A Presentation of Special Economic Zones (SEZs)

1. A Presentation of Special Economic Zones (SEZs) By Yonghua Ding China Railway Construction Corp. LTD. (CRCC) March, 2014

2. Overview of China’s SEZs China’s Overseas Trade and Economic Cooperation Zones Advice to create a SEZs CONTENTS ◆ ◆ Overview of China’s SEZs ◆

3. What is Special Economic Zone? Overview of China’s SEZs Special Economic Zones (SEZs) are - ◆Located in a geographically delimited area of a country, ◆Administered by a single autonomous body , ◆Offering certain incentives and preferential policies for businesses that are located and operating within the zone, ◆Characterized typically by more liberal laws and economic policies than a country’s general economic laws, ◆Encouraging industry, manufacturing, and services for export,

4. Brief history and types of China’s SEZs Overview of China’s SEZs Economic & Technological Development Zones (ETDZ): Located in broadly defined zones with wide spectrum of investors High-tech Industrial Development Zones (HIDZ): Encourage investment in high-tech businesses by offering incentives to enterprises/investors Special Economic Zones (SEZs) Export Processing Zones (EPZ): Eliminate or streamline most customs procedures for business Free Trade Zones (FTZ): Encourage investment by bringing down tariff barriers

5. Major Contributions Contribution to FDI In Billion USD Contribution to Employment The total employment of the SEZs, ETDZs &  HIDZs account for 4% of China’s national em-ployment. Contribution to High Technology Until 2011, the HIDZs had accounted for half of China’s high-tech gross industrial output and export with another 1/3 made by the ETDZs. Contribution to GDP The total GDP of the major state-level SEZs, ETDZs, HIDZs, EPZs & FTZs accounted for roughly 21.8% of China’s national GDP in 2007. Overview of China’s SEZs 78 45 3 0.5 1978 1988 1998 2008

6. A. Strong commitment to reform from the top leadership B. Preferential policies and institutional autonomy Successful Experience of China’s SEZs Overview of China’s SEZs ◆Strong commitment to reform and pragmatism from top leadership, ◆SEZ policy backed by different levels of national, provincial and local governments & authorities, and Taking pragmatic approach towards economic reforms. ◆Preferential policies and incentives legally enacted and implemented for zones, ◆ legislative authority to establish and issue municipal laws and regulations under the basic lines of the national laws, ◆ Highly efficient administrative services, including rapid customs clearance to create a business-friendly environment,

7. C. Strong support & pro-active participation of the Government Overview of China’s SEZs Successful Experience of China’s SEZs ◆Government to build a sound legal and safe business environment for the investors in the zones, ◆Hardware: good infrastructure - roads, water, electricity, gas, sewerage, telecommunication, etc. ◆Software: “ one-stop service “ centre for administrative & business services , such as accounting, legal, business planning, marketing, import-export assistance, personnel training, management consulting, etc.

8. D. Introduction of FDI and investment from overseas Chinese E. Technology learning, innovation , upgrading and strong links with Domestic Economy Successful Experience of China’s SEZs Overview of China’s SEZs SEZs are the attraction of FDI and investments from Overseas Chinese leading to significant technology transfer and learning spillovers. ◆Concentration of professionals and skilled people, including many R&D personnel, ◆Being centers of knowledge and technology generation, adaptation, diffusion and innovation, ◆closely linked to the domestic enterprises through supply chains or value chains, helping achieve economies of scale and business efficiency,

9. F. Innovative cultures G. Clear objective, benchmarks, and intense competition Successful Experience of China’s SEZs Overview of China’s SEZs Large number of professionals in the SEZs as immigrants from across China and overseas to form a strongly motivated migrant community helping generate an innovative and entrepreneurial culture. China’s SEZs are set up with clear objectives and targets for economic growth, exports, employment and investment, etc. The large number of SEZs would compete with each other for investments based on quality of services and infrastructure offered to investors.

10. H. Location advantages Overview of China’s SEZs Successful Experience of China’s SEZs The SEZs usually located in the coastal region or in the region with good access to major infrastructure such as, roads, ports, airports and  railways and  links to international markets and historical trading relationships. 

