SOUTHERN FEDERAL UNIVERSITY
Economic Faculty
TEACHING MATERIALS
Special Academic Discipline
«Special Economic Zones and Offshore
Territories»
Programme originator - PhD. Olga Sinskaya
Rostov-on-Don
2011
1
1. EXECUTIVE SUMMERY
For the developed and developing countries, Special Economic Zones
(SEZs) traditionally have had both a policy and infrastructure rationale. In terms of
policy, the SEZs can be a useful tool as part of an overall economic growth
strategy to enhance industry competitiveness and attract foreign direct investment
(FDI). Through SEZs, governments aim to develop and diversify export while
maintaining protective barriers, to create jobs, and to pilot new policies and
approaches (for example, in customs, legal, labor, and public-private partnership
aspects). SEZs also allow for more efficient government supervision of enterprises,
provision of off-site infrastructure, and environmental control.
This discipline examines the evolution of SEZs with concentration on last 30
years’ experience in zones reviewing development patterns and economic impact
of zones worldwide. The experience shows that while zones have been effective in
addressing economic growth and development objectives, they have not been
uniformly successful; success in East Asia and Latin America have been difficult
to replicate, particularly in Africa, and many zones have failed. Moreover since the
on-set of zone development in developing countries, concerns have been raised
about the impact on employment (in terms of gender, wage levels and benefits,
workers’ rights and work condition), the environment, and related social factors.
The other aspect of SEZs is the modern offshore international business
which spreads to the world economy in different spheres.
The central goal of the “Special Economic Zones and Offshore Territories”
Special Academic Discipline is presenting to students the main fundamental
principles of international business in terms of Special Economic Areas. The main
idea is to understand any advantages and disadvantages of using business schemes
and projects in the Free Economic Zones or Offshore Territories. Moreover there
will be demonstrated the experience of different countries in the sphere of creating
special economic order for selected territories and analysis the opportunities for
Russian taxpayers in using privileges that some countries can suggest for
international actors.
After completing the “Special Economic Zones and Offshore Territories”
course, the students are expected to be able:
 to understand the essence and nature of Special / Free Economic Zones
and their operations in different countries with various level of economic
development;
 to realize any consequences for national economy using the tool of free
economic areas;
 to know special characteristics of business in terms of offshore systems;
 to define types and kinds of economic areas and their functions and aims
as well;
 to know history and methodology of Russian Special Economic Zones;
 to be familiar with all privileges and special services for Russian Special
Economic Zones’ residents;
2
 to understand main schemes of work with offshore companies;
to discern the role of Free Economic Areas within contemporary global
economy.
The structure of discipline is consists of 4 programme units (modules).
Unit 1 “The Theory and Classification of Special Economic Zones” creates
the subject matter, structure, goal and objectives, evolution and modern trends of
SEZs development. There will be discovered the basis and driving forces for
special economic zones functioning in terms of modern global economy.
Unit 2 «The Creation and Operation of Special Economic Zones: International
Experience» is devoted to international experience in sphere of SEZs concept
realizing. There will be developed different ideas of special economic zones’ role
for different countries, their special characteristics and trends for developed and
developing countries. Moreover there will be a special review of Russian and
Chinese SEZs experience. The special attention will be paid to scientific-technical
economic zones in the international practice.
Unit 3 «The Offshore Territories in the Contemporary World Economy»
discovers main points of offshore territories phenomenon and their impact on
different sides of economy, finance and social life.
Unit 4 «The Principles of Offshore Business Regulation» brings main items of
offshore territories regulations internationally. Moreover the national level of
regulations is important in context of economic security and fight with the illegal
incomes and money laundry.
The following methods and forms of study are used in the course:
 Lectures with presentations
 Colloquium
 Writing
 Self-study
 Use of different reference books and Internet resources
At the end of the course the students are supposed to write an essay and to
pass a test. Upon the successful completion the students will gain 6 credits.
