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    SEZ Developer Obligation

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    Bhaumik Nayak
    The document summarizes key legal and regulatory issues for establishing Special Economic Zones (SEZs). It discusses that an optimal framework should offset host country constraints, meet investor needs, and reflect successful worldwide practices. It then outlines various components of an SEZ framework, including customs regimes, tax incentives, land use policies, environmental protection, and immigration rules. The goal is to establish a competitive, streamlined system to promote economic development through SEZs.

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    SEZ Developer Obligation

    Uploaded by

    Bhaumik Nayak
    101 views21 pages
    The document summarizes key legal and regulatory issues for establishing Special Economic Zones (SEZs). It discusses that an optimal framework should offset host country constraints, meet investor needs, and reflect successful worldwide practices. It then outlines various components of an SEZ framework, including customs regimes, tax incentives, land use policies, environmental protection, and immigration rules. The goal is to establish a competitive, streamlined system to promote economic development through SEZs.

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    The document summarizes key legal and regulatory issues for establishing Special Economic Zones (SEZs). It discusses that an optimal framework should offset host country constraints, meet investor needs, and reflect successful worldwide practices. It then outlines various components of an SEZ framework, including customs regimes, tax incentives, land use policies, environmental protection, and immigration rules. The goal is to establish a competitive, streamlined system to promote economic development through SEZs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    101 views21 pages

    SEZ Developer Obligation

    Uploaded by

    Bhaumik Nayak
    The document summarizes key legal and regulatory issues for establishing Special Economic Zones (SEZs). It discusses that an optimal framework should offset host country constraints, meet investor needs, and reflect successful worldwide practices. It then outlines various components of an SEZ framework, including customs regimes, tax incentives, land use policies, environmental protection, and immigration rules. The goal is to establish a competitive, streamlined system to promote economic development through SEZs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 21

    Special Economic Zones Workshop

    Legal and Regulatory Issues for SEZs

    Gokhan Akinci
    Foreign Investment Advisory Services

    New Delhi, India


    April 29, 2004
    Components of Legal and Regulatory
    Framework of Free Zones
    Special Economic Zones need flexibility and competitiveness
    – Economic development through integrated, multi-disciplinary planning
    – Aims to develop new competitive advantages through integration of: larger
    areas, usage of integrated infrastructure, broader economic activities,
    policy liberalization, deregulation of utilities and one-stop administration

    => Optimal SEZ legal and regulatory framework should


    incorporate three sets of factors:
    – Configured to offset the constraints operating in the host country, and
    should reflect that country’s comparative advantages
    – Meet the needs of foreign and local investors in terms of incentives,
    services, and amenities
    – Package of services and incentives offered reflect the experience of
    successful SEZs worldwide, and should be competitive with these zones
    Overall Framework

    ¾ Whole idea of quality in all aspects of the SEZ


    investment climate aiming to offset market/policy
    inefficiencies
    ¾ In line with int’l best practice/standards
    ¾ Application of national regimes
    ¾ More streamlined approach
    ¾ Post audit
    ¾ Tailored to the needs of occupants
    ¾ Benefits from being in an environment of
    ¾ Compliance
    Regulatory Hierarchy

    International Home Individual Internal


    Agreements Country Free
    SEZZone Investor
    Laws Regulations Guidelines
    ƒ WTO
    SEZ Law
    ƒ Free Zones ƒ Policies • Employee
    ƒ ILO Regulations
    ƒ Investment ƒ Operating and Codes
    ƒ Bilateral trade Guidelines
    agreements ƒ Labor
    • Operating
    ƒ Internal Manuals
    ƒ Other ƒ Customs Regulations
    measures
    (e.g. security) ƒ Procedures • Occup. Safety
    ƒ Immigration
    Manuals and Health
    Policies
    ƒ Ports and
    Transport ƒ Emergency
    Plans • Emergency
    • Land Plans
    Components of Legal and Regulatory
    Framework of Free Zones

    Three methods:
    1. Contract with individual zone manager
    2. SEZ legislation
    3. Implementing regulations (bylaws)
    Major components:
    ¾ Overall objectives/basic concept
    ¾ Zone designation criteria including qualifying/eligible activities
    ¾ Customs Regime
    ¾ Tax regime
    ¾ Incentives package
    ¾ Development contract
    ¾ Rights and obligations of zone enterprises
    ¾ Rights and obligations of the zone manager
    SEZ Designation Criteria
    „Typical criteria include:
    4Compatibility with overall land use plan
    4Financial commitments to the project
    4Minimum physical design standards
    4Proposed development schedule
    4Financial and technical references of the zone
    development group
    4Infrastructure and other requirements from national
    and local authorities
    4Impact on off-site infrastructure, services
    Customs Practices/Procedures

    „ Streamlined inspection procedures


    4Use of a single declaration form
    4Single-point, on-site inspections
    4Responsibility of FZ enterprise to report overages, shortages &
    damaged material
    4Reliance on ex-post enforcement
    „ Transfer procedures
    4No examination at port of entry/exit
    4Provision of rapid transfer privileges
    4Application of EDI links
    SEZ Incentives

    Basic incentive ingredients of a successful SEZ regime:


