Ownership and Operating Models
At a Glance
- Each of the various types of SEZs may be owned and managed by the public sector, private sector, or a combination of the two.
- The best choice of ownership model depends on the context and the specific objectives being pursued, as well as economic and capacity constraints.
- African Shenzhen: China's Special Economic Zones in Africa (Deborah Brautigam, Tang Xiaoyang)
- An Overview of Six Economic Zones in Nigeria: Challenges and Opportunities (World Bank)
- Special Economic Zones: Performance, Lessons Learned, and Implication for Zone Development (Gokhan Akinci, James Crittle)
- Special Economic Zones: A Guidance Framework for Policymaking (Claude Baissac, Thomas Farole, Jean-Paul Gauthier)
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There are three established models for SEZs’ ownership and operations, each with its own strengths and weaknesses. These can be distinguished by their degree of public or private sector involvement.
- Public ownership and management: this model implies that the government has full control—and full responsibility. This means the government has greater oversight of the type of investments attracted and of firm operations. Chinese SEZs are the success stories of this model. However, this model does carry significant risks, particularly for government budgets. Excluding the private sector may mean that political processes determine the location of an SEZ, overly optimistic forecasts lead to the wrong size, or zones develop weak operational capacity and cannot attract sufficient investments to be sustainable.
- Public ownership with private management/operation: under this model, the government keeps the land and all the assets, while a specialist firm works to attract investment and run the day-to-day operations. Depending on how infrastructure is funded, this model can take many specific forms, including a concession, a build-operate-transfer setup, or a public-private partnership. This approach maintains government oversight, while incentivizing a private operator to drive the zone’s success. However, zone performance depends on how this agreement is implemented. The contract setting out the roles, obligations, and costs is critical, as is the monitoring and oversight of the managing operator. In countries or regions with low capacity to negotiate and enforce these service contracts, the SEZ risks poor implementation or targeting.
- Private ownership and management: private firms have control, while the government’s role is confined to the management of some incentives (e.g., tax or customs). A 2007 global study found that 62% (of 2,301) of zones were privately owned, developed, and operated (compared to less than 25% in the 1980s). This was driven by the perception that private zones are more successful than most public zones, as well as a general lack of government funding for zone development. In the case of Honduras, stagnant government-run zones were transformed when the law was changed to allow private development of zones. However, in this model, the government relinquishes control over the type of investment attracted—which may weaken potential benefits to the local economy.
A 2011 review of SEZs did not find any clear pattern of private SEZs outperforming public SEZs (or any other model), but it noted that the private sector can be more dynamic when implementing zones—and that the private sector is an important source of expertise and risk management. Ultimately, the choice of SEZ model should consider the objectives, capacity, and incentive structures of those who run the program.
Recently, a new form of ownership and management has emerged. In 2006, the Chinese government announced that it would establish economic and trade zones in foreign countries. Zones have since been established in Zambia, Egypt, Nigeria, Mauritius, Ethiopia, and Algeria. However, no studies are available yet on the impact of these zones.
 Gokhan Akinci and James Crittle, Special Economic Zones: Performance, Lessons Learned, and Implication for Zone Development (Washington, DC: World Bank, 2008).
 Thomas Farole, Special Economic Zones in Africa: Comparing Performance and Learning from Global Experiences (Washington, DC: World Bank, 2011).