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Special Economic Zones: Evidence and prerequisites for success

Policy brief Firms

Authors

Tewodros Makonnen Gebrewolde

Senior Country Economist, Ethiopia, International Growth Centre
  • Special Economic Zones (SEZs) aim to benefit from firm clustering by facilitating technology spillovers, labour availability, and market access.
  • Evidence on the employment and wage effects of SEZs is mixed. Wages for unskilled workers tend to be lower initially and then increase over time. Labour abuse is a concern in many SEZs
    Export-oriented SEZs are frequently part of global value chains, limiting firms’ net export earnings. Export Processing Zones (EPZs) have been successful in some countries.
  • Improved business climate in zones are associated with increased FDI while the empirical evidence of SEZs’ effects on technology spillovers is not strong. This is usually due to limited domestic supply chain development.
  • SEZs in China and the US have had positive effects on urbanisation, particularly housing development.
  • Coordinated policy, low-wage labour supply, infrastructure, trade logistics, and facilitation systems are prerequisites for successful SEZs

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