decades0 59 , SEZs =ere / and still are / regarded
)5 a large num)er o# countries as an important economic polic5 tool. 60 Discussions a)out
ones started at a time o# structural c*ange in t*e glo)al economic en"ironment. It is consid-
ered as conseFuence o# s*i#ts #rom import su)stitution policies to e9port-oriented gro=t*
strategies in man5 de"eloping countries. 61 As a p*enomenon o# t*is trend< Latin American<
Cari))ean< Asian and< to a lesser e9tent< A#rican countries set-up national SEZ programmes<
conseFuentl5 emerging as *ost countries #or an e9tensi"e num)er o# ones =orld=ide. 62
Considered #rom an economic perspecti"e< t*e #oals < =*ic* go"ernments tr5 to ac*ie"e )5
implementing national SEZ strategies< mig*t slig*tl5 di##er #rom case to case. o=e"er< ac-
cording to Hoac*im A*rens and Astrid 'e5er-@audecBas as =ell as o# R. 4*amara aBs*i< t*e
primar5 o) ecti"e o# one strategies is to attract #oreign in"estment in order to:
• Increase and di"ersi#5 e9ports.• Create o)s and raise li"ing standards.• 4rans#er impro"ed tec*nolog5 to local econom5 and impro"e *uman resources.
58Aggar=al< Arad*na: Per#ormance o# E9port Processing Zones / A Comparati"e Anal5sis o# India< Sri LanBa and@anglades*< Regional Council #or Researc* on International Economic Relations 7CRIER8 ?orBing Paper< um-)er 1;; 72 ;8< p. 1.
59 arunaratne< C*andana and A)a5aseBara< As*ani: Impact o# EPZs on Po"ert5 Reduction and 4rade &acilitation inSri LanBa< > ESCAP AR4 e4 ?orBing Paper< um)er 1%6 7!cto)er 2 1%8< p. .
60I)id.61AB*tar< 'o*ammad ani#: An E"aluation o# arac*i E9port Processing Zone / A Preliminar5 In"estigation< in:
4*e PaBistan De"elopment Re"ie=< Jolume 62< um)er 6 72 %8< pp. $2+-$6 7p. 2+$8.62Hauc*< er)ert: E9port Processing Zones and t*e Quest #or Sustaina)le De"elopment / A Sout*ern A#rican Pers-
pecti"e< in: En"ironment and >r)ani ation< Jolume 16< um)er 1 72 28< pp. 1 1-11% 7p. 1 28.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
#ollo=ing c*apter =ill anal5se and discuss SEZ programmes =orld=ide in order to deri"e pol-
ic5 suggestions #or t*e Lao national SEZ strateg5 in accordance =it* its set o) ecti"es:
• Integrating t*e Lao econom5 in t*e regional and international marBets )5 increasingand di"ersi#5ing e9ports.
63A*rens< Hoac*im and 'a5er-@audecB< Astrid: i)idN 4*amara aBs*i< R: Promotion o# Social Dialogue in EPZs inSout* Asia / S5nt*esis o# Countr5 E9periences< in: !)erai< S.< Si"ant*iran< A. and JenBata Ratnam: La)our Issuesin E9port Processing Zones in Sout* Asia / Role o# Social Dialogue< IL!< (ene"a 2 1< pp. 1 -6 .
64As alread5 re#erred to in c*apter 1< t*e classi#ications in regards to SEZs are not al=a5s clearl5 distinguis*ed andused interc*angea)l5. e"ert*eless< researc* during t*is time mainl5 #ocused on ones< =*ic* =ere designed tocreate #a"oura)le e9port conditions #or producers and ma5 t*ere#ore #all under t*e categories traditional EPZor *5)rid EPZ.
65Amira*madi< oos*ang and ?u< ?eiping: E9port Processing Zones in Asia< in: Asian Sur"e5< Jolume %;< um)er$ 71$$;8< pp. 2 / 6$ 7p. 2$8.
66Amira*madi< oos*ang and ?u< ?eiping: i)id< p. % .
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clines< =*ile< at t*e same time< t*e output o# t*e capital-intensi"e commodit5 in t*e EPZ rises<
e"entuall5 intensi#5ing t*e tari##-induced distortion and reducing domestic =el#are. 68
67HenBins< 'auricio< EsFui"el< (erardo and LarraXn @.< &elipe: E9port Processing Zones in Central America< a"ardInstitute #or International De"elopment< De"elopment Discussion Paper< um)er 6 71$$ 8< p. 11.
68 amada< oic*i: An Economic Anal5sis o# Dut5-&ree Zone< in: Hournal o# International Economics< um)er 1%71$ 28< pp. 6;- 6.
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?ong s researc* in 1$ indicated t*at )ot* studies used dissimilar assumptions concerning
=*at Bind o# good =as produced in t*e one< =*at good =as used to repatriate #oreign and
domestic production #actors< and i# ta9es =ere imposed on pa5ments. A crucial #inding o#
?ong s =orB =as t*at =el#are le"els associated =it* &DI in EPZs and in t*e domestic econ-
om5 do not di##er as long as t*e production in an EPZ is #ocused on one good and i# t*is good isalso utili ed #or #actor repatriation.70
Alt*oug*< ?ong s #indings s*o=ed t*at &DI in EPZs is not in#erior to #oreign in"estment in t*e
domestic econom5< t*e assumption t*at EPZs *a"e a negati"e =el#are e##ect on t*e *ost econ-
om5 *ad )een uncontested until t*e )asic -! #rame=orB =as #urt*er ela)orated. a 'i5a-
ga=a #or e9ample 71 e9tended t*e standard model later on )5 constructing a t*eoretical
#rame=orB< =*ic* comprised t*ree #actors / land< la)our and capital / and t*ree goods / t=o
t5pes o# industrial commodities and #ood. In t*e initial stage o# *is researc* model< a countr5
onl5 #ocused on producing one industrial good and #ood. 4*en< in order to di"ersi#5 t*e do-
mestic industr5< t*e go"ernment introduces an EPZ and o##ers speci#ic su)sidies to #oreign
companies accordingl5. 'i5aga=a s #indings s*o=ed t*at under distincti"e conditions / t*at is<
i# t*e e9port su)sid5 is smaller t*an t*e import ta9< and i# t*e impact o# t*e su)sid5 is larger
on t*e output o# t*e alread5 produced industrial commodit5 t*an on t*e output o# t*e di"ersi-
#5ing production / EPZs mig*t *a"e a =el#are increasing e##ect. e"ert*eless< *is =orB also
69
amilton< Carl and S"ensson< Lars: !n t*e ?el#are E##ects o# A 0Dut5-&ree Zone3< in: Hournal o# International Eco-nomics< Jolume 1%< um)er 1-2 71$ 28< pp. 6;- 6.70?ong< ar-,iu: International &actor 'o"ements< Repatriation and ?el#are< in: Hournal o# International Economics<
Jolume 21< um)er %-6 71$ 8< pp. %2+-%%;.71!t*er pu)lis*ed =orBs< =*ic* also used "ariances o# t*e e9tended standard -! model and su)seFuentl5 came to
similar conclusions< include: ,oung< Leslie and 'i5aga=a< a : >nemplo5ment and t*e &ormation o# Dut5 &reeZones< in: Hournal o# De"elopment Economics< Jolume 2 < um)er 2 71$ +8< pp. %$+-6 ;N C*aud*uri< Datta andAd*iBari< Smita: &ree 4rade Zones =it* arris-4odaro >nemplo5ment / A ote on ,oung-'i5agi=a< in: Hournalo# De"elopment Economics< Jolume 61< um)er 1 71$$%8< pp. 1;+-1 2N Din< 'usle*-du: E9port ProcessingZones and @acB=ard LinBages< in: Hournal o# De"elopment Economics< Jolume 6%< um)er 2 71$$68< pp. % $-% ;.
