Economic zones as a tool for local economic development

Abstract

SEZs play varied roles in facilitating national, regional, local economic development, and global economic connections, with some remarkably successful in doing so. Despite the prevalence of special economic zones worldwide, their performance and impact on the economy and structural transformation are quite mixed. Among the many lessons learned from successful special economic zone programmes, the key elements include a strategic location, integration of zone strategy with the overall development strategy, understanding the market and leveraging comparative advantage, and, most importantly, ensuring that zones are ‘special’ in terms of a business-friendly environment —especially a sound legal and regulatory framework and an embodiment of sustainability and resiliency towards various external shocks. This paper offers a systematic review of the international literature addressing the impact of the Special Economic Zone model on local economic development. By identifying, critically assessing, and compiling the most relevant and high-quality studies on the topic, the basic conditions for the success or failure of this industrial policy model come to light. As a result of the analysis of the effectiveness of SEZs in Poland, the article concludes that the impact of SEZs on the Polish economy is positive, and additionally they are the source of value added for the market. The analysis shows that SEZs had a strongly positive impact upon the development of the least developed regions in Poland, while the effect was weak or even negative in relatively richer ones. The research on Special Economic Zones as regional development enablers discusses the diverse and international track records in the implementation of SEZs, the interplay of SEZ models and local institutional infrastructure and stakeholders, and the SEZ models that can best fit certain development states and/or settings. As the locational advantages change, the emphasis and the objectives of the SEZ must also change. Reliance on “generic” locational advantages must necessarily diminish, and greater emphasis needs to be placed on developing “specialized” locational advantages. Another key finding is that the benefits of a SEZ must intentionally “leak” beyond the perimeter of the zone. The pervasiveness of the direct, indirect, and induced extra-SEZ effects beyond the geographically bounded space of the SEZ determines its success or failure.