LECTURETTEA Survey of the Effects of Special Economic Zones

on China's Economic DevelopmentIntroduction1. China is wide and densely populated, its borders being shared with many countries. The country has long stood as a developing country, and faced a lot of political problems as an aftermath of the internal uprisings and external interferences during the 19th Century. Thus, its economy was often under the monopoly of the powerful nations and then kept detached from the outside world so as to decline too much. Among the conflicts, political as well as military, those in connection with Japan lasted for about 50 years from the near-end of the 19th Century to the mid 20th Century. Under the leadership of Mao Ze Dong, China established itself as the People's Republic of China only in October, 1949. The centralized economic system was adopted with the assistance of the government between 1949 and 1978, which was before the Economic Reforms. Starting from 1958, the country adopted the Great Leap Forward in an attempt to become a developed nation. But miscalculations and unsystematic measures just led to the deterioration of the country's economy, forcing Mao Ze Dong to resign from his position. Then, subsequent to the ideological clashes in the Party were the chaotic failures of both the industrial and agricultural sectors in China.

2. After the death of Mao Ze Dong in 1976, Deng Xiaoping carried out economic reform plans to develop the nation's economy in accordance with the then changing situations of the world. The 1978 Economic Reforms under Deng Xiaoping's administration brought about important turns for the future economic progress of China. To increase production in the agricultural sector and uplift social standards, the Open Door System was introduced to its economy, and reforms were made on its economic structure. The

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new budding countries in Asia in the 1960s and 1970s – namely, Taiwan, Hong Kong, Korea and Singapore – became examples for China in implementation of export-based policies. Benefiting from their experiences and successes, China decided to build four special economic zones in Shenzhen, Zhuhai, Xiamen and Shantou. These special economic zones were intended to import high technology, boost up export, increase foreign exchange, create job opportunities, take over foreign management skills and economic expertise and attract foreign investment. The establishment of these special economic zones as a by-product of the 1978 Economic Reforms made obvious progresses on China's economy, bringing a 9% or so annual economic increase and then replacing Japan as the Second Economic Power nation of the world. So there is no denying that the special economic zones have played an important role in China's economic development from the outset to the present situation.

Aims and Objectives3. The aim of this paper is to survey the effects on China's economy of the special economic zones carried out under the Economic Reforms, to set up ideals and examples, and to explore the possibilities of special economic zones in Myanmar which shall contribute to the country's future economy.

CHINA'S ECONOMIC BACKGROUND AND REFORMSThe Economic Background4. China, which had been ruled by a series of dynasties throughout its long history, came into contact with foreigners in the 16th Century, with the arrival of Portuguese merchants in 1516 and of the Christian missionary groups in 1601. From that time onwards, China had relations with such foreigners as the Portuguese, Spanish, Dutch, English and Russians. In the later periods, it faced the wars with these Europeans for certain economic and commercial reasons

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as well as invasions of the colonialists. In Qing Dynasty, its frequent war remunerations to foreign countries resulted in budget deficiency in the King's finance, and so the Kings had to solve the problem by levying large taxes from their citizens and then creating political instabilities or conflicts. The second half of the 19th Century also saw the occasional outbreaks of wars between China and its neighboring countries. China was often subject to the bullies of Japan, Russia and several European countries.

5. The colonialist wars in the early 20th Century revived patriotism in China, with a growing interest in politics among the educated youths of the country. After the 1917 October Revolution of Russia, the Socialist blocs and Marxist groups were organized in China. On 1 July 1921, the Communist Party was properly formed by 12 Chinese communist leaders at its First Congress. Meanwhile, the Kuomintang Party stood as an official party doing its organizing work continuously. In parallel with the strong organizing skill of the Kuomintang Party, the Communist Party sought members for the benefits of the working classes such as workers and peasants. In 1927, the Communist Party had about 50,000 full-fledged members and around 30,000 communist youths. Chiang Kai-shek seized power in 1926 after the death of Sun Yat-sen on 12 March 1925. Chiang Kai-shek in power removed the communists from the Kuomintang Party in 1927.

6. Ideological clashes broke out between the Kuomintang Party and the Communist Party, resulting in a series of combats and wars. Prior to 1949 in which the modern People’s Republic of China was formed, China had been a developing country messed up with territory wars and political conflicts. After such a long time of difficulty, the Communist Party of China under Mao Ze Dong’s leadership established the People’s Republic of China on 1 October 1949.

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7. A really systematic economy emerged with the establishment of modern China. From its set-up in 1949 until 1978, the centralized planning was carried out and success was seen in solving the soaring inflation rates and providing the fulfillment of foods. The implementation of farming communes and nationalization of industries were done in the first Five-Year Plan (from 1953 to 1957). Macro-level industrialization was set up with the help of the Soviet Government. In 1958, Mao Ze Dung decided to launch the Great Leap Forward programme to cope with the increasing economy of the Soviet Union and the US.

8. In 1962, Mao Ze Dong admitted the failure of his Great Leap Forward programme and resigned from his position, which was succeeded by Lieu Xiaok Chi. The reformists including Lieu, Premier Chou En-lang, Deputy Prime Minister Deng Xiaoping and administration and business management. Because of a greater extent of freedom in agricultural transactions for peasants as well as other reforms, Lieu and Chu improved China’s economy. In 1966, so as to get rid of the counter-revolutionists in the Party, Mao Ze Dong started cultural revolution, during which a lot of government officials, experts and entrepreneurs got executed or banished. This resulted in the destruction of the country’s agricultural and industrial sectors and the deterioration of its economy. At the death of Mao Ze Dong in 1976, Deng Shaogn Peng reformed the affairs of the Party and the country in an attempt to start the Open Market Policy.

China’s Economic Reforms9. China adopted the centralized economic system for nearly 30 years from the establishment of modern China in 1949 to 1978. As a result of this, China was left far behind many countries economically. Taking lessons from the weaknesses of the red-tape

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system which had been adopted for about three decades between the establishment of modern China in 1949 and 1978, the 11th Central Committee Congress (1978) of China's Communist Party decided to reform the country's economic system. It can be said, therefore, that the Chinese economic reforms started after 1978. To bring out the economic reforms, the following policies were adopted by the 11 Central Committee Congress (1978):

(1)to improve the agricultural, industrial, technological and defense sectors

(2)to improve the country's economy using the Open-door Economy to increase links with the outside world in the economic and commercial fields, and

(3)to change the situations, providing the economic infrastructure step by step in both the urban and rural areas.

10. In implementing these policies, the intended periods were set up:

(1)the First Phase – to increase the industrial and agricultural production of 1980 by four times by the year 2000

(2)the Second Phase – to become a medium developed nation by the year 2021

(3)the Third Phase – to become a first-rate developed rich nation by the year 2049

11. In October 1979, Prime Minister Hua Kou Fong went on goodwill visits to West European countries and brought back promises for financial and technological aids from France, Germany, Britain and Italy. The 12th Congress of China's Communist Party held in February 1980 decided to adopt Deng Xiaoping's economy-oriented policy in place of Leader Mao Ze Dong's politics-oriented policy.