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e concludes t*at 4if the average tariff e7ceeded the ?@2 , the electricity used y +< firms would entail a net ta7 A or, in the reverse case, a net su sidy.0 84
Do-estic borroGin# onl5 *as an impact on t*e net =el#are o# a *ost countr5 i# domestic
capital marBets are restricted and interest rates are *eld do=n. In suc* a case< 4the implication
is that the domestic output forgone as a result of additional orrowing y "foreign( +< firms
e7ceeds the compensation received from them in interest and principal repayment0. 85 4*e out-
come =ould )e< t*at t*e opportunit5 costs o# t*e )orro=ed capital =ould surpass t*e actual
marBet price< t*ere#ore creating a negati"e =el#are e##ect.86
Since companies< =it* "er5 #e= e9ceptions< =ould not *a"e mo"ed to t*e countr5 in t*e a)-
sence o# EPZs<taxes constitute a clear net )ene#it #or t*e domestic =el#are. 4*e ma orit5 o#
companies are #oreign< and< according to ?arr s inter"ie=s =it* managers< 4few would have
invested in the host country without the +< incentives0. 87 e"ert*eless< *e added< too generous
ta9 *olida5s can distort t*e positi"e impact. 88
Develo(-ent and recurrent costs create t*e )iggest s*are o# direct costs< including t*e es-
ta)lis*ment o# t*e one site as =ell as necessar5 in#rastructure around it< its maintenance< and
administration cost.89
,et< it is important to add to ?arr s researc* #indings #rom t*e 1$ st*at< according to a more recent ?orld @anB pu)lication< an important #eature o# current one
o=ners*ip arrangements and de"elopment approac*es are t*e increasing num)er o# ones<
=*ic* are de"eloped< o=ned< and operated )5 t*e pri"ate sector. e5 #actors )e*ind t*is trend
are< on one side< t*e impression t*at pri"ate ones ac*ie"e a )etter per#ormance t*an t*e ma-
orit5 o# pu)lic ones< and< on t*e ot*er side< t*e general lacB o# pu)lic #inancial resources #or
one esta)lis*ment. 4*us< #ormall5 institutionali ed pu)lic-pri"ate partners*ip approac*es
83I)id< p. .84I)id.85I)id.86I)id.87I)id.88I)id.89I)id< p. 1.
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%; Regional Economic Cooperation and Integration in Asia
*a"e ser"ed as catal5st to reduce net cost and #acilitate one de"elopment. 90 E9amples< =*ic*
=ere taBen into account in t*e report< include 91 :
• Pu)lic pro"ision o# o##-site in#rastructure and #acilities as an incenti"e #or pri"ate#unding o# on-site in#rastructure and #acilities.
• Assem)l5 o# land parcels =it* secure titles and de"elopment rig*ts )5 t*e go"ernment#or lease to pri"ate one de"elopment groups< de"elopment o# )etter landuseGo=ners*ip la=s and regulations< as =ell as t*e adoption o# en#orcea)le oningand land use plans.
• @uild-operate-trans#er and )uild-o=n-operate approac*es o# on-site and o##-site onein#rastructure and #acilities< =it* go"ernment guarantees andGor #inancial support.
• Contracting pri"ate management #or go"ernment o=ned ones< or lease o# go"ern-ment one assets )5 a pri"ate operator.
• EFuit5-s*i#ting arrangements in =*ic* case a pri"ate contract manager o# a go"ern-ment one can e9ercise a purc*ase option once pre-de#ined per#ormance le"els *a"e)een reac*ed.
>. !x(ort Increase and Diversification
As Adrian ?ood and ot*ers emp*asi ed< in t*e current era< in =*ic* *ig* international capital
mo)ilit5 ampli#ies t*e rele"ance and impact o# geograp*ic c*aracteristics in determining t*e
composition o# comparati"e ad"antages and location o# production sites 92 < international trade<
as a catal5st #or economic gro=t* and po"ert5 reduction< taBes a prominent place in de"elop-
ing countr5 s economic polic5 c*oices.93
Studies< suc* as o# Ann arrison and AndrYs RodrXgue -Clare #or e9ample< 5ield insig*t t*at
go"ernment inter"entions designed to #oster e9port promotion generate *ig*er =el#are )ene-
#its t*an ot*er #orms o# inter"ention. 94 ence< EPZs / as an inter"ening polic5 tool / can< in
accordance =it* ?illiam 'il)ergand 'att*e= Amengual s #indings< *a"e an impressing im-
pact on a countr5 s e9port per#ormance.95 o=e"er< as Hamie 'cCallum pointed out< t*e posi-
90I)id< p. 1 .91
I)id< pp. 1 -1$.92?ood< Adrian and @erge< ersti: E9porting 'anu#acturers: uman Resources< atural Resources and 4rade Poli-c5< in: Hournal o# De"elopment Studies< um)er %+ 71$$+8< pp. %;-;$ 7%+8N ?ood< Adrian: !penness and ?ageIneFualit5 in De"eloping Countries / 4*e Latin American C*allenge to East Asian Con"entional ?isdom< in:?orld @anB Economic Re"ie=< um)er 11 71$$+8< pp. %%-;+ 7p. % 8.
93 arunaratne< C*andana and A)a5aseBara< As*ani: 4*e Impact o# EPZs on Po"ert5 Reduction and 4rade &acilita-tion in Sri LanBa< prepared #or AR4 e4 Con#erence on Empirical and Polic5 Issues o# Integration in Asia and t*ePaci#ic< 1-2 o"em)er 2 12< Colom)o< Sri LanBa< p. +.
94 arrison< Ann and RodrXgue -Clare< AndrYs: 4rade< &oreign In"estment< and Industrial Polic5 #or De"elopingCountries< ational @ureau o# Economic Researc* 7 @ER8 ?orBing Paper< um)er 1;2 1 7August 2 $8< p. +;.
95 'il)erg< ?illiam and Amengual< 'att*e=: i)id< p. 11.
