Московский экономический журнал 10/2020


УДК 338.49 : 338.012 : 334.7

DOI 10.24411/2413-046Х-2020-10694 

Развитие специальных экономических зон в Ливане 

The development of a special economic zone as a growth point for the Lebanese economy

Вертай Светлана Петровна, к.э.н., доцент, Белорусский государственный экономический университет

Рами Тут, аспирант, Белорусский государственный экономический университет

Sviatlana Viartai, associate professor of the department of economics and management, candidate of economic sciences, associate professor

Rami Tout, postgraduate student, Belarusian State Economic University

Аннотация. Специальные экономические зоны создаются как точки роста национальных экономик, функционирующих в рамках специального законодательства, без изменения общего экономического модуля страны. Основными выгодами формирования специальных экономических зон является привлечение иностранных инвестиций, создание новых рабочих мест, развитие человеческого капитала. Анализ функционирования СЭЗ в различных странах показал, что существуют отличия в подходах к формированию СЭЗ и формированию механизма управления ими. СЭЗ в Ливане была создана в 2008 году и в настоящее время разрабатывается механизм ее управления. В статье проведен сравнительный анализ теоретических концепций и опыта функционирования СЭЗ в других странах и в Ливане.

Summary. Special economic zones are created as points of growth for national economies, functioning within the framework of special legislation, without changing the general economic module of the country. The main benefits of creating special economic zones are attracting foreign investment, creating new jobs, and developing human capital. Analysis of the functioning of SEZs in different countries showed that there are differences in approaches to the formation of SEZs and the formation of a mechanism for managing them. The SEZ in Lebanon was established in 2008 and a mechanism for its management is being developed. The article provides a comparative analysis of theoretical concepts and experience in the functioning of free economic zones in other countries and in Lebanon.

Ключевые слова: специальные экономические зоны, СЭЗ, экономическое развитие, экономический рост, точки роста, развитие человеческого капитала, механизм управления СЭЗ.

Key words: special economic zones, SEZ, economic development, economic growth, growth points, development of human capital, management mechanism of SEZ.


The concept of the “Special Economic Zone” (SEZ) indicates an economic instrument established through a special legislation, without altering the general economic module of the country. Such a measure is enacted by local governments for the purpose of boosting economy in general through its role in attracting foreign investment, generating employment and increase exports, not to mention boosting economic cycle of the zone’s region.  Jean Prybyla, American economist who studied Chinese economics in 1984 at length, notes about special economic zones: “the historical link of the concept of Special Economic Zones with regional economic cooperation zones as well as the many variations of this idea that exist around the world: export zones, free zones, industrial zones, suggests that special economic zones are an experimental and evolving formula intended in advance to fulfill certain specific objectives: among these, earning foreign currency through exports and acquiring technology features prominently in the concerns of Chinese politicians » [6, p 67-68].

Although special economic zones first appeared in areas like Puerto Rico (1951) [9, P.73], Ireland with the Shannon airport area (1959) [10] and Taiwan to Taichung (1965) [11], mainland China is the country which has met with the greatest success in the use of SEZs for the purpose of developing its industrial capacities [7, P.91]. In 2006, the Chinese government which continued to expand policies to support trade and investment abroad (the policy of Going Global or Zouchuqu) announced plans to establish up to fifty zones of economic and commercial cooperation around the world, without giving a timetable, in the framework of the implementation of its eleventh five-year plan [8, p 43]. The aim of ZES is to attract new investors, which means making the regions concerned more attractive than the others. Given that the project is targeted at disadvantaged areas (for cyclical or endemic reasons), it was a question of stimulating activity through tax incentives.

Main part

The concept of special economic zones corresponds to a geographically defined development strategy with a view to attracting investment and stimulating economic activity, whether in the secondary or tertiary sector. The essential characteristic of SEZs is that they live on public aid granted to companies. By definition, an SEZ concerns a defined territory, often sparsely populated and likely to accommodate one or more economic activities within its perimeter. Its purpose is to contribute to the establishment of stable and sustainable development in the region. «Development» means the consolidation of the preexisting industrial fabric, but also new investments made in order to improve the infrastructure of the developed area. In the short term, the main aim is to curb unemployment where the low taxation is the driving force behind the law.