Author of the discipline is Olga Sinskaya, PhD, senior lecturer of
International Relations and World Economy Department, Economic Faculty of
Southern Federal University, Rostov-on-Don, Russian Federation
+7 863 240 96 27
sinskaya@mail.ru
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2. COURSE SCHEDULE
№
Subject
Duration
Total
Total
1
1.1
1.2
2
Class hours
Lectures Seminars
Self-study
Unit 1 «The Theory and
Classification of Special
Economic Zones»
Nature and essence of Special
Economic Zones. The role and
position of Special Economic
Zones in the system of World
Economic Relations
5
4
2
2
1
5
4
4
--
1
Special Economic Zones are
the tools of attraction of
investments to develop regional
economy
Unit 2 «The Creation and
Operation of Special
Economic Zones:
International Experience»
2.1
Special Economic Zones in the
countries with different level of
economic development
7
3
2
1
4
2.2
Special Economic Zones in the
transition economies
10
4
2
2
6
2.3
Innovative, scientific and
technological economic areas
3
2
2
--
1
3
Unit 3 «The Offshore
Territories in the
Contemporary World
Economy»
3.1
Essence and role of Offshore
zones in the modern global
economy
5
4
4
--
1
3.2
Offshore business: international
experience
7
6
4
2
1
3.3
Offshore business in Russia and
for Russian companies
4
3
2
1
1
4
4
Unit 4 «The Principles of
Offshore Business
Regulation»
4.1
International practice to
regulate offshore companies
activity
3
2
2
-
1
4.2
Offshore regulation in Russia
2
2
2
-
Summarizing discussion,
taking the test
Total:
8
2
-
2
6
59
36
26
10
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3. PROGRAMME
Unit 1 “The Theory and Classification of Special Economic Zones”
The integrated aim of the Unit. This Unit is devoted to the essence of
actual thing in modern economic life of different countries which is called Special
Economic Zones. These zones are used by governments as the specific testing area
for examination of new policies and regulation tools in the sphere of economic and
social life. This block of lectures contents the following topics: SEZs essence,
evolution, classification, motivation of SEZs creation, goals difference for
developed and developing countries, attraction for investors, privileges for
residents.
Subject 1.1. Nature and essence of Special Economic Zones. The role
and position of Special Economic Zones in the system of World Economic
Relations.
Introduction. The place of Special Economic Zones and Offshore Territories
in the system of modern International Economy.
Different scientific approaches to the definition of Special Economic Zones.
SEZs as a factor of accelerated economic growth. Specific features and SEZs
characteristics. Special Economic Zone in terms of Russian Federal Law “About
Special Economic Zones”.
The history of SEZs creation in different countries in the world. Evolution of
different SEZs types. International experience. Diversifications of functions and
activities within SEZs. SEZs generations.
Criterions of SEZs classifications. SEZs activity types. SEZs border types.
Full-serviced zones. Cross-border co-operation.
Goals and objects of Special Economic Zones. Role of SEZs for developed
and developing countries.
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Subject 1.2. Special Economic Zones are the tools of attraction of
investments to develop regional economy.
Preconditions of SEZs creation and developing which are attractive for
foreign investors. Infrastructure requirement as one of the most important things to
attract international capital sources.
Types of business privileges in the SEZs. Special tools of FDI attractions to
develop industrial and market potential: international practice.
Principles of business activity in the SEZs for attracting and utilizing of
internal and external territory potential. Motivation system to attract foreign
investors to the special economic zone. Principle of competitive advantages in the
SEZs’ market. Costs necessary to create an effective competitive zone.
International experience of foreign investment attraction.
Main directions of FDI’s attracted through the SEZs and their impact on the
national economy.
Unit 2 «The Creation and Operation of Special Economic Zones:
International Experience»
The integrated aim of the Unit. The main idea of this module (block of
lectures) is to research a special experience of foreign countries in the sphere of
creation and developing of special economic zones. In spite of a lot of differences
with the goals and objectives of SEZs in different countries with different levels of
development, the tool of SEZs is considered as a very effective and attractive to
stimulate business activities. Different countries use a wide range of tools within
SEZs in accordance with their aims and economic policies. The study of
international experience is more than actual today for Russian economy while it
tries to develop an effective concept for Russian SEZs.
Subject 2.1. Special Economic Zones in the countries with different level
of economic development.