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%+ Regional Economic Cooperation and Integration in Asia
promoting e9port di"ersi#ication. Esta)lis*ed in 1$+1 as a go"ernment response to unsuccess-
#ull5 implemented policies o# import su)stitution< EPZs *ad )5 1$$; contri)uted to a total
s*are o# %V o# gross e9ports and a ratio o# 6 V o# net e9ports. Pre"ious e9port reliance on
garment production *ad )een di"ersi#ied to more #ull pacBage productions. 101 e concluded
su)seFuentl5: 41he 2auritian success is due to the coming together of all necessary elementsand policies required for flourishing the +< s. 1he incentive 4package0 was attractive. 1here was
an a undant and educated pool of la our availa le. 1he government was sta le, provided
stream-lined services, and interfered minimally0. 102
In 2 ;< Arad*na Aggar=al conducted a comparati"e EPZ per#ormance anal5sis on t*e coun-
tries India< Sri LanBa< and @anglades*< scrutini ing crucial #actors #or success#ul e9port and
one per#ormance in Sout* Asia. Empiricall5 e9amining t*e determinants o# "ariations in e9-
port per#ormance and in"estment< s*e dre= in *er cross-countr5 comparison t*e conclusion
t*at 4countries wishing to take advantage of the opportunities provided y 5ones will have to put
together a co-ordinated package of incentives, infrastructure and good governance0. 103 o=e"er<
*er #indings also suggested t*at some #actors are relati"el5 more central t*an ot*ers. ?*ile
#or e9ample t*e si e o# an EPZ *ad no su)stantial impact on one per#ormance< t*e p*5sical
in#rastructure connecting t*e one to t*e rest o# t*e domestic econom5 is *ig*l5 rele"ant. 104
4*ere#ore ne9t to good go"ernance and appropriate incenti"es< one o# t*e most crucial #actors
o# e9port per#ormance< =*ic* *as )een identi#ied in *er =orB< is t*e location o# ones and
in#rastructure #acilities. Locating an EPZ in a strategic position< suc* as close to ma or cities<
airports and ports< *as a positi"e impact on )ot* e9port per#ormance and in"estment. &ur-t*ermore< t*e producti"it5 o# ones *ad )een a##ected )5 t*e )roader economic and institu-
nesia< 'ala5sia< 4*ailand and t*e P*ilippines / as outstanding e9amples. 109 o=e"er< t*ere
are also countries in =*ic* EPZ de"elopment and e9pected emplo5ment e##ects *a"e not suc-
ceeded / especiall5 on t*e A#rican continent. er)ert Hauc*< #or instance< pointed out t*e dis-
tinct #ailures o# Sout*ern A#rican EPZs to generate emplo5ment and income increases. 110 An-
ot*er illustrati"e case =ould )e en5a< =*ere t*e go"ernment spent millions o# dollars on its
EPZ programme =it*out ac*ie"ing a su)stantial impact on domestic emplo5ment rates. 111 4*e
underl5ing pro)lems in t*ese cases *a"e )een attri)uted to t*e o"erall one design< =*ic*
lacBed in appropriate incenti"e sc*emes< location site< as =ell as good go"ernance practices<and not to speci#ic emplo5ment regimes as suc*. 112
!ne aspect< =*ic* is particular prominent in t*e literature on EPZs and emplo5ment genera-
tion is t*e dominant ratio o# #emale =orBers in ones. 'an5 studies #ound t*at EPZs empo=-
106 HenBins< 'auricio: Economic and Social E##ects o# E9port Processing Zones in Costa Rica< IL! ?orBing Paper<
um)er $+ 72 ;8< p. 1+.107 > Industrial De"elopment Report 2 $ / @reaBing In and 'o"ing >p: e= Industrial C*allenges #or t*e @ottom
@illion and t*e 'iddle-Income Countries< p. +2.108 At*uBorala< Premac*andra: &oreign Direct In"estment and 'anu#acturing #or E9port in a e= E9porting Coun-tr5 / 4*e Case o# Sri LanBa< in: 4*e ?orld Econom5< Jolume 1 < um)er 6 71$$;8< pp. ;6%-; 6 7p. ; 8.
109 C*aud*uri< 'rinal: 4*e Role o# &ree 4rade Zones in Emplo5ment Creation and Industrial (ro=t* in 'ala5sia< in:IL!: E9port Processing Zones and Industrial Emplo5ment in Asia / Papers and Proceedings o# a 4ec*nical?orBs*op< AR4EP< Asian Emplo5ment Programme< @angBoB 1$ 6< pp. $-$6 7p. + 8.
110 Hauc*< er)ert: i)id< p. 11 .111 Rol#e< Ro)ert< ?ood=ard< Douglas and agira< @ernard: &ootlose and 4a9 &ree / Incenti"e Pre#erences in e-
tions on trade union rig*ts< lacB o# en#orcement o# la)our legislation< and a)sence o# =orBer s
organi ations representation in EPZs as 4undermining the a ility of 5ones to upgrade skills,
improve working conditions, and enhance productivity.0 119 Super"isor5 )odies o# IL! *a"e e"er
since pu)licl5 condemned discrepancies )et=een rati#ied con"entions and o##icial EPZ prac-
tices in regards to t*e rig*t to organi e and oin organi ations 7e9amples: @anglades*< Do-
113 e5 er< oeleen: Daug*ters in Industr5 / ?orB< SBills and Consciousness o# ?omen ?orBers in Asia< Asian and
Paci#ic De"elopment Centre< uala Lumpur< 1$ N Dunn< Leit*: Education o# ?omen ?orBers in t*e Carri)eanE9port Processing Zones / C*allenges and !pportunities< in: La)our Economics< um)er $ 71$$68N i)ria<
a li: Culture< Social Class< and Income Control in t*e Li"es o# ?omen (arment ?orBers in @anglades*< in:(ender and Societ5< Jolume $< um)er % 71$$;8< pp.2 $-% $.
114 Aggar=al< Arad*na: Impact o# Special Economic Zones on Emplo5ment< Po"ert5 and uman De"elopment< In-dian Council #or Researc* on International Economic Relations 7ICRIER8 ?orBing Paper< um)er 1$6 72 +8< p.1 .
115
P*illips< (ar5 and Ka)a< Hant ie: 4*e ?orBers\ Stor5 / La)our Rig*ts Jiolations at udson\s @a5 Suppl5 &actoriesin Lesot*o< Et*nical 4rading (roup 7E4A(8< Canada 2 2.116 ossain< Ismael: E9port Processing Zones in @anglades* and Industrial Relations< in: !)eroi< A.S.< Si"anant*iran<
A. and JenBataRatnam< C.S: La)our Issues in E9port Processing Zones in Sout* Asia / Role o# Social Dialogue<IL!< e= Del*i 2 1< pp. 6 - .