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12. The following basic tenets were laid down upon the implementation of policies and objectives for China's thorough economic reforms:

(1)to adopt the open-door economy for the flowing in of the foreign investments and technology as well as for the updating of ongoing concepts and systems used in the local businesses, to continue the existing Socialist system in politics, and to maintain industrial production and basic infrastructure in the State's hands

(2)to localize reforms rather than uniform them, in consideration of the different populations, climates, soil conditions and resources in China's different states and provinces

(3)to carry out the projects one by one and to speed up only when success is met and in consideration of the circumstances

13. In carrying out China's economic reforms, the links between the country's different economic aspects and the outside world played an important part. The open door economy was used as an ideological weapon, with which the conditions in the country were adjusted. The economic reforms between the 1970s and the 1980s focused on the rural areas while those carried out in the 1990s emphasized the urban areas.

14. Economic benefits were remarkably seen together, with the changing formation of the country's economic structures, after two decades' implementation of economic reforms. A safe stage was reached for changing from the centralized economy to the market-based economy. During the economic reforms, there was a gradual increase in foreign investment, exports and economic growth. The stock -markets, real estate markets and investment markets emerged though they had been never heard of before. The policy on foreign currency exchange rates is also starting to change with

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other attempts to solve the problems of trade deficiency, unemployment, economic disparity and economic growth disparity between the urban and rural areas.

Establishment of the Special Economic Zones in China 15. Premier Chu En-leng who took the responsibility of the country in early 1964 implemented the four-dimensional modernization, from which the term 'Special Economic Zones' originated in Chinese language. The 'zone' in the term refers to a part of the country which is entitled to the transaction rights and the export rights that are not easily available in other zones of the country. The Chinese government recognized the important roles of the Special Economic Zones in:

(1)taking over the high-tech industries(2)learning modern technological and management skills(3)creating job opportunities(4)increasing exports and earning foreign income(5)increasing the economic growth in the region(6)building economic links between local businesses and other

Chinese societies in Hong Kong, Macao and Taiwan(7)benefiting experiences from the market forces and economic

reforms(8)setting up links between the economically stagnated local

regions and the economically developed foreign regions.

16. Generally, the Chinese government established the special economic zones with the following objectives:

(1)to seek foreign investment, and modern technology and equipment, and to train the local workers with them

(2)to increase constructive rivalry among trade organizations for the improvement of the country's industrialization, management and economic development

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(3)to earn more foreign income and plant foreign investments and high-tech in the other regions of China through these special economic zones

(4)to keep these zones as test-zones in the country's economic reforms so as to realize the significance of economic reforms and then to build links with the production sector as demanded by the market economy, and

(5)to increase job opportunities for the job-seeking youths.

17. Deng Xiaoping continued to speed up the four-dimensional modernization programme after laying down the reform plans in 1977. Taking examples of the new budding countries in Asia, he attempted to build links with the outside world in China which had been economically stagnated due to political instability and ideological conflicts. Aware of the importance of technology in stagnated China, the Chinese leaders prioritized in the policies the access to high technology for the country's economic improvement.

18. The 11th Congress of China's Communist Party held in 1978 incorporated establishment of special economic zones as part of the policy under the economic reforms. As China could not improve by its own and must seek foreign aids for the development of the country's economy, the establishment of special economic zones had been an effective means for finding technology, investment, and management from foreign countries.

19. In July 1979, the State Council issued a direction for the remarkable development of transportation, foreign trade and foreign investment in Guangdong and Fujiant Provinces. In December in the same year, the local authorities of the Guangdong Province promulgated a new technology bill for implementation of special economic zones. The bill reduced not only the tax and tariff

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rates, as much as half of the imposed tax on the same commodities compared with other regions, but also the lease rents, at the same time allowing tax exemption for importing machinery and raw materials. Plans were also arranged to attract more foreign investment by ensuring the cheap labour in China compared with in Hong Kong.

20. Even a year before the issue of declaration for establishment of 3 special economic zones in Guangdong Province, the Chinese government experimented on a square kilometer land patch in Shenzhen as an export production zone. The objectives for experimenting on such special economic zones included experimenting on business managements and on financial and labour reforms, with the purpose of developing the zones in the whole country if the experimented zones showed success.

21. In the Special Economic Zones, other services such as hotel and tourism, retail sales businesses, agricultural business and housing projects were encouraged to ensure foreign investment in every aspect. Thus, by surveying the production zones of some Asian countries which used the export-oriented strategy and applying the theories in full range, the Chinese government modified the original 'export production zones' concept into the new concept of special economic zones.

22. Out of the many regions in the country, the Chinese government chose as the first special economic zones the regions who have more contacts with the outside world. In the 1980s, four SEZs were established, out of which three are Shenzhen (near Hong Kong) Zhuhai (near Macao) and Shantou (in a major city of overseas Chinese nationals in Guangdong). The other SEZ is Xiamen (in Fuchan across Taiwan). The fifth special economic zone was established in Hainan in 1988, timely with the Provincial Status

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Improvement measures. All the SEZs are along the coast providing easy access to and from the overseas countries.

Map Showing the First Phase Sezs In China 23. As a way of boosting up some parts of the open door economic policy and taking experiences from the established zones, 14 coastal cities were opened in 1984 with investment incentives for new foreign investors. Economic and technological zones were also set up for the development of techno-oriented industries and news enterprises.

24. Starting from February, 1985, the three delta regions around ‘the Pearl river, and Fuchan river and Yansi river became OEZs, provided with special incentives for the flow of foreign investment and increased production of exports. Under the scheme of OEZs were included Shanghai and its environs. In these coastal regions, favorable conditions and special statuses were created so as to develop export-oriented projects.

25. The Chinese government attempted to introduce the market economy in his country while after the Reform Plans international job separation, international marketing and resource exploration were being experimented. This being so, the special economic zones served as the foundation of developments for the different regions.

26. The special economic zones which were established earlier were small ones, intended as a forerunner for implementing the freer policies regarding trade, customs and other matters. The first prescribed rules and regulations for the SEZs came up with the Guangdong SEZs’ Laws in the 1980s. This regional SEZ law was devised by the Central Government with the help the legal experts, based on the difficulties and experiences seen in that particular region.

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27. The SEZs Law of China offers the following incentives to the potential foreign investors:

(1) Protection of Private Property. The SEZs allow the foreign investors to set up new industries and enterprises with their own capital or in joint ventures with the local Chinese entrepreneurs. The government gives protection of their private property.

(2) Incentives for Customs Tariffs. The foreigners only need to pay taxes by 15% - 24% on their income as long as they are paying the 33% tax on the local enterprises income. They are entitled to the exemption from port customs tariffs.

(3) Policy for farm use. Though the Chinese Law has prescribed all the land in China as State-owned, the investors have the right to develop and use the leased land as well as the right to hand over and mortgage it. If the work concerned shall last over 15 years, then the land borrowers will have the exemption from the cost of having the right to use the land for the first five years and need to pay only half its cost for the next five years.