    ¾ Import and Export Duty Relief
    ¾ Streamlined licensing requirements
    ¾ Tax relief
    ¾ Liberalized labor regulations (ILO standards)
    ¾ Access to Foreign Exchange
    ¾ Free Repatriation of Capital and Profits
    ¾ Local Market Access
    ¾ Procedural incentives
    ¾…
    Critical Components of SEZ
    Legal/Regulatory/Institutional Framework

    ¾ De-monopolization/deregulation of utilities and


    transportation
    ¾ Contractual arrangements with the developers
    ¾ Land and building policy
    ¾ Land use and zoning
    ¾ Property Development
    ¾ Municipal Services
    ¾ Environmental Policy
    ¾ Labor and immigration
    ¾ Regulatory Agency
    ¾ Enterprise/Resident Registration
    Contract With Zone Developer
    Contractual forms
    4BOT or BOO concession agreement
    4Simple lease or related contract
    4Equity-shifting joint venture
    Main components
    4Rights of developer/manager
    4Obligations of developer/manager
    4development schedule
    4financial commitments
    4operating commitments
    Contract With Zone Developer

    Obligations of the Government


    4Off-site infrastructure provision
    4Consolidation of land for long-term lease
    4Financing of on-site infrastructure
    4Development rights on other properties, or related
    projects
    4Tax and other concessions
    4Investment promotion support
    SEZ Firms: Rights

    Basic rights
    ¾ Repatriation, remittance of earnings, loans/contracts
    ¾ Freedom from expropriation, requisition of investment, etc.
    Specific rights
    ¾ lease or purchase properties, make/own improvements, sub-
    lease with approval
    ¾ freely sell, lease, transfer articles, services with other SEZ firms
    or overseas; associate with other firms
    ¾ engage in any licensed activity, change activity upon prior
    written notification
    ¾ enter into any foreign loan, contract
    SEZ Firms: Obligations

    Obligations of SEZ-registered firms


    4Engage in lawful and licensed activity
    4Not utilize or produce prohibited goods
    4Not engage in activities with negative environmental
    impact
    4Comply with all applicable national laws and regulations
    4Provide reports on a timely basis on production activities
    SEZ Developers/Operators:
    Rights
    Same privileges as an SEZ firms as well as:
    4Sell, lease, sub-lease its property or improvements without
    control
    4Develop zone infrastructure & facilities
    4Provide utility/other services
    4Freely receive debt or equity financing
    4Freely make investments; issue bonds, etc
    4Freely assign rights to zone revenues to foreign or domestic body
    4Freely charge and modify fees
    4Adopt rules and regulations for the zone
    4Promote zone or contract with others to do so
    SEZ Developers/Operators:
    Obligations

    4Comply with law and regulations


    4Maintain proper records and accounts
    4Maintain adequate security measures
    4Meet contractual obligations
    4Provide on-site facilities for government
    Immigration
    ¾ Visas and work permits:
    ¾ Freeport Investor (perm/temp)
    ¾ Freeport Foreign Worker
    ¾ Foreign nationals for business or tourism
    ¾ Streamlined procedures (possibly by the SEZ
    Authority):
    ¾ Foreign visitor entry
    ¾ Residency approvals
    ¾ Work permits issued by Freeport Authority
    ¾ Visitors:
    ¾ Includes anyone who is not a Freeport Resident
    ¾ Different classes, rights/duties set in rules
    Land Planning

    ¾ Regional Plan, objectives and policies:


    population, employment, environment
    ¾ Zoning map and implementation ordinance,
    including rules for land development &
    occupancy
    ¾ Construction Permits
    ¾ Occupancy Permits required for all sites
    ¾ Water conservation rules and standards.
    Environmental Protection

    ‰Environmental Management System


    ‰Conservation/Protection Strategies
    ¾ Air Quality Management Strategy
    ¾ Regional Water Quality Management Strategy
    ¾ Solid Waste Management Strategy
    ¾ Designated Conservation Areas
    ‰Clearances and Permits
    ¾ Registration Clearance
    ¾ Groundwater Use Permit
    ¾ Discharge Permit
    ¾ Air Quality Point Source Permit
    ‰Emergency and Contingency Planning
    ‰Penalties and Fines
    Transportation and Utilities

    ¾ Surface Transportation Office


    ¾ Vehicles Department
    ¾ Public Transportation Office

    ¾ Public Works Office


    ¾plans, constructs and operates public works and
    utilities systems in the Freeport Area

    ¾ Utilities Regulation Commission


    ¾licenses and regulates public works and utilities
    systems in the Freeport Area
    Enterprise/Resident Registration
    ¾ Eligibility Criteria set in rules
    ¾ negative list of economic activities
    ¾ flexibility on residence standards
    ¾ Specific Procedures for Review
    ¾ Zoning and Environmental approval for enterprises
    ¾ Visa approval for foreign residents
    ¾ Automatic Approvals
    ¾ Conversion of Existing Enterprises/Residents
    ¾ Banks and Financial Services
    Legal/Regulatory Issues for SEZs
    in South Asia
    ¾ 1ST MODEL in India happening.
    ¾How does it fit with best practices?
    ¾Major factors for success?
    ¾Privately operated
    ¾Infrastructure provision
    ¾Land Management
    ¾Environmental Protection
    ¾Labor/immigration issues
    ¾ Tax Evasion/Distortion
    ¾WTO Compatibility
    ¾MFA issues

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