Zones of Foreign Trades (ZFT) in USA. Special characteristics of American
ZFT. Types of ZFT: GP- and SP-zones. Enterprise zones. Key feature of export
processing zones in USA. NAFTA as an international integration special economic
zone with USA participation.
Key features of SEZs activities in some European high developed countries
in the XX-XXI centuries. SEZs of Germany, Great Britain, Denmark, Ireland
(“Shannon”) etc.
Main types of Japanese SEZs: technopolices and Free Trades Areas (FTA).
Government support of SEZs in Japan.
SEZs is the fundament for the national concept of economic growth in
developing countries. Special characteristics of SEZs in developing countries.
Their key features. Role of export processing zones for economic growth
promotion in developing countries. Export Processing Zones in Syria, India, South
Korea, Indonesia, Philippines etc.
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Subject 2.2. Special Economic Zones in the transition economies.
Countries of Baltic, Central and East Europe in the SEZs market. Goals and
objectives of SEZs in these countries. Key features of Free Customs Zones in the
European countries in transition. SEZs of former Yugoslavia countries, Bulgaria,
Lithuania and other Baltic and Central and East Europe countries.
Chinese experience is an example of effective implementation of SEZs ideas
to the national economy. The role of SEZs for integration of Chinese national
economy into Global International Economic System. SEZs of China is a channel
of attraction of foreign direct investment and technology, management experience
and finance as well. Stages of SEZs development in China. Key features of state
policy for investment attraction in China. Seaside Open Cities in China and their
role for the internal districts development. Difficulties and problems of SEZs
development in China. “The Belt of Openness” in the Chinese economy.
Main characteristics of Russian SEZs development. Stages of SEZs’
activities in Russia. The Programme of SEZs development in USSR and main
reasons of its failure. Creation of SEZs in some regions of Russian Federation in
90-s XX. Goals and objectives of first Russian SEZs. Reason of ineffective SEZs
performance. Federal Law “About Special Economic Zones”, 2005. Concept,
ideas, goals and objectives of new SEZs in Russia created in terms of Federal Law.
Russian Federal Agency of SEZs Regulations.
Special Economic Zones in the CIS countries (Belarus, Ukraine,
Kazakhstan).
Subject 2.3. Innovative, scientific and technological economic areas
The role of scientific and technological economic zones for the innovative
process development and hi-end technologies realizing. Elements of the innovative
activities mechanism I the system of market economy.
Modifications of scientific and technological economic zones. Parks of
Research and Development. Technopolices and Technoparks.
Scientific-Technical cooperation within the technological economic zones,
parks of research and development, innovation and research areas.
Structure of the biggest technological economic zones.
Key features of technological economic zones in countries with different
level of development. Technopolices in Japan and Techoparks in USA.
Characteristics of technological economic zones in Europe and Asia. Russian
technological economic zones.
Unit 3 «The Offshore Territories in the Contemporary World Economy»
The integrated aim of the Unit. This module (the block of lecturers) opens the
essence of offshore zones in the contemporary system if World Economy. Despite
of rather short history of this tool of regional economy stimulation, this type of
SEZs has a significant role in the global business activities. A half of all finance
transactions and one third of world turnover is provided through the offshore
business structures. There are more than 2000 units in the world where the offshore
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regimes are used. The most business organizations use offshore jurisdiction for
their business deals. This module gives the explanation of offshore business
essence, provides main business schemes of utilizing offshore zones for regular
practice of some companies, describes the classification of main offshore
jurisdiction.
Subject 3.1. Essence and role of Offshore zones in the modern global
economy
Actuality and range of offshore activity in terms of modern World Economy.
The role of offshore territory for the contemporary global and national economy.
Factors of demand increasing for services provided by offshore companies. Aims
and methods of offshore companies / zones utilizing in terms of modern
International Economic Relations.
Main attributes of offshore jurisdictions.
Offshore zones variety. “Tax Heaven”. Countries which provide preferential
conditions for special activity. International treatments of avoidance of double
taxation. Offshore territories. Untraditional offshore zones (Ireland, Cyprus).
Offshore centers specialization. Offshore centers and zones for banking and
insurance activity. Investment holding centers. Offshore zones for ship-owners and
international transportation.