(4) Policy for labour. The foreign investors are allowed to hire or fire the employees at their own will and according to the laws prescribed.

28. The Chinese government has based the following principles in setting up the special economic zones:

(1) The establishment of SEZs is mainly intended to attract foreign investment.

(2) Both the Chinese locals and foreign investors are allowed to do joint ventures or 100% foreign investment.

(3) The production is export-oriented.(4) The business transactions depend mainly on the movement

of the market forces.

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Chapter 2The Conditions of the Special Economic Zones in China

Emergence of the Special Economic Zones in China29. With the success of the forerunning SEZs in Shenzhen, Zhuhai, Shantou and Xiamen, other 14 coastal cities were added as the economic zones with special rights starting from April 1984. These port cities were dispersed in every direction extending from Taliang in the North to Fujou in the South. Though these cities are not fully developed into Special Economic Zones, the minimum taxation is prescribed to lure foreign investment and economic cooperation. Especially, these cities were intended as the gate into the other regions of wide China for the high technicians, managers and those with international market experiences. Guarantees have been given to those entrepreneurs who invest in these areas for tax exemption, and in exchange for hi-tech transfers, rights to sell their products in the country and abroad.

30. Hainan on the southern coast of China is also an important region for the improvement of China's economy. Though the area is as large as Taiwan, its population is only one third of the latter's. The State Council laid down investment policies for this region in July 1979, with greater investment incentives than those for Guangdong Province. Programmes were developed for agriculture, live-stock breeding, small-scale industrialization, mining, oil exploration, tourism and transport, and leased contracts to Thailand, Hong Kong, the US, Singapore, Malaysia and Australia. The projects with Singapore include not only the cultivation of oil-coconut but also the construction of 10 beach hotels, a golf course, and beach resorts offering yachting sports, which gives a good ground for the development of tourism in the region. Hainan's socio-economic status is intended to near Taiwan's.

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31. Regarding the establishment of successful SEZs in China, the Chairman of the International Energy Resources Policy Committee from Japan spoke in praise of these zones, their quick emergence and effective results, while on his visit to the Shenzhen Special Economic Zone in May 1984. Some Socialist leaders and progressive Western leaders saw the establishment of the zones not as a Chinese-style experiment, but as a practical reinforcement to the theory.

32. It is expected that construction projects and investment will develop gradually in the near future though the economic growth in other SEZs may not be as quick as in Shenzhen. Since the regions around SEZs are found to have more contacts with the outside world, the SEZs can become the gateway to the network of economic and technical cooperation as well as cultural exchange among many countries. They will be the archway to the inner parts of China from the SEZs.

33. The development process of SEZs in China has been moving slowly and systematically since 1978. Evidence of economic success originating from these special economic zones has convinced people of the importance of economic reforms and its benefits, and the zones have therefore enjoyed the support of the local entrepreneurs. In the later periods, many projects came up under different names but with a similar nature to the SEZS.

34. The special economic zones set up periodically under the 1978 Economic Reforms can be studied separately. In the 1980s, the following special economic zones were first established:(a) Shenzhen(b) Zhuhai(c) Shantou(d) Xiamen

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(e) Hainan

35. Following the success of initial economic zones, other 14 port cities were provided with special economic rights for the development of regional economy in the year 1984. These port cities are:

(a) Dalian (b) Qinghunang Dao(c) Tianjin(d) Yantain(e) Qingdao(f) Lianyungang(g) Nantong(h) Shanghai(i) Ningbo (j) Wenzhou(k) Fuzhou (l) Guangzhou

(m) Zhanjiang (n) Beihai

36. Following the success of SEZs and development projects in portal cities, more economic zones were extended in the coastal regions in 1985 with the intention of attracting foreign investment and bring about diversity. These zones are:

37. In 1990, when the Chinese government opened the Budong Special Economic Zone, the whole coastal regions of China became open-door economic regions.

38. Following the development of coastal regions, 13 inland frontier cities were also changed into border trade cities starting from 1992. These cities are:

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(a) Hunchun(b) Heine(c) Suifenhe(d) Manzhouli(e) Erenhot (f) Techeng(g) Bole(h) Yining (i) Hekou(j) Wanding(k) Ruili(l) Pingxing

(m) Dongxing 39. Moreover, seven potentially good cities were opened in the frontier and coastal regions. These cities are:

(a) Nanning (b) Kunming(c) Uramgi(d) Hohhot(e) Harbin(f) Changchun (g) Shihiazhuang

40. To open wider the door to the outside world and to attract more foreign investment in the country, 13 free trade zones were launched in 1990 where special rights are being provided concerning trade barriers and administration helps. Foreign trade and exports were focused on these zones, namely:

(a) Waigaogiao – 5.5 sq km - Shanhai(b) Tianjin – 5.00 sq km – South China(c) Dalian – 1.25 sq km – Northwest China(d) Shatoujiao – 0.20 sq km – Sinjianghwangkan Port

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(e) Futian – 1.35 sq km – Mid Shanzhen(f) Guangjhou – 1.40 sq km – North Hong Kong(g) Zhangjiagang – 2.00 sq km – South of Yansi river(h) Haikou – 1.93 sq km – near Jianphan(i) Qingdao – 2.50 sq km – Jiandong Province(j) Ningbo – 2.30 sq km – near Weiling Seaport(k) Fuzhou – 1.80 sq km – Fuzhou Province(l) Xiangyu – 0.60 sq km – Zian Province

(m) Shantou – 1.30 sq km – Shantou Province(In these zones, there are altogether 5813 industrial enterprises, among them 3404 are foreigner-owned.)

41. Other Economic Zones. Apart from the mentioned economic zones, some cities, big and medium-sized, of the country have the following economic zones:

(a) 32 State-level economic and technological development zones,

(b) 52 advanced industrial development zonesPHOTO: The Economic Impact of Special Economic Zones

Growth of the Special Economic Zones in China42. To bring improvement in established SEZs, policies should be laid down before potentially developable regions are chosen. When establishing SEZs, fundamental principles must focus on two basic considerations of bringing benefits to foreign investors and to the State. Though the general principles are basically the same, the details are different from region to region. The general principles are as follow:

(a) The Central Committee approves the basic principles of each zone drawn by the relevant zone authorities after

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they have been submitted for revision to the State Party Committee.

(b)The economic zones are forerunners for the economic growth of the entire nation, not only as the regional exporters.

(c) The relevant zone authorities are entitled to the free use of discretion and judgment in matters of foreign investment.

(d) Land property is basically the State-owned, but land release is permitted for investment. The duration, rent rates, and modes of payment may differ according to the priority nature of the work. Favors are naturally given to those businesses required by the State.

(e) Tax exemption is given to the imported machinery and raw materials, vehicles and other necessary utilities for production of goods.

(f) Income tax is durable only at 15% but, in the early two years of the Open-door Economy, investment of US$ 5 million and above will enjoy a cheaper rate of income tax. High-tech enterprises will similarly enjoy a cheaper rate.