117 De=an< Ritu: Et*ics o# Emplo5ment and E9ports / ?omen in E9port Processing >nits in India< in: !)eroi< A.S.<Si"anant*iran< A. and JenBataRatnam< C.S: i)id< pp. 221-2+%.
118 ettiarac*c*i< 4riest: Some Aspects o# Social Pro)lems Related to E9port Promotion< in: >ni"ersit5 o# Colom)oRe"ie=< Jolume 1 71$$18< pp. 62-;$.
119 IL!: Emplo5ment and Social Polic5 in Respect o# E9port Processing Zones 7EPZs8< Committee on Emplo5mentand Social Polic5< 2 t* Session< (ene"a 2 %< p.+.
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>.@ Tec)nolo#$ Transfer and =u,an Ca(ital Develo(,ent
46eveloping countries may consider technology transfer as a ase for devel-
oping their technology capa ility implying that the capa ility required is
eyond adapting the technologies to suit the local situation. Bowever, it is
postulated that not every transfer process can e e7pected to upgrade the
technology capa ility of the receiver.0
"Cartiko <utranto, %&&D( 121
According to li#e c5cle *5pot*esis< t*e li#e span o# an EPZ can )e di"ided into t*ree de"elop-
ment stages. Accordingl5< its impact on tec*nolog5 trans#er and *uman capital de"elopment
=ill depend on t*e current p*ase o# li#e c5cle t*at ones are in. In t*e initial p*ase o# national
economic de"elopment< an EPZ is usuall5 c*aracteri ed )5 assem)l5-t5pe< la)our-intensi"e<
and lo=-sBill productions. Crucial contri)utions o# t*e one to t*e national econom5 onl5 con-
tain generation o# emplo5ment and reduction o# po"ert5 )5 pro"iding income opportunities
#or untrained =orBers and to t*ose =*o are at t*e lo=er end o# income distri)ution. 122 Along-
side #urt*er national economic de"elopment< an EPZ =ill enter t*e second stage< in =*ic*
tec*nolog5 trans#er and *uman capital de"elopment e##ects set-o##. 'ore ad"anced industries
=ill enter t*e one< using more sop*isticated production processes and ad"anced tec*nolo-gies< t*ere#ore creating a demand #or *uman capital and sBill upgrading. 4*e #urt*er an EPZ
61 Regional Economic Cooperation and Integration in Asia
more sophisticated products.0 124 According to t*eir results< pre"iousl5 e9isting *uman capital<
sBill training< and tec*nological capa)ilities in t*e *ost countr5 s industries mattered #or t*e
magnitude and intensit5 o# tec*nological progress in EPZs: 4)hile most +< s are capa le of
generating foreign e7change earnings and employment, relatively few have een a le to gradu-
ate into more mature stages of the +< life-cycle. [...] *kill development funds, vendor develop-ment, satellite relations and a focus on education have all een vehicles of local investment in
human capital that have led to technological upgrading. 125
&urt*ermore< as Andre= Sc*ranB *as s*o=n in *is =orB on product-c*ain approac*es in EPZs<
=*ic* =ere specialised in apparel production< not onl5 t*e pre-e9isting *uman capital #ounda-
tion is a crucial aspect un#olding tec*nological progress and sBill #ormation e##ects< )ut also
t*e c*oice o# t*e industrial nic*e. e concluded: 4/fter all, the returns to a given economic ac-
tivity are a function of the num er of suppliers availa le as well as their positions in the relevant
chains, and the !choice! of chain is therefore no less important than the !choice! of position in
the chain.0 126
Com)ining )ot* aspects< domestic *uman capital endo=ment and industrial c*oice< C*andra
et al. *ig*lig*ted in t*eir cross-countr5 and industr5 127 researc* on crucial institutional struc-
tures and policies< =*ic* ena)led countries to acFuire< adapt and disseminate tec*nologies to
impro"e t*eir e9port competiti"eness: 41echnological learning is a comple7 process ecause
several of its elements are 4tacit0 A or em odied deeply in people or organi5ations. 2aking good
use of new technologies requires the deli erate uilding of such tacit capa ilities "information,
skills, interactions and routines( to handle technology. 128 According to t*eir #indings< in order
#or a countr5 to attain sta)le gro=t* rates and ac*ie"e *ig*er le"els o# de"elopment< 4getting
it right in each case can e attri uted largely to appropriate synchroni5ation of elements of in-
dustry-specific policies with the institutions necessary to motivate learning among e7porters0. 129
124 !mar< arima and Stoe"er ?illiam: 4*e Role o# 4ec*nolog5 and uman Capital in t*e EPZ Li#e-c5cle< in: 4rans-national Corporations< Jolume 1+< um)er 1 72 8< pp. 1%%-1;$ 7p. 16%8.
125
I)id< p. 1;2.126 Sc*ranB< Andre=: Read5-to-?ear De"elopment &oreign In"estment< 4ec*nolog5 4rans#er< and Learning )5?atc*ing in t*e Apparel 4rade< in: Social &orces< Jolume %< um)er 1 72 68< pp. 12%-1; 7p. 16;8.
127 Sample o# ten industries in si9 countries: India: so#t=are industr5 and agriculture 7mai e and grapes8< C*ile:salmon and =ine production< en5a: #loriculture< 'ala5sia: electronics< palm oil and related products< 4ai=an:electronics< and >ganda: #is*er5 e9ports. All =ere at t*e initial stage de"eloping countries t*at success#ull5adapted ne= tec*nologies to catc* up =it* de"eloped countries in a particular industr5.
128 C*andra< Jandana and ol"alli< S*as*i: 4ec*nolog5< Adaption< and E9ports / o= Some De"eloping Countries(ot It Rig*t< in: 4ec*nolog5< Adaption< and E9ports / o= Some De"eloping Countries (ot It Rig*t< 4*e ?orld@anB< ?as*ington DC 2 < pp. 1-6+ 7p. 8.
129 I)id< p. 1%.
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• Pro(ert$ ri#*ts and rule of laG4 ?it*out e9ception< propert5 rig*ts =ere preser"edand pla5ed an important role in attracting ' Cs =it* ne= tec*nologies to producee9port-Fualit5 goods.
6% Regional Economic Cooperation and Integration in Asia
• )o-(etition4 (o"ernments "alued competition among domestic and #oreign compa-nies< multinational corporations 7' Cs8 =ere gi"en special pri"ileges 7o#ten as incen-ti"es8 in most o# t*e industries.