 As for the terminology, the term SEZ related to special economic zones is relatively a new comer and quite a generic one [1, p.9-11],, defining a broad range of zones. Several studies adopted to depict a concept that encompass a wide range of economic zone/activity. It covers various types of zones, such as FZ (Free Zone), EPZ (Export Processing Zone) and many others. In the matter of fact, a concise definition of this concept has been an ongoing task. For instance, OECD (Organization for Economic Cooperation & Development) has one, Kyoto convention 1999 presented its own definition, but probably the best concise one came from the economist Adam Ambroziak, 2011; he stated: “it is an area geographically demarcated, usually physically secured; it has a single management or administration; it offers benefits for investors physically within the zone; and it has a separate customs area (duty-free benefits) and streamlined procedures” [2, p.245-267].From a historical perspective, SEZs refer to a variety of components: free zones, at the scale of a port, a district or a city, functioning as economic and fiscal enclaves. They have notably been a tool for the establishment of capitalist enterprises in countries with a directed economy, and more particularly in the coastal cities of China.

Dissecting the term that is composed of three words would lead us into further comprehension of this concept: The word “special” relates to the particularity of the status through legislation, “economic” is quite a broad definition that encompass trade, industries and services of various kinds. “Zone” clearly depicts that this concept is marked and defined by specific locations, although some legislation in some countries kept this point much more fluid.

As broad as it is, this concept is still far from being one in all countries. There was a notable absence of comprehensive data concerning SEZ around the world up to the 90’s s it is shown by the collected data then was self-reported and on individual case.  The main reasons that these zones differ in various countries is the related legislation that usually caters to the need of the host economy. Furthermore, the size of SEZs can be very variable and some have a dense mesh, while in others it is more distended. Their activities differ, of course, according to needs, nevertheless they have several common features, among which, first of all, the legal framework in which they are registered.

The basic common characteristics, clearly defined in their respective legislation are:

  • Extra-territoriality: SEZ is a clearly demarcated zone that exists outside the domestic custom territory while benefitting from national certificates of origin and can participate in national trade agreement and arrangement.
  • Tax incentives: Exemptions include purchases of operating materials, income taxes, labor taxes and taxes on repartition of profits. The rate of exemption varies from case to case
  • Eligibility and equal treatment; which include Local and foreign owned firms.
  • Sales and purchases: to and from domestic market is often admissible and treated like regular imports or export and eventually subject to customs and local taxation.
  • Privately owned firms SEZ are eligible for full benefits dictated through legislation, and fair competition from government owned one.
  • Labor policies are in full compliance with ILO standards, and disputes are solved through specialized mechanism.

While SEZs differ in some aspects in host countries. Here are some examples on such variances:

 SEZ management; Most of the earlier zones were run by government appointed board or a customized authority established for this particular purpose. This have changed considerably lately. As some countries kept a very tight state run boards like Egypt, Jordan or Turkey. Some others like UAE kept the governmental base of boards running their SEZ, but gave it a substantive level of autonomy and freedom from red-tape bureaucracy of other departments in the government.

Privately run SEZ appeared in a later stage, and gaining ground rapidly. They first appeared in the 80’s in Central America and the Caribbean competing with the inefficient state run ones. In MENA region alone 18% of SEZ are privately owned (World Bank report, 2018) where the government’s role is restricted as a logistical service provider or a mere landlord (Farole, Baissac & Gauthier, 2012). Japan hosts now the largest rate of privately owned SEZ.

Economic activity and eventually the objectives also differ from certain countries to others. While some SEZs are built to generate direct employment basically, and indirect ones through regional spillovers. An example of that is the garment focused ones in Bangladesh, Vietnam and Mauritius. While others focus on export/lead growth like China, Turkey and the UAE. Although labor intensive zones still persist, the tendency following the Chinese model, is to reap the full benefits of the economic activities such as attracting FDI and improving foreign exchange rate.

