Integrating Special Economic Zones into Economic Development Strategies7th Working Group Meeting on Investment Zones in Iraq

Thomas Flynn, Policy Analyst, MENA Division, GRSParis, France17 February 2015

Purpose of presentation

• Define utility of SEZs • Examines ways to link SEZs to economic strategies• Case study of Malaysia

What are SEZs? What do they offer?

For Iraq• SEZs need to be tailored to

the Iraq context. Potential benefits: spur

industrialisation, diversification; perhaps resolve land allocation problems

• However, SEZs can distort the economy because of preferred legislation, incentives, etc. Could discourage wider

trade and investment reform

• SEZs are… One of various economic policy

instruments to support private sector development and stimulate investment

Can serve multiple policy objectives• Similar goal: A secure, conducive

environment for enterprises Developed and managed land,

subdivided into plots Adequate on- and off-site

infrastructure and access to utilities Support services for existing or new

businesses (e.g. business licencing, training, incubation)

Perhaps offer fiscal or commercial incentives, access to finance

Portfolio of SEZs

Why different zones? Depends on policy objectives

• Industrial Zones can be for both domestic and foreign investors, especially in manufacturing and support services

• Export Processing and Free Zones work under specific customs regimes to facilitate regional/international trade and support export-oriented manufacturing

• Investment Zones offer streamlined regulations and licencing and incentives to attract foreign investors and develop new industries

• In other countries, technology parks and business incubators offer high-level support services

Therefore, one country can have different zones depending on policy objectives

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Different types of SEZs

Extent of support services and incentives provided

Leve

l of t

echn

olog

y an

d fo

reig

n ca

pita

l

Industrial Zones

Technoparks and Incubators

Independent Enterprises or

Clusters

Investment Zones

Basis for an SEZ strategy (part 1)

Basis for an SEZ strategy (part 2)

• SEZ strategy should be integrated into national development plans Funnel national policy into specific

policies, ensures linkages The policy framework for the

strategy must be flexible to adjust to evolving economic development priorities

If not…

Possible objectives

for SEZ strategy

SME developm

ent

Industrialisation

Job creation

Technology and

innovation policyRegional

developmentInvestmen

t and trade

policy

Sector developm

ent

Economic diversificat

ion

Foreign Exchange

• Balance: the SEZ strategy should focus on achieving specific policy objectives, aligned with country development objectives; however, based on market demand

Putting together an SEZ strategy (part 3)

• Sample Content of a Strategy

• Background and Rationale

• Vision and Objectives• Legal and Regulatory

Framework • Zone Regulator• Zone Governance and

Administration • Regulatory Relief – One

Stop Shops• Zone Designation and

Land Usage• Fiscal and Other

Incentives• Monitoring and

Evaluation • Financing Zones

SEZ Strategy

Country advantages

Trade and investment data

analysis

Investor survey

Benchmarking of SEZs

Developing the SEZ strategy: choosing the right policy (part 4)

Implementing SEZ strategy (part 5)

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Vision 2020

ICT Development

Plan (Industrial

Development Plans)

Multimedia Super

Corridor (MSC)

www.thecommonwealth.org

• Vision 2020: Former Malaysian PM; Industrial Development Plans (New Economic Policy)

•Population: 29.2 million•GDP per capita: USD•Unemployment: 3.4%•World Competitiveness: 25th place•20th in the world for FDI attractiveness•Malaysia’s 2011 FDI inflows jumped 31.5% to US$11.97 billion from 2010

Example: Malaysia’s approach from plan to SEZ

• Multi-billion dollar project launched in 1996 Land area: 15 km by 50 km (size of

Singapore)• “It was never just about building

parks” 2011: MSC revenue: USD 10.4

billion 119,138 jobs created since its

inception• 2011: 26 Cybercities and

Cybercentres in the MSC Cyberjaya national Cybercity

capital Putrajaya seat of Malaysia’s

government administration

Multimedia Super Corridor (MSC) and results

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• Characteristics of Companies in the MSC? Basis Bay N2N Connect Nexustel

Yigitcanlar, et al.: “The case of Multimedia Super Corridor”

Lessons for Iraq

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• Credible and long-term vision MSC was positioned on the national agenda, part of an overall

economic development strategy, and all the initiatives were linked locally

High level advisory boards and international experts on long-term basis

Engage with potential anchor investors; invest in infrastructure• Monitor and evaluate • Flexibility and pragmatism in approach!