Special Border Economic Zones: Concepts, Characteristics and Applications SEZs as Catalysts for Economic Corridors, Value Chains and Production Networks Training Shanghai, People’s Republic of China 25-29 September 2017 cross-border cluster of varying degrees networks of activities of collaboration productive activities strengthen well defined industrial links varying stages of goals from broad development development between options economies (sides of border) • Area in border; can be in single country or BEZ or adjoining areas of two or more countries • Can be formal or informal SBEZ • Specific services and facilities in customs, logistics etc. to help strengthen supply or value chains with neighboring country • Transnational area along border of two or more countries CBEZ • Informally or formally managed jointly by countries or SBZ • Unified set of policies and incentives in finance, taxation, investment, trade and customs regulations SEZ SBEZ • Geographically • Geographic location in delimited area international border • Single management crossing and administration • Designated as bilateral • Special incentives and cross-border project benefits for companies • Operates same in zone principles as SEZs • Separate customs area • Require close • Typically Structured as institutional PPP collaboration 4 • Near gateways to international markets; lower production and logistics costs of companies SEZ • Objective commercial (profit maximization) • Attract investors in productive activities to promote subregional value chains • Stimulate cross-border trade and investment • Catalyst to commerce along economic SBEZ corridors • Improve social and economic welfare of population attract cross-border investment; employment trade and transfer know and develop investment how and skills (along economic technology corridors) social and reduce agglomeration economic around mega- “demonstration development in cities; balanced area” border areas growth expand markets complementarity utilize resources and economies of resources along borders of scale Private Sector: low costs; GVC opportunities Development Government: Partners: Socio- inclusive economic devt, growth; stability and development SBEZ quality of life SMEs: Local HH: Business- Improve living trade Standards opportuni- ties Infrastructure (Hard and Soft) Components Industrial Park Infrastructure and services, supply chains, value chains, zone designation, regulations, safeguards, quality control and product conformity standards Customs, Immigration, Trade facilitation: simplification, Quarantine and Security harmonization and standardization Transportation and Logistics Vehicle and rail standards and regulations; logistics centers Governance Incentives and commercial regulations and practices, rule of law, security Public Utilities Electricity, gas, telecommunications, sewage, ports Infrastructure (Hard and Soft) Components Learning Centers Business Development Service (BDS) centers, higher education Border Townships Urban planning, infrastructure services, social welfare services, recreation centers Finance Commercial banking, investment banking, insurance, foreign exchange Health Care Hospitals and primary, secondary and tertiary health care facilities Determinants of BEZ success (Aggarwal, 2011) Macro climatic Political cooperation Economic development Trade and investment barriers Micro climatic Meso Climatic Fiscal incentives Traditional: Other relaxations Reg. connectivity Quality Trade facilitation at borders infrastructure BEZs New Regionalism: Single window Reg. governance governance Reg. Institutions Reg. financial system Social capital Firm specific Management Factor intensity Stage 1 Stage 2 Stage 3 Cross-border Industrial Special Gateway of Border Border Transport Complex Economic Corridor Zone Transport Cross-border Regional facilitation trade and Economic investment Development facilitation Behind-the- Border Customs Integrated Border Value Border Townships Cooperation Transport Policies Chains Policies Cooperation Hard Soft Infrastructure Infrastructure Level 1 Level 2 Level 3 SBEZ SBEZ National Boundaries Level 1 Level 2 Level 3 SBEZ facilities Informal SBEZ Joint SBEZ on either or collaboration facilities and both sides of cross-border supporting the border VCs and activities infrastructures Name Description US- History Mexican Border Industrialization Program established Border Maquiladoras in 1965 ; “Twin plants” with manufacturing Economic operations in FTZ; US companies invest due to low wages Zone Results 1995-2000- exports of assembled products tripled and rate of growth fast Late 20th century- 25% of GDP, 17% employment Key Lessons Decline post 2000 given competition and low- cost offshore assemblies (e.g. China); post NAFTA growth connected to increase