Dear Editor – Last week a Radio New Zealand (RNZI) news bulletin reported that Prime Minister, the Hon. Manasseh Sogavare, had announced his government would soon put in place legislation to guide the establishment of Special Economic Zones in the country.
The Prime Minister was quoted as saying the idea was to zone the country into various economic areas so different provinces could enter into activities that would be specifically feasible for their people.
The PM reportedly added that it was vital the economic zones secured the right kind of investment and the right investors.
I have written previously to the local media on my observations of how SEZ’s operate in Thailand and the economic benefits I have witnessed in my 10 years in the country.
Residing, as I do, next door to Myanmar I have been particularly keen to observe how that country has recently set out on a path to encourage foreign investment through a number of policy and legal initiatives, including the establishment of its own SEZs.
The formation of liberalized foreign investment rules since 2012 has clearly encouraged investor interest in Myanmar and, with a focus on SEZs, it has provided Myanmar with the opportunity to encourage investment in export-focused industries, offering investment incentives and freeing foreign investors from burdensome regulatory requirements some encounter within existing foreign investment law procedure.
It is still early days, but already I perceive the Special Economic Zone Law helping Myanmar meet its domestic and international commitments to economic liberalization.
Investors approved under the Special Economic Zone Law process also enjoy significant tax incentives, such as an average of 50 percent tax relief during the first five years of operation and partial relief on re-investments of export profits.
In addition, certain export goods produced within a Special Economic Zone may be exempt from customs duties during the first five years of operation, with additional exemptions possible during year’s six to ten.
Import duty relief may be granted for importation of raw materials, equipment, and some goods related to manufacture, with tax relief even extended to profits obtained from offshore sales during the first five years of operation.
Non-tax incentives include the ability for investors to secure long-term leases of up to 75 years, which is more than is currently available for investors under the Myanmar Companies Act.
There are also freedoms to repatriate profits from operations and protections against nationalization.
The development of SEZs in Myanmar has the potential to bring significant economic benefits to the country and already I have witnessed investors from China, Japan and France trading and profiting from the country’s SEZs.
It is to be hoped the Solomon Islands will also attract foreign investment and transfer of capital and technology once the country has its own Special Economic Zone Law and legislation providing for duty relief and tax incentives for potential investors.
Myanmar has put much into infrastructure development, such as roads, bridges and transportation networks to ensure the SEZs are accessible and exports and goods can be easily transported.
I would imagine such developments will be needed in the Solomon Islands as a first priority along with the introduction of the necessary legislation, as I have covered.