What is SEZ?
SEZ or Special Economic Zones refer to an area or region that has special economic laws, policies, and/or regulations which are different from that of the other regions or areas of a particular country. Usually these policies and guidelines are geared toward better economic ties with other countries. Countries with SEZ’s or Special Economic Zones also aim for more foreign investments coming into the country and offer free-trade agreements to stimulate economic growth.
The policies and guidelines of a Special Economic Zone vary from country to country. Some offer tax exemptions for foreign investments. These tax exemptions could also cover the entry of export items from the foreign country. Other economic zones offer incentives to lure more foreign investments in a particular country. Incentives may also be given for a pre-determined number of years depending on the industry. Besides the tax exemptions and tax cuts, economic zones could also offer subsidies for utilities like water and power. This particular subsidy and/or policy are only given out to those who may make direct investments on the specified economic zone.
Special Economic Zones may be limited to a single industry only or may cater to a mixture of foreign investments. Foreign investments may be a mix of electronics manufacturing, agro-industrial, tourism, and information technology among various others. China, for example, has an entire province as an economic zone. This has stimulated economic activity and growth in the area with the population also steadily increasing over the years. India is also a big player in the business of offering Special Economic Zones to attract direct foreign investment. To date, India takes the largest pie in the BPO or Business Process Outsourcing industry all across Asia. The Philippines also has allocated several regions as Special Economic Zones with a majority of which catering to the Information Technology industry.