Change Leader: Special Economic Zones Provide Global Opportunities
These profiles are based on interviews, and the opinions and statements are those of the subject and are not necessarily shared or endorsed by this publication.
This particular webcam interview was recorded by Todd Danielson, the editorial director of Informed Infrastructure. You can view a video of the full interview at the top of this page or by visiting bit.ly/3I0EHI1.
A Rapidly Changing World
Although most of what you read about in Informed Infrastructure takes place in North America, Europe and the developed parts of Asia, some of the largest and most-important opportunities for global infrastructure are in “developing” areas, countries and continents. And the key to accessing many of these locations is a Special Economic Zone (SEZ) designation.
SEZs introduce financial policies to encourage businesses to set up in the zone, typically encompassing investing, taxation, trading, quotas, customs and labor regulations. And according to Thibault Serlet of the Adrianople Group, “markets need legal stability, and SEZs help countries with more-complicated legal systems adopt a more western-familiar, internationally standard legal system to facilitate doing business in the areas around these key infrastructure hubs.”
Developing countries often have corrupt systems of resource development, requiring bribes for different people at each step of the process. Most major infrastructure developers don’t want to work in those types of situations, so SEZs are created to create a satisfactory environment.
“It’s very important that countries fight against corruption, and a major tool to improve ease of doing business, to improve efficiency, is Special Economic Zones,” notes Serlet. “Special Economic Zones represent the partial privatization of the legal system.”
In addition to legal stability, businesses trying to operate in developing areas need physical infrastructure; utilities such as energy and water; and easy access to raw materials, logistics and a consistent workforce. SEZs help in all these areas.
What Makes an SEZ?
SEZs typically are declared through two models: the designation-based model (i.e., “Soviet model”), in which a country simply declares an area to be an SEZ, and the application-based model, in which an area meets certain criteria such as available employees, land size or available infrastructure.
Although there may seem an infinite and inexplicable number of reasons to declare areas an SEZ, they’re now proliferating at an incredible rate. “One third of all new SEZs have been created in the last five years,” explains Serlet. “And as the world becomes more global and the need for transparency increases, you’re only going to see more and more of them.”
Benefits of Efficiency
Doing business in an SEZ often comes with a wide variety of incentives for the project. Western companies operating in the zones will have tax codes, labor laws and visa policies more similar to doing business in the United States than doing business in that particular country.
Serlet believes there’s a revolution now happening in global governance, especially with the pandemic, and SEZs will help stimulate efficiencies, meet sustainable-development goals and save lives.
“We always think about devastation and destruction and human suffering in terms of events like wars and hurricanes, but it’s really the everyday grind of filing the paperwork and it being slow and your family not being able to provide for it. That is really killing people,” he notes.
Serlet cites the great famine in China as an example: “It wasn’t that the Chinese government was unable to grow enough crops to feed people. It was that they were unable to process the crops into food fast enough, and the crops would waste. It was fundamentally a supply chain problem.”
He adds that during the pandemic, many SEZs became physical quarantine zones, because they were already fenced off, and many never shut down. According to Serlet, 70 percent of the world’s supply of Nitrile gloves came from four Special Economic Zones: two in Thailand and two in Malaysia.
Trying to Make Sense Using Maps
As SEZs increase in number and become more important to global economics, Serlet and the Adrionople Group tried to make better sense of them through a timeless technique—mapping—and created the Open Zone Map.
“Believe it or not, until October 2021, nobody had made a comprehensive map of every single SEZ in the world [that met certain inclusion criteria],” says Serlet. “So we got 40 of our best friends and spent the next two years making a map ourselves.”
The Open Zone Map is completely in the public domain, and anyone can use it for any purpose—commercial or noncommercial—with the same license as Wikipedia. “We really want to help researchers and other people build their tools,” adds Serlet.
“I think SEZs are part of this great supply chain,” he says. “And we really need to think about efficient government as a lifesaving tool and how we can make our infrastructure serve human needs much better.”