‘export free zone’ in Ireland, ‘maquiladora’ in Mexico, ‘duty free export processing zone’ and ‘free export zone’ in the Republic of Korea, ‘export processing zone’ in the Philippines, ‘investment promotion zone’ in Sri Lanka, ‘foreign trade zone’ in India and ‘free zone’ in the United Arab Emirates.”<sup>4</sup> “Development Areas” can also fit the definition of SEZ.

SEZs are a long-established part of international trade. “Entrepots,” warehouses where merchandise can be stored, manipulated, and in some cases processed, without the payment of duties and taxes, have existed for many centuries. City-wide free zones on international trade routes were also common. The first modern industrial free zone was established in Shannon, Ireland in 1959. Today, SEZ programs exist in most countries around the world.

Developing countries have increasingly used SEZs as an important economic development tool. A recent survey found over 2,300 SEZs in 119 developing and transition countries around the world.<sup>5</sup> Starting in the late 1970s, China used SEZs to pioneer new economic policies, provide modern infrastructure and attract investment for export-oriented industries.<sup>6</sup> A 2008 WTO trade policy review of China found that as of 2006 there were 660 SEZs and other development zones authorized by the central government and an additional 1,346 development zones approved by local governments.<sup>7</sup> Following the example of China, Vietnam has also extensively used SEZs to introduce new economic policies, provide improved infrastructure and attract investment. As of July 2005, Vietnam had established 124 industrial and export processing zones, attracting 3,612 investment projects amounting to over $15 billion.<sup>8</sup> But SEZ proliferation is not limited to Asia, and significant numbers of zones exist in all World Bank regions (Figure 1).

> 4 Michael Engman, Osamu Onodera and Enrico Pinali, Export Processing Zones: Past and Future Role in Trade and Development, OECD Trade Policy Working Paper No. 53, TD//TC/WP(2006)39/FINAL, p. 10. 5 See Gökhan Akinci and James Crittle, Special Economic Zones: Performance, Lessons Learned, and Implications for Zone Development (The World Bank Group/FIAS, April 2008).

> 6 See, e.g., Meng Guangwen, The Theory and Practice of Free Economic Zones: a Case Study of Tianjin, People’s Republic of China (doctoral thesis, Ruprecht-Karls University of Heidelberg, Germany, 2003); Edward Graham, Do export processing zones attract FDI and its benefits? The experience from China, International Economics and Economic Policy. (Springer-Verlag 2004).

> 7 Trade Policy Review China, Report by the Secretariat, WT/TPR.S/199 (16 April 2008), Table AIII.5. These zones have various names, such as “Special Economic Zone”, “New Area”, “Open City”, “Border City”, Free-Trade Zones”, Export Processing Zones”, “Economic and Technological Development Zones”, “Border Economic Cooperative Areas”, etc. The local zones and some of the national zones listed do not exempt goods in the zone from duties and taxes and therefore do not fall within this Paper’s definition of SEZ.

> 8   Report of the Working Party on the Accession of Vietnam, WT/ACC/VNM/48 (27 October 2006), p. 86.

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