Subject 3.2. Offshore business: international experience
Basics of offshore business. Adequate degree of business unit residence for
taxation. Offshore business. Offshore company. Organizational and legal forms of
offshore business. Tax transparency.
Main characteristics of offshore firms’ attributes.
Methods of offshore companies utilizing for needs of legal bodies and
private persons.
Optimization of legal bodies’ activities. Tax planning. The optimal finance
channel for capital flow among different countries. The tool of interest foundation.
International trust. Reliability of finance assets and risk management.
Offshore zones for private persons.
Offshore companies functions. Offshore company is the import supplier.
Offshore company is the export purchaser. Offshore company is the contractor.
Offshore company is the property owner. Offshore company is the bank account
holder. Offshore company is the employer. Offshore company is the leasing
company. Offshore company is the ship-owner.
Subject 3.3. Offshore business in Russia and for Russian companies
Offshore business in Russia: the current state and direction of development.
Foreign offshore units and Russian territories with the privileged tax regimes.
Reasons of demand growth of offshore service.
Main characteristics of some Russian offshore territories: zone of economic
favor “Ingushetia”, Novgorod region zone of economic favor, special tax zones in
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Kalmykia etc. (before the Federal Russian Law “About special economic areas”
adoption in 2005).
Main reasons of disadvantageous of former Russian offshore territories.
Special characteristics of offshore business in Russia. Methods of tax
planning realized in Russia. The schemes of tax minimizing. Registrar companies
and their activity in Russia. Registrar companies requirements.
Offshore business fraud and methods of avoid it.
Unit 4 «The Principles of Offshore Business Regulation»
The integrated aim of the Unit. The problem of offshore business
adjustment seems to be very sharp under the modern economic circumstances. The
World Economy accumulated a huge experience in both sides, positive and
negative, in the field of relations between National Government and Offshore
Companies. The border between legal and illegal business is very transparent. The
wrongful acts lead the whole countries to the degradation of their social and
economic systems. The tools of legal and illegal business are almost the same. That
is why the Global Community wants to make the business activity more
transparent to increase the possibility of its adjustment. The offshore schemes often
give additional barriers for the international regulations. This Unit (module) gives
you examples of authority regulation of offshore companies’ activities. Also there
is information regarding main powerful international organizations which take part
in the field of anti-offshore regulation. There is explanation of their goals and
objectives, main point of work, the role of Russian authority which monitor the
international finance, currency and tax aspects.
Subject 4.1. International practice to regulate offshore companies
activity
Anti-offshore legislation. Government arrangement of offshore business
units utilization by citizens and national companies. Governmental tools of
national interests protection in front of offshore business and capital outflow. State
requirements to the names and legal entity of offshore companies.
International Institute of offshore business regulation. Basel Committee on
Banking Supervision. International Organization of security papers monitoring.
International organization activity of anti-money-laundering. Financial
Action Task Force (FATF). Recommendation of Special Group of finance
criminality combating. Directions of anti-money-laundering activities. The Council
of Europe Committee of Experts on the Evaluation of Anti-Money Laundering
Measures and the Financing of Terrorism "MONEYVAL". Egmont Group. The
Eurasian Group on combating money laundering and financing of terrorism
(EAG).
Subject 4.2. Offshore regulation in Russia
Offshore regulation in Russian Federation. Currency regulation in Russia.
Federal Russian Law “About combating money laundering”. Recommendation of
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Bank of Russia for finance control. Federal Financial Monitoring Service. FFMS
aims of combating legalization (laundering) of proceeds from crime and financing
of terrorism, and coordinating activities of other federal executive bodies in this
sphere. The power of FFMS. FFMS controls and supervises the process of
implementation of the requirements of the legislation of the Russian Federation on
combating legalization (laundering) of proceeds from crime and financing of
terrorism by legal persons and individuals, bringing to responsibility those who
have performed infringement of this legislation. Russian bodies which manage the
collection, processing and analysis of the data on operations (deals) with monetary
funds or other assets, subject to control under the a.m. legislation. Checking
according to the a.m. legislation the submitted information on the relevant
operations, in particular receives necessary clarifications on the submitted
information etc.