• Public *u-an ca(ital develo(-ent4 In"estments in *uman capital and sBill de"el-opment *a"e )een critical to t*e de"elopment o# all studied industries< maBing t*e di#-#erence )et=een replicate rat*er t*an )u5 #oreign tec*nologiesN especiall5 in t*e ser-"ice and manu#acturing sectors< success depended on *a"ing a suppl5 o# =ell trainedengineers and ot*er tec*nical and managerial sBills. 132
>. Lin<a#es to t)e Do,estic !cono,$
41he activities of +< s are e7pected to create at least some ackward link-
ages etween them and the rest of the economy and accelerate industriali-
5ation growth in the host country. 1here are two main types of such link-
agesE utili5ation of domestic raw material inputs and su contracting ar-rangements with domestic firms.0
"1ayakoshi Cusago and afiris 15annatos, 3FF ( 133
In researc* circles< it *as )een =idel5 acBno=ledged t*at #or EPZs to add to sustaina)le eco-
nomic de"elopment t*e5 =ould need to )e linBed to t*e domestic econom5 / esta)lis*ing so
called 0)acB=ard linBages3. As 'auricio HenBins put it concisel5: 41he strength of ackward
linkages etween +< s and the rest of the domestic economy seems to play an essential role in
determining whether, and to what e7tent, the host nation enefits from opening +< s. Hor e7am-
ple, y purchasing inputs in the domestic economy, +< enterprises may increase overall demand
for domestically produced goods and services, such as raw materials, intermediates, supplies,
equipment, utilities, as well as maintenance, anking, insurance and construction services.0 134
o=e"er< according to ?illiam 'il)erg and 'att*e= Amengual s "alid o) ection< t*e underl5-
ing issue o# EPZs is t*at< in*erentl5< t*e5 resist suc* linBs. 4*e5 emp*asi ed correctl5:4Hor
one, +< s are generally created precisely to attract foreign firms ecause domestic firms are not
competitive internationally and are not a le to generate foreign e7change. 1hus, from the start,
domestic firms are generally ehind in their capacity to provide low-cost, high quality inputs to production in +< . *econd, +< s are generally defined y an allowance of duty-free imports of
132 I)id< p. 1;-%6.133 usago< 4aBa5os*i and 4 annatos< Za#iris: E9port Processing Zones / A Re"ie= in eed o# >pdate< 4*e ?orld
@anB< Social Protection Discussion Paper< um)er $ 71$$ 8< p. 12.134 HenBins< 'auricio 72 ;8: i)id< p. 26.
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to input producers #rom a)road e9pose national companies to a cost disad"antage. According
to Dorsati 'adani E 41he tariff free inputs for the firms in the 5one act as import su sidies com-
peting against domestic input production and discouraging creation of ackward linkages.0 136
Still< de"eloping linBages =it* t*e domestic econom5 is not generall5 ruled out. Sout* orea s
'asan EPZ #or instance is a good e9ample o# de#ining success )5 connecting EPZs to t*e rest o#
t*e domestic econom5 t*roug* )uilding a di"erse industrial )ase outside o# t*e ones. In t*is
case< input purc*ases #rom t*e domestic econom5 increased #rom 1%V in 1$+2 to %2V in
1$ 6< remaining at *ig* le"els t*roug*out t*e s. 137
E9amples liBe Sout* orea and ot*ers o##er some promising polic5 implications on *o= go"-
ernments can success#ull5 esta)lis* )acB=ard linBages =it* t*e national econom5. Case stud-ies *a"e re"ealed t*at linBages are oug*t to )e greater under certain conditions< suc* as:
• *en !P" activit$ focuses on -ore *i#*=tec* sectors suc* as electronics rat*ert*an loG=tec* sectors suc* as a((arel. 4*is insig*t is dra=n #rom t*e East Asian e9-perience< =*ere a num)er o# countries used electronics productions in EPZs to slo=l5)uild e9ports and linBages to t*e domestic econom5 7Ann arrison and AndrYsRodrXgue -Clare< 2 $8138 .
• *en t*e do-estic -arEet si5e is lar#er. Si e implies not onl5 t*e e9istence o# adomestic marBet< )ut also t*e a)ilit5 to support large-scale production and a large in-#rastructure. Andre= Sc*ranB 72 68139 emp*asi ed t*e #actor in discussing 'e9ico se9port success and to ela)orate t*e di##iculties o# )uilding linBs to t*e domestic econ-om5 =*en t*e econom5 is small and lacBs t*e potential #or di"ersit5 t*at linBages can)ring.
• *en t*e baseline level of industrial develo(-ent of t*e econo-$ is *i#*er.Dorsati 'adani 71$$$8 140 pointed out t*at t*e creation o# )acB=ard linBages seemslargel5 conditional on t*e industrial )ase o# t*e nation. In countries =*ic* did not al-read5 en o5 a solid industrial )ase and adopted EPZs to encourage t*ese linBages and#oster a domestic industrial )ase< some linBage occurred< t*oug* it =as spott5 and in-consistent< =it* #irm ones complaining o# t*e poor Fualit5 or t*e incompati)ilit5 o#local inputs.
135 'il)erg< ?illiam and Amengual< 'att*e=: i)id.< p. 2 .136 'adani< Dorsati: i)id< p. 2 .137 4aBa5os*i< usagoand 4 annatos< Za#iris: i)id< p. 12.138 arrison< Ann and RodrXgue -Clare< AndrYs: i)id.139 Sc*ranB< Andre=: i)id.140 'adani< Dorsati: i)id.
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6; Regional Economic Cooperation and Integration in Asia
• *en t*e state is -ore activist and focused on econo-ic develo(-ent Git* t*ecusto-s area t*at is outside t*e 5one. 4*is point emerges not onl5 in t*e discussiono# East Asian e=l5 Industriali ed Countries< )ut also in t*e cases o# t*e DominicanRepu)lic< Costa Rica< and 'auritius. 4*ese states acti"el5 pursued an industrial polic5t*at in"ol"ed care#ul management o# EPZs and gradual de"elopment o# domestic a)-
sorpti"e capacit5. Claude @aissac 72 118141
#or instance emp*asi ed in *is anal5sis o#'auritius not onl5 management o# t*e domestic econom5< )ut also care#ul administra-tion o# t*e EPZ itsel#. 4*e 'auritian go"ernment capa)l5 managed costs and encour-aged domestic o=ners*ip o# EPZ #irms< =*ic* created greater integration o# t*e EPZ=it* t*e *ost econom5.
141 @aissac< Claude: i)id.
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policies< and institutional design =ill )e *ig*lig*ted in order to pro"ide *5pot*eses #or t*e Lao
SEZ strateg5.
@.* !,beddedness of !"s in C)ina’s -(en Door Polic$
In 1$+ < t*e C*inese go"ernment under Deng Kiaoping launc*ed t*e so-called 0open door re-#orms3. It =as a political e9periment< =*ic* =as designed to 4test the efficacy of market-
142 Panitc*paBdi< Supac*ai: OPutting t*e Do*a De"elopment Agenda @acB !n 4racB / =*5 it matters to C*ina< ?4!
and C*ina< @ei ing International &orum< o"em)er 2 %.143 ?ei< (e: Special Economic Zones and t*e Economic 4ransition in C*ina / Economic Ideas Leading to t*e 21 Cen-
tur5< Singapur 1$$$< p. ;.144 &IAS: i)id< p. 6 .
