Chinese overseas industrial parks in Southeast Asia: An examination of policy mobility from the perspective of embeddedness

doi:10.1007/s11442-018-1526-5

Abstract

Abstract:

The development of overseas industrial parks is a key component of the Belt and Road Initiative and an expected experimental way of promoting inclusive globalization by inventing new forms of cooperation between China and local host countries. Policy mobility, a classic theory within international political geography addressing the connection between local and global policies, has implications for overseas industrial parks development. In this paper, we argue that policies are not easily moved directly from one place to another; instead, policies are embedded due to the role of local actors in policy mobility. This article first provides an overview of seven China-Southeast Asia economic and trade cooperation zones identified by the Ministry of Commerce, and analyzes their key participants. It then discusses policy mobility by looking into the roles of revenue, land, and talent in developing these industrial parks. The paper finds that these parks face challenges, such as the complicated geographical environments of host countries, huge pressure from enterprise investment capital, the lack of overseas service platforms, and underdeveloped agglomeration economies. In the light of the current situation, policy suggestions for the future sustainable development of overseas industrial parks are put forward.

Key words: overseas industrial parks, Southeast Asia, Belt and Road Initiative, inclusive globalization, policy mobility, China

Tao SONG, Weidong LIU, Zhigao LIU, Yeerken WUZHATI. Chinese overseas industrial parks in Southeast Asia: An examination of policy mobility from the perspective of embeddedness[J].Journal of Geographical Sciences, 2018, 28(9): 1288-1306.

Figures/Tables 5

Figure 1

Figure 2

Table 1

The profiles of seven Chinese overseas economic and trade cooperation zones in Southeast Asia approved by the Chinese Ministry of Commerce"

Cooperation zone	Year of establishment	Country	Chinese enterprises	Location
Thai-China Industrial Park in Rayong	2005	Thailand	Huali Industrial Group	Located near the No. 331 High-speed Railway, Rayong Province, 27 km from Laem Chabang, the largest deep water port in Thailand
Sihanoukville Special Economic Zone	2006	Cambodia	Jiangsu Taihu Cambodia International Economic Cooperation Zone Investment Co. LTD	Located in Sihanoukville, the only international port city in Cambodia, 3 km from Sihanoukville International Airport and 12 km from the port
Long Giang Industrial Park	2007	Vietnam	Tien Giang Investment Management Co. LTD	Located in the Jiulongjiang Plain, southern Vietnam. About 50 km from downtown Ho Chi Minh City, the international airport, and Saigon Port. The park is near an inland river and the cargo can be transported directly to the international port.
China-Indonesia Economic and Trade Cooperation Zone	2007	Indonesia	Guangxi State Farms Group LTD	Located in the Greenland International Industry Center, Bekasi County, east of Jakarta, the capital of Indonesia
Integrated development zone of Saiseta, Vientiane	2010	Laos	Yunnan Provincial Overseas Investment Co., Ltd	Located in Saiseta and Saitani counties, in the northeastern part of Vientiane, the capital of Laos, with an area of 10 km²
Indonesia Morowali Industrial Park	2013	Indonesia	Shanghai Decent Investment Group	Located in Morowali County, Central Sulawesi, Indonesia, with an area of >2,000 ha. It is located next to the provincial highway, about 60 km from the center of Morowali County
China-Indonesia Julong Agricultural Industry Cooperation Zone	2011	Indonesia	Tianjin Julong Group	Many parks in the same area, including Central Kalimantan Park, Southern Kalimantan Park, Western Kalimantan Park, and Northern Kalimantan Park in Kalimantan Island as well as Lampung Port Park, Lampung Province in Sumatra

Table 1

Table 2

Leading industries and enterprises in China-Southeast Asia economic and trade cooperation zones"

Cooperation zone	Area (km²)	Description		Leading industry	Investment/ income	Main enterprises
Thai-China Industrial Park in Rayong	12 1st installment: 1.5; 2nd installment: 2.5; 3rd installment: 8	Industrial areas, bonded areas, convention and exhibition center, logistics bases and commercial and residential support facilities		Automobile fittings, machinery and home appliances	1 billion US dollars (2016)	80 enterprises
Sihanoukville Special Economic Zone	11.13 1st installment: 5.68	Textile and apparel, hardware tools, and light industrial appliances in export processing, commercial and trade, and residential zones		Textile and apparel, hardware tools, light industrial appliances	Investment value of 0.31 billion US dollars	100 enterprises, including Jinchenyuan Textile Co. LTD, Enterex International Limited (automobile fittings), and Canadia Bank
Cooperation zone	Area (km²)	Description	Leading industry		Investment/ income	Main enterprises
Long Giang Industrial Park	6 industrial district: 5.4; residence area: 0.6	Industrial district; residence area	Textile and light industry, machinery and electronics, and chemical construction materials		With the income of 0.4 billion US dollars (2014)	17 established and under construction enterprises in 2015; 13 enterprises came into service in the same year
China- Indonesia Economic and Trade Cooperation Zone	5 1st installment: 2.05	3 industries in a group, including household appliances, machinery manufacturing, and agricultural processing	Automobile assembly, machinery, home appliances, fine chemicals, and new materials		Investment value of 0.65 billion US dollars	In 2015, 25 enterprises and 12 under construction
Integrated development zone of Saiseta, Vientiane	10	Agricultural products export and processing, light industrial products export and processing, services and logistics, bonded area, business district and residence, and tourist area	Energy and chemical industry, agricultural and animal products, electric products industry, cigarettes and tobacco, construction materials, and logistics and storage		Investment value of 0.3 billion US dollars	13 enterprises
Indonesia Morowali Industrial Park	20 (plan)	4 electronic generators, base station, satellite television system, 300,000 tons port berth and more than 70 residences	Ferronickel, stainless steel		Total investment value of 4 billion US dollars	6 enterprises, including PT Sulawesi Mining Investment and Indonesia Guangqing Ferronickel Industry Co. LTD
China- Indonesia Julong Agricultural Industry Cooperation Zone	4.21	5 parks including Central Kalimantan Park, Southern Kalimantan Park, Western Kalimantan Park, and Northern Kalimantan Park in the Kalimantan Island and the Lampung Port Park, Lampung Province in Sumatra	Oil palm planting and development, intensive processing, acquisition, storage and logistics		A total investment of 1.245 billion US dollars	12 upstream and downstream enterprises for palm oil

