Ukraine
The experience of Ukraine is discussed for the purpose of providing a sharp contrast with that of other countries. Ukraine is located in Eastern Europe and is considered a big country with an energy consumption twice that of Germany’s. It was one of the founding republics of the former Union of Soviet Socialist Republics or the USSR (Soviet Union for short). However, with the collapse of the USSR in 1991, this republic became independent again and implemented several economic reforms to transform itself from being a centrally-planned economy to a free market economy. For 8 continuous years, the country’s economy declined and registered some growth of 7% annually starting only in year 2000. The establishment of economic zones within the country was part of the economic reforms being implemented to spur the nation towards some growth.
But in the case of Ukraine, its export zones became centers of criminal activity instead. Their zones attracted shady investors, industrialists, and financiers who put up business fronts that engaged in smuggling, money laundering, the illegal assembly of some consumer products, importations of counterfeit goods, and intellectual piracy. According to Dr. Sam Vaknin, these “fiscal monstrosities” of low customs duties and tax-free zones located in the country’s extraterritorial hubs effectively give Ukraine an unfair trade advantage as these incentives are actually considered as export subsidies. The International Monetary Fund (IMF) and other multi-lateral lenders and donors are concerned about the huge revenue losses in a struggling economy and recommended that SEZ alone in themselves are insufficient to attract foreign direct investments or to foster economic growth and enhance consumer prosperity.
http://www.globalpolitician.com/print.asp?id=1554
Most central and eastern European countries’ experience with SEZ have been dismal failures with perhaps a few exceptions like that of Poland. Majority of research show that political stability and macro-economic factors also play a big part in the eventual success of any country’s experimentation with SEZ. Basic infrastructure such as ports, roads, airports, stable water and power supplies and efficient sanitation systems are essential to any SEZ and their operations must be integrated into a nation’s overall economic strategy and linked into a local regional economy to be meaningful.
This is the case with South Korea where its export zones concentrated on production of higher value-added items and upgraded workers’ skills through technology transfers. More importantly, its strategic approach of special economic zones is vastly different from that of other countries by focusing on the broader institutional and economic contexts of the country rather than treating them as an economy within an economy. Although it is much easier to resolve problems of infrastructure and governance within a smaller geographical area (such as within a SEZ) than solving them countrywide, the South Koreans emphasize that special economic zones are not alternatives to a good national economic development plan. For a lengthier discussion, please see this site:
http://eng.ifez.go.kr/guide/org/special-economic-zone.asp