Special Economic Zones are booming globally
Special economic zones are all the rage these days.
But why?
What are special economic zones?
In its new Report, World Investment Report 2019: Special Economic Zones, the United Nations Conference on Trade and Development (UNCTAD) has documented the massive rise of SEZs whih are now present in over 147 countries. As of 2018, globally we have witnessed growth in SEZs to nearly 5,400, up from 4,000 five years ago. But what is more there are over 500 more new SEZs in the pipeline.
But what makes SEZs so special?
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.”
It is this ability to catalyze an economy, with growth, jobs, foreign and local direct investment, that make SEZs so special. Click To TweetGlobal SEZ boom in context
Let’s face it SEZ have a proven track record for economic growth and development through industrial upgrading, economic diversification and greater global value chain participation.
There are many examples of SEZs that have played a key role transforming economies, promoting greater participation in global value chains and catalysing industrial upgrading.
Mukhisa Kituyi, UNCTAD Secretary-General
However, as the UNCTAD Report makes clear none of these benefits are guaranteed as much will depend on the regime design, the implementation of this design and responsiveness to changing global investment and trade trends.
On this latter point all is not well in the world. The global SEZ boom has to be placed in the context of 13% decline in foreign direct investment in 2018, which is the sharpest decline since the global financial crisis and is the third consecutive year of decline.
The SEZ boom is part of a new wave of industrial policies and a response to increasing competition for internationally mobile investment.
World Investment Report 2019: Special Economic Zones
