Aligning business, physical and governance models critical for special economic zone success
Special economic zones are serious business.
SEZs participate in over 40% of global goods trade and according the United Nations Conference on Trade and Development (UNCTAD) in 2018, globally there were some 5,400 SEZs, up from over 4,000 five year prior. SEZ are serious business indeed.
According to the World Bank, SEZs are:
A geographically delimited area, usually physically secured (fenced-in); single management/administration; eligibility for benefits based upon physical location within the zone; separate customs area (duty-free benefits) and streamlined procedures
Special economic zone : performance, lessons learned, and implication for zone development by Akinci, Gokhan; Crittle, James. Washington DC: World Bank, 2008
Special economic zones, free zones, special trade zones, industrial zones, whatever you may call them come in a variety of forms, names and functions. These reflect a government’s priorities and positioning of its economy. However, what unifies them all is that they are development tools used by governments to attract, and facilitate investments that act as catalysts to diversify whole or targeted segments of their economies. It is this ability to catalyze an economy, with growth, jobs, foreign and local direct investment, that make SEZs so special. The UN Secretary General, Antonio Guterres, put it best, “among the most important instruments for attracting investments are Special Economic Zones.”
However, none of these benefits are guaranteed.
In order for zone regimes and the investors they attract to set themselves up for the best success – have a go at it – much will depend on the regime’s design, the implementation of this design and its responsiveness to changing global investment and trade trends. What is more, both policymakers and investors alike in doing so have to make sure that their business models, physical designs and governance structures of their special economic zone are all aligned.