11. Case of Shenzhen Special Economic Zone • Area: 396 KM2 • Established in 1980, the first SEZ in China

12. Main Changes from 1980—2007 Case of Shenzhen Special Economic Zone

13. Development in Stages Case of Shenzheng Special Economic Zone Main Task 1. Development of infrastructure and service facilities. 2. System Innovation Salary System, Construction System, Labour System, Price System, Enterprise Structure, Insurance System Government Structure, etc. Initial stage (1980—1985）

14. Case of Shenzhen Special Economic Zone 3. Establishment of “open” area like Shoukou Industrial Zone and some ports. 4. Some foreign banks attracted to settle down in the Zone. 5. “Shenzhen Speed” Building up the conception “ Time is money, efficiency is life” It was a great challenge to the traditional planned economy system. Main Achievements • Export- oriented and Open-door policy • Utilization of foreign fund and technique for infrastructure • Attraction of foreign investment for industry • Active development of international trade and transit trade Overall Development Stage(1986—1992）

15. Case of Shenzhen Special Economic Zone • Ending the deficit situation of Export & Import trade In 1987. • The total trade value ranks first among the cities in China since 1992. 2. Market Economy Policy • Creation of state-own enterprises system, joint-stock system, the contract system, the transfer of property rights and bankruptcy. • The establishment of nonferrous metal futures market and Shenzheng Stock Exchange. • The establishment of new administrative system of the state-owned land. Bidding system for the land.

16. Case of Shenzhen Special Economic Zone D. The establishment of contract system and social security systems for labours. • Good investment & innovation environment established, Good infrastructure, good service. • Upgrade the economic development model High-tech enterprise and research institution are encouraged. • Gradual reduction of incentives and foreign investors enjoys the same national treatment. • High level of international economic cooperations. New Development Stage (1993—now）

17. Enlightenment from Shenzhen SEZ Case of Shenzhen Special Economic Zone • Wise resolution of the Central Government to set up Shenzhen SEZ. • The success of Shenzhen SEZ broke the myth that modernization could be realized only in capitalistic system. • To open the mind and insisting on reform is the soul of economic development.

18. Incentives of Shenzhen Special Economic Zone Case of Shenzhen Special Economic Zone

19. Case of Shenzhen Special Economic Zone • For foreign-invested enterprises, corporate income tax rate is decreased from the original 30% down to the present 15%. • Foreign-invested manufacturing enterprises can enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 3 years according to the regulations of the tax law. Certified export-oriented enterprises at the expiration of tax exemption and reduction period enjoy a reduced rate of 10% for corporate income tax provided the export volume accounts for 70% or above of the total industrial output. Certified manufacturing enterprises using state-of-the-art technologies at the expiration of tax exemption and reduction period are entitled to a reduced tax rate of 10% for a 3-year extension. Incentive for General industries

20. Case of Shenzhen Special Economic Zone C. Half of the land use fee for the land for industrial use utilized by certified export-oriented enterprises will be exempted. Half of the land use fee for the certified enterprises using state-of-the-art technologies will be exempted for 5 years. D. The foreign-invested enterprises engaged in the service sector with an investment of over US$ 5 million and operation duration of over 10 years can enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years. E. Sino-foreign equity joint ventures engaged in port and dock construction projects with operation period of over 15 years may enjoy the exemption of corporate income tax for the first 5 years from profit-making year and half reduction thereof for ensuing 5 years after their applications are approved.

21. Case of Suzhou Industrial Park ◆To develop into a hi-tech industrial park with international competitiveness◆To develop into an innovation eco-township of internationalized,  modernized, information-based  happy district of Suzhou ◆SIP covers a total jurisdiction area of 288 sq km, among which 80 sq km area belongs to  China-Singapore Cooperative Zone. ◆Starting with west-most parcel and moving eastwards. ◆Projected population of 600,000, including a workforce of about 360,000.

