SEZ case studies, 7th Working Group Meeting on Investment Zones in Iraq, Anders Jönsson, Southeast Asia Division, GRS Mike Pfister, Investment Division, DAF Paris, France17 February 2015

1. SEZ case studies
7th Working Group Meeting on Investment Zones in
Iraq
Anders Jönsson, Southeast Asia Division, GRS
Mike Pfister, Investment Division, DAF
Paris, France
17 February 2015

2. Disclaimer
This presentation is not a result of OECD research and represents the insights and
opinions of the presenters only.

3. The 1995 reforms catalysed a remarkable
transformation both of SEZs and the economy as a
whole.
1995: 16 economic zones
Characteristics:
EPZA authority
Mostly public zones
No substantial delegation of
authority to EPZA to interact with
zone residents
Unclear and conflicting goals
SEZ Act of
1995
Major reforms:
Move towards private sector
zone development
PEZA, under DTI, took over
the functions of EPZA
Dual mandate: Promotion
and regulation
Clear focus on employment
creation, export generation,
and FDI promotion
2008: 166 economic zones
Successes:
61 industrial estates, 99 IT parks, 5
tourism zones, 1 medical park
From 9.6 bn PHP investment in 1994
to 133.7 bn PHP in 2008
3500% growth since 1994

4. Although Japanese electronics predominate,
SEZ investments are well diversified.

5. One-stop shop
• Permits for building, occupancy,
import, export and exemptions
from local government
requirements
• Special non-immigrant visas
• Harmonised customs through
PEZA-BOC MOA
• Environmental clearance through
PEZA-DENR MOA
• Approval takes one business day
• Transparent and immediate
incentive allocation
One-stop shop plus
• PEZA availability 24/7
• DG interacts directly with residents
• PEZA investment promotion and
zone stakeholder advocacy
• Commitment to transparent, graft-
free administration
PEZA services go far beyond simple administration.

6. Key success factors for SEZs in the Philippines include
good governance and private sector inclusion.
Requirements KSF of the Philippines
Clear objectives Clear focus on FDI and diversification
Adapted to market
demands
Most zones developed by the private sector
PEZA has a supervising and co-ordinating role
Delegation and
delimitation of authority
PEZA has far-reaching authority and autonomy to issue
licenses and interact with zone residents
Private sector takes care of non-state functions
Clear institutional structure
Clear financing roles
Low transaction costs for
zone residents
Excellent infrastructure
Lowered cost of regulatory compliance
Focus on cost reduction and just-in-time deliveries at PEZA
Access to labour Availability of skilled labour
Staff training support through PEZA
Efficient promotion PEZA promotes zones overall, and private operators promote
specific opportunities
Strong political support SEZs have a strong role in all national economic planning
instruments.

7. Overall economic challenges
• Sustained 6-9% growth over the past decade
under President Noynoy Aquino;
• But growth driven largely by resource
allocation – overall TFP growth slightly
negative;
• Main driver: BPO – but employment not
substantial, especially for non-skilled
employees;
• Manufacturing in decline;
• Lack of a „missing middle“ of competitive,
exporting medium-sized companies;
• Graft remains pervasive;
• Dependence on remittances and highly volatile
and integrated sectors of the economy;
• Brain-drain – although the Filipino work force
is highly educated relative to its level of
economic development, many opt to seek
employment abroad.
Challenges for SEZs
• Pervasive lack of domestic linkages apart from
employment due to;
 Legal obstacles;
 Weak domestic entrepreneurship (cf.
Malaysia).
• Difficulty in generalising SEZ reforms to the rest
of the economy, creating incresingyl isolated
enclaves;
• Increasing problems of graft and contraband;
• Decline of labour-intensive activities, such as
light manufacturing.
But substantial structural obstacles remain over the
next decade.