4. TOPICS AND PLANS OF SEMINARS
Subject 1. Nature of Special Economic Zones and their role in the system of
World Economic Relations
1) Essence of economic definition of Special Economic Area
2) Evolution of Special Economic Zones
3) Classification of modern SEZ
Self-assessment questions:
1. Find out different approaches to the SEZ definition. What is the essence of
term? What goals and objectives try to achieve the countries which start the
SEZ developing on site? Is there any goal difference between countries with
different level of economic development?
2. Follow up the stages of SEZ evolution. Give examples of first European
special free areas activities (The Hanseatic League, Open Towns, Free
Ports).
3. What are the outstanding features of modern SEZ? Which criteria could be
put on the basis of SEZ today’s classification?
Reading
- Special Economic Zones Performance: Lessons Learned, And
Implications For Zone Development. The World Bank Group.
Washington, USA. April, 2008.
Subject 2. SEZ activity in developed and developing countries
1) Distinguishing features of SEZ in different countries with
developed and developing economy.
2) The experience of SEZ activities in different countries.
Self-assessment questions:
1. What are the main characteristics of SEZ establishing, development
and management in different countries with the different levels of
economic development?
2. What are the distinguish features and special tendencies of SEZ
development in the following countries:
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





USA;
Great Britain;
Other countries of Western Europe;
Japan;
Newly Industrialized Countries of South-East Asia;
Countries of Southern and Latin America.
Reading.
- Special Economic Zones Performance: Lessons Learned, And
Implications For Zone Development. The World Bank Group.
Washington, USA. April, 2008.
Topics for essays:
- Special features of SEZ activities in USA, Great Britain and Japan with the
external trade or industrial specialization.
- SEZ in developed countries of Asia and Southern America: current state,
problems and prospects.
Subject 3. SEZ activity in transitional countries
1) SEZ in countries of East Europe and Baltic states.
2) SEZ in China.
3) SEZ in Russia.
4) SEZ in CIS.
Self-assessment questions:
1. What are the main characteristics of SEZ development in countries of of
East Europe and Baltic states?
2. What were the stages of SEZ development in China?
3. Study the process of Russian SEZ establishment. What is the role of Russian
Federal Law “About the Special Economic Zones” for Russian SEZ
development? Compare the experience of Chinese and Russian SEZ. What
were the reasons of disadvantages of Russian SEZ in 90ties?
4. Describe SEZ of Belarus and Kazakhstan. Estimate their efficiency under
current conditions.
Readings.
- Russian Federal Law “About the Special Economic Zones” N 116-ФЗ,
22.05.2005
- Special Economic Zones Performance: Lessons Learned, And
Implications For Zone Development. The World Bank Group.
Washington, USA. April, 2008.
Topics for essays:
- Chinese SEZ experience – lessons for Russia.
- SEZ in Russian Federation: history, activity, current state and prospects.
Subject 4. Offshore business international experience
1) Essence of offshore business
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2) Offshore companies utilization for needs of legal bodies and
private persons
3) Practical aims of offshore companies
Self-assessment questions:
1. What is the sense of offshore business? What legal and organizational forms
are used in by offshore business units? What does it mean the offshore
jurisdiction? What are the main attributes of offshore company?
2. How do legal bodies and private persons realize their interests via offshore
business schemes?
3. What business functions do offshore companies provide? What are the main
schemes of deals and transactions with offshore companies?
Subject 5. Offshore business in Russia and for Russian companies.
1) Main characteristics of activity some former offshore territories in
Russia.
2) Specificity of Russian offshore business.
Self-assessment questions:
1. Which Russian territories had the rights of offshores? What was the essence
of their activity? What were the reasons of unpleasant consequences for the
Russian political subdivisions involved into offshore projects realizing?
2. How do Russian companies make offshore business today?
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5. STUDENT’S SELF-STUDY
№
п/п
Self-Study
Hours
1
1.
2
Prepare for seminar “Nature of Special Economic Zones and
their role in the system of World Economic Relations”
3
2
4
Estimation at seminar
2.
Prepare for seminar “SEZ activity in developed and
developing countries”. Essay writing.
4
Estimation at seminar,
essay’s grade
3.
