roads and airports) and efforts to attract foreign
investors. About 80 percent of all SEZs are within 5
kilometers ( 3. 1 miles) of a port, and most are within
25 kilometers ( 15. 5 miles) of a major airport, notes
Mr. Gauthier, enabling easy imports and exports.
To avoid an empty SEZ with no tenants in
sight, government leaders need to think carefully
about the scope and scale, development timeline
and phasing, and capacity to build the zone, Mr.
Gauthier says. Private-sector partnerships often
help. “In most SEZ projects, private developers
help streamline project delivery and balance the
cost and risk of extensive infrastructure investments,” he says.
While governments can push through laws to
sponsor SEZ development projects, private-sector
project leaders understand market demands and
how to deliver infrastructure valued by target tenants within a set timeline and budget. “You need a
strong upfront plan with the right scope and scale,
or the capital expenditure won’t be recovered,”
Mr. Gauthier says.
Plan for Protests
Planners also need to be prepared for significant
stakeholder backlash. Labor groups often feel
companies in SEZs take advantage of local workers, and local investors often see foreign investors
benefiting from incentives that local business can’t
access. “It is common to face such challenges during the setup phase of the project,” Mr. Gauthier
says. He advises project leaders to be ready to
defend their plans but also be open to changes that
might address local concerns.
For example, to set a welcoming and peaceful
stage for an SEZ in Panama, the government there
responded to national labor unions’ concerns that
it might erode local labor protections. It enacted
a law that both provided for
stronger labor standards in the
zone and gave organiza-
tions operating there more
flexibility in terms of labor
negotiating contracts. “In
the end, the law provided
a win-win solution for
business as well as for the
unions,” Mr. Gauthier says.
Governments in the
early stages of considering
an SEZ project should assess what natural
advantages and competitive strengths the
region has to offer, Mr. Hopkins says. They
should consider risks related to competi-
tion, cost and time to deliver before breaking
ground. “The project strategy cannot rely on
the tax advantages alone,” he says. “It needs
to also build on the location’s advantages and
be integrated with other elements related
to the business environment, such as talent,
local infrastructure and ability of domestic
firms to be suppliers.” —Sarah Fister Gale
“You need
a strong
upfront plan
with the
right scope
and scale, or
the capital
expenditure
won’t be
recovered.”
—Jean-Paul Gauthier,
Locus Economica,
London, England
The zones
don’t come
cheap: Most
cost north of
US$1
billion.
Puerto Chiapas in Chiapas, Mexico is
one of the country’s new SEZs.
