Design and Implementation
At a Glance
- Successful SEZs are distinguished by having a clear value proposition based on sustainable sources of comparative advantage and incentives. In other words, an SEZ needs to stand out from competitor locations targeting similar investor markets.
- In the case of extractive industries, a related SEZ’s value proposition may be relevant to one stage of extractive industry operations but not others.
- Zones are best developed in phases to allow for the market to be tested before large-scale investments are made.
- Enabling the Development of Industrial Capacity: Resource Corridors, Clusters and SEZs World Bank Conference on Local Content Policies in the Oil, Gas, and Mining Sector (Ian Satchwell)
- Industrial Cluster: Case for Special Economic Zones in Africa (Carol Newman, John Page)
- Special Economic Zones in Africa: Comparing Performance and Learning from Global Experience (Thomas Farole)
- Making Foreign Direct Investment Work for Sub-Saharan Africa: Local Spillovers and Competitiveness in Global Value Chains (Thomas Farole, Deborah Winkler)
Enabling the Development of Industrial Capacity: Resource Corridors, Clusters and SEZs World Bank Conference on Local Content Policies in the Oil, Gas, and Mining Sector
This resource provides examples of decision-making approaches to clusters, special economic zons (SEZs), and resource corridors. This is ...
Making Foreign Direct Investment Work for Sub-Saharan Africa: Local Spillovers and Competitiveness in Global Value Chains
This resource provide users with the tools to better understand the dynamics of spillover in certain contexts, including: (i) in low-income ...
This resource outlines the requirements for a special economic zone (SEZ) to succeed. Of specific interest is chapter 4 (pages 111 to 130), ...
The purpose of this review is to inform and identify lessons from special economic zone (SEZ) policies across countries and across the World ...
This article raises the question of whether spatial industrial policies can be designed to facilitate clustering, with a focus on creating ...
This study evaluates the overall economic performance of special economic zones and analyzes key development trends in terms of zone ...
The World Investment Report monitors foreign direct investment trends and outlines investment policy developments around the world. The 2019 ...
Once the strategic choices around an SEZ have been made, there is still a lot of work to be done around its design and implementation. Getting this right will help ensure the SEZ’s success.
Successful SEZs have a clear, differentiating value proposition based on incentives and sustainable sources of comparative advantage. This value proposition should make a clear case for why an investor might choose the SEZ over competitor locations that target similar investor markets. Differentiating factors could include the location, physical characteristics, nature or quality of services offered, economic linkages, and specific investor targets in terms of subsectors, geographies, or types of companies. Different value propositions may be relevant to different stages of extractive industry operations. For example, the exploration stage and the operations stage can involve different types of companies with different needs; exploration companies might have a shorter time horizon, but could value certain turnkey services when they are new to a market.
A detailed technical and financial feasibility should be used to determine the design, associated financial costs, and various revenue scenarios—all of which should be weighed against the socioeconomic benefits. Realistic assessments of market size, potential share, and take-up rates are needed. Long-term budgetary commitments may also be needed while the SEZ builds up a base of investors or tenants. These should be mapped against initial goals.
Site-specific feasibility assessments are also required. These should include the environment, infrastructure development, transport integration, traffic impact, and security.
Determining the appropriate size for each SEZ is critical. To retain flexibility and to test the market before large-scale investments are made, zones are usually developed in phases.
Depending on ownership and management decisions, private sector partners need to be identified, with roles and obligations outlined in the contract.
Although it has been argued that extractive projects set up with foreign direct investment can be considered de facto SEZs—given that investment agreements sometimes allow these projects to operate under a different tax and regulatory regime than is applied in the rest of the country—designing a physical SEZ around this setup might not be effective.
The implementation approach of an SEZ is also crucial for its success. Many SEZs have failed to apply their legal frameworks, particularly in terms of administration, operation, monitoring, and enforcement. Others have failed to create the necessary institutional cooperation systems for the various governmental bodies, regulators, and utilities involved. The speed of decision-making around implementation needs to be aligned with investor decision-making time frames.