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Time to open up development zones

By Sun Shiwen (China Daily)
Updated: 2008-07-11 11:44

At a press conference held on Tuesday, the Ministry of Land and Resources announced they have just found 20 cases of violation to the rules and regulations about protection and development of land and mineral resources. Those responsible have been punished accordingly.

In two of the 10 cases involving illegal uses of land farmland was occupied in an unauthorized manner to expand development zones, one in Jiangsu province and the other in Chongqing municipality.

Development zones used to take important positions in our country. They are named according to their different focuses, like "economic and technological development zone", "economic development zone", "high-tech industries development zone" and "science and technology park".

There are also development zones at different levels depending on their supervising institutions, ranging from "national" development zones to "provincial" and "municipal" ones. One often sees one city divide its development zones into several sections.

Development zones did play a significant role in the progress of the urban economy and technology in the past two decades. But their own growth had also become out of control.

The central government has organized several campaigns to check development zones and the unqualified ones or those with poor performances were cancelled.

From July 2003 to December 2006, the number of development zones were reduced from 6,866 to 1,568 and their total area were cut from 38,600 square kilometers to 9,949 square kilometers.

In the Law on Urban and Rural Planning approved by the lawmakers in October 2007, it was stipulated that no development zone should be established outside the established plan for the city layout.

This clause is meant to regulate the development zones and put them under a proper watch.

At the early stage of the economic reform and opening-up, the authorities set up development zones to lure investment by offering favorable treatment and special policies in these areas.

By limiting these treatments within the zones, the authorities could also get instant feedback to accumulate the experiences in management and system innovation. Success, in commercial terms and administrative aspects, in development zones could serve as a good example for the rest of the country.

On the other hand, development zones with policy incentives to investors are relatively independent of the existing urban system. Therefore, new issues or problems arising from the investment growth or industrial expansion could be contained within the zones, instead of posing shocks to their hosting cities.

All these strategies worked well under the social conditions at a time when it was premature to launch an all-round reform to social and economic institutions.

The accomplishments in development zones soon made them popular. Departments in charge of commerce supported local governments to set up "economic and technological development zones". Departments governing science and technology had a hand in "high-tech and new technology development zones", while the departments in charge of higher education joined hands with local governments to establish "technology parks".

All these development zones offer favorable polices to attract investors and businesses of different types. And these zones are under the management of their own administrative commissions, relatively independent.

The unique governance method of development zones produces a parallel system with the local authorities. In one city, rules and regulations in taxation, industry, environment and other fields were different in and out of the development zones and an institutional barrier is formed.

The primary success of development zones attracted the local authorities, who voluntarily encouraged establishment of new development zones or expansion of the existing ones.

In this process, many malpractices emerged. The management commissions of development zones, independent of the local government hierarchy, should focus on running the economic affairs within the development zones. But as the zones are enlarged, sometime covering several towns, the commissions take on many jobs beyond the economic sphere, like maintaining public security and maintaining the hygienic conditions.

It not only hurts the efficiency of the managers of development zones in luring investment and serving investors, but also burdens them with the jobs they were not supposed to do.

More importantly, necessary political institutions, like local people's congress, do not function in the development zones, where there have been many long-term residents.

In recent years, development zones no longer offer the same favorable treatment to investors as they did before.

After the new taxation policy and labor stipulations were enforced, the development zones have meager differences with other areas in their financial incentives. The strongest leverage that could be offered by hosting cities of development zones is to lower the land cost or offer more land for investors. If not dealt with properly, the land incentive might violate practicing rules and regulations about the protection of land.

The relatively independent regime in development zones might be a restriction on sustainable growth of the zones in the long term.

Meanwhile, the urban infrastructure of the Chinese cities has been stepped up in the last three decades. And most of them are now very investor-friendly.

Therefore, development zones should not be as closed as they were. Opening them up could help people draw lessons from the successful experiences of development zones and promote them in the rest of China.

The author is a professor at College of Architecture and Urban Planning under Tongji University