(g)Accrued interests and the salaries of foreign citizenship workers are allowed to go out of the country through the banks concerned, after all the necessary payments have been made.

(h)Re-investment from accrued interests will be exempted from tax and duties.

(i) Any investors – foreign citizenship holders and expatriate Chinese nationals – are allowed to migrate without visas from Macao or Hong Kong to China and vice versa.

(j) The investors’ property and rights are under the State’s protection and support.

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(k) Products from the SEZs are exportable, and are allowed on sale if the taxes are paid as prescribed.

(l) Foreign expertise and administrative officers are allowed in any enterprise so long as they abide by the existing laws.

43. Establishment of SEZs in China has brought about the growth of joint ventures and foreign investments in the growing economy of the country. Just after stabling SEZs in China, Premier Jiao Zhiang on his visit to Washington spoke of China-US trade in the National Council, emphasizing that China was in need of foreign investment and technology and that China had opened its door without any intention of closing it back. His statement officially showed China’s strong determination to open its economic door to the world to the widest extent. Subsequent to the establishment of SEZs in China, the number of joint ventures between China and foreign companies has increased annually with momentum. In 1983 alone, about 100 joint ventures emerged in China, in the equal number of those that had been established in the previous four years.

44. New investments have gradually come up with the increasing number of local businesses and joint ventures. Even the disinterested foreign entrepreneurs have turned their attention to investment in China. The foreign direct investment in China in 1983 reached over US$ 100 million in the equal amount of investment that the previous four years between 1979 and 1982 had earned. Joint ventures have grown in number with increasing foreign investment. To draw attention to joint ventures, investment growth workshops were conducted regionally. Consequently, hundreds of foreign investors agreed to invest as joint ventures in the SEZs.

45. In the meantime Mameili, the Deputy Director of China’s Foreign Economic Relations And Trade Ministry, revealed that there would

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be 100 joint ventures by the end of the year, in spite of the then existing 22 joint ventures in the first half of 1983. He added that joint ventures would bring foreign technical transfer and import capital. Joint ventures were established in the implementation of macro-businesses, especially in industrial and energy sectors. Fund raising and advice seeking were done by such investment groups as corporations. Since the enhancement of joint ventures was in accordance with the government’s policy, the local corporations reached agreements with over 40 foreign companies, bringing 5 joint ventures into existence at that time.

46. With the increasing number of foreign firms and joint ventures, altogether 400,000 factories and workshops in China were repaired and modernized with the help of technology imported through those joint ventures. By using new technology, progress could be made in competitive production of commodities. Joint ventures also serve a good help to China’s experience in foreign exchange. For instance, Yuan 30 billion (equivalent to US$ 15 billion) was used to make outmoded factories up-to-date, when the joint venture owners had to share the cost of the imported materials, thus involving foreign exchange in the process.

47. While foreign investment was focused, impositions of rules on local investment were also minimized so as to allure the local entrepreneurs. The Joint Venture Law issued in September 1979 included exemption of long-term taxes as the special right to foreign entrepreneurs, increased production of China-made materials, establishment of joint ventures, and free decision-making in business enterprises.

48. However, the foreign investors were not quite clear about the practice of their property in accordance with the foreign investment law published a few years ago. So the Chinese government

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promulgated the first Property Act on 12 March 1984 to encourage the local entrepreneurs and to reduce the anxiety of foreign investors. It also served as a reaction to foreign investors’ pressure on the government to protect their technological equipment from becoming victims to the stealth of intellectual property. Thus highlighting China’s encouragement and support forwards the foreign capitalists. In Policy matters, measures were also taken to reduces the delays of bureaucracy, which can hamper the investment processes of the foreign investors.

49. In 1983, big investment joint venture enterprises like Shanghai Glassblowing Enterprise and Beijing Jeep Corporation came into existence. With the capital investment of US$ 100 billion, the glass blowing project was started jointly by the Shanghai Bank Branch, the Shanghai Glassblowing Factory, the Beijing Tang Brothers Plc. Company from Britain, and the UTI Limited from Hong Kong. With this joint venture, the Beijing Tang Company imported modern glassblowing technology. The Beijing Jeep Corporation was set up by the Beijing Motorcar Factory and the US Motorcar Corporation, enjoying the copy rights in using the technology of the US Corporation. The US Motorcar Company started with the capital investment of US$ 8 million plus another US$ 8 million’s worth of technological aides. The project amounting to the total investment of US$ 51 million brought 31.4% profit to the US Motorcar Company. With agreements to re-invest up to 49% of the profits gained in the business, the joint venture was operated.

50. Good signs were seen as time went on since the establishment of 4 economic zones with the exporting capacity of Hainan as a SEZ, the direct flow of foreign investment into these regions. The following tasks show the exports of the SE2s, the flow of foreign investments and economic situations.

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Exports from China’s SEZs between 1978 and 2008 (in billion US$)FDI in China’s SEZs (in million US$)Production from China’s SEZs (in billion Chinese Yuan) 51. Thus, China has used SEZs as a tool for briefing economic growth and involving foreign investments in trade and technological transfer from developed industrialized countries including the US.

52. The establishment of SEZs in China has been an effective performance not only for individual regions development but also the economic growth of the entire nation. After success of export-based zones in some East Asian countries, China equipped itself with some ingredient parts of capitalism on its fundamental socialism with protection of self interests, which has hampered its economic growth for some time. With two systems having two opposite characteristics, China has faced lots of difficulties in harmonizing them.

53. In the 1980, a great success was seen beyond expectations from the initial establishment of SEZs. But such sudden reforms brought about social and economic instabilities and complaints. Regarding them as the natural consequences of the hard times, China went on with its reforms and policy of open-door economy, seeking ways to overcome the difficulties through discussions and negotiations concerning economic and social imbalances in the region. It exploited the experiences from the formerly established SEZs, programmes which drawn up for providing help to other regions developments.

54. In the family of nations, there were both believes and skeptics about the Chinese economic reforms. The flow of foreign investment was only in a limited condition, technical transfer, foreign exchange

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earnings and job opportunities were not achieved as had been expected. Only 10% of the foreign investment during the initial period came to the industrial sector. Hi-technical transfer was almost impossible because the existing enterprises in the industrial sector were only small-scale businesses, sub-contract ones light industries and labour-based cheap production enterprises. Furthermore, difficult entry into Chinese market, the state of Chinese currency not easy for exchange, unfamiliarity with rules and regulations and so on hampered the foreign investors a lot. Co-operative and joint sector systems were commonest form of investment in China in the meantime.

55. With export-based foreign investment, establishment in industries, the centre of goods distribution and unsuccessful SEZs, progress was not made in technological transfer and foreign exchange earnings. The products from those zones were just ordinary, most sold in the region and only 20% exportable. Since the investments were in their first-phase, a large portion of investment went not only to the infrastructure. Import increased with a greater speed and exports, causing business-related crimes and other social problems as well as high inflation and low cost-effectiveness.

