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Reaction Paper
Reaction Paper
Reaction Paper
REACTION PAPER
TITLE: The Role of Law in Economic Development: To Develop a Special Economic
Zone in Order to Build a national and Regional Economy
https://www.emerald.com/insight/content/doi/10.1108/978-1-78756-793-1-
00012/full/html#:~:text=Law%20plays%20an%20important%20role,support%20is%
20hard%20to%20get.
I. SUMMARY:
Even though laws and regulations support the SEZ development in Sei
Mangkei, the authors have discovered that legal uncertainty was yet to be fully
implemented for the development. 1It is stated that Sei Mangkei SEZ has been
operating since 27 January 2015. However, the necessary infrastructure to support
investments within and outside the sector has not been fully developed, resulting in
tenants being unable to function effectively. According to the developer of Sei
Mangkei, it was necessary to provide certain incentives from the regional
1
Ginting, B., Sembiring, R., Siregar, M., & Abduh, A. (2018). The role of law in economic Development: to develop a
special economic zone to build a national and regional economy. In Emerald reach proceedings series (pp. 209–214).
https://doi.org/10.1108/978-1-78756-793-1-00012
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government such as reduced or waived property taxes and duties on land and
buildings, to attract investors.
Complete and total legal compliance has not been ensured by SEZ
development or management assurance. The Sei Mangkei SEZ development
experience demonstrates that legal certainty has not been fully realized.
Furthermore, the problem of legal certainty has not yet been fully addressed about
the amenities and financial incentives. The legal incentive that was promised has not
been acknowledged, and the management is convoluted and bureaucratic.
To overcome this situation the author suggested integrating the said agencies
of the government as well as the ruling institutions. As mentioned in the paper, the
Central Government, the Provincial Government, the Regional Government, and the
Management Institution are the said government agencies that should aid the legal
uncertainty of the Sei Mangkei SEZ. The paper points out the significance of uniting
the power of these government agencies in order to finish the project regarding the
infrastructure and also to harmonize the policies regarding SEZ management.
II. ANALYSIS:
3
Since SEZs often involve a “special” legal and regulatory regime including
incentive regimes and may be appropriate in case the main constraints are related
to legal and regulatory issues that affect the business environment besides other
constraints, such as land and infrastructures. To increase government
2
Pandamdari, E. (2023). The legal certainty of right to manage the Mandalika Special Economic Zone. In Proceedings
of the 3rd International Conference on Business Law and Local Wisdom in Tourism (ICBLT 2022) (pp. 891–897).
https://doi.org/10.2991/978-2-494069-93-0_103
3
Zeng, D. Z. (2021). The dos and don’ts of special economic zones. https://doi.org/10.1596/36663
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accountability, administrative transparency in a SEZ is essential. The governance
structure, authorities, and modes of operation of the Zone must all be clearly
understood, as this unavoidably should include details on reporting and auditing
procedures.
The article also pointed out and identified several obstacles to the
establishment of Special Economic Zones (SEZ), with a focus in particular on the Sei
Mangkei SEZ study. These challenges include unfinished infrastructure, including
port facilities, transportation linkages, waste management, and energy supply.
These shortcomings make the Special Economic Zone (SEZ) less functional and less
appealing to prospective investors. Complete and total legal certainty has not been
ensured by SEZ development or management. The process of creating the Sei
Mangkei Special Economic Zone has demonstrated that legal certainty has not been
fully achieved. The facilities and investment incentives have not fully addressed the
issue of legal transparency. The law's stated incentive has not materialized, and the
process is convoluted and excessively complicated. Resulting in unmoved growth in
the economy.
4
Lorizio, M., & Gurrieri, A. R. (2014). Efficiency of justice and economic systems. Procedia. Economics and Finance,
17, 104–112. https://doi.org/10.1016/s2212-5671(14)00884-3
5
Azmi & Associates. (2023, April 12). Legal profession as strategic industry for economic growth and prosperity.
https://www.linkedin.com/pulse/legal-profession-strategic-industry-economic-growth
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The study has also highlighted how crucial it is for management organizations
and government agencies at all levels to work together to address the difficulties
associated with SEZ growth. It implies that to improve the operation and appeal of
Special Economic Zones (SEZs), coordination between management institutions and
the federal, provincial, and local governments is necessary to finish infrastructure
projects and align laws.
Having proper governance over the SEZ development is a must as it grasps the
rope to the tower of success. SEZ growth needs strong institutional capability, which
may be challenging and costly in a highly regulated environment with frequent
government failures. 6 Tun and Tun (2023) stated that it is important that improved
governance is implemented. A SEZ's day-to-day operations, like any other huge
business venture, benefit from the highest level of transparency available. This
implies that all deals, rules, and interactions with the SEZ should be made public.
6
Tun, T., & Tun, T. (2023, December 7). Special Economic Zone a test for better governance in Myanmar | East Asia
Forum. East Asia Forum. https://eastasiaforum.org/2017/06/15/special-economic-zone-a-test-for-better-governance-in-
myanmar/
7
Portuese, A., Gough, O., & Tanega, J. (2014). The principle of legal certainty as a principle of economic efficiency.
European Journal of Law and Economics, 44(1), 131–156. https://doi.org/10.1007/s10657-014-9435-2
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It gives useful advice for stakeholders and legislators interested in fostering
economic growth through SEZ efforts, as well as insights into the prospects and
difficulties related to the Special Economic Zone (SEZ) development.
III. MY REACTIONS:
https://courses.lumenlearning.com/suny-macroeconomics/chapter/rule-of-law-and-economic-growth/
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It appears evident that law holds significant sway over all aspects of
business, playing an important role in advancing economic development. The
establishment of Special Economic Zones (SEZs) highlights the importance of
legal certainty in enabling economic growth. However, it is concerning that
SEZs lack the necessary legal basis to ensure such certainty. And there must be
a reason why the Special Economic Zone, couldn’t have the legal certainty it
should possess. The role of law in economic development extends beyond mere
assertion and protection. A strong legal system serves as a basis for advancing
innovation and entrepreneurship. Clear and enforceable regulations enable
businesses to operate with confidence, encouraging them to take risks and
explore new opportunities.
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REFERENCE LISTS:
Azmi & Associates. (2023, April 12). Legal profession as strategic industry for economic growth
economic-growth
Ginting, B., Sembiring, R., Siregar, M., & Abduh, A. (2018). The role of law in economic
Development: to develop a special economic zone in order to build a national and regional
1-78756-793-1-00012
Lorizio, M., & Gurrieri, A. R. (2014). Efficiency of justice and economic systems. Procedia.
Lumen Learning. (n.d.). Reading: Rule of Law and Economic Growth | Macroeconomics.
https://courses.lumenlearning.com/suny-macroeconomics/chapter/rule-of-law-and-
economic-growth/
Pandamdari, E. (2023). The legal certainty of right to manage the Mandalika Special Economic
Zone. In Proceedings of the 3rd International Conference on Business Law and Local
0_103
Portuese, A., Gough, O., & Tanega, J. (2014). The principle of legal certainty as a principle of
https://doi.org/10.1007/s10657-014-9435-2
https://scholar.smu.edu/til/
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Tun, T., & Tun, T. (2023, December 7). Special Economic Zone a test for better governance in
https://eastasiaforum.org/2017/06/15/special-economic-zone-a-test-for-better-governance-
in-myanmar/
Zeng, D. Z. (2021). The dos and don’ts of special economic zones. https://doi.org/10.1596/36663
Reaction Paper
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