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6+ Regional Economic Cooperation and Integration in Asia
oriented economic reforms in a controlled economy0. 145 ot Bno=ing =*ere t*ese re#orms
=ould lead< t*e go"ernment made t*e decision not to e9pose t*e entire centrall5 planned
econom5< )ut ust certain segments. In Deng Kiaoping s =ords< t*e go"ernment soug*t to
4crossing the river y touching the stones0. 146 An integral part o# t*is approac* =as setting-up
strategic SEZs< =*ic* ser"ed as e9perimental la)oratories #or marBet )ased policies and insti-tutions. 4*ere#ore< as 'alini 4antri put it< t*e articulation o# t*e SEZ polic5 in C*ina was 4of
special significance among the various measures introduced y the 6eng Liaoping Government,
to li eralise the e7ternal sector of the hinese economy.0 147
?it*in t*e set re#orm course< in Hul5 1$+$ t*e central go"ernment decided t*at t*e pro"inces
(uangdong and &u ian s*ould taBe a leading role in opening up to t*e outside =orld and im-
plement 4special policies and measures0. 148 @5 August 1$ < S*en *en< Z*u*ai< and S*antou in
(uangdong pro"ince =ere designated as SEZs #ollo=ed )5 Kiamen in &u ian pro"ince in !cto-
)er 1$ . 4*e term 0SEZ3 =as selected a#ter lengt*5 semantic discussion and intellectual de-)ate< =it* SEZs )eing conceptuali ed as a comple9 o# related economic acti"ities and ser"ices
rat*er t*an uni-#unctional entities. 149
@.2 C)inese !"s % Definition' Conce(t and -b ectives
According to o##icial C*inese de#inition< SEZs are geograp*icall5 delimited areas< in =*ic* a
minimum o# )ureaucratic control is supposed to #acilitate cooperation =it* #oreign compa-
and 2acao and their companies and enterprises to open factories and set up enterprises and
other esta lishments with their own investment or in oint ventures with our side, and shall pro-
tect their assets, the profits due them and their other lawful rights and interests in accordance
with the law0. 151 In t*is conte9t< SEZs =ere regarded )5 t*e central go"ernment as conduits #or:
• &oreign in"estment
145 Zeng< Douglas Z*i*ua: o= Do Special Economic Zones and Industrial Clusters Dri"e C*ina s Rapid De"elopment<4*e ?orld @anB Polic5 Researc* ?orBing Paper< um)er ;; % 72 118< p. .
146
I)id.147 4antri< 'alini: C*ina s Polic5 #or Special Economic Zone< in: India Quarterl5< Jolume < um)er % 72 128< pp.2%1-2; 7p. 2%18.
148 ,eung< ,ue-man< Lee< Hoanna and ee< (ordon: C*ina s Special Economic Zones at % < in: Eurasian (eograp*5and Economics< Jolume ; < um)er 2 72 $8< pp. 222/6 7p. 22%8.
149 ?ong< =an-,iu: C*ina s Special Economic Zone E9periment / An Appraisal< in: (eogra#isBa Annaler Series @<uman (eograp*5< Jolume $< um)er 1 71$ +8< pp. 2+/6 7p. %28.
150 Dusc*a< ?aldemar: 4ec*nologietrans#er in die JolBsrepu)liB C*ina durc* ?irtsc*a#tsBooperation / @estim-mungsgr[nde< &ormen< Standorte und ?irBungen< am)urg 1$ +< p. 2 1.
151 Regulations on Special Economic Zones in (uangdong Pro"ince< August 1$ < in: Legislati"e A##airs !##ice o# t*eState Council: La=s and Regulations o# t*e People s Repu)lic o# C*ina< @ei ing 2 ;.
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In general< as studies *a"e indicated< t*e C*inese SEZ approac* )ears some similarit5 to EPZs
in )eing delimited areas< in =*ic* pre#erential treatments are o##ered to #oreign in"estors to
attract o"erseas capital and tec*nolog5. o=e"er< as =an-,iu ?ong pointed out< SEZs in
C*ina di##ered #rom EPZs in se"eral important aspects:
• 4*e PRC =as a socialist state =it* a strictl5 planned econom5< =*ile SEZs representeda capitalist concept #rom t*e ?est. 4*ese ones t*ere#ore ser"ed as an important la-)orator5 #or t*e capitalist mode o# production.
• C*inese SEZs are generall5 larger in scale t*an EPZs.• SEZs are< unliBe EPZs< usuall5 compre*ensi"e units< in =*ic* #oreign in"estments are
not con#ined onl5 to manu#acturing< )ut also to real estate de"elopment< tourism< agri-culture and ot*er ser"ices.
• 4*e central go"ernment *as taBen a rat*er #le9i)le approac* )5 allo=ing pre#erentialtreatments to )e gi"en to in"estors setting up )usiness in areas ad acent to )ut outsidet*e )oundaries o# SEZs. 4*is applies< o# course< onl5 to undertaBings t*at t*e C*ineseconsidered to )e important and desira)le.
• In order to #acilitate o"erseas in"estment in t*e SEZs< "arious #orms o# #inancial partic-ipation *a"e )een designed =*ic* include sole proprietors*ip< oint "enture< coopera-ti"e production< intermediate processing and compensation trade. 153
@. )en7)en !"
4*e S*en *en Special Economic Zone 7SSEZ8 =as at t*e top o# C*ina s SEZ *ierarc*5< )eing
t*e largest o# t*e &our ?indo=s . Its long-term strategic goal< as en"isaged )5 t*e central
as a )ase #or de"eloping ne= tec*nolog5 and ne= products #or consumer industries =it* e9-
port potential. 154
152 &en=icB< Ann: E"aluating C*ina s Special Economic Zones< in: @erBele5 Hournal o# La=< Jolume 2< um)er 271$ 68< pp. %+ -%$+ 7%+ 8.
153 ?ong< =an-,iu and C*u< Da"id: E9port Processing Zones and Special Economic Zones as (enerators o# Eco-nomic De"elopment / 4*e Asian E9perience< in: (eogra#isBa Annaler Series @. uman (eograp*5< Jolume <
um)er 1 71$ 68< pp. 1-1 7p. %8154 Sit< Jictor: C*ina s E9port-!riented !pen Areas / 4*e E9port Processing Zone Concept< in: Asian Sur"e5< Jolume
2 < um)er 71$ 8< pp. 1- +; 7 +18.
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o# t*e pre-e9isting administration o# (uangdong =it* t*e peculiarities o# SEZs. According to
Article 2% o# SEZ regulations< it *ad compre*ensi"e aut*orit5160 to:
• Dra= up de"elopment plans and organi e t*eir implementation.• E9amine and appro"e t*e in"estment pro ects o# in"estors.• andle registration o# industrial and commercial enterprises and land allotment.• Coordinate =orBing relations among t*e )anBing< insurance< ta9ation< customs< #ron-
tier inspection< postal and telecommunications< and ot*er organi ation.• Pro"ide sta## mem)ers and =orBers needed )5 enterprises and protect legitimate
rig*ts and interests o# t*e sta## mem)ers and =orBers.