56. In 1984, The Cultural Government of China revised the effects of its economic reforms, drawing lessons from experiences obtained from the SEZs, launching of free trading in Coastal cities and inner regions. The government recognized the potential benefits of the open-door market economy while seeing the difficulties of these SEZs.

57. From the 1980s to the 1990s, China launched SEZs under various programmes in the coastal regions and other cities, which can be regarded as the doors extended to the world from China. Meanwhile, the world saw China’s economy booming with its

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growing economic growth, the steady flow of foreign investment and the better export GDP ration. But some experts found that the role of formerly SEZs was hurt by the extended rights equally granted to other coastal cities.

58. Due to these economic zones, economic growth was seen, but since it did not meet expectations, policies were revised later. Action was taken to conduct proper implementation of high-tech and economic management in SEZs. Enterprises related with received attention in place of ignorance in the former times.

59. Economic growth due to SEZs was remarkable, with increasing job opportunities. The opportunities per worker in these SEZs outstripped that in other regions. But these often arose social and economic crimes, bribes, smuggles, environmental damages and labour strikes.

60. In the 1990s, changes in policy matters were made after revision of the former policies of SEZs, the Chinese government also encouraged other governments in the regions to launch development programmes and thus increased foreign investments. Even in the local retails, finances, transport, estates and shipping, foreign investment was allowed to enter.

61. Though open-door economy was adapted all the way into the far-fetched regions, disparities were growing out of control. The inner parts were left behind the developing coastal regions. Poor labour rights and frequent labour strikes also decreased the compatibility of SEZs and the effectiveness of macro-strategies. Therefore, China has always been seeking its weaknesses and new strategies to deal with them while at the same time enjoying the benefits from the establishment of SEZs.

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Chapter 3The Contributions of SEZs to Economic Growth in China

62. There were remarkable differences at every stage of development, the concerning accruing benefits and encountered problems in the establishment of SEZs. But obvious benefits of their establishment were clearly seen. For instance, Guandong, Fujiang and Haina had become prioritized regions for local and foreign investments bringing the increasing DGP growth and industrial production.

63. China attempted to build SEZs throughout the country but exerted the total authority in 7 SEZs, often referred mathematically to as 4 + 2 + 1 meaning 4 SEZs in the 1980, 2 SEZs in the 1990 and 1 Tianjrang-Peihai development set up in 2006.

64. The benefits of establishing SEZs had effects on China’s economic production and commercial sectors as well as other social economic conditions. By creating open and free economic situations including SEZs, together with economic reforms in the entire nation, China’s competitive skills were changed remarkably during the last few years of the 20th Century and the beginning of the 21st Century.Growing Trade in China in Relation with the Global Trade (1985-2000)1. World Export Market Share (%)

1. Primary Export2. Natural Resources-Based Industrial Products 3. Non Natural Resources-Based Industrial Products

Low TechMedium TechHigh Tech

2. World Export Market Share (%)1. Primary Export2. Natural Resources-Based Industrial Products

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3. Non Natural Resources-Based Industrial ProductsLow TechMedium TechHigh Tech

3. Main ExportsToys and Sports materialsShoesCommunication-relatedInformation Storage DevicesClothingComputer Components and AccessoriesTextilesTravel packagesPlasticFurniture

Mac-Economic Conditions65. China’s SEZs contributed a lot to the accumulative GDp, job opportunities, attracted foreign investments and technical innovations of the country. Furthermore, the modern management practices became familiar to the local enterprises. The SEZs set up initially in 2006 and before contributed 5% of the whole nation’s accumulative GDP, 22% of the accumulative industrial exports and 9% of foreign direct investment. But China’s macro economic conditions grew much in the meantime with the SEZs’s contribution of 5% GDP, 15% exports and 22% foreign investment flow. Production per capita was also changed remarkably as shown in the following graph.China’s Production per CapitaContribution of First Phase SEZs and ETDZs ParticularSEZ

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Percentage ration in contribution to the whole countryETDZPercentage ration in contribution to the whole country

66. In 2006, China had 54 economic and technological development zones, 54 HIDZs and 15 FTZ, which contributed 11.1% GDP cumulative and 19.8% exports. The total GDP of Shanhai-Budong reached RMB 96.05 billion and exports (worth US$ 18 billion) SEZs and ETDZ, therefore, contributed 18.5% of the total export in 2006, and 21.8% of the total GDP in 2007. The composition of exports was also found to have changed from agricultural to industrial.Changing Composition of Exports from China (%)Comparison between Exports and Imports in China (in billion US$)

Flow of Investment67. The SEZs were the main places for attracting foreign investment. In 2007, the foreign investment in China peaked at US$ 74.8 billion with FDI entry in 5 SEZs at US$ 7.3 billion. In the Shanhai-Budong regions and Tianjiang-Shanhai regions, FDI was at US$ 7.2 billion with US$ 2.6 billion to FTZs. So the flow of foreign direct investment into SEZs comprised 46% of the whole nation in 2007.

Job opportunities68. The growth of job opportunities due to SEZs was very high. According to the 2006 statistics, the first SEZs employed 15 million people, providing 2% of the country’s total job opportunities. In 2007-2008, the Shanhai-Budong region contributed nearly 17% job opportunities of the Shanhai Municipality. In the Tianjiang-Shanhai zone, there was 5.4% of the whole Tianjiang Municipality’s employment i.e, 0.33 million employees in number. 54 ETDZs and

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54 HIDZs provided 5.35 million and 6.5 million people with employment while 7 SEZs, ETDs and HIDZs have together employed 4% of the whole country’s populace. (China has a population of 770 million). The proportion of workers by sector has also changed sector-wise. The population of agricultural workers has reduced while industrial workers have grown in number. Population of Workers by Sector (in million)

Technological Transfer69. SEZs have been important and reliable places for China’s new high-tech businesses. In 2007, 54 HIDZs arranged for high-tech businesses as well as science and technical business. Over 50000 businesses registered officially, which included 70% or so registered businesses in the country. 18.5% of the workers working in the zone comprised 1.2 million science and technical staff who were producing 33% high-tech products of the nation.

70. For the past 15 years since the establishment of HIDZs, the production of SEZs amounted to more than half of the high-tech production of the country. Its export comprised one third of the country’s high-tech exports. Costs accrued gradually in research and development work since it was the focus of the place with RMB 31.4 billion spent in 2002 comprising 24.4% of the whole country’s research cost. Between 2002 and 2006, it went up three times, peaking at RMB 105.4 billion (i.e, 35.2% of the nation’s research spending.)

71. Evidence has shown clearly that SEZs in China have been helpful to the development of the technological sector. In the 1980s, China aimed at high-tech price production, and today it has possessed a big market share of its high-tech products in the international market. It is obvious from such success that SEZs are

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the main propellers for China’s high-tech enterprises, giving a lot of contribution to the improvement of technology.

