When to Use an SEZ
At a Glance
- SEZs can play a powerful role in attracting investment, generating jobs, supporting industrialization, and facilitating trade, and are most effective when problems faced in the wider economy are unlikely to be solved at a national level or in the medium-term (and even then, cheaper or more targeted options may still exist).
- SEZs have the most potential when there are multiple constraints which act to impede investment, such as access to land and infrastructure, trade barriers, and problematic red-tape, along with pent-up local demand or a lack of accessto global or regional value chains.
- For SEZs to succeed, there must be a commercial case for investment based on sufficient scale of opportunity and sustainable sources of competitiveness. This means they cannot rely exclusively on fiscal incentives (which can overcome certain barriers, but are rarely the main driver of investment decisions).
- The national investment environment, as well as the capacity and capability within the local economy, will still largely determine the types of investment that can be attracted and, critically, which links to the local economy will be viable.
SEZs can play a powerful role in attracting investment, generating jobs, supporting industrialization, and facilitating trade. However, in many cases, they are not the most appropriate or viable tool. For example, most of the SEZs introduced in South Africa in the early 2000s failed to induce significant investment (instead many existing companies simply relocated into the zone) or job creation. This was partly due to the use of these zones for spatial development of poor regions–which SEZs are generally poorly suited to do.
 Anthony Altbeker and Katie Mckeown and Ann Bernstein, Special Economic Zones: Lessons for South Africa from international evidence and local experience, (Johannesburg: Centre for Development and Enterprise, 2012)
 World Bank Group. Special Economic Zones: An Operational Review of Their Impacts, (Washington, DC: World Bank, 2017)
- Special Economic Zones in Africa: Comparing Performance and Learning from Global Experience (Thomas Farole)
- Breaking out of Enclaves Leveraging Opportunities from Regional Integration in Africa to Promote Resource-Driven Diversification (Gozde Isik, Kennedy Opalo, Perrine Toledano)
Breaking out of Enclaves Leveraging Opportunities from Regional Integration in Africa to Promote Resource-Driven Diversification
This report explores the relationships between extractive resources, regional integration, and economic diversification. It discusses the ...
This resource outlines the requirements for a Special Economic Zone (SEZ) to succeed. Of specific interest is chapter 4 (pages 111 to 130) ...