In 1979, a small fishing village near the southeast coast of China underwent an economic experiment to try to jumpstart its economy. Today, this experiment has transformed the once 30,000-person town of Shenzhen into a global epicenter nicknamed the “Silicon Valley of China” with extreme job growth and a population quickly approaching 13 million. During a recent business trip, I visited Shenzhen as well as several other cities in China.
So how did a small town of 30,000 become a megacity of unprecedented growth and economic development? Starting as a trial concept in public-private partnership designed to bring China’s economy back from the brink, special economic zone designations like Shenzhen’s have helped liberate local and regional economies, spur rapid business development and create countless jobs, and in the process they have become a template for economic expansion waiting to be replicated around the world and here at home.
China’s special economic zones are comparable to the United States’ “opportunity zones” established in the 2017 tax bill.
I wrote about how opportunity zones work and their benefits in this publication last September. Like SEZs, opportunity zones incentivize economic investment in designated areas around the country that otherwise may go underdeveloped. Investors who put their recently realized capital gains into opportunity zone projects are eligible for three significant tax benefits — deferral, reduction and tax-free growth of proceeds of the investment. What’s more is the projects act as a catalyst for further business development and economic growth in those local and regional economies.
For China, this approach has proven exceptionally effective over the last few decades. Shenzhen was one of four experimental SEZs first designated in 1980. The success of each of the four projects was so rapid that within four years, the government had created 13 additional SEZs. Today, there are more than 1,300 SEZs across China.
Over the last 30 years, many of these zones and their respective cities have dominated the markets, sitting atop China’s economy. In fact, Shenzhen’s economy outpaced that of its southern neighbor, Hong Kong, for the first time just last year.
I have been traveling to China since 1987, and in that time, I have witnessed firsthand the positive impact of these designations on regional economies and local communities around the country.
Research has further shown the effects of SEZs on China’s economy to be far-reaching. Nearly 30 years after the first SEZs were introduced, research showed that communities with an SEZ designation saw the earning capacity of workers grow, the standard of living increase and a significant uptick in foreign and local investment.
The takeaway is obvious and twofold: We need to be investing in opportunity zones — in Arkansas and across the country — and we need to be doing it now.
Congress has given us a tool to bring about dramatic economic change in opportunity zones. Gov. Asa Hutchinson has identified 85 opportunity zones here in Arkansas alone, and there are 9,000 more designated across the country.
There is a potential market estimated at as high as $6 trillion ready to be unleashed in opportunity zone projects across the country.
Communities that will have the most success with opportunity zones are those with an innovative and well-orchestrated plan for development. This is an opportunity for Arkansans to create a vision, design long-term development projects and propel local and regional communities into economic powerhouses the envy of states across the South and nation.
If our business leaders, local officials and regional stakeholders come together with their visions and proposals, we can take full advantage of the enormous opportunity presented to us by opportunity zones.
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Lisa Ferrell, CEO of North Bluffs Development Corp. of Little Rock, is the founder of Southern Cap Opportunity Zone Fund LLC, a team of tax, legal and fund professionals connecting investors with eligible opportunity zone projects. Email her at LisaFerrell@SBCGlobal.net. |