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SEZ case studies

SEZ case studies, 7th Working Group Meeting on Investment Zones in Iraq, Anders Jönsson, Southeast Asia Division, GRS
Mike Pfister, Investment Division, DAF
Paris, France17 February 2015

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SEZ case studies

  1. 1. SEZ case studies 7th Working Group Meeting on Investment Zones in Iraq Anders Jönsson, Southeast Asia Division, GRS Mike Pfister, Investment Division, DAF Paris, France 17 February 2015
  2. 2. Disclaimer This presentation is not a result of OECD research and represents the insights and opinions of the presenters only.
  3. 3. The 1995 reforms catalysed a remarkable transformation both of SEZs and the economy as a whole. 1995: 16 economic zones Characteristics: EPZA authority Mostly public zones No substantial delegation of authority to EPZA to interact with zone residents Unclear and conflicting goals SEZ Act of 1995 Major reforms: Move towards private sector zone development PEZA, under DTI, took over the functions of EPZA Dual mandate: Promotion and regulation Clear focus on employment creation, export generation, and FDI promotion 2008: 166 economic zones Successes: 61 industrial estates, 99 IT parks, 5 tourism zones, 1 medical park From 9.6 bn PHP investment in 1994 to 133.7 bn PHP in 2008 3500% growth since 1994
  4. 4. Although Japanese electronics predominate, SEZ investments are well diversified.
  5. 5. One-stop shop • Permits for building, occupancy, import, export and exemptions from local government requirements • Special non-immigrant visas • Harmonised customs through PEZA-BOC MOA • Environmental clearance through PEZA-DENR MOA • Approval takes one business day • Transparent and immediate incentive allocation One-stop shop plus • PEZA availability 24/7 • DG interacts directly with residents • PEZA investment promotion and zone stakeholder advocacy • Commitment to transparent, graft- free administration PEZA services go far beyond simple administration.
  6. 6. Key success factors for SEZs in the Philippines include good governance and private sector inclusion. Requirements KSF of the Philippines Clear objectives Clear focus on FDI and diversification Adapted to market demands Most zones developed by the private sector PEZA has a supervising and co-ordinating role Delegation and delimitation of authority PEZA has far-reaching authority and autonomy to issue licenses and interact with zone residents Private sector takes care of non-state functions Clear institutional structure Clear financing roles Low transaction costs for zone residents Excellent infrastructure Lowered cost of regulatory compliance Focus on cost reduction and just-in-time deliveries at PEZA Access to labour Availability of skilled labour Staff training support through PEZA Efficient promotion PEZA promotes zones overall, and private operators promote specific opportunities Strong political support SEZs have a strong role in all national economic planning instruments.
  7. 7. Overall economic challenges • Sustained 6-9% growth over the past decade under President Noynoy Aquino; • But growth driven largely by resource allocation – overall TFP growth slightly negative; • Main driver: BPO – but employment not substantial, especially for non-skilled employees; • Manufacturing in decline; • Lack of a „missing middle“ of competitive, exporting medium-sized companies; • Graft remains pervasive; • Dependence on remittances and highly volatile and integrated sectors of the economy; • Brain-drain – although the Filipino work force is highly educated relative to its level of economic development, many opt to seek employment abroad. Challenges for SEZs • Pervasive lack of domestic linkages apart from employment due to;  Legal obstacles;  Weak domestic entrepreneurship (cf. Malaysia). • Difficulty in generalising SEZ reforms to the rest of the economy, creating incresingyl isolated enclaves; • Increasing problems of graft and contraband; • Decline of labour-intensive activities, such as light manufacturing. But substantial structural obstacles remain over the next decade.