Table 2

Table 3

General policies for the China-Southeast Asia economic and trade cooperation zones"

Countries in Southeast Asia	Cooperation zone	Policy
Thailand	Thai-China Industrial Park in Rayong	Enterprises with Chinese interest need not pay corporate income tax for a maximum of 8 years (different preferences are based on industry; knowledge-based and high-technology industries may secure the maximum tax free period), imported machinery is tax free for 8 years; imported materials used for export can be tax exempt for 5 years; foreign skilled workers, experts, and their spouses can work; foreign workers can be granted land ownership.
Cambodia	Sihanoukville Special Economic Zone	The Investment Law for the Kingdom of Cambodia stipulates that: in addition to the stipulation on land ownership mentioned in the constitution law of the Kingdom of Cambodia, all the investors, regardless of nationality and race, are equal before the law; nationalization policies that damage the interests of investors shall not be adopted by the government; in terms of authorized programs, the government shall not control the product and service prices; the government shall not carry out foreign exchange control policies but allow free in-and-out movements of foreign exchange.
Countries in Southeast Asia	Cooperation zone	Policy
Cambodia	Sihanoukville Special Economic Zone	According to the regulations outlined in the Investment Law for the Kingdom of Cambodia and the management laws for the special districts, all enterprises in Sihanoukville Special Economic Zone enjoy a series of preferential tax policies: tax for imported equipment and construction materials that are used to invest and establish a plant can be 100% exempt from import tariffs; according to the types of products, enterprises in the park can have 6-9 years of generous tax holidays from the business profit tax; enterprises do not need to pay export tax for exported products; and equipment and construction materials are free from added-value tax.
Vietnam	Long Giang Industrial Park	The government of Vietnam has already adopted the most preferential tax policies to attract enterprise investment. Enterprises in the park have a 15-year tax reduction period once they have operational revenue, with a discount of 10% (currently, the corporate income tax in Vietnam is 25%); before they start to earn money, they also have a 4-year tax free period with a subsequent 9-year half-tax period. This is the most preferential set of tax policies in Vietnam. Enterprises do not need to pay import and export taxes for equipment listed in the fixed assets. Once the operation starts, raw materials, goods, materials, and imported accessories are subject to a 5-year import tax free period. Enterprises in the park can make a decision on the classification of their enterprise (general enterprise or export processing enterprise) depending on their own situation. Export processing enterprises are free of import and export taxes and added-value tax for raw materials.
Indonesia	China-Indonesia Economic and Trade Cooperation Zone	Enterprises with Chinese interest can enjoy a corporate income tax and imported machinery tariff free period of up to a maximum of 8 years. Enterprises do not need to pay tax for imported raw materials for selling purposes in the initial 5 years. Foreign skilled workers, experts, and their spouses can be brought into the park. Foreign workers can purchase land. China and Indonesia have signed the Investment Protection Agreement, Maritime Agreement, Agreement on the Avoidance of Double Taxation and Memorandum of Understanding for subjects such as agricultural and mining, which provide guarantees for Chinese enterprise investments in Indonesia.
	Indonesia Morowali Industrial Park
	China-Indone-sia Julong Agricultural Industry Cooperation Zone
Laos	Integrated development zone of Saiseta, Vientiane	The development zone complies with the legal procedures formulated by the governments of Laos and China. Land use rights can be transferred or rented to others with a tenure of 70 years, but can be extended to 99 years after expiration with the authorization of the Laos government. Production enterprises can earn tax free profits for 6-10 years. Once the period expires, the enterprises pay 5% tax; commerce and trade enterprises have a 2-5 year profit tax free period, with a subsequent tax rate of 5%; service enterprises have a tax free profit period of 2-10 years, with a subsequent tax rate of 5%.

Table 3

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