155
&en=icB< Ann: i)id< p. % .156 !)orne< 'ic*ael: C*ina s Special Economic Zones< !ECD< 1$ p. $ .157 Regulations on Special Economic Zones in (uangdong Pro"ince: i)id< Art. % and Art. 26.158 According to Article 2; o# (uangdong s SEZ regulations< t*e (uangdong Pro"incial SEZ De"elopment Compan5
=as set up to suit t*e e9panding economic acti"ities in t*e ones. Its responsi)ilities included: Raising #undsand *andling trust in"estment )usinesses< operating< or oining in"estors in operating< rele"ant enterprises int*e ones< acting as agent #or in"estors in transactions relating to sales and purc*ases in trade =it* t*e interior<and pro"iding ser"ices #or )usiness discussions.
159 Regulations on Special Economic Zones in (uangdong Pro"ince: i)id< Art. .160 is*itateno< SonoBo: C*ina s Special Economic Zones / E9perimental >nits #or Economic Re#orm< in: Interna-
tional and Comparati"e La= Quarterl5< Jolume %2< um)er 1 71$ %8< pp. 1+;-1 ; 7p. 1++-1+ 8.
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Regional Economic Cooperation and Integration in Asia ;
• Esta)lis* educational< cultural< *ealt*< and "arious pu)lic =el#are institutionsN• 'aintain la= and order and protect< in accordance =it* t*e la=< t*e persons and
propert5 against encroac*ment.
4*e Be5 organi ational unit in eac* o# t*e SEZs =as t*e SEZ De"elopment Compan5. It =as a
planning and de"elopment enterprise< as =ell as a negotiations )ureau #or t*e #oreign andC*inese in"estors coming to t*e SEZ. In t*e case o# S*en *en< t*e De"elopment Compan5 *ad
pu)lic and pri"ate-pu)lic in#rastructure pro ects =ere carried out: 164
• In 1$ ;< t*e construction o# t*e deep-sea port C*i=an *ad )een #inali ed.• In 'arc* 1$ +< t*e construction o# an electric rail=a5 line #rom S*en *en to (uang-
*ou< co"ering 16+ Bm< *ad )een completed< t*ere#ore trans#orming t*e cit5 into oneo# t*e ma or tra##ic unctions )et=een ong ong and (uang *ou< =*ic*< in 1$ +alone< recorded si9 million tra"ellers.
161 Crane< (eorge: 4*e Political Econom5 o# C*ina s Special Economic Zones< e= ,orB 1$$ < p. ;%.162 Stolten)erg< Cl5de: i)id< p. 62.163 Regulations on Special Economic Zones in (uangdong Pro"ince: i)id< Art. ;.164 Sc*r5en< Rainer: ong ong und S*en *en / Ent=icBlungen< Jer#lec*tungen und A)* ngigBeiten< am)urg
1$$2< pp. 1;;-1;$.
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SEZs< t*ere#ore "arious #iscal and non-#iscal incenti"es =ere o##ered 7*ig*lig*ted in ta)le 68<=*ile at t*e same t*e in"estment climate in t*e rest o# t*e *ost econom5 continued to )e e9-
e8 t*at rein"ests its s*are o# t*e pro#it in t*e one #or a period o# #i"e 5ears or long-
er.Re-ittances :
a8 In"estor pro#it a#ter enterprise income ta9< =ages and salaries< and
)8 Legitimate earnings o# #oreign o"erseas o# o"erseas C*inese and ong ong and'acao =orBers and sta## mem)ers o# enterprises can )e remitted a)roadt*roug* t*e @anB o# C*ina or ot*er )anBs located in t*e one< in accordance =it*t*e pro"ision o# t*e SEZ #oreign e9c*ange control measures.
169 Regulations on Special Economic Zones in (uangdong Pro"ince: i)id< Art. 12 -1 .
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170 IntervieG (artner : 18 an# "*ile : Inter alia< #ormer researc* #ello= at Researc* Institute o# t*e C*inese 'inis-tr5 o# Commerce< committee mem)er o# State Industrial Polic5 Ad"isor5 Committee< researc* #ello= o# &oreign4rade and International &inance Researc* Centre o# C*inese Academ5 o# Social SciencesN 28Professor HuHianxian# : E9pert #or economic gro=t*< regional economics< and t*e political econom5 o# institutions and de-"elopment at Sun ,at-sen >ni"ersit5< (uang *ouN and %8 Professor uan i-in# : Deput5 Director< C*ina Cen-tre #or Special Economic Zone Researc* at S*en *en >ni"ersit5.
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172 Pissula< Petra and L]sc*< Dieter: Special Economic Zones in t*e People s Repu)lic o# C*ina< in: Intereconomics<Septem)erG !cto)er 1$$ < pp. 2;+-2 2 7p. 2 8.
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)acB ?estern approac*es and Bno=ledge. Simultaneousl5< eac* 5ear< C*ina sent man5 o##icial
delegations #or stud5-tours to learn a)out #oreign production processes. 176
LinEa#es Git* t*e do-estic econo-$4 Literature dealing =it* SSEZ s linBages to t*e domes-
tic econom5 during t*e 1$ s is scarce. o=e"er< Petra Pissula and Dieter L]sc* s =orB on
174 &itting< (eorge: E9port Processing Zones in 4ai=an and t*e People s Repu)lic o# C*ina< in: Asia Sur"e5< Jolume22< um)er 71$ 28< pp. +%2-+66 7p. +%$8.
175 Crane< (eorge: Special 4*ings in Special ?a5s / ational Economic Identit5 and C*ina s Special Economic Zones<in: Australian Hournal o# C*inese A##airs< um)er %2 71$$68< pp. +1-$2 7 18.
176 Lin<,i#u and ?ang< ,an: C*ina s Integration =it* t*e ?orld / De"elopment as a Process o# Learning and Indus-trial >pgrading< 4*e ?orld @anB Polic5 Researc* Paper< um)er 6+$$ 72 8< pp. 1$-22.
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;$ Regional Economic Cooperation and Integration in Asia
Infrastructure develo(-ent4 Due to insu##icient amounts o# a"aila)le #unding on t*e central
le"el< t*e C*inese go"ernment decided t*at SSEZ =ould not *a"e to trans#er an5 pro#its to t*e
central or pro"incial go"ernment in t*e #irst decade< )ut rat*er rein"est it in t*e )uild up o#
*ard and so#t in#rastructure. 'unicipal and district aut*orities could< t*us< decide on *o= t*e5
=anted to in"est into t*e p*5sical de"elopment o# SSEZ< e"entuall5 leading to t*e )uilding o##actories< roads< =ater and electricit5 suppl5< sc*ools< and ot*er necessar5 in#rastructure
production. 4*ere#ore< as #or e9ample ,iming put it: 41he hina model cannot e easily learned
and adopted y other countries.0 o=e"er< according to general consensus )et=een t*e e9-
perts< SSEZ is ne"ert*eless a good case e9ample #or gaining inspiration and ideas. Potential
central polic5 implications< =*ic* *ad )een pointed out during t*e inter"ie=s< included:
• Nu-ber of 5ones4 A go"ernment s*ould #ocus on setting up a limited num)er o#ones in t*e )eginning to t*oroug*l5 stud5 appropriate incenti"es and polic5 meas-
ures. Setting up too man5 ones< =ill lead to a de"elopment process in =*ic* t*e at-tention o# SEZ rele"ant aut*orities and allocation o# national resources =ill )e distri-)uted ine##icientl5.
