Economic Development Zones, also known as Special Economic Zones, offer incentives to businesses to encourage growth. Governments can adopt economic development goals for underdeveloped regions, with exact geographic boundaries and incentives such as tax breaks and government loans. India and China have successfully used economic development zones to stimulate foreign investment and create job opportunities.
Economic Development Zones are government-designated geographic regions that offer special economic incentives to businesses to encourage growth. They are also known as Special Economic Zones (SEZs), Corporate Zones and Opportunity Zones. In some countries, economic development zones are labeled according to the benefits they offer to businesses. For example, some areas are called free trade zones or export processing zones. This type of business development model has been successfully employed around the world, in countries such as China, India, the United States, and Brazil.
Governments can adopt economic development goals for underdeveloped or underdeveloped geographic regions. Economists often believe that stimulating business investment improves the surrounding community by creating jobs, stabilizing neighborhoods, and increasing access to goods and services. In some cases, areas are targeted at a specific type of business growth. For example, a government might target an area for job growth and create economic development zones that offer incentives for manufacturing firms to target one of the areas. Similarly, a government may want to stimulate the economy by increasing exports, so it will establish Export Processing Economic Development Zones that provide incentives to businesses conducting the desired business in the target areas.
Economic development zones have exact geographic boundaries that can be outlined on a map. Companies located in the target area are typically eligible for various types of government incentives, including tax breaks, special loans, government loan guarantees and equity investments. The government can also issue municipal bonds intended to benefit businesses within the zone. From a commercial point of view, the incentives offered by the area can increase overall profitability by a high margin. For example, tax breaks for locating in an area typically involve property tax breaks and tax credits for hiring local workers that can be good for 10 years or more.
India has made effective use of economic development zones to stimulate foreign direct investment. The country has set up a number of economic incentives for foreign companies to locate targeted areas and start outsourcing operations. This resulted in the development of an entire outsourcing industry, especially in customer service, where foreign companies would either move part of their operations to India or form a partnership with an Indian company to provide remote services to the company’s client base in their home country.
China is another country that has successfully used economic development zones. Foreign companies located in the zones are eligible for numerous government incentives that improve profitability. The country can also benefit from this strategy through economic growth and more job opportunities for the country’s workforce.
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