In the city of Kutaisi, another free industrial zone will be set up by the  Chinese concern Hualing.

According to Deputy Economy Minister Dmitry Kumsiashvili, the department is actively working to issue the Chinese investors permission to create FIZ as  soon as possible.

"The company plans to invest  USD 150 million in the project.  It is planned to  construct several enterprises in the framework of the project.  For Georgia,  investment inflow, including from Hualing, is of  great importance "- said the Deputy Minister.

Along with that, it should be noted that already established  free industrial zones , particularly in Poti, Batumi, Tbilisi and Kutaisi, have  not yet been able to achieve success.
 

Economists have no single opinion on the use of FIZ. Over 3 000 FIZs are operating in the world, only  a fifth of them are  more or less successful. There are doubts about appropriateness of this kind of free zones. Developed countries establish FIZ   mainly in the framework of regional policy. In particular, Britain for the development of individual islands under its jurisdiction, creates free zones for the purpose of providing them with specific privileges in comparison with other regions.
 

The same  regional motifs are crucial in creating free zones in other developed countries  such as Ireland and Italy.

In general, the free zones in developed countries are characterized with too small population, and therefore, this kind of zones may not have a major impact on the overall economic situation in the country. For example, Gibraltar, with a small population and a weak economy, stands to benefit from the economic privileges.

For developing countries, in this case much depends on the size of the country, regional factors, the quality of economic legislation, etc. The creation of free zones is very beneficial in large countries with opportunities of rapid mobilization of cheap labor and a large domestic market. In particular, growth in the Chinese free economic zones in the 90s was  4-5 times higher than in  rest  territory of the country.
 

What will happen  if  the whole economy is liberalized to the level of the free zones? As a result, we can expect significant economic growth throughout the country, not just in one region. 

But at the same time  free zones contribute to  uneven development of region due to their preferences for one part and ultimately  this  may slow down  economic growth. In turn, it will also lead to an  increase in social and infrastructure spending, as the rejection of the liberalization of the entire economy of the country will  reduce the productivity of the economy.
 

An escape of the companies from  neighboring regions to the FIZ  also creates problems. Thus, the artificial creation of preferences will create the conditions for investment flows  in some regions and investment deficit in others.

On the basis of this, development of economic transparency and market conditions across the country is more favorable, which in turn will promote balanced development of the economy of the country.

Source:commersant.ge