Size and geographical location also differ from one country to another. What started in the 70’s as moderate size free zones usually near ports, gradually grew much bigger like Aqaba/Jordan for example or Mersin/Turkey  and airport  to facilitate shipment , or industrial clusters in rural area to boost local economies. Finally turned quickly with the entry of the Chinese mega models, such as Shenzhen, into what can be labeled as modern cities with all the facilities related to any metroplex with all logistics needed like housing and medical care.

Incentives and tax exemptions are areas of difference among various SEZs. Some offer 100% tax breaks on certain purchases and export, while others have it for limited time and to be re-negotiated. Labor rights and related dispute settlement are still the most diverse aspect found in legislations establishing the SEZs. Although ILO standard are being coerced lately.

On the other hand, for their accounting, entrepreneurs benefit from an advantageous depreciation procedure for goods acquired in connection with the construction and installation of infrastructure. This allows them to dispose of new funds more quickly which can be injected into the productive system. The SEZs also offer to facilitate the procedures for setting up a company. Thus, an entrepreneur has the guarantee of the local administration that the time required to obtain an activity license in the territory of an SEZ will not exceed one month. This clause is especially interesting for foreign investors, unfamiliar with administrative practices, which are particularly tortuous.

TSEZ, the first SEZ in Lebanon was established legislatively in 2008 and passed later in 2009 (TSEZ law no 18) (Official Gazette, 2008). This legislation was aimed to realize two main objectives; the first is to follow what the government adopts as the new module of Lebanese economy, meaning the private-public sector partnership, attending to the needs of rural areas and to increase growth in general economy. The second objective is to establish this tool with least expenses possible, through a new established dredged territory and with minimal infrastructure. These measures were adopted with lessons learned from Rachid Karami International Fair -RKIF- fiasco in mind. The mentioned fair/expo was intended to attract international corporations and exhibitors through fiscal incentives, is  also located in the city of Tripoli , was conceived in the late 50’s, took 17 years to be built at an enormous cost, governmentally operated and almost in ruins now. It has not been launched yet due to many factors, the most notable ones are political rivalry and the security situation that was persistent up till 2016. That in mind TSEZ was conceived to be a joint venture between public and private sector, to lessen drastically the bureaucratic drag. The chosen location is a dredged 55 hectares adjacent to the seaport of Tripoli to avoid the high cost of land appropriation, while the other choice was a semi abandoned military airport at Qolayyat 12 miles north of Tripoli . 45 of these hectares are leasable, and 10 are for transport network. The geographical position of the SEZ — located in the northern part of the port — will facilitate its economic integration and will encourage, in the long term, the continuation of the modernization works of the facilities of the port area and the development of its activity.

An appointed board, with offices physically present within the zone will be assigned for the role of regulation while the actual management will be left to the private sector. While government supplies the basic infrastructure and a power plant, in addition to pre-built incubators over 10 hectares for smaller operations, while larger ones would lease just the lots. TSEZ would benefit from a unique design of key administrative, legal, taxation and regulatory framework. In addition to single window clearance in matters of licensing via-a-vis other public institutions. Worth noting that manufactured products within TSEZ would not benefit from Lebanese certificate of origin.

TSEZ enjoys a prime location within the city of Tripoli; a distance of less than half a mile from Tripoli Mediterranean seaport, 12 miles from a potential airport, categorized as a military one for now, and an ancient railway running through the coast. Low income residential clusters are less than 2 miles from the zone, providing rapid employment without the hassle of re-lodging.

Incentives offered can be considered the most generous in the Middle East. Fiscal incentives are as follows: 100% exemptions on imports of raw, construction and office materials. 100% exemptions on export, property, building permit and shares/bonds issued by the corporations. 100% tax exemption for corporations with more than 50% Lebanese workforce and over 300,000$ of fixed capital.

While financial incentives are as follows: Total capital and profit repartition. Unrestricted currency conversion in addition to permissible 100% foreign corporate ownership. No restrictions on sales to local market, treated as imports, or purchases from local market.

