A new special economic zone
China’s government recently announced plans to create a new special economic zone (SEZ), about 100km southwest of Beijing in Hebei province. The Xiongan New Area will reportedly focus on developing clusters of high-tech, innovative businesses and is another measure in the state’s efforts to reduce traffic, air pollution and population growth in the capital.
It is hoped it will rival south China’s Shenzhen Special Economic Zone, which in the 1980s helped kickstart China’s modern economic boom, and Shanghai’s Pudong New Area, formed in the 1990s.
From a Thai perspective, it will be interesting to see the new zone take shape, as it may offer great learning opportunities for Thailand’s economic planners in relation to our own SEZ programme, as well as the development of the Eastern Economic Corridor.
The Thai SEZ programme calls for 10 SEZs to be established in border provinces nationwide, with the aim of boosting Thailand’s key industries.
Each zone targets business activities, which are decided and categorised by the area in which the SEZ is located. For example, Songkhla in the south is close to the sea and has rich forest areas, so its target industries are agriculture and fisheries, furniture, garments, textiles and leather products, logistics, industrial estates and tourism.
Thailand’s SEZs will offer one-stop service centres with customs checkpoints, as well as enhanced services for licensing and permission applications, and insurance procedures.
Boost for cross-border trade
Thailand’s Ministry of Commerce is hoping that once the local SEZs are operating they will boost cross-border trade by 50 per cent. That trade currently accounts for around 10 per cent of the total, so the potential national gains are high.
Other nations in this part of the world have set up SEZs. Laos, for example, already has eight such zones, and aims to add another 13 by 2020.
But China’s track record in successfully executing its SEZ strategy sets it apart.
Created by Deng Xiaoping in 1980, Shenzhen was the first of almost 30 SEZs or New Areas, and has become China’s Silicon Valley, as well as one of the world’s major shipping and logistics centres. Pudong New Area was set up on Shanghai’s east bank by Jiang Zemin in 1993 and has since seen paddy fields converted into a thriving, heavily populated extension of the old city. Part of the zone has become a thriving financial hub for modern China.
The Chinese zones offer many trade liberalisation tools such as special tax-investment incentive schemes and corporate establishment structures designed to encourage foreign investment. The resulting gains in investment and exports have been well documented. Thailand is clearly hoping to emulate such successes, not only with its SEZs, but also with its grand plans for the Eastern Economic Corridor which include major tax and investment incentives for companies investing in targeted industries. News of Xiongan has already provided a fillip to the share prices of Chinese companies likely to participate in developing the necessary infrastructure for the New Area. This is not surprising as the Chinese government has far greater powers than its Thai counterpart when it comes to executing these kinds of plans.
Here in Thailand, the SEZ programme remains a work in progress, although promisingly there has been considerable interest in the Eastern Economic Corridor from foreign investors, most notably in China.