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China implemented “special status” project: A model for Donbas

Author : Egor Kucherevsky

15:02, 22 February 2017
China implemented “special status” project: A model for Donbas

Author : Egor Kucherevsky

It is necessary to create a favorable economic climate in order to attract capital to Donbas; and Ukraine could learn a lesson from the Chinese

15:02, 22 February 2017

Read the original text at 112.ua.

Open source

The issue of "special status" of Donbas plays an "extraordinary" role in the settlement of the eastern Ukraine conflict.

August 31, 2015 the Parliament voted in first reading for the constitutional reform on decentralization, which was supposed to give a special status to Donbas. It resulted into riots and, grenade explosions, and death of four National Guards.

Although the law on the special order of the local government in uncontrolled territories was not canceled. It will not enter into force without the election. The question remains unanswered.

"Samopomich" party has registered a draft law on the occupied territories and requires severance of economic relations with uncontrolled Donbas.

Related: Donbas trade blockade: pros and cons

The coalition and the government claim that the adoption of the document is simply dangerous. Without Donbas coal Ukraine might fail the heating season and start rolling blackouts. The deputy minister for the occupied territories George Tuka even accused the author of the document Oksana Syroid of separatism.

The topic is really painful. And the reaction should be reasonable. But not only Ukraine has faced with the issue of "special" regions.

Can a "special status" be synonymous with progress?

Hong Kong is a special administrative region of China with a population of more than 7 million people. Hong Kong's GDP per capita is 56 thousand 878 USD, Which is 4 times higher than the figure in China. For comparison: GDP per capita in Switzerland is 58 thousand 647 dollars.

Reduced state interference in the economy, the free market, and low taxes. And no capital gains tax, dividends, interest, royalties received from abroad or sent abroad at all.

Since 1841, Hong Kong has been a free port, imported goods are not subjected to customs duty. It is a pleasant fact that allows us to purchase some popular products at a price lower than in their country of production. However, there is a group of excisable goods: alcoholic beverages, tobacco, methyl alcohol, and mineral oil.

There are two official languages - Chinese and English.

Territory management is carried out in the course of "one country, two systems." The sovereignty over the territory belongs to the People's Republic of China, but the reins are in the hands of Hong Kong. The Chinese government is involved only in the sphere of defense and the forming foreign policy.

Related: Reintegrating Donbas: Ukraine wants to cut water supply and social benefits

All these things affect the image of the indigenous people of Hong Kong. They hardly could be called a typical Chinese, and they would not call themselves so. This is due to the fact that Hong Kong people have long lived in a developed economic environment, while residents of mainland China recently started getting back on track the average level of prosperity. However, this does not prevent them to buy property in Hong Kong, and "local bourgeoisie" are not happy with that.

Since 1999, Macau enjoys wide autonomy. Economic system and of Macau are similar to Hong Kong but the activities and core earnings are radically different from the "business brother."

Macau is a city with a rich infrastructure of entertainment, including casino, gaming house, racetracks, restaurants, and nightclubs. Gambling brings the city about 70% of total profits. Also textile industry is developed in Macau.

Related: Reintegrating Donbas: experience of Basque Country (Spain)

The population of Macau is about 230 thousand residents. More than 2/3 of them are involved in the gambling industry. GDP per capita is 101 thousand 293 USD, and is the highest GDP in China. Compared with other countries, Macau is second only to Qatar, with its record-breaking 132 thousand 870 USD.

Macau is separated from Hong Kong by some 60 kilometers of water surface of the South China Sea, but the city is developing under the flag of another colonial power - Portugal. The trading value of Macau was unprecedented in the region, but it began to lose ground in favor of Hong Kong, which passed under British control since 1841.

Macau has two official languages - Chinese and Portuguese, but the value of the latter is small. The names of the streets in Macau are written in both Portuguese and Chinese, but in fact almost none of the locals does not speak it.

The path of Hong Kong's and Macau’s autonomy lasts for 20 years.

Related: Mass demonstrations regarding Donbas trade blockade were held in Kyiv

In 1997, Hong Kong came under Chinese sovereignty. The transfer has been issued by the Sino-British Declaration. According to the basic law of Hong Kong, the territory has received broad autonomy for 50 years. This autonomy means independence of the executive, legislative and judicial branches. However, Beijing was far-sighted in the issue of the election system in Hong Kong. The head of Hong Kong is elected by an electoral college, which is formed by voting of 38 functional constituencies representing business associations, large sectors of the economy. Big business in Hong Kong depends on the Chinese market, which determines their vote in favor of the pro-Beijing candidate.

The main goal of China in the course of "one country, two systems" is intended to be reunited with the mainland of the previously lost territories of Hong Kong, Macau, and Taiwan. Due to the rapid economic development of these areas, China is afraid of losing control over these regions and tries to gradually tighten nuts in those areas where this is possible. An illustrative example is a series of protests in Hong Kong in 2014 and 2015, the so-called "Umbrella Revolution."

Related: EU calls to stop Donbas trade blockade

The main legislative body, Standing Committee of the National People's Congress, tried to reform the electoral system in the upcoming 2017elections of Hong Kong executive. Beijing decided that the nominating committee must first approve the three candidates, and then move to universal suffrage. This decision angered the residents of Hong Kong. Crowds of protesters fighting for cancellation of the reforms, insisting on the balloting of all candidates.

After almost a year of Hong Kong Legislative Council cancelled the reform. The protesters left the streets, but the sediment has remained. Hong Kongers are sensitive to Beijing's encroachments on their rights. However, China has no plans to take the position, following the planned course.

* * *

Analyzing historical experience, we can come to the model of the future Donbas.

East of Ukraine is not “saturated” with the age-old trade, but has a strong industrial base. Each fallen shell destroys this base, together with the economic attractiveness. The first step should be a complete cease-fire and no prerequisites for the resumption of hostilities.

In order to attract capital to the region is necessary to create a favorable economic climate. In this case, it can help establish a free industrial-economic zone trade.

Related: Groysman: Donbas blockade may lead to disconnection of electricity and heat

Taking into account the specifics of industrial Donbas, the components of such a zone would be:

  1.  free customs zone (no customs duty on the goods imported for the needs of the region)
  2. preferential tax regime (companies operating in the region would get some privileges to certain types of taxes. Revenues from these taxes partially or fully remain in the region and go, for example, for the development of infrastructure)
  3. low rents on land and benefits for utilities for the investor companies
  4. free withdrawal of foreign capital gains.

With the right management and coordination, the commercial and social life in the region would resume very soon. Capital inflows would create new jobs, increasing the welfare of citizens, and the region will acquire a qualitatively new Ukrainian future and negate any doubts in favor of its identity.

Related: Alchevsk steel mill ceases to work due to trade blockade in Donbas

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