Moreover, there are some additional incentives that can contribute in the effectiveness of the ZES like tax exemption on personal property for skilled workers and income tax up to 10 years from commencement for certain sectors like health care, educational, logistics and tourism. The target area is a basin filled with water located within the walls of the port of Tripoli in which emerges an islet of approximately 100,000 m², which should facilitate the works. The SEZ development plan took into account the economic potential of each region as well as its demographic situation and the socio-professional characteristics of the populations. From then on, a development scenario was established for each. SEZ management companies were instructed to select investors based on these parameters. In this regard, it already appears that the ability of SEZs to fulfill their objectives depends to a large extent on the choice of the company responsible for their management and their internal functioning.

The primary site reclamation project for the port adjacent to the Port of Tripoli has been completed, the study of the strategic environmental impact will be presented soon to the Ministry of Environment for approval, and the launch of the project to develop a directive plan for the Special Economic Zone in Tripoli — the port site in the year 2017 and its commitment to the company Specialized engineering. The Council for Development and Reconstruction has been mandated by the Council of Ministers to launch a tender for the development of infrastructure that was expected to take place at the beginning of the year 2019 but get delayed. The SEZ Authority has been able to secure the first part of financing this project through a contribution of 15 million US dollars from the Lebanese state while negotiating with the World Bank to finance the remaining part to complete the development of infrastructure and operational costs for the Special Economic Zone for the next five years. The results of the project to develop the temporary system for licenses, which is funded by a gift from the International Finance Corporation, are being delivered. 


This TSEZ-focused research will focus on human capital accumulation within the context of Tripoli and eventually establish a framework to estimate the impact of TSEZ on this northern region. This framework will help the intended zone authority to carry on effective policies and to focus resources on missing factors to speed up the development of local human capital which is vital for TSEZ success and eventual Northern region growth.

Tripoli has great promising opportunities to have a role in the process of reconstructing Syria due to its strategic location, and to be a logistical center through which to take advantage of the existing components — that is, Rashid Karami International Exhibition, the Port of Tripoli, René Moawad Airport, the railway with the Syrian borders, the Special Economic Zone and installations of the oil in addition to its expected role in being a pioneer in the information and technology sector, and a tourist and cultural center. As mentioned in its establishment system, Tripoli ZES will play a major role in attracting local, Arab and foreign investments and improving global trade exchanges because it will serve as a business platform for investors and a model for doing business in Lebanon, a catalyst in the process of sustainable economic growth and a lever to change the face of Tripoli and the North.

However, we need to admit that there are major obstacles; this estimate obviously does not take into account the obstacles that could slow the execution of the project. It is to be hoped that the political and security situation at the local level does not delay the works, also noting that a possible prolongation of the war in Syria that may also affect the development of the SEZ. The second potential obstacle concerns the funding of the next stages of the project can be seen in the budget for infrastructure works has not even been quantified yet. The project that will last for 6 years is behind its initial schedule and must absolutely be updated. It is therefore not possible to assess the total budget for the project, or to decide on the means by which it will be financed, at the same time refuting the estimates — around $ 66 million — who have been relayed by some politicians.

A third obstacle could concern the hazards linked to the backfilling works themselves. In fact, the speed of execution and the cost of this type of operation depends in particular on the proximity and accessibility of the sources from which the materials used for backfilling are extracted in addition to the technical difficulties posed by this type of project. The developments in question can naturally be reduced to nothing given the obstacles which have hampered past efforts. And they will face significant challenges in terms of inclusion, communication and integration with local economies.

Accordingly, it is vital to take quick actions to get the TSEZ implemented shortly; first, TSEZ should get the highest political support and approval at the Lebanese current government. Than, this zone has be treated as priority as an integral part of a comprehensive socioeconomic development plan for the country. Secondly, international donors must provide needed funds and other technical support for TSEZ to initiate major Lebanese economic reforms. Finally, local groups and stakeholders in north of Lebanon will have to launch a social campaign to pledge TSEZ as soon as possible.


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