Special Economic Zones and Export-led Growth: An Industrial Policy Imperative

The chapter will examine the role of special economic zones (SEZs) as drivers of export-led growth and structural transformation. SEZs and related export processing zones (EPZs) are mechanisms that governments have used to attract investment, create jobs, facilitate technology transfer, promote manufactured exports, and foster industrial development. Developing country governments have established SEZs as a policy choice but their ability to succeed depends on long-term industrial policy objectives, aligning industrial policy instruments such as SEZs with the corresponding stage of industrialization of the country, and the degree of complementarity of SEZs with other industrial policy instruments. After defining SEZs, the chapter will highlight the strategic importance of building productive capacity for exports, more specifically, manufacturing capabilities as a leading long-term development goal. It will then analyse the interrelationship between SEZs and ‘early, ‘middle’ and ‘late’ stages of industrialization. Finally, the chapter will consider alternative ways of combining SEZs with other policy instruments to achieve the desired development goals.