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

Thomas Flynn, Policy Analyst, MENA Division, GRSParis, France

17 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; perhapsresolve 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

Different types of SEZs

5

Extent of support services and incentives provided

Leve

l of

tech

no

logy

an

d f

ore

ign

cap

ital

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 diversifica

tion

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)

11

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

12

• 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!