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

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.