Prepare for seminar “SEZ activity in transitional countries”.
Essay writing.
4
Estimation at seminar,
essay’s grade
4.
Test
3
Scored grade
5.
Prepare for seminar “Offshore business: international
experience”.
2
Estimation at seminar
6.
Prepare for seminar “Offshore business in Russia and for
Russian companies”
2
Estimation at seminar
7.
Colloquium / Test
6
Scored grade
Total:
Control forms
23
Additional essay’s topics
1.
2.
3.
4.
Eastern Europe experience of SEZ activity in transition.
Offshore zones in terms of modern World Economy.
Cyprus is a low tax jurisdiction and their role for Russian economy.
International institutes of offshore business adjustment and their role for the
current level of international relation.
5. Special characteristics of offshore zones utilization for Russian business
practice.
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7. GLOSSARY
№
Definition
Content of definition
п/п
1
2
3
1. Special
A Special Economic Zone (SEZ) is a geographical region that
Economic Zone has economic and other laws that are more free-market(SEZ)
oriented than a country's typical or national laws.
"Nationwide" laws may be suspended inside a special
economic zone.
2.
Free
zones
trade Free trade zones (FTZs; also known as commercial free
zones) are fenced-in, duty-free areas, offering warehousing,
storage, and distribution facilities for trade, transshipment,
and re-export operations
3.
Export
processing
zones
Export processing zones are industrial estates aimed primarily
at foreign markets. Hybrid EPZs are typically sub-divided
into a general zone open to all industries and a separate EPZ
area reserved for export-oriented, EPZ-registered enterprises
4.
Enterprise
zones
Enterprise zones are intended to revitalize distressed urban or
rural areas through the provision of tax incentives and
financial grants
5.
Free-ports
Free-ports typically encompass much larger areas. They
accommodate all types of activities, including tourism and
retail sales, permit on-site residence, and provide a broader set
of incentives and benefits
6.
Single factory
Single factory EPZ schemes provide incentives to individual
enterprises regardless of location; factories do not have to
locate within a designated zone to receive incentives and
privileges
7.
Specialized
zones
Specialized zones include science/technology parks,
petrochemical zones, logistics parks, airport-based zones, and
so on
8.
Offshore
company
1. A company which is incorporated outside the
jurisdiction of its primary operations regardless of
whether that jurisdiction is an offshore financial centre
(sometimes known as a non-resident company) i.e. a
Canadian company may be 'offshore' for the purposes
of a USA citizen ; or
14
2. Any company (resident or otherwise) incorporated in
an offshore financial centre, i.e. offshore jurisdictions
9.
Trust company
10. Federal
Financial
Monitoring
Service
A trust company is a corporation, especially a commercial
bank, organized to perform the fiduciary of trusts and
agencies. It is normally owned by one of three types of
structures: an independent partnership, a bank, or a law firm,
each of which specializes in being a trustee of various kinds
of trusts and in managing estates. Trust companies are not
required to exercise all of the powers that they are granted.
Further, the fact that a trust company in one jurisdiction does
not perform all of the duties of a trust company in another
jurisdiction is irrelevant and does not have any bearing on
whether either company is truly a "trust company".
A trustee will manage investments, keep records, manage
assets, prepare court accountings, pay bills (depending on the
nature of the trust) medical expenses, charitable gifts,
inheritances or other distributions of income and principal.
The Federal Financial Monitoring Service is a federal
executive body aimed at combating legalization (laundering)
of proceeds from crime and financing of terrorism, and
coordinating activities of other federal executive bodies in
this sphere.
11. Financial
Financial Action Task Force (FATF) is an inter-governmental
Action
Task body focused on the development and promotion of policies,
Force
both at national and international levels, to combat money
laundering and terrorist financing
12. The Eurasian
Group
on
combating
money
laundering and
financing
of
terrorism
(EAG)
The Eurasian Group on combating money laundering and
financing of terrorism (EAG) is a FATF-style regional body
founded on October 6, 2004 by decision of the Inaugural
Conference of six states – Belarus, China, Kazakhstan,
Kyrgystan, Russia and Tajikistan. Uzbekistan joined the EAG
in 2005.
15