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Possible creation of free economic zone in Ukraine’s Donbas: What is it about?

Author : 112.ua News Agency

Source : 112 Ukraine

This idea is not new, free economic zones already exist in a number of states. It is still unclear how seriously this idea is being considered in Ukraine. We will tell you what this is about in general
18:59, 5 August 2020

Head of the Ukrainian delegation to the Trilateral Contact Group (TCG) in Minsk Leonid Kravchuk
RIA Novosti

Ukraine can offer to create a free economic zone (FEZ) in Donbas. This is one of the possible compromises in the talks in Minsk, as the new head of the Ukrainian delegation to the Trilateral Contact Group Leonid Kravchuk believes.

“We can offer to consider creation of a free economic zone in these areas. By the way, in 1993, as president, I signed a decree establishing a free economic zone in these regions, but then it somehow was lost. But this does not mean that it is impossible to return to this issue and discuss it” he said on The Pulse talk show on 112 Ukraine TV channel.

According to Kravchuk, the FEZ can provide more opportunities and legal freedoms in Donbas.

“This is not news

So says the Vice Prime Minister of Ukraine Oleksiy Reznikov.

Deputy Prime Minister of Ukraine, Minister for Reintegration of the Temporary Occupied Territories
bigmir.net

“This is the issue we are not just considering...We call it lands, or territories, of priority development. This is a working name. Now we are talking that we have to create an opportunity for priority development of government-controlled Luhansk, Donetsk, and Kherson regions, to make growth points there, to attract investments, to establish certain preferential regimes there,” UNN agency cited him as saying.  

According to Reznikov, the point is to provide growth points, to promote investors’ desire to come with venture capital and start investing there.

So, what is a free economic zone anyway?

A free economic zone or it is also called special economic zone (SEZ) - is an area in a country that is subject to different economic regulations than other regions within the same country. The SEZ economic regulations tend to be conducive to–and attract–foreign direct investment.

A special economic zone is an area in a country that is subject to different economic regulations than other regions within the same country.

The economic regulations of special economic zones tend to be conducive to–and attract–foreign direct investment

Special economic zones are typically created in order to facilitate rapid economic growth by leveraging tax incentives to attract foreign investment and spark technological advancement.

So the goals are:

- to attract FDI;

- to create new working places;

- to develop an export base;

- to develop import phase-out, etc.

For investors SEZs can be interesting due to:

- bringing production closer to the consumer;

- minimization of expenditures for customs duties;

- access to infrastructure;

- use of cheaper labor;

- reduction of administrative barriers.

Of course, all of the above implies the development of the territory in which the SEZ was established. In the context of Donbas it can be very appropriate.

How is it in other countries?

There are more than 50 SEZs in the United States, through which pass 3% of national imports and 2.5% of exports. In South Korea, there are 170 such zones. In China, economic special zones appeared back in 1979.

In neighboring Belarus, SEZs were created in the 90s, now there are six such zones in the country. Poland can also tell of its experience of creating SEZs.

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