According to consolidated economic literature, SEZs are exceptional tools for catalyzing foreign direct investments, and especially in developed countries their use has been to introduce facilitations in the commercial logistics sector. Ports and airports are critical to the successful development of Special Economic Zones.
The benefits from establishing a SEZ
In the first case, port infrastructures, having considerable storage capacity and logistic connections, act as a buffer to regulate the flow of goods to and from the SEZs. Furthermore, the type of commodity flows carried out in the proximity port influences the nature of the entrepreneurial activities undertaken in the SEZ. On the other hand, proximity to an airport, which favors the traffic of perishable goods and products with high technological added value, is another key success factor, allowing the faster connection of SEZs with national and international markets, as well as with Global Supply Chains and the Global Value Chains. However, the proximity to ports and airports is not an indispensable requirement for the proper functioning of these instruments: for example, in Poland there are only four SEZs located near an important port (for example Gdansk, Szczecin, Gdynia) and the success of the other SEZs has depended on different factors.
The ability of SEZs to bring about an acceleration of economic development is remarkable: according to a 2019 analysis by the World Bank, the growth rate in SEZs was on average 14.7%, i.e. about 11.56% higher than the average growth recorded in the rest of the world.
The impact of the crisis on SEZs and their economic role
Compared to the decreases foreseen for 2021 by the WTO and UNCTAD, which estimated a contraction of global trade up to 32% and 40%, respectively, due to the pandemic crisis, the anticipation of these economic shocks already occurred in 2020 in all production sectors. Although to an infinitely lesser extent, this also concerned the production plants located in Free Zones and SEZs, whose ontologically business-oriented regulatory and infrastructural characterizations worked, in this exceptional situation, with a "parachute" effect, guaranteeing a faster positive reaction.
SEZs are also able to facilitate economic diversification, which plays a central role in countering the negative economic effects produced by the pandemic, being an essential factor in reducing the vulnerability of the country system to economic shocks such as that resulting from Covid-19. The correlation between SEZs and economic diversification was also highlighted in the official release of the G20 Trade and Investment Ministers Meeting of 22 September 2020, which also focused on SEZs. Furthermore, the strategies hinging on the replication and adaptation of best practices adopted within the "free zones of exception", especially if SEZs, are also suggested by UNCTAD among the factors to be included in any government program aimed at accelerating the recovery of the economic sector in the post-Covid-19 phase.
The opportunity of SEZ in Italy…
The issue of the correct implementation of SEZs should be a priority on the government agenda also in Italy. In fact, there is still no concrete effectiveness and competitiveness analysis of the SEZs and Simplified Logistic Zones - SLZs, (the other tool to attract Foreign Direct Investments envisaged for the port and rear-port areas of the central and northern Regions of Italy). Due to legislative choices, to tell the truth rather questionable, they are still struggling to take off effectively more than three years after the launch of the reference legislation in 2017, so far subject to continuous updating which, moreover, harms its adequate understanding by investors.
… and the main shortcomings
The existence of inefficient SEZs contributes to not guaranteeing an adequate defense of the competitiveness of the country system with respect to the initiatives of aggressive and constantly expanding competitors. The lack of an organic law dedicated to SEZs and SLZs and indeed an excessive and incongruous fragmentation of regulatory updates of various ranks compared to the regulatory provisions contained in the "omnibus" legislative texts of 2017, have resulted in a state of permanent regulatory precariousness, which in turn has generated a situation of confusion and operational uncertainty, both in the local authorities required to request the establishment of the SEZs and SZLs and to draft the strategic development plans, and in investors, unable to have a clear prior definition of the regulatory and operational scenario in which they are about to invest their economic resources.
On the subject of governance, some doubts arise from the new composition of the steering committees after the changes introduced by law no. 160/2019 that, by providing Extraordinary Government Commissioners, has further expanded and divided the "subject for the administration of the SEZ area", that is to say, precisely "complicating and burdening" the conformation of an already complex collegial body, rather than "simplifying" the management of the SEZs and the activities of the companies that intend to invest in them.
Furthermore, considering that SEZs are aimed at entrepreneurs, it is a serious mistake not to have foreseen in the steering committees the presence of a representative of the entrepreneurial and productive sector. Administrative facilitations, tax incentives, as well as financial resources and the quality of the infrastructures made available for the take-off of SEZs require a decisive change of pace, especially in the pandemic phase.
The dialogue between public administration and companies must urgently undergo a profound simplification, given the reputation of Italy as one of the most bureaucratic countries in the world, and at the same time as having poor administrative efficiency, documented in various reports of international organizations. For example, according to the 2019 report of the World Economic Forum , Italy ranked 96th out of 141 countries for administrative efficiency, 138th for the quantity and complexity of government regulation. As far as tax breaks are concerned, the lower attractiveness of the tax credit with respect to real tax exemptions or breaks, as is the case abroad, constitutes a limit. However, in this regard, there is a timid revision pursuant to Law no. 178/2020, with the provision of a 50% reduction in corporate income tax (IRES), in favor of companies that will settle in the southern SEZs.
