Special Economic Zones in the OIC Region:
Learning from Experience
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Where possible incentive frameworks should be standardised at the country level to ensure that
competition between zones within a single state does not result in the adoption of unsustainable
packages of incentives which may undermine economic performance and achieve ‘value for
money’. In addition, examples from successful SEZ programmes within OIC Member Countries
and globally indicates that incentives packages which include ‘sunset clauses’ benefit from
avoiding unsustainable guarantees of fiscal incentives.
Targeted Incentive Frameworks
Locus Economica - legal SEZ experts - recommend that incentive frameworks should typically
be based on:
 Low reliance on tax holidays and other fiscal incentives;
 Simplicity of taxes (maximum three to four taxes);
 Avoidance of duplication of national tax administration; and
 Elimination of indirect taxes.
Very importantly, fiscal incentives should be focused on the sectors and strategies which are
being targeted by the proposed zone programme and should not be used as the main
differentiator between competing zones. There should ideally be a clear and transparent link
between national economic priorities, target industry-sectors suitable for the SEZ programme
and associated incentivisation.
Examples from Case Studies
Ethiopia – Bole Lemi Industrial Park
The Bole Lemi Industrial Park created a strong incentives package whichwas developed through
well-coordinated government agencies aimed at targeting specific investors to mitigate existing
concerns and weaknesses within the Ethiopian investment environment. This included pro-
active investment strategies and well-designed investment legislation and regulation which has
resulted in a more attractive investment proposition within the zone.
Malaysia – Penang FIZs
Incentives within the Penang FIZ are determined at the federal level by the Malaysian
government which offers a comprehensive range of incentives targeted at priority sectors and
industries. Malaysia has historically taken a pro-active approach to incentive programmes,
transitioning from export orientated incentives prevalent at the beginning of their FIZ
programmes and moving to incentives aimed at technology transfer, R&D activities and skills
and training initiatives as they have sought to facilitate a shift to higher value added activities
and industries.