Tag Archives: the regions

Special economic zones – special?

There’s been a fair bit of media flying around about Special Economic Zones (SEZs) in relation to their application in regional New Zealand.  Kicked off by another great piece of research from the NZ Initiative.

As Wikipedia puts it…In SEZs, business and trades laws differ from the rest of the country. To encourage businesses to set up in the zone…policies are introduced. These policies typically regard investing, taxation, trading, quotas, customs and labour regulations.

Financial incentives in my view generally don’t work with the only winner being business, who are being rewarded for shifting their business somewhere or entering into a market or industry.  Subsidies are only slightly better in that they are more targeted to industry or location type initiatives.  The problem with both incentives and subsidies is that money has to come from the public purse, I.e. Shifted from one part of the economy to the other.  NZ has very few incentives or subsidies after the market reforms of the last 40 years so to reintroduce them now would be interesting to say the least!

Special Economic Zones are widespread in China. They were set up among other reasons to transition certain geographic areas of Chinas economy into a more market focused economies and to act as a controlled test bed of policies.  In many instances the focus has been about attracting Foreign Direct Investment (FDI) and all the benefits that come from that. A huge spinoff has been the ability for provincial and local government and companies to enable homegrown industry to develop around the the foreign companies. Do not underestimate the importance of foreign investment on China’s economy or their Special Economic Zones.

I support Special Economic Zones in both the thinking behind them and the potential but before we roll them out in NZ let us answer these questions:
1.  Do we understand all the different parts of the economies and are they working together?  The Special Economic Zones I’ve seen did incredibly well at connecting all the parts of economies that need to which was easy to do with everything within a 100km, but that’s not too different to regional NZ is it?  It wasn’t just about taxes, planning or infrastructure.  It was innovation, entrepreneurship, industry development, education, the environment and more.
2.  Are there projects that are investment ready?  A key platform of Special Economic Zones is foreign investment, so who is spending time with investors to understand what investors want and is regional NZ ready for Special Economic Zones that could consist of largely foreign investors?

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The brief – step change economic development

Here’s my brief for the Winston Churchill Fellowship.

The elevator pitch

To research what makes places grow, stagnate or decline with a focus on small locations outside cities.

Identify the actions that people can take to get a ‘step change’ in the places where they live.

I started off calling this ‘provincial’ economic development but you can swap this out for ‘small town’, ‘rural’, ‘regional’, ‘local’ or ‘outside big cities’.  

Who?  

Explore the different perspectives of those who have an impact – private sector, non-government and government.

Where?

United States, Europe and China.  I’m visiting both cities and smaller locations to look at transferable actions.

When

June-July 2015.

Why?

Economic development, particularly but not exclusively job creation, is the foundation of every community, no matter what size.  Most if not all local communities in New Zealand will continue to face the challenge of how to maintain (let alone increase) employment and therefore how to sustain growth.

Provincial New Zealand is undergoing a significant shift in how economic wealth is generated, and many communities are struggling. In particular value is able to be generated without increasing job creation (e.g. in dairy) or traditional “work” in such local communities (for example in retail).

The challenges local economies face now will only intensify over the next few decades, including industry changes, the growth in dominance of service provision over production, technology, education, labour supply, agglomeration, aging population and affordability.  Each of these issues has flow-on affects, and when combined the problems become more complex, impacting the viability of economies.   More specifically how communities benefit and remain viable under different economic processes is critical.

The value add in many new successful economies does not come from traditional sources such as raw materials, low or even partially skilled work, physical presence near customers – industrial models are changing or disappearing and with them so too many of the traditional employment structures and infrastructures.

People talk of Zombie Towns, neglected regions and how to revive them.  There’s no silver bullet but we’ve got to do something – doing nothing is not an option.