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Chapter 4 Establishment A SEZs in Myanmar

Potential Areas. 72. Since SEZs have evidently given good contributions to economic growth during the last three decades, they have drawn every nation’s attention. Myanmar, in an attempt to build an all-round developed modern nation, is also drawing programmes to construct Special Economic Zones in the country. Potential areas in the country were sought by drawing data from the NGO’s surveys, and asking advice from the experienced local entrepreneurs. Using the existing infrastructure, the potential areas are chosen on the basics of low initial investment, accessibility to bus-terminals and airports, and availability of manageable human resources.

73. The following areas have good potentials for the establishment of SEZs in Myanmar.

1. Thilawa (Thanlyin - Kyauktan Region)2. Dawei Region3. Kyaukphyu Region4. Sittway Region5. Muse Region6. Tachileik Region7. Mandalay Region8. Mawlamyine Region9. Pa-an Region

10. Tamu – Kalay Region

74. Thilawa (Thanlyin – Kyauktan). Thilawa SEZs, situated in Thanlyin Tsp, Yangon Division, is the first SEZs to receive a lot of foreign investment. It was constructed with the cooperation of Chinese Experts who saw the region potential for a successful SEZ. If the project is to start, then it will create at least 200,000 job opportunities for the citizens.

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75. Thilawa SEZs is situated closed to Thilawa port, 25km away from Yangon. Thanlyin Bridge-1 has a 20-ton loading capacity and Thalyin Bridge-2 which is under construction with bear 60-ton loads. Thilawa port is on the Yangon river and is opened in 1998 equipped with 6 jetties and container cranes. Not far from the Yangon International Airport, the place is good for the establishment of a multi-function type SEZ. Research has shown that it is the best place for distribution of goods to any region in the country.

76. Dawei Region. Dawei region is just 300 km from Bangkok, Thailand. Geographically, it serves as a deep sea port in the Indian Ocean and a gate way to East-West Economic Corridor of the GMS in the sub-Mekong Region. The future SMZ in Dawei Region has the potential for trade investment from ASEAN nations, bringing benefits from them.

77. Under the present circumstances, there are good potentials in the region for the establishment of international standard tourist resorts and development of tourism. The region is close to the future Asia High-Way, and provides not only feasibility for building an International Deep Sea Port, land routs to Thailand, Laos, Cambodia and Vietnam not via the Straits of Melacca, Oil Chemical industries by using natural gas from Yadana Offshore Oil Industry, and but also resources for fuel demands and marine resources.

78. From Dawei Region, kinks can be made to Thilawa Port by sea. It can comfortably be connected with Yangon, just 25 km away. Workers can easily commute to the region and engineering expertise can be obtained readily with spare parts of the machines. There is easy availability of labour because it is not away from Yangon, Thanlyin, Kyauktan, Khayan and Thongwa townships. With

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the existing infrastructures, the exports process will be quicker and smoother, good for the establishment of an SEZ.

79. Kyaukphyu Region. Situated on Yanbye` island, Rakhine, the region is a good exist to the sea in the Bay of Bengal. With 20 m - to - 25 m deep strait and surrounded by small islands, the region is expected after some preparations to become a deep sea-part for small to the biggest oil oceaners. The Yangon-Kyaukphyu motorway, 400 miles long, has connected the region to Yangon. Shwe Offshore Oil Location, 25 miles west of Kyaukphyu, is projected to reserve 12 TCF of natural gas. It is likely to produce 4,000 barrels of natural gas and crude oil on the daily basis, which will provide the required electricity and fuel oil when the SEZ is established. It is a potential area as a good sea port for export and import with Yunan State, China as well as an SEZ.

80. Sittway Region. Sittway Port has existed since the British times and the oldest seaport for trade and commerce. Ever before World War II, trade had prospered here in connection with other seaports like Kolcutta, Chittagong, Yangon, Malaysia, Singapore from where merchandise ships are said to have run twice a week. This being so, the place has already had good grounds for economic development. In Sittway region, the Kalatan-river all round development programme and Establishment of the Sittway Deep Water Port are expected to be finished by the year 2013. Starting from November 2010, a new port region will be explored near the present-day Paungdawgyi of Sittway, for which stone walls are being laid down, earth refilled and soil tested. The Indian Asanume Company has a branch opened in Sittway to supervise the project. 81. The establishment of Sittway deep water port and the all round development of the Kalatan river will bring benefits to both

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Myanmar and India. After completion of the project, the Kalatan river will be able to link the rood on the India Border, which is 62 km away, through Paletwa, 225 km from Sittway. The route with be connected to the 54th National Road of India, and will provide a network among Sittway, Kyauktaw, Paletwa, Setpyitpyin, Aing zaw, Chin Paing, Reed and Titim. A trade route between Rakhine and Mizoram, India, as well as between Rakhine and Chin will also be possible.

82. As for India, it will be able to avoid delays due to flood and landslides carriage of merchandize and the way from Kolcutta to West Bengal, and from the Northern State to Mizoram in Northeast region. Furthermore, the trip from Kolcutta to the Mizoram will be shortened.

83. Muse Region. Muse, situated in Ching-Myanmar border in northeast Myanmar on the road to Chin, is an important place for border trade. As well as an exit from Yunan State of China, Muse can be an exist to the sea via Mandalay to Kyaukphyu Deepwater Port and Yangon Port. The city is on the way which trade flows from Muse through Mandalay to Thailand or India. When Shweli Hydro Power Project can produce 400 Megawatt, an SEZ with EPZ and FTZ will be implemented.

84. Tachileik Region. Situated in far east Myanmar, Tachileik serves as a medium for border trade between Thailand and China. Textiles and Consumer’s goods are being exported to Thailand through Kengtung-Tachileik route. Thailand exports durians, rubber, oil and cosmetics to China. Regional development can be carried out by providing goods sheds for export/import merchandise, setting up an FTZ and giving services.

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85. Mandalay Region. The Tanta-Oo International Airport is in Tanta-Oo township 20 km from Mandalay. So a special economic zone could be established in Mandalay region so that electronic and other products, light and high-tech goods, with be exported by flight from Tanta-Oo with easy availability of human resource.

86. Under the existing circumstances, Mandalay Region has geographical advantages for air transport, with a network of connecting the main roads from its central part of the country. The region, by using the transport means along the Ayeyarwady river, can easily transport the Myanmar products to other economic zones. Also, it has other advantages ranging from accessibility to hydro-power plants such as Ye-ywa and Paung-laung, accessibility to the Ayeyarwady river that will help industries, resourcefulness of humans for labour readiness for the development of cultural tourism.

87. Mawlamyaing Region. The International high-way motor road is to be built between Mawlamyaing Port of Myanmar and the Danam Port of Vietnam which is regarded as the Bridge of ASEAN. This road, passing through Laos and Thailand on its 1,200 miles long way, helps to avoid the use of Melacca Straits and increases local trade opportunities. The establishment of an SEZ in Mawlamyaing Region would have completed a greater part of EWEC projects, leaving just a 80 km long motor-way and Mawlamyaing Deep-water Port to be built. The currently used railway will continue to be used, and the fuel requirements will easily be fulfilled by the natural gas that Yetagun and Yadana Offshore Oil lands provide.

