The political economy of special economic zones: the cases of Ethiopia and Vietnam

Abstract

There are over 5,000 Special Economic Zones (SEZs) in the world. About 75 percent of developing economies and almost all transition economies use SEZs in their early stages of industrialization. Why have SEZs traveled so far and fast globally? How does this policy vary when it enters different national contexts? I develop an SEZ policy adoption framework for developing or transitioning countries. I then apply the framework to compare how Ethiopia and Vietnam have learned from mainland China and Taiwan’s SEZ policies. Drawing on field interviews with 53 key stakeholders, I argue that the recent wave of SEZ adoption among late industrializers is rooted in their desires to catch up, just as China and other Newly Industrialized Economies (NIEs) did. A coalition between the NIEs’ governments, private investors, and state-owned companies actively promoting their model become the key policy ambassadors in the globalization of SEZ while expanding NIE capital to emerging markets. The localization of SEZs in national contexts, however, is constrained by their extant institutional settings. My case studies demonstrate the importance of policy transfer as a driver of SEZ policy and highlight the critical role that emulation plays in late industrialization.

Keywords:

• Policy transfer
• special economic zones
• late industrializers
• Ethiopia
• Vietnam
• Newly Industrialized Economies

Acknowledgements

I thank all my interviewees in Ethiopia and Vietnam. I thank constructive feedback on the earlier versions of this article from RIPE’s editors and reviewers, David Steinberg, Deborah Bräutigam, Yoon Jung Park, Bruce Parrott, Tom Christensen, Mario Colella, Alejandro Baron, Jung-Ju Lee, Jyhjong Hwang, and Derby Sinn. I also thank participants in the following events for their comments: Hopkins-Nanjing Center 2019, SAIS-CARI 2019 Conference, Young Scholars Forum on International Development 2019, Tsinghua University 2019, and Society for the Advancement of Socio-Economics 2020 Conference.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 However, SEZs encompass different variants in different countries. In Ethiopia, they are referred to as industrial parks (IPs), while most Vietnamese SEZs can be sub-divided into three groups: industrial zone (IZ), export processing zones (EPZ), and economic zone (EZ). For simplicity, I will continue to use the general word “SEZ.” A summary of their differences is attached in the Appendix.

2 World Bank National Accounts Data. September 1, 2018.

3 To protect the identity of my interviewees, all the interviews and quotes cited in this research are anonymized.

4 Interview, Micro and Sectoral Research Center, Ethiopian Development Research Institute. Addis Ababa, Ethiopia. July 2018.

5 Interview, Ministry of Industry. Addis Ababa, Ethiopia. July 2018.

6 Ibid.

7 Interview, Tan Thuan Export Processing Zone. HCMC, Vietnam. July 2018.

8 Interview, Linh Trung Export Processing Zone III. HCMC, Vietnam. July 2018.

9 Interview, Industrial Park Division, Ethiopian Investment Commission. Addis Ababa, Ethiopia. July 2018.

10 Interview, Aftercare & Industrial Parks Management Directorate, Industrial Park Development Corporation. Addis Ababa, Ethiopia. July 2018.

11 Interview, Eastern Industrial Park. Dukem, Ethiopia. July 2018.

12 Ibid.

13 Interview, Ethiopian Development Research Institute. Addis Ababa, Ethiopia. July 2018.

14 Interview, Ministry of Industry. Addis Ababa, Ethiopia. July 2018.

15 Interview, Eastern Industrial Park. Dukem, Ethiopia. July 2018.

16 Interview, Eastern Industrial Park. Dukem, Ethiopia. July 2018.

17 Interview, One-Stop-Shop Service Directorate, Ethiopian Investment Commission. July 2018.

18 Interview, Industrial Park Development Corporation. Addis Ababa, Ethiopia. July 2018.

19 Ibid.

20 Interview, Vietnam National University. HCMC, Vietnam. July 2018. Interview, Ministry of Planning and Investment of Vietnam. Hanoi, Vietnam. July 2018.

21 Interview. Fulbright University Vietnam. HCMC, Vietnam. July 2018.

22 Interview. Vietnam Academy of Social Sciences. Hanoi, Vietnam. August 2018.

23 Interview. Fulbright School of Public Policy and Management. HCMC, Vietnam. July 2018. 

24 Ibid.

25 Interview, Ho Chi Minh City Export Processing Zone Authority, HCMC, Vietnam. July 2018.

26 Interview, Tan Thuan Export Processing Zone. HCMC, Vietnam. July 2018.

27 Interview, Ethiopian Investment Commission. Addis Ababa, Ethiopia. July 2018.

28 Interview, Hawassa Industrial Park. Hawassa, Ethiopia: July 2018.

29 Interview, Hawassa Industrial Park technician team. Hawassa, Ethiopia: July 2018.

30 Interview, Hawassa after-care operation team. Hawassa, Ethiopia. July 2018.

31 Interview, Chu Lai Open Economic Zone, Tam Ky, Quang Nam, Vietnam. July 2018.

Additional information

Funding

This research was funded by research grant ES/M004074/1 from the UK’s Department for International Development and the Economic and Social Research Council (DFID/ESRC). The funding support was arranged by Johns Hopkins SAIS China Africa Research Initiative (CARI).

Notes on contributors

Keyi Tang

Keyi Tang is a Ph.D. candidate at Johns Hopkins University School of Advanced International Studies and a Pre-doctoral Research Fellow at Boston University’s Global Development Policy Center. Her research focuses on international and comparative political economy of development.