Special Economic Zones in the OIC Region:
Learning from Experience
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There are a number of significant challenges associated with the design and implementation of
OSS structures. Firstly, the range of activities, services and functions that should be included
within the OSS needs to be defined and agreed. Following this, significant effort will have to be
expended in agreeing the mechanism for the various entities involved to pass over control of
functions to the OSS. These functions will be wide-ranging and will include: customs processes,
business licencing, environmental permits, training and labour force related activities, utilities
and energy. Brokering agreement across this diverse range of government functions will be
extremely time-consuming and should not be under-estimated.
Examples from OIC Member Countries
Malaysia – Penang
Prior to the formation of Invest Penang, the PDC carried out inward investment and promotion
activities for the state of Penang and its FIZs and Industrial Estates. In 2004, Invest Penang was
created however to formalise the ‘one-stop-shop’ responsibilities and functions of the PDC. The
promotion agency now provides comprehensive information on Penang’s investment
opportunities and facilitates every stage of the investment process.
Nigeria – Lekki Free Zone
The creation of new legislative and regulatory policies in Nigeria with regards to Free Zone
development, coupled with greater political stability and economic growth has enabled the Free
Zones programme to advance significantly in the early 2000’s.
6.2.4 Incentives Framework
The reduction of administrative burdens is key to a successful SEZ programme. Non-fiscal
incentives, which facilitate the ease of doing business within SEZs, are now often cited as more
important to investors than the implementation of fiscal benefits, particularly with regards to
the provision of a genuine ‘one-stop-shop’ which can expedite the acquisition of licenses and
fast-track clearance processes. 125
With regards to fiscal incentives, there is a key balance that needs to be maintained between
offering investors, for example, lower taxes and over-subsidising the SEZ programme. Incentives
are key to attracting inward investment within SEZs and should provide the zone with clear,
comparative fiscal advantages compared to areas outside the zones. The rapid increase of SEZ
development globally, however, provides challenges in defining unique incentives programmes
and introduces a risk that governments will pursue a ‘race to the bottom’ in order to undercut
more mature economies and zone developments.
125 A. Mukherjee et al. (2016) Special Economic Zones in India. ICRIER, India.