SPECIAL ECONOMIC ZONES

JLN supports the creation of Special Economic Zones in regional and rural areas to help boost business profitability and job creation.

JLN notes that approximately 2,301 Special economic zones in 119 countries have been very successful at stimulating financial growth, lowering unemployment and creating community wealth for a range of countries and communities – and has been used as an important tool to remedy fiscal crisis in (according to Parliamentary Library research):

Summary

  • Number of countries with special economic zones = 119
  • Number of special economic zones = 2,301

 

Great Britain

  • Great Britain, where on the 17 August 2011 Prime Minister David Cameron, Chancellor George Osborne and the Communities Secretary Eric Pickles, announced the location of 11 new enterprise zones. These new zones were expected to generate 30,000 new jobs by 2015.
  • Some of the incentives used to attract investment to the British zones were:
  • Over £150 million in tax breaks for the new business over the next four years
  • As of 2012 some businesses operating within the enterprise zones in assisted areas would be eligible for enhanced capital allowances available for plant and machinery investment
  • A business rate discount up to £275,000 per eligible business over a five-year period

 

United States of America

  • Like the UK, the US Empowerment/Enterprise program involves a range of spatially targeted tax breaks and grants designed to encourage economic and social investment in disadvantaged areas.
  • The federal government administers two such programs, the Federal Empowerment Zones
  • (EMPZ) and Federal Enterprise Community (ENTC) programs.1
  • As two researchers at Yale University Busso and Kline observed, the Empowerment Zones is one of the few social welfare programs popular on both sides of the congressional aisle. In an era where non-entitlement spending on social welfare programs has been scaled back dramatically, the federal EZ program has enjoyed rapid growth.2 
  • The state-run programs are called State Enterprise Zones (ENTZ). These programs vary dramatically from each other. For example, some states may offer only subsidies for investment to business, while others may also offer employment tax breaks.
  • Some zones are only created in particular neighbourhoods while others cover hundreds of square miles.

 Incentives-Federal

  • Businesses are eligible for a tax credit of up to 20% of the first $15,000 in wages earned by each local worker they employed
  • $100 million per zone to be spent on training, emergency housing assistance, promotion of home ownership
  • $2400 in tax breaks for hiring local residents between the ages of 18 to 24.3

 

China

  • Since the economic reforms of 1978, China has been setting up SEZs and providing them with financial, investment and trade privileges as well as encouraging them to test innovative policies that if successful could then be implemented into the wider economy.
  • In 1980, the first SEZ was established in Shenzhen and is often highlighted as a success story for turning a small fishing village into a vibrant economic hub, which is now home to a number of high-tech companies. In 2003, the Shenzhen zone attracted US$30billion in foreign direct investment,
  • exported $48 billion worth of goods and directly employed 3 million people.
  • In June 2012, the Economist reported that the zone will be further expanded to attract more “modern service industries”. The plan is to attract finance professionals, lawyers and accountants and impose no income taxes on them.

 

Developing and Transition Countries Summary

The following table shows the number of zones in developing and transition countries. As this table indicates the Asia Pacific region has the most number of SEZ (p.26)

Number of zones in Developing and Transition Economies

 

Summary

  • Number of countries with special economic zones = 119
  • Number of special economic zones = 2,301

  

Country & Location of Special Economic Zone Number
Asia and Pacific 991
China 187
Vietnam 185
Americas 540
Central and East Europe and Central Asia 443
Middle East and North Africa 213
Sub Saharan Africa 114

 

JLN also notes that Parliamentary Library Research indicates that: Despite regular calls to create SEZs in Northern Australia and in the Northern Territory, there have never been SEZs in the formal definition (as used in this Memo) in Australia.[1]

JLN calls on the Australian federal and state governments to stop the ad hock granting of special economic incentives for certain companies – and to develop an organised plan to establish special economic zones in rural and regional where the worst social indicators and unemployment rates are being recorded.

JLN acknowledges that because of consistently high unemployment and falling business confidence, economic zones, which guarantees for all Tasmanian business:

  1. a payroll tax free zone
  2. dramatically reduced Bass Strait freight / vehicle / passenger charges; and
  3. the cheapest electricity / gas prices in Australia – indeed the world

…. is the first essential step our state must take on a long journey to recovery.

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