** SEZs: how infrustructures enhancement generates global trade and employment. **
Special Economic Zones (“SEZs”) are defined as geographical areas that offer special trade incentives. Many countries employ their own variations of these special enclaves, and in doing so use their own terminology to describe them. For example, Mexico refers to its zones as “maquiladoras,” Ghana, Cameroon, and Jordan have “industrial free zones,” the Philippines calls its economic zones “special export processing zones,” and Russia has “free economic zones.” Despite the differences in nomenclature, each SEZ operates to increase trade throughout its respective region by offering special trade incentives to stimulate local and foreign investment within the region.
The first modern special economic zone was created in Puerto Rico in 1942. Since then, 135 countries have developed over 3,000 zones. Their development has helped to improve global trade relations and has created over 70 million jobs and hundreds of billions of dollars in trade revenue.
Special Economic Zones are generally implemented to meet fiscal, social, and infrastructure policy rationales. The most important fiscal goal of an SEZ is to facilitate economic growth through the use of reduced tariffs and more efficient customs controls. They are also essential tools for companies seeking to cut costs and improve inventory efficiency.
The Special Economic Zones (SEZs) traditionally have had both a policy and an infrastructure rationale. In terms of policy, the SEZ can be a useful tool as part of an overall economic growth strategy to enhance industry competitiveness and attract foreign direct investment (FDI). Through SEZs, governments aim to develop and diversify exports, to create jobs, and to pilot new policies and approaches (for example, in customs, legal, labor, and PPP – public private partnership – aspects).
In Europe, the first “modern zone” was established in Ireland in 1959. Since then, a variety of different zone setups have evolved, namely:
– Free Trade Zones (FTZ), also known as commercial free zones. These are fenced-in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, trans-shipment, and re-export operations.
– Export Processing Zones (EPZ) are industrial estates aimed primarily at foreign markets. Hybrid EPZs are typically sub-divided into a general zone open to all industries and a separate EPZ area reserved for export-oriented, EPZ-registered enterprises.
– Enterprise Zones (EZ) are intended to revitalize distressed urban or rural areas through the provision of tax incentives and financial grants.
– Freeports typically encompass much larger areas. They accommodate all types of activities, including tourism and retail sales, permit on-site residence, and provide a broader set of incentives and benefits.
– Single Factory EPZ schemes (similar to bonded manufacturing warehouse schemes) provide incentives to individual enterprises regardless of location; factories do not have to locate within a designated zone to receive incentives and privileges.
– Specialized Zones include science/technology parks, petrochemical zones, logistics parks, airport-based zones, and so on.
Since its establishment in 1988, Malta Freeport has registered remarkable growth and is now a major maritime transhipment logistic centre in the Mediterranean region enjoying positive international recognition with global carriers as a reliable and credible port.
Malta Freeport focuses on the ‘hub’ concept, whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent feeder vessels. Around 95 per cent of Malta Freeport’s container traffic is transhipment business. The logistic concept offers various benefits for Malta Freeport’s clients, including fewer mainline port calls, reduced voyage times through minimal diversions and shorter transit times thus enabling them to concentrate on profitable voyage legs. Malta Freeport can handle more than 2.37 million TEUs (twenty-foot equivalent unit) traffic volume as records show. For this reason Malta is the Mediterranean’s third largest transhipment port and Malta Freeport represents a strategic platform for the shipping lines that have chosen it as their Mediterranean hub port being located at the crossroads of some of the world’s greatest shipping routes and in the heart of the Europe/Maghreb/Middle East triangle.
Malta Freeport Terminals offers transhipment facilities developed in line with their increasing requirements including a total operational deep water quay of 2,140 metres, a total area of 680,000 square metres, 15,085 container ground slots and a total number of 894 reefer points.
Malta Freeport is currently equipped with twenty-three Quayside Cranes, namely nineteen super post-Panamax and four post-Panamax Quayside Cranes. Four super post-Panamax Quayside Cranes. 2 Rail-Mounted Gantry Cranes (RMGs) and 55 Rubber-Tyred Gantry Cranes (RTGs).
The various developments being undertaken enable Malta Freeport to accommodate larger vessels in view of the developments taking place within the containerisation industry towards ever larger and cost-effective ships whilst also attaining faster vessel turnaround times.
Generally it can be said that SEZs provide to global corporations incentives to invest in the development and infrastructure of a foreign country through the use of a tax-friendly environment. Reducing a company’s income taxes will have a direct positive benefit on earnings, allowing the investing company to profit from its foreign investment within the SEZ. Most of the benefits that investors look for in SEZs are economic benefits such as tax holidays, reduced tax-rates, and duty-free imports. Some of these benefits are permanent and last as long as the investor does business in the SEZ.
The SEZ’s host country government also benefits when a corporation chooses to locate within its SEZ location. The host country in fact earns income tax revenue from the corporate earnings within the country. It also earns income from import duties if not totally abated and charges on zone output levels. The improved infrastructure and quality of life that result from successful SEZs improve the surrounding regions’ economy.
It can be said that Malta has developed its own unique trade units to capitalize laws, customs, resources and trade practices. These developments have been successful and it confirms that SEZs can provide great investment benefits by attracting companies with tax incentives and new technologies, while providing new employment opportunities, public and private inclusive growth and new infrastructure investment perspectives
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