A special economic zone (SEZ) is a piece of serviced land, typically industrial, that provides infrastructure and connectivity for private firms investing within it. Such zones can support economic transformation in developing countries by helping to overcome some of the typical constraints to private firms’ growth, such as the high-cost of energy and poor-quality infrastructure.
However, SEZs have a mixed history of success. Risks associated with their implementation are greater in developing countries where the institutional environment is weaker, including in relation to government capacity, legal and regulatory frameworks and construction capabilities.
This paper focuses on one aspect of SEZ execution – their financing. The purpose is to provide guidance on financing options and their advantages and disadvantages. The paper includes case studies on existing SEZ financing and examines in detail the possibilities for private financing of SEZs.