More funds are needed
Considering the insufficient financial resources allocated up to now, it is necessary to increase the funds destined to support the creation of SEZs, even more so due to the disadvantage deriving from the repeal (provided for by law no. 160/2019) of art. 34 of Legislative Decree No. 34/2019 (converted with amendments by law No. 58/2019), which provided for the definition of a "Large investment plan in special economic zones", including financial resources for the three-year period 2019-2021 equal to a total of 300 million euros. Finally, considering the direct correlation between the quality of infrastructure and the amount of foreign direct investment (FDI) projects that can be catalyzed, it is necessary that the areas intended to be included in the SEZs are equipped with adequate tangible and intangible infrastructures. So, to give an effective response to the reform needs of the SEZ issue in Italy, it could be useful to take the opportunity offered by the upcoming changes that will be made to the National Recovery and Resilience Plan (NRRP), relating to the Next Generation EU.
The new European funds
The version of the NRRP of 11 March 2021, which contains the objectives to be pursued for the country’s recovery , dedicates little space to the SEZs. In fact, the only reference is contained, in the context of "Mission 3: Infrastructures for a sustainable mobility", within the second component titled "Intermodality and integrated logistics", which includes a national investment program aimed at creating a competitive and environmentally sustainable port system, to develop traffic connected to the major European communication lines and to enhance the role of southern Italian ports in inter-Mediterranean trade flows, where they face growing competition from the ports of North Africa. In the integrated "Ports of Italy" project, the accessibility and connectivity of the ports in the center and south is expected "to be improved in order to stimulate local value chains", and in this respect, the purpose the NRRP attributes to the SEZs in southern Italy is to provide "incentives for the location of production and logistic centers close to ports."
The attention dedicated to these instruments is insufficient given that among the NRRP objectives there is also that of increasing the competitiveness of the country system. The limit also emerges with respect to the NRRP Guidelines approved by the Interministerial Committee for European Affairs (CIAE) in September 2020, in which, on the other hand, a wider and horizontal role of SEZs could be envisaged, inferable from the presence, among the government intervention missions indicated, also of the " competitiveness and resilience of the production system ", for which" it is necessary to rethink the tools useful for attracting investments and encouraging reshoring processes ".
What role for SLZs?
Instead, among the new strategies for developing efficient tools in terms of "FDI catching", the Simplified Logistic Zones (SLZs) are ignored. Since the objective of Mission 3 is also to develop a competitive port system at the national level, illogical is the absence of references to the only investment attraction tool envisaged by the legislator to accelerate the development of the port and rear-port areas of the center and north, where eight port systems are actively engaged in structuring their economic revitalization strategies.
It's not clear why only in Italy two different instruments with the same goals and operational contexts continue to exist, despite the fact that with the introduction of the so-called "Strengthened" SLZs in certain areas of central and northern Italy, this terminological and functional "duality" is now more formal than substantial. This "duality" is clearly inconsistent with a vision of systemic development of the port and national logistics clusters, corresponding to the inspiring logic of the 2016 port reform, and indeed nullifies it, because in this way some port systems are made more competitive than others, solely because they can catalyze investments by taking advantage not only of procedural simplifications, but also of the offer of greater facilitations and the option of resorting to "accelerated" procedures for the establishment of customs-free zones.
In the medium / long-term, it is necessary to begin a legislative path to implement an endogenous strategy to accelerate national economic development, strongly centered on the concept of "SEZ as Safeguarding" the national economy, through a single/comprehensive approach. In this regard, the application of the SEZ instrument should be extended to all regions of the country, providing for the same administrative and infrastructural facilitations, and relating to the creation of customs-free zones, but (coherently with Regional Aid map 2014 - 2020 extended until 31 December 2021) with the application of tax breaks exclusively for the «'a' areas» in the south with higher rates and for the «non-predefined 'c' areas» of the center and north with reduced rates, hoping, however for a revision of the current map for the MFF 2021-2027.
This approach, also much more consistent with CIAE Guidelines, would not be in conflict with current European constraints in terms of tax benefits, which would be safeguarded with respect to the legislation on state aid. Perhaps even in Italy, based on the requests emerging because of the pandemic, one could hypothesize a concrete "opening" to the era of growth and structural reforms in the country, as well as the strengthening and defense of the national economy. The archetype of an effective development model for our country through the implementation of reforms that have always been proclaimed and never implemented, could finally find its debut with the concept of new-generation SEZs which, from tools exclusively conceived in a functional logistic/port context, could also become "experimental territorial laboratories" of pilot policies to free the country from the "limits" that slow down its effective recovery.
Through these SEZs-Labs, the legislative measures implementing innovative policies could be allowed to "incubate" in predetermined areas, before their extension, once calibrated, to the entire country. For example, by applying an orientation already expressed in the past by UNCTAD, some special economic zones could be configured as "test-drives" of United Nations SDGs 2030-oriented policies, which have not yet been adopted at the national level. The abandonment of the aforementioned "duality", the more functionally advanced use of SEZs, the provision of more incisive administrative and tax facilitations, as well as the structuring of their governance in a more agile way and with an accentuation of the role played by the central institutions - which would also guarantee the adequate fulfillment of financial intelligence functions, against possible speculative interventions at the world level directed towards the Italian economy - constitute an urgent strategy to be implemented within the NRRP.
A national recovery based on this type of instrument has a historical precedent that should not be underestimated, because it could have many similarities with the current one. In fact, it is no coincidence that to "accelerate and encourage foreign trade" in the United States, Foreign Trade Zones were launched in 1934 (in fact the first SEZ in the world was the one established in New York in 1937) with the aim of mitigating the negative effects of the Smoot-Hawley Tariffs Act of 1930, which had further aggravated the crisis following the 1929 Wall Street crash, resulting in the most famous economic miracle in economic history: the New Deal.