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Editor in chief: Angelo Scorza
14/05/18 10:06

Italy first in Europe for ZES

The recent law allows the country to be the first founding member of the European Community and the first Western European State to adopt rules expressly directed to the regulation of exceptional instruments for accelerating economic development

The insertion of articles 4 and 5 dedicated to SEZ Special Economic Zones (ZES in the Italian version) in Decree-Law no. 91/2017, converted, with amendments, into Law no. 123/2017, containing: "Urgent provisions for the economic growth of Southern Italy", has allowed Italy to become the first founding member of the European Community and the first Western European State to adopt rules expressly directed to the regulation of these exceptional instruments for accelerating economic development, recalls Maurizio D'Amico, Secretary General of Advisory Board, FEMOZA.

With the forthcoming publication of the Decree of the Presidency of the Council of Ministers, that will implement these rules, the concrete implementation of the SEZ in the eligible areas of the South will take place.

Worldwide, the constant increase in the number of Free Zones and SEZs is justified by unequivocally symptomatic data of the positive link between these instruments and economic development, which, with reference to foreign direct investment projects (FDI), translates into average values of investments (and consequently of the average values of jobs) generated inside them objectively superior in comparison to those generated externally. At the same time, the progressive attention given by the international organizations to the proliferation of the SEZs (in which it takes place, together with the macro-category of the free zones, now more than 25% of world trade), has determined the definition of precise structural standards, to maintain the capacity of appeal towards multinational companies.

This increase occurs in a period in which in the Member States of the European Union and in the world there is a decrease in the possibility of implementing uniform rules on tax incentives to catalyze the FDI and in which the governments are asking the United Nations the adoption of more effective measures for sustainable development.

The report of the United Nations Conference on Trade and Development (UNCTAD) of 2015 "Enhancing the Contribution of Export Processing Zones to the Sustainable Development Goals" reveals a further functional development of free zones in general and specifically of special economic zones, to allow them to remain competitive and keep their ability to attract foreign capital unchanged. Especially for the SEZs, under the new regulatory frameworks and user demands, it is becoming vital to provide for precise standards of environmental protection and labor protection, as well as growing attention to corporate social responsibility in the supply chain of the multinationals companies.

At the same time, the free zones and the SEZs have to resolve the growing incompatibility of the tax incentives existing within their perimeters with respect to the rules of international trade (among other things aggravating even more, as regards the context of the European Union, the juridical regime applicable in itself very stringent because of the rules on competition and state aid), also in consideration of the fact that the derogations from the World Trade Organization (WTO) rules provided for developing countries ( for example, tax exemptions for production for export) have expired.

In fact, the competitive landscape of these instruments is changing partly due to a correction to the regime introduced by the SCM Agreement which seeks to phase out the use of certain tax subsidies for the Export Processing Zones - EPZ (substantially similar to the SEZs) with effect from 2016.

In 2015 the WTO was called to resolve the dispute determined by the European Union's complaint about the tax system in force in the EPZ of Brazil in relation to production activities in the automotive sector, to verify compliance with the SCM Agreement. This was the first dispute that arose regarding the compatibility of the tax incentives applied in the SEZs with respect to the rules governing international trade.

This shows that the attractiveness of a special economic zone for foreign investors does not lie exclusively in the presence of certain customs and tax incentives (the latter, moreover, necessarily limited over time for areas located in the European Union), but also depends for example, from the opportunity to exploit synergies with local SMEs located near special zones, to have access to the best infrastructures, to interact with research and development institutes, and to use a professionally prepared workforce. To help make the special economic zones compatible with the rules of international trade, according to UNCTAD some solutions could be hypothesized.

Firstly, the competitiveness of free zones and SEZs can be improved through the abandonment of an overly focused approach to "cost advantages", instead using sustainable business practices, to support the eco-sustainable business for companies operating within the their borders, because of the identification of the greater social and environmental responsibilities ascribed to them.

A second way is to configure the SEZs as test-drives of SDG-oriented policies (i.e. consistent with the United Nations Sustainable Development Goals for the 2015-2030 period for international development), which have not yet been adopted at national level.

Thirdly, these tools can play a pioneering role in creating and promoting clusters of environmentally sustainable technologies for innovation, which, for example, in collaboration with national research institutes and universities, could develop and support local talent, and therefore, a highly skilled labor force in this sector to guarantee a wider economic and social development.

This evolutionary scenario offers the opportunity to propose a further possible function of the Special Economic Zones, which, in parallel with the catalization of FDI , could be that of institutional laboratories aimed at verifying if the innovative policies in the economic, financial and commercial fields adopted within them, they can then be extended to the entire national territory: previous examples have occurred, for example, in China, South Africa, India.

Any governmental plan of economic and social development based on the launching of medium and long-term reforms within a country could well be reconciled with the typical SEZs regime (in which axiomatically industrial activities are regulated by more liberal economic laws, respect to those applied in the surrounding area), so as to allow legislative measures to be applied in an area similar to a so-called “Experimental territorial laboratory” of pilot policies.

A practical application of this formulation might be inspired by various proposed approaches, more or less recently, the issue of sustainable economic development, which among other things is also increasingly manifested by the need for a new conception of the business community relationship with the society, of which there are different models, such as the concept of Economics 0.0 or that of the benefit corporation. The third millennium is proposing a scenario composed of mutually interconnected factors: globalization, sustainable economic development, the new balances related to business community/civil society and enterprise/individual relationships, as well as global security.

The new probable evolutionary process, which will develop in the next few years in the world, will contribute to the creation and spread of "third generation" free zones, in which the application of economic theories will prevail more and more (such as those of P Romer and M. Klugmann) and in which will become increasingly important, as factors of investment catalysing, the introduction of infrastructural and administrative benefits compared to those of a fiscal nature, with the final aim of offering to investors an environment more and more sustainable, smart, innovative and safe.

As part of this global evolutionary process, with regard to Italy, especially if (at least in a more mature phase, after the imminent start-up in the South) will be assigned the further role of institutional incubator of innovative policies to the SEZs, the latters will represent the ideal places in which to experiment new solutions that can compose essentially and genetically divergent needs and interests, and, in short, become the ideal areas to realize the concertation between politics and the market.

If that will happen, Italy, also because of his involvement in the initiative "One Belt One Road", will serve as a model for a new Euro-Mediterranean economic dimension hypothesis, FEMOZA’s D’Amico pinpointed.


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