wages (compared to Asia); despite decline, Maquiladoras still exists, employs workers and merged with domestic economy 14 Name Description San Diego, Background California- Metropolitan conurbation Tijuana Leading industries are trade, services, electronics, (US- tourism, life sciences, high-tech and defense Mexico Maquiladoras border) Results 5 million residents; 2 million employees, busiest land- border crossing; commercial exchange valued at $2.1M daily; value of trade exceeds $ 4B per year Key Lessons Need for regional governance and institutions Improve border efficiency (i.e. traffic congestion and delays cost economies an estimated $6B annually and over 50,000 jobs due to reduction in output) 15 Name Description Triple Background. Frontier Efforts to reduce problems (e.g. drug trafficking, informal migration, smuggling and other crimes) or Triple 1990s Hydroelectric power and FTZ ; Ciudad del Este (CEL, State Border Paraguay), Foz do Iguaçu (Brazil)and Puerto Iguazú (Argentina); Area CEL 3rd largest free-tax commerce in world; airports and - tri-border infrastructure; tourism area along Key Lessons Lax regulation and weak rule of law led to illicit activities; could junction of not attract multi-national firms Paraguay, Good Practice (between Paraguay and Brazil) Argentina Itaipu Binacional (enterprise), a cross-border cooperation in and Brazil environment (dam); transnational higher education center (University for Integration of Latin America) Recommendations Twin City Arrangements for border area development process (e.g. value adding activities in technological products, agriculture, tourism etc); Joint Management Committees etc16 Name Description Oresund History Region “Borders, Bridge and Branding” (Hospers 2006) (Sweden and Transnational metropolitan area in Northern Europe Denmark) Connected by Oresund bridge built in 2000 - Copenhagen Population of 3.6 million people and Zealand Agglomeration economies, integrated labor market, Region - Skåne technology hub (university consortium) country Industry specific corridors (e.g. Medicon Valley, a life (Malmo, sciences industrial zone) Helsinberg Results and Lund) Large share of Danish and Swedish R&D; life sciences and medical tech employs 40,000 and ICT employs 100,000 27% share of GDPs (total for both countries) 17 Name Description Oresund Key Lessons Region Rebranding of Regional Identity- Changed Oresund (Sweden Committee (institutionalized in 1993) to Greater and Copenhagen and Skåne (2016); committee as political Denmark) collaboration of 46 Danish and 33 Swedish municipalities Wider policy efforts needed for infrastructural improvements (i.e. bridge which served as initial catalyst no longer sufficient; Oresund Integration Index slightly declined past 4 years, i.e. composite index measuring cross-border integration areas , i.e. labor market, transport and communication, housing market, business, and culture) Aging, shortage in skilled labor and growing competition Strong public, private and university linkages (triple helix) 19 Name Description Oresund Institutional Aspects Region Oresund Committee (institutionalized in 1993) – full (Sweden committee meets twice a year and smaller executive and committee 4 times a year; political cooperation Denmark) Secretariat with support from external organizations name such as the Oresund Institute, Oresund Direct and changed in Oresund Culture, firms and students also support Jan 2016 Local and regional authorities involved in strategy and Greater action plan development Copenhagen Other organizations include Oresund University and Skåne (12 universities) and the Oresund Science Region (12 universities, 2,500 companies and authorities) 2013 – developed vision statement but no strategy Medicon Valley Alliance- cluster organization 20 Scoping Study for the Special Border Economic Zone in the Indonesia-Malaysia-Thailand Growth Triangle Takbai - Pengkalan Kubur Su Ngai Kolok - Rantau Panjang Ban Buketa - Bukit Bunga Betong - Pengkalan Hulu Ban Prakob - Durian Burung Sadao - Bukit Kayu Hitam Padang Besar (Songkhla & Perlis) Wang Prachan - Wang Kelian - 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Special Economic Zone Value Chains Transport & Logistics Socio-Econ Development SME Development & BDS Linkages to Indonesia Padang Wang Besar Sadao Ban Ban Su Ngai Prachan (Songkhl - Bukit Prakob - Betong - Buketa Kolok - Takbai - - Wang a & Kayu Durian Pengkalan - Bukit Rantau Pengkala Kelian Perlis) Hitam Burung Hulu Bunga Panjang n Kubur Special Economic Zone 3.5 2.5 4.0 5.0 3.0 2.5 4.0 3.0 Value Chains 3.0 4.5 4.5 5.0 3.0 2.5 4.5 3.0 Transport & Logistics 2.0 2.5 2.5 4.0 3.0 3.0 3.0 1.5 Socio-Econ Development 4.0 2.0 2.0 3.0 3.5 3.0 4.5 3.0 SME Development & BDS 3.5 3.0 3.0 3.5 3.0 2.5 5.0 3.5 Linkages to Indonesia