Multinational Corporations and Industrial Parks, High-Tech Zones, and Special Economic Zones: Hitting it out of versus zoning out in the Park

Dr. Jean-Marc F. Blanchard's picture

Countries around the world are aggressively constructing industrial parks (“Parks”), high-tech zones (HTZs), and special economic zones (SEZs). They hope incentives such as free or discounted land, lower taxes, and lighter regulation coupled with improved infrastructure, better trade opportunities, and high-quality administration will yield multiple benefits. These include increasing the amount of foreign capital they obtain, facilitating entry into global production chains, and upgrading their scientific capabilities.

The timing for creating Parks, HTZs, and SEZs seem auspicious given that China has made the constructions of Parks, HTZs, and SEZs an integral part of its Belt and Road Initiative. Furthermore, Chinese companies, now major capital exporters, seem attracted by incentives and other locational benefits of Parks, HTZs, and SEZs such as those flowing from agglomerations of other Chinese companies. Still, the mere existence of Parks, HTZs, and SEZs does not automatically ensure success either for multinational corporations (MNCs) moving into them or for the host countries that have “invested” in them. As far as host countries are concerned, Parks, HTZs, and SEZs have to have a broader attractiveness besides incentives, have to acknowledge the absorptive capacity of the host country, and have to grow around a host country’s real comparative advantages not ones the host country dreams it has. Furthermore, while costs have to be incurred to build up the requisite infrastructure, host countries have to be careful about borrowing too much to construct Parks, HTZs, and SEZs as they often show poor or no returns over the short- to medium term. As for MNCs, they need to calculate carefully about revenue potentialities as supping on economic incentives alone likely will not sustain profitable operations over the medium- or longer-term. Only through a careful consideration will host countries and MNCs “hit it out of” rather than “zone out” in the park!