88. Pa-an Region Special Economic Zone. Pa-an region, is a smooth land area, 240 km from Thailand Myanmar Border, on the bank of the Thanlwin river. It is on the trade route between Thailand and Myanmar. It can have a sufficient supply of electricity provided

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by the natural gas from Kanpauk-Thaton Gas Pipeline. SEZ programmes are to be launched on the economic development programmes jointly conducted by 4 ASEAN nations, namely-Cambodia, Laos, Myanmar and Thailand.

89. Tamu-Kalay Region. The region is near the Indian Border in Chin State, northeast Myanmar. It is on the trade route between India and Myanmar. The Tamu-Kalay-Bagan Motorway, which Myanmar will hold responsible for building as part of the India-Myanmar-Thailand Highway, will play an important role in the future. Merchandise Storehouses can be built before the establishment of FTZ for China-India trade. Agreement has been made to launch Htamanthi Hydro Power Project in northern Sagain with the help of India. The project is estimated to be able to produce 600-1000 megawatts, which can help the changing process into an SEZ.

90. Myawady Region. Situated on Thailand-Myanmar Border, Myawady plays a central role in border trade. The Yangon-Pa-an-Myawady Motorway is usable in every season, which has been provided with a sufficient number of bridges. The trade between Myanmar and Thailand amounted to US$ 3.176 billion in the year 2004-2005. The establishment of an SEZ with EPZ and FTZ would be helpful to the development of the region.SEZ Regions under Implementation91. Thalyin-Kyauktan Region (Thilawa). Thilawa SEZ is near Thilawa port in Thanlyin-Kyauktan township, southeast of Yangon. The land area is 12.836 square kilometres (around 51 square miles or 3200 acres). Because an international port for containers within a good environment, measures are being taken to establish a Myanmar-China Joint Venture Thilawa Special Industrial zone. The capital share ration agreed to is 40% from Myanmar and 60% from Jingshing Co.Ltd of Shanhai, China. The SEZ (Thilawa)

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Implementation Committee was formed of 24 members with the Minister for Industry-1 as chairman, according to the announcement 2/2005 dated 21 January 2005.

92. The group of enterprises to be constructed in the SEZ (Thilawa) include electronic enterprises, the industrial enterprises, the environmental protection enterprises, the pharmaceutical production enterprises and small-scale industries. The implementation in the Thilawa Zone will be divided into six parts – namely Admin Support Building, Modern Industrial Zone, Export Production Zone, International Support Area, Science and Research Development Area, and Foreigners’ Residence Area. The targeted electricity demand will be supplied in 4 stages. The daily requirement for gas is estimated at 100 cubic meter per hour for the industries and for the whole zone 120,000 cubic meter per diem. The capital investment will be US$ 2.12 billion.

93. Dawei Region. Dawei Deepwater Region is a new gateway running through the regions under implementation by Myanmar and Thailand jointly. It is an alternative for the currently used waterway, the Straits of Melacca. The new Dawei-Bangkok trade route would become the most cost-effective and time-effective cross-border trade route for investors, entrepreneurs and merchants. Besides its high competitiveness, the region would give a strategies link between East Asia and South Asia with a network of motor roads and railways as well as gas and oil pipeline and communication webs.

94. After the implementation of the Dawei Deepwatere Port merchandise from Middle East, Africa and Europe would not need to cross Melacca Straits to go to China, Thailand, Vietnam, Laos and Cambodia. The merchandise ships from Dawei Deepwater Port would save 4 days (equivalent to 1250 nautical miles or 2316 km),

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compared with those from Singapore. This deepwater port will play an important part in getting rid of trade barriers for Asian countries including Myanmar and Thailand. After the completion of the project, goods could be transferred within a day between Dawei and Bangkok.

95. With the Dawei Deepwater Port Programme, the industries zones and roads (motorways as well as railways) to Bangkok, Thailand, will come up with the establishment of Myanmar’s first SEZ. The estimated cost for the programme is US$ 13 billions and the Indian Company will take responsibility for the construction of the project.96. The Dawei Deepwater Port, situated on the shortest way between South China Sea and the Andaman Sea will become the most important port between south Asia and East Asia in the future.

97. Kyaukphyu Region. Kyaukphyu in Rakkine State, Myanmar, is a port city on Megday Island on the west coast of West Myanmar. The economic aims for this region is to promote this region, now as a river port, to a deep sea port for increasing job opportunities of the citizens and for doing business transactions with big ocean-lines and container ships.

98. Kyaukphyu Deepwater Seaport will transport goods between Chittagong (Bangladesh), Yangon or Kolcutta and Indian ports. It joins the Myanmar coastal region to Kouming (the city in Southwest China) along the Muse-Lashio-Mandalay-Minbu-Sittway-Kyaukphyu through Yunan Province.

99. Sittway Region. To improve border trade between Myanmar and India, by means of an MOU ratified on 2 April 2008 between Myanmar & India. India aims to build the Kalatan river Project starting from 18 December 2010 to 13 July 2013 by deadline. This

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project includes the establishment of Sittway Port, All-round Transport Programme along the Kalatan river near Sittway, Rakhine State in western Myanmar, and the linking of the trade between Sittway and Kolcutta by coastline & motorway.

100. The Kalatan river project intended for trade enhancement between Myanmar and India will link Mizoram State in northern India to the Bay of Bengal to increase trade exchange between the two countries. The mutual trade amounted to US$ 1.19 billion in the fiscal year 2009-2010, 26% higher thean 2008-2009. The India-Myanmar value shows India is the fourth biggest trade partner after Thailand, China and Singapore. Though on the agenda since 12 years ago, the project could be started only in 2008, leaving India to finish it as quickly as possible.

101. The capital investment in SEZs is large in size, with the entrepreneurs focusing on export. Small companies, small joint ventures and limited companies cannot compete while public companies and big entrepreneurs need to be involved. Deepwater ports along Rakhine coastal region is a natural asset of resources. Nautical transport for economic growth in links with the international community is a reliable economic business, so the Sittway Deepwater Port Scheme will be creating potentials for economic growth in Rakhine and in the region.

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CHAPTER 5OVERVIEW AND SUGGESTIONS

Overview on China’s Establishment of SEZs102. Modifications of procedures and prescriptions of laws should have been done in accordance with time and situations in which SEZs were established in China.

(A) Strong Determination and Pragmatic Leadership for ReformsIn the early periods when uncertainties abounded, Chinese leaders adopted slow-and-steady approach to reforms, which could help them overcome difficulties and political disturbances, and ensure a macro-economic stable environment for the open-door economic policy. In 1992, the visit of Chinese leader Deng Xiaong Peng to southern China showed the government’s intention to make reforms in its economic system. Rather than imitating other countries, China decided rightly to choose its own style with Chinese characteristics in changing into the Market Economy.

