Oliver Wyman addresses the impact of special economic zones in today’s increasingly globalised market place
Dubai, United Arab Emirates, 3 September 2018: As a national development strategy, Special Economic Zones (SEZs) have become a global phenomenon. From an estimated 500 in 1995, the number of SEZs has grown to around 4,300 in over 130 countries, reveals a recent report by the strategy consultancy firm, Oliver Wyman.
Titled “Special Economic Zones as a tool for economic development,” the report raises and addresses two critical questions on the opportunities and challenges posed by the creation of Special Economic Zones:
- Are Special Economic Zones still relevant and effective as a development strategy in this crowded and connected global marketplace?
- What is required for Special Economic Zones to succeed in shifting national and global economic conditions?
According to the report, Special Economic Zones can be characterised as a geographically delineated area subject to differentiated regulation and administration from the host country in which it resides. These zones are created for the purpose of attracting foreign direct investment in economic activity that could not otherwise be achieved. Across the decades, Special Economic Zones have evolved from a relatively simple proposition, to an increasingly diverse range of propositions, designed to achieve more specific development objectives.
“Special Economic Zones evolve in four stages, and the GCC countries, are currently under stages I and II, namely the Special Manufacturing Zones (SMZs) and Special Service Zones (SSZs). Each focusing on leveraging on abundance of low cost land labour to overcome the absence of a domestic market through export,” said Anshu Vats, Partner, Oliver Wyman.
“There is a natural temptation to aspire to the most innovative stage III, but there is still the need for an infrastructure to accommodate this move. We can understand the need for creating these zones as the appeal is clear; knowledge based economic development with high economic value add. What is less clear is how they could succeed when global competition for dominance in such sectors is fierce. Selecting which sectors to rely on and designing the right value proposition will constitute a Special Economic Zone’s success,” he added.
Special Economic Zones remain a powerful development strategy in today’s crowded global marketplace but in such a global and interconnected marketplace, their success is dependent on a number of factors including the host economy’s position in the global context, the target industries/sectors based on insight from potential investors, and defining guidelines on how to plan success for these zones.