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Howard's End: Rural Special Economic Zones

The Government's extra 10,000 migrants with special skills and $474 million for Research and Development are being applauded by many. But where is the research money and the migrants likely to go? It's time to create Special Economic Zones for rural areas. John Howard writes.

Across the world many countries have established Special Economic Zones (SEZ) in certain geographical areas where businesses are given incentives to start or expand. According to the reports I've seen the SEZs even have the support of the World Bank.

Towns, provinces and regions in China, Singapore, Poland, Ireland, the U.S. and the U.K. are just a few of the places with SEZs.

Buffalo's Special Economic Zone, in New York State, offers a 19% investment tax credit, 25% capital tax credit, a $1,500 employee tax credit and an 8% sales tax (GST) refund. Then there's a 40% reduction in electricity rates for a certain time and a 100% property tax abatement for 7 years.

In China, the town of Shenzen once a tiny fishing village, has developed into one of China's most prosperous cities. In fact, the economy has grown each year at a breathtaking average of 34% and wages are four times higher since a Special Economic Zone was created in 1980.

Through its SEZ, Shenzen and now 28 other SEZ's in China, are rich because China is becoming rich. Just the same as when Auckland, Wellington, Christchurch, Napier, Hastings or New Plymouth become richer so will Special Economic Zones in New Zealand.

Managed properly, it's a win-win situation because businesses receive incentives to establish in certain under-developed areas, while the areas receive sustainable jobs and economic investment that are vital to their health and well-being.

Ask yourself a question - why would a company want to invest in the under-developed and isolated areas of New Zealand when there's already land, infrastructure, cheaper transport, research money, larger markets and now, 10,000 more skilled migrants readily available?

That's a question Government has to answer and find solutions for. And it can by establishing Special Economic Zones.

The NZ Herald reported over the weekend that Government's extra 10,000 skills migration plan will add another community the size of Greymouth to the population every year.

If only it would - but it on the West Coast, or Northland or the East Coast. Under present policies that's not likely to happen because they're already isolated and don't have the needed base of companies or universities to start with.

Tourism is good, but tourism generally only lasts over the summer months and it also relies on disposable income and discretionary spending. Tourism also has a cost in providing infrastructure which the under-developed areas are simply not able to afford based on present low populations. It's a Catch-22.

What it means is that many are playing on the A-team while the West Coast, Northland and the East Coast are, at best, struggling to get onto the B-Team.

Auckland Chamber of Commerce chief executive Michael Barnett gave the Government "top marks" for making the changes on immigration so soon after concerns were raised at an October business forum.

And Wellington is reporting that it has the lowest unemployment in the country. Most other cities in New Zealand also seem to be doing very nicely - and good on them.

But not everyone can be dotcom millionaires - a point Science Minister Pete Hodgson warned about last week. He also said that New Zealand needed to "transform its economy from a reliance on primary industry commodities to a more value-added and knowledge-based production."

Good point - but how does Government plan to do that? Primary industry commodities are mostly, and sometimes all, that the under-developed areas have and many young people are deserting them because of it.

Too often, people in the regions can't even raise the 50% contribution needed to get some Government money for feasibility studies for their great new idea.

Clearly, the Government is the only party able to make the decisions necessary to drive the under-developed areas forward - it should immediately do so through the creation of Special Economic Zones.

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