Enterprise Zones

Enterprise Zones

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Introduction

In the United States, enterprise zones were originally conceived as programs to help distressed inner-city areas. Since then, enterprise zones have become pillars for economic development and success in many states across the country. They have been adopted by federal governments as an instrument for stimulating economic development in poorer regions. The target for these programs was based on the argument that inner-city minorities encounter challenges in accessing the buoyant job markets presence in the suburbs. It was also based on the argument that efficiency of economic development can be realized by focusing the benefits on the less advantageous areas in the country. In the United Kingdom, Enterprise zones were introduced about 30 years ago as part of government’s growth strategy.  Just like in the United States, the programs were used to stimulate investment and job creation in inner-city areas. Despite having being abandoned at the turn of the second millennium, enterprise zones look set to make return in the country. This is due to the obvious rationale for the programs: the aim is to attract businesses and investment to depressed areas of the country by offering a broad range of incentives to businesses and companies located within the zones. These incentives often include tax breaks and investment subsidies aimed at fast-tracking planning regulations (Potter & Moore, 2000).

What are Enterprise Zones?

By definition, enterprise zones refer to specific geographical areas of land that offer a number of benefits and incentives to businesses or investments within local enterprise partnership boundaries. The aim of these benefits is to attract new businesses or investments to an area or promote more investment from established businesses. In most cases, enterprise zones vary in sizes and from region to region. Some of the common incentives offered through enterprise zones programs include:

• Reductions in corporate tax paid by organizations and companies.
• Tax credits or giving capital gains allowances on investment in assets and premises
• Subsidies on capital expenditures
• Fast-tracking of planning processes to enable business establish their premises easily and cheaper

Notably, the incentives offered by the federal government through Enterprise Zones are not permanent. They are typically available for not more than 10 years so as to ensure that subsidies available to firms and investments are not treated as permanent rents for businesses. Therefore, Enterprise Zones can only be used to achieve lasting benefits if they enable the depressed areas to become competitive business locations, so that the companies are not tempted to move away after the benefits have ended. The extent to which these programs offer benefits to such areas on the long term basis is still open to debate in many countries around the world (Potter & Moore, 2000).