• Decentrali5ation4 Especiall5 in t*e earl5 stages< t*e di##usion o# po=er to local le"elscan )e essential. Aut*orities on t*is le"el can monitor and access t*e need o# in"estorsmore closel5< t*ere#ore allocating resources )ased on marBet demand. In t*e C*inesecase< t*is approac* *ad )een an essential #eature in success#ull5 de"eloping SSEZ.
• @e$ features of national (olic$4 ConseFuentl5< t*e central and pro"incial aut*oritiess*ould onl5 pro"ide t*e )road polic5 #rame=orB and regulations< a good educations5stem< and important in#rastructure #acilities liBe pro"incial or national roads etc.
• )rucial conce(tual as(ects4 Domestic poor la)our sBills andGor a lo= tec*nologicalle"el do not ultimatel5 pose constraints in t*e initial de"elopment stage o# SEZs< )utt*e identi#ication o# potential marBets and capital sources are crucial aspects< =*ic*need to )e considered in t*e )eginning o# e"er5 SEZ strateg5: ?*at is a countr5 scomparati"e ad"antage !# =*ic* #actors can a countr5 maBe =*at o= s*ould na-
tional resources )e allocated• De-and=driven !" develo(-ent4 4*e national< pro"incial< and local aut*orities
s*ould regard t*e concerns o# t*e pri"ate sector and incorporate t*eir opinion in SEZlegislation and de"elopment< =*ere it is appropriate and reasona)le.
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
cess#ull5 esta)lis*ing SEZs #rom a glo)al and C*inese perspecti"e. 4*ere#ore< learning #rom
international and S*en en s practices o# designing and implementing e9port processing ones<
#ollo=ing essential polic5 implications s*ould to )e considered )5 t*e Lao CSEZ in its courseo# en*ancing alread5 e9isting SEZs and setting-up ne= ones:
. T*orou#* cost=benefit anal$sis
As descri)ed in su)-c*apter 6.2< )e#ore setting-up SEZs< go"ernments need to calculate eig*t
aspects o# SEZ cost-)ene#it structure in order to determine =*et*er it =ill produce su)stantial
net =el#are )ene#its: Potential #oreign e9c*ange earnings< emplo5ment< tec*nolog5 trans#er<
purc*ase o# domestic ra= material and capital goods< usage o# electricit5< domestic )orro=ing<
ta9es< as =ell as de"elopment and recurrent costs. !# t*e a#orementioned aspects< de"elop-ment and recurrent cost constitute t*e most su)stantial s*are o# cost. 4*ere#ore< as a ?orld
@anB stud5 in 2 and t*e case stud5 on S*en *en SEZ *ad s*o=n< di"erse approac*es on
*o= to #inance t*e )uild-up o# in#rastructure< *a"e )een de"eloped in practice:
• &ormall5 institutionali ed pu)lic-pri"ate partners*ips 7PPPs8 to reduce a go"ern-ment s s*are o# net cost and #acilitate one de"elopment 7#or t*e di"erse t5pes o# PPPssee pages %2 - %%8.
• (i"ing #inancial autonom5 to t*e local S*en *en SEZ aut*orities in t*e earl5 stages o#one de"elopment )5 not o)liging t*em to trans#er s*ares o# re"enues to t*e super or-
dinate pro"incial and central le"els< )ut rat*er encouraging t*em to rein"est it in ne-cessar5 in#rastructure pro ects according to t*e needs o# in"estors and o"erall onede"elopment.
2. !x(ort increase and diversification
4*e positi"e long-term impact o# SEZs on a *ost countr5 s economic de"elopment in terms o#
e9port gro=t* and di"ersi#ication is dependent on a go"ernment a)ilit5 to sei e #oreign de-
mand and direct resources o# *ig*er producti"it5 accordingl5. According to t*e -! model o#
#actor proportion< a countr5 s*ould concentrate on producing and e9porting goods o# =*ic* it
can e9tensi"el5 maBe use o# its production #actor ad"antage. &urt*ermore< ne9t to t*e crucial
aspects o# detecting potential marBets and capital sources )e#ore esta)lis*ing SEZs< as identi-
#ied in t*e e9pert inter"ie=s regarding S*en *en SEZ< #indings o# pu)lis*ed =orBs on glo)al
718 generation o# emplo5ment and 728 reduction o# po"ert5 )5 pro"iding income opportuni-
ties #or untrained =orBers and t*ose =*o are at t*e lo=er end o# income distri)ution. Along-
side #urt*er national economic de"elopment< SEZs =ill enter t*e second stage< in =*ic* tec*-
nolog5 trans#er and *uman de"elopment e##ects set o##. o=e"er< as t*e C*inese case and in-
ternational academic =orBs on t*e role o# tec*nolog5 di##usion and *uman capital #ormation*a"e demonstrated< t*e li#e c5cle o# a SEZ is not an automatism. Se"eral polic5 aspects are
crucial #or SEZs to un#old e##ects o# tec*nolog5 di##usion and *uman sBill upgrade: 18 pre"i-
Regional Economic Cooperation and Integration in Asia ;
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8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR
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#acilitation. @5 t*ese means< also resources #or pro-poor policies can )e generated in order to
)oost =eaBer economies.
0ocus Areas
• Addressing #unctional aspects o# regional cooperation and integration =it*in P@( )5 or-ganising studies and capacit5 )uilding acti"ities.
• Contri)uting to t*e implementation o# concrete pro ects in t*e (4I priorit5 areas o#trade< multi-destination tourism< and local cross-)order cooperation.
• Promoting peer-to-peer learning and e9c*ange o# good practices among regional initia-ti"es< leading to pilot replication o# lessons learnt.
/act Box RCIPro ect na-e Regional Economic Cooperation and
Integration 7RCI8 in Asia)o--issionedb$
(erman &ederal 'inistr5 #or Eco-nomic Cooperation and De"elopment7@'Z8
@e$ sub ects 4rade and in"estment #acilitation<port cooperation< local cross-)ordereconomic cooperation and socialimplications o# economic integration
Duration 2 11 / 2 1;
8/12/2019 Inputs and Materials- Guideline on How to Successfully Implement Special Economic Zones in Lao PDR