22. Case of Suzhou Industrial Park The 8 sq km-Phase I area, adjacent to the Old City, will be built into a central district of industry and commerce integrating  finance and tourism.Double cities and double flanking zones The Phase II area is about 23 sq km and will be turned into a high-tech industrial district with waterfront features. The vast land of Phase III, totaling 32 sq km, is close to Shanghai  and expected to become a base of technology-intensive manufacturing and  processing industries. Phase III Phase I Phase II

23. Case of Suzhou Industrial Park

24. Case of Suzhou Industrial Park • RMB 133 billion of GDP, USD 18.9 billion of accumulated  utilized foreign capital and RMB 197.2  billion of accumulated registered domestic capital. • With only 3.4% of the total land and 5% of the total population of Suzhou, SIP contributes around 16% of Suzhou's GDP. • 79 Fortune 500 companies have made investment in SIP with a total of 125 projects. Achievements

25. China’s Overseas Economic & Trade Cooperation Zones (OETCZ) Introduction of the zones Three types of OETCZ Manufacturing, processing and assembling Resource exploitation Integration of manufacturing,   trade,logistics, real estate,  tourism, etc. In the mid-1990s, the Chinese Government adopted the policy of “ Going Global”, encouraging Chinese companies to target new markets, build global relationships, and invest abroad. It is also the commitment from Chinese Government to help African countries develop their economies by creating SEZs

26. China’s Overseas Trade and Economic Cooperation Zones

27. 24 zones approved by the Chinese Ministry of Commerce Total investment of $2.9b Total output of $8.4b Total tax paid of $265m 17865 jobs been created 237 enterprises entered the zones China’s Overseas Trade and Economic Cooperation Zones Facts about the zones 单击添加 单击添加 单击添加 单击添加

28. Lekki Free Zone Pictures

29. Lekki Free Zone Pictures

30. SEZ as a part of national economic growth strategy, SEZ’s master plan as a sub-plan of regional general plan Master Plan of Lekki Free Zone Residential Estate Lekki Free Zone CBD Manufacturing Processing  Lekki Airport LAGOS Airport Seashore Expressway Tank Farm Commerce & Logistics Lekki-Epe Expressway Lekki Free Zone New port APAPAPort

31. Preferential and Incentive Policies in Lekki Free Trade Zone • Complete tax holiday from all Federal, State and Local Governments rates, taxes, Custom Duties and Levies; • One-stop approval for all permits, Operating License and Incorporation Papers; • Duty-Free and Tax-Free importation of raw materials and components for goods destined for re-export; • Permission to sell 100% of manufactured assembled of imported goods into the domestic Nigeria market. When selling into the domestic market, the amount of import duty on goods manufactured in the Free Trade Zone is calculated only on the basis of the value of the raw materials or components used in assembly, not on the finished products;

32. Preferential and Incentive Policies in Lekki Free Trade Zone • 100% foreign ownership of investments; • 100% repatriation of capital, profits and dividends to the country of origin; • Waiver of all import and export License; • Waiver on all expatriate quotas for companies operating in the zones; • Prohibition of strikes and lockouts for the first 10 years of operation of a free zone.

33. Advice to create a SEZs Why should I use the word “create” Main points to create a SEZs ? Type of SEZs to Decide SEZs

34. Advice to create a SEZs Type of Administration and Investment A. Invested, operated and administrated by the Government B. Invested, operated and administrated by PPP Under the control of the high committee C. Invested and administrated by the Government and operated by an expert team

35. Advice to create a SEZs Selection of the Location • Near Ports, Airport or Railway; • Good Infrastructure & Services

36. Advice to create a SEZs . Preferential policies and incentives legally enacted and implemented for Zone • Incentives is the key to attract the domestic and foreign investment

37. Advice to create a SEZs Master Plan for the Zones • The overall arrangement and layout in space and time for the development of land use, industrial structure,traffic organization, infrastructure, environment protection of the Zone

38. Advice to create a SEZs Construction • To follow the Regulatory Plan and Site Plan • To follow the Municipal Project Plan • To follow the Engineering Design

39. Advice to create a SEZs Administrative Service & Marketing • To built a centre for administrative & business services • To make a marketing promotion worldwide

40. Advice to create a SEZs To establish attractive & friendly investment environment Why do investors invest in the Zone? “Open-door” Policy & Opening your mind

41. Advice to create a SEZs Key Points to Operation Incentives legally enacted Implementation & Continuity High efficient administration services, especially a rapid customs clearance (one-stop service) Land compensations & friendly community relationships Good Security

42. Thank You  !