3.2c SEZs and FDI

Question 1

what is a Special Economic Zone

Answer 1

large areas set aside by governments in locations well placed for international trade

companies can import raw materials and export finished goods without incurring domestic taxes

Question 2

why are SEZs attractive to FDI

Answer 2

• lower taxes
  often a tax-free period of to 10 years after a business invests and special tax incentives in China
• infrastructures such as port facilities, power and water connections are provided by the government
  providing a subsidy for investors, lowering their costs
• limited environmental regulations
  companies incur fewer costs
• all profits can be sent to the company HQ overseas

Question 3

examples of SEZs

Answer 3

The Netherlands - Amerstam Airport Area is home to 1000 multinational companies

South Korea - Songdo International Business District

Question 4

china’s 1978 open door policy

Answer 4

in 1980, China created 4 SEZs in Xiamen, Shenzhen, Shantou and Zhuhai to encourage FDI

in 1990, stock markets opened and economic growth boomed (average economic growth of 10% a year)

by the 1990s, 50% of China’s GDP was being generated in SEZs

in recent years, national SEZs have contributed 22% of China’s GDP

more than 500 million have been lifted out of poverty since the economic reforms began