(B) Favourable Policies and Organizational AuthorityTo allure investments in SEZs, favourable policies were adopted such as leasing land cheaply, stopping tariffs and taxes, clearing tax procedures, profit movability, investment at will, tax exemption in importing raw and semi-raw materials, license control for domestic production. These policies not only provide favourable privileges like housing, research funds and stipends for the workers’ children, but also attract skilled workers scattered over the country and abroad. Organizational authority is allowed both politically and economically in these SEZs and ETDZs, with legislation power for municipality and procedures in their work. At that time, the legalizing power was not only in China’s National Congress and the Standing Committee but also in the Provincial People’s Congress and the standing Committees. In observation of new policies, the relevant

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Committees were allowed freer authority for the development of the zones. For instance, from Labour Contracts and pay negotiations to employment of labour can be done on the legal basis. Shenzhen region has showed success the government’s creative experiments on realistic policies. In 1981, Shenzhen received the same statues with Guanchon from Guandong administration. In 1992, the Central Government granted legislation to the region, thus making Shenzhen the first to change labour wage rates in the country. Unlike the adopted conditions, the minimum pay schemes and social insurance programmes were started. In Tianjiang ETDZ, too, legislation was granted for creativity. One remarkable example of which can be seen in research development in cooperation with famous universities as a way of linking academic institutes to the industrial sector.

(C) Government’s Unwavering Support and Involvement The Central Government has reduced its existing controls to create free, attractive good policy environments. In the meantime, effective regulations and procedures with good administrations, infrastructure and means of communication have been provided. In the SEZs at earlier phases, the government’s direct investment was voluminous. For instance, in 1992, before the provincial ETDS were permitted, the regional government started the capital, providing necessary infrastructure and various services logistic, legal and economic programmes, marketing, export-import aids, skills training and managerial consultation were given to the entrepreneurs and enterprises in the zone. In Suzhon technological development zone, the government provided finance, information, labs, inspection, technical exchange and initiations the SEZ admin boards conducted the procedures smoothly and timely with the relevant policies. After a certain amount of success, high-tech based exports were focused, and negotiations were made for foreign direct investment in parallel

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with the local enterprises. In 2007, China established 25% reduction of taxes for local and foreign investors.

(D) FDI and Migratory Chinese workersFDI and migratory Chinese workers all over the world have played and important part in the successful of SEZs. In the 1970s when SEZs came into existence in China, it coincided with the attempts to promote the industrial sector organizations and change labour-based jobs to industrialization in other countries like Hong Kong, Macao Taiwan and China itself. SEZs helped to attract migratory Chinese workers to their homeland. Flexible conditions of various kinds were created such as tax exemption, special-price land leasing and holidays.

103. Suggestion. China has made progress with full momentum during the last three decades in its attempt at economic development through special economic zones. In 2010, China became the second biggest economic power, showing its remarkable progress within 3 years from 1980 to 2008. The unstable nature of progress has been a challenge for long-term economic development. In spite of increasing economic growth, balanced development in all regions of China remains to be seen. From 2004 onwards, the export amount has been declining in spite of its alleged economic growth.China’s Export Rates per Annum

104. The economic disparity between the coastal regions and the inner regions in north and west China has been growing at a desperate rate. With the increasing number of social problems and criminal cases doubled by economic and environmental deterioration, observatory watching over continuous development through macro-level policy related negotiation needs to be

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conducted so as to place modifications in accordance with the world’s economic and trade situations.

105. The Chinese Government should implement the following in order to overcome new challenges and to maintain its in-hand development strategy in the future:

a) Smooth changing into the knowledge and techno-based economic development pattern,

b) relying on the local market and consumption as a source of economic development,

c) promoting the SEZs through technological innovations and observations

d) consolidating protection of the existing weak intellectual property rights

e) encouraging with pressure through right incentivesf) strengthening academic and industrial linksg) strengthening the financial resources

Overview 106. SEZs in China were designed with foresight Shenzhen SEZs was placed on Hong Kong border, Zuhai near Macao, and Xiamen opposite to Taiwan. The original narrow patterns were granted freer implementation through special policies for pragmatic economic transactions.

107. The main financial resource for the establishment and development of China’s SEZs is foreign direct investment for which either joint ventures and co-operative schemes or foreigner-owned enterprises have been allowed. In spite of the State-owned property and the local private enterprises in the regions, the foreigner-owned and joint venture businesses are mainly conducting export. The exports are aimed at overseas regions, but with the concerned authorities, they are allowed entry into the local market.

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108. The business transactions in SEZs are based on the market under the government’s steering macro-plan objective. The importance of market mechanism distinguishes the economies within the zone and outside. The managers have rights to decision-making in relation with strategies and operation.

109. Incentives are given to attract foreign direct investment. Outsiders are entitled more privileges than local investors. The administration sector provides necessary aids and allows exemption customs and duty fees on the imported machinery and raw materials. But the import materials need to be declared on sale in the region at due custom rates. 15% tax is payable for every enterprise in the economic zone, the provincial tax is not payable.

110. Comparative Study with MyanmarThe following facts are noted:a) China practices socialist economy while Myanmar adopts

market-oriented economy. With basic economic differences, most investors in China’s coastal economic zones are once expatriate Chinese nationals. Macao, Hong Kong and Taiwan are close to SEZs, which means exporting and importing can easily and abundantly done. Myanmar lacks such an advantage.

b) China, in spite of differences in foreign policy matters with the US, is regarded by the latter to be the most favoured nation, due to its big territory, large population and abundant natural resources. Myanmar, on the other hand, is economically and politically sanctioned by the US on the excuses of breaching human rights and democratic movements.

c) Emphasis should be placed on the establishment of suitable SEZs in Myanmar. With the right choice of means and places, the SEZs would bring the following effects to the country.

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1. promoting economic growth2. attracting FDI3. creating new job opportunities4. raising regional development5. improving and modernizing infrastructure while the

private sector investment is quicken economic growth.d) East Asia and South East Asia have showed their central role

in the world’s economy. Impulses coming from opening the door let in the enormous flow of FDI as a mechanism for economic growth. Since 1991, Myanmar has been on this trend, with its annual economic growth at 7% between 1992 and 1995, and expanding foreign trade. Proximity to international economic organizations is necessary to speed up into the world’s economic currents. Delayed by ASEAN, Myanmar reached the final agreement with India in 2008 on the implementation of these projects.

Conclusion111. China has made economic progress through establishment of economic zones. Myanmar should take China as a good example and learn from its experiences. The possible difficulties in establishing SEZs should be studied in detail. Since increasing exports should be the main factor in Myanmar’s economic growth, Myanmar needs to enhance production of goods to increase exports. So construction of SEZs is an inevitable process for the country to go through.

112. Effective use of natural resources as raw materials should be considered in constructing SEZs. Myanmar needs to show off its resourcefulness, cheap labour and land use to attract foreign investment. Incentives should be given for the entry of advanced high-technology. Myanmar nationals must be trained to be skilled workers and exports. Under the present circumstances, Market

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economy needs the government’s control in its transitional period at least until it has been settled later, to be operated by the government’s policies alone. The state needs to provide help for the growth of private-sector and the emergence of new enterprises. It is important that centralism be reduced by laying down sound policies for this purpose.

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