A special economic zone (SEZ) is an area within a nation which has relaxed financial and economic laws. The laws are altered with the goal of attracting foreign investors who might be interested in doing business in an area where they receive favorable treatment. One example of a special economic zone is a free trade zone, although they are are many other types of special economic zones. Some of the most famous are found in China, where the government has been creating such areas since the 1980s.
Sometimes the national government spearheads the development of a special economic zone, while in other cases, it may be the local government, with the goal of revitalizing the local economy. Such zones are often developed in cooperation with major foreign investors such as corporations which would like to put up factories in the zone. Within the zone, taxes are reduced and may be cut entirely, businesses pay lower tariffs, and other financial regulations are relaxed. A special economic zone may also have reduced environmental regulations.
The idea behind a special economic zone is that it will stimulate rapid economic growth. By attracting foreign investors, nations can tap into wealth from other countries to improve their economies and living conditions. Such zones can develop very quickly, attracting workers from all over the area, and may also provide opportunities for advancement for people working in management. Local businesspeople can also take advantage of the conditions in special economic zones.
Numerous nations have experienced economic booms as a result of special economic zones. People who opt to work in the zones may be able to earn salaries higher than those in other areas of the country, and can send money home to family to improve living conditions outside the zone. The effort to attract foreign investment can be highly effective, providing host nations with more economic and political power as a result of their increased international standing.
The formation of such zones has been criticized from a number of different perspectives. There is some concern that making SEZs can potentially displace native populations, who may not be fairly compensated for the loss of the land, and thus that special economic zones could create refugees. Relaxation of environmental and occupational health and safety laws has also been criticized because it can endanger the environment and the human population. When companies concentrate polluting factories and industries within zones with relaxed environmental standards, it is difficult for nations to set and enforce laws which are designed to protect the environment.