The European Bank for Reconstruction and Development’s (EBRD) latest transition report on navigating industrial policy examined the success of SEZs in EBRD countries.
It found that “roughly only 40% of SEZs can be regarded as successful”, through analyzing night-time light (NTL) data, given the lack of data that tracks added economic value.
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It also analysed how other socioeconomic factors contributed to an SEZ’s success.
NTL, which quantifies the amount of artificial bright lights at night, can be used as a proxy to measure levels of economic activity. A high NTL density is related to higher urbanisation and development levels.
The report notes that, in the past few decades, the interest in SEZs as an economic catalyst has skyrocketed. In the EBRD regions alone, SEZs have risen from 198 in 1990 to 1,114 in 2020.
The report found that, among the infrastructure variables considered, only access to a port significantly increased the likelihood of success for an SEZ. A highly skilled workforce, measured by the number of people with tertiary education, is also predictive of success.
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By GlobalDataSome factors that were not consistently associated with success or failure of SEZs include distance to railways, access to telecoms infrastructure and community satisfaction with public services.
The report added that, aside from these factors, “the evolving nature of global production networks and changes to countries’ comparative advantages can significantly impact SEZs’ performance over time, and local zone-specific factors and effective SEZ management (which are not captured by region fixed effects) can also play a role)”.
Some of the global events that have affected FDI flows recently include the rise in conflict, greater protectionism and the creation of the AI supply chain.
