Private Sector Investments in Economic Zones Development Key Mechanisms and International Trends Part 1 Bakkar Ali Maasher Business Development Division

About ICD Multilateral financial institution established in November 1999 as the private sector development arm of IDB Group Authorized capital: US$ 2 billion Membership: 45 member countries and 5 public financial institutions. Total projects approved over 142 with 120 active and completed projects, in more than 28 member countries Areas: Islamic Finance and development focused economic sectors

ICD Objectives Provide innovative financial products and services to the Private Sector with high growth potential and development effectiveness Encourage the development of Islamic Finance industry and capital markets in member countries Advise governments and private sector entities Facilitate cross border business and investments Support SME capacity development and entrepreneurship

Operations by Region

Operations by Sector

A broad definition for Zones Special Economic Zone (SEZ) a geographical delimited area that has economic laws more liberal than a country's typical economic laws. eligibility for benefits based upon physical location within the zone has single management / administration usually has separate customers area and streamlined procedures Some evolve into highly specialized facilities configured to the needs of specific industries and activities.

Types of zones are also broad Source: SPECIAL ECONOMIC ZONES, FIAS Report, April 2008 Free trade zones (FTZs). Export processing zones. Hybrid EPZs. Enterprise zones. Free-ports. Specialized zones. Single factory EPZ schemes

Economic drivers for Zones Development Part of a wider economic reform to stimulate exports To alleviate growing unemployment pressures To pilot new policies and approaches in a controlled environment To enhance competitiveness of manufactures and service providers through the agglomeration effect To attract foreign direct investments To provide for “common infrastructure” efficiencies

Trends in Zones Developments Shift from pure export processing toward more emphasize on integrating zones into the domestic economy New zone development projects are increasingly treated like any other large scale real estate development project Expansion for zone activities from pure industrial to include more commercial and professional services More incentives to attract private sector developers and operators Privatization of services provided to tenants including utilities provision, tailored facilities development and value added professional services

Success factors for effective private sector involvement Reduced unfair competition between public and private zones. Subsidization should focus on SMEs zones Unbundled regulatory, development and operational roles Effective PPP models for zone development projects Integrated approach to infrastructure provision

Private Sector role is key ! “On the whole, privately operated zones tend to offer better facilities and amenities, command higher prices from tenants and attract “higher end” types of activities. As a result, private zones generally have been more profitable and have had better social and environmental track records than public zones throughout the world (with East Asian government-run zones the notable exception).” Source: SPECIAL ECONOMIC ZONES, FIAS Report, April 2008