Successful industrial parks can drive economic competitiveness (Credit: World Bank, Flickr)
Why do so many industrial park programs fail? They are popular across the developing world, inspired perhaps by China, where they are widely used as a policy tool and where their products are impressive to the visitor: functional parks with many firms and bustling activity. But horror stories abound, even in China, of empty parks, subsidized land speculation and tax erosion, and often no parks at all. This has not dampened enthusiasm, however. The theory is simply too seductive. By providing high-quality, shared infrastructure to firms in specific areas, industrial parks are meant to create pockets of competitiveness that eventually spill over onto the rest of the economy. For capacity-constrained governments, they have the further appeal of focus.
Economic development succeeds best when public policy and the private sector work in harmony, not at cross-purposes. That’s the idea at the heart of the efforts by two former Chief Economists of the World Bank, Justin Lin and Joseph E. Stiglitz, to promote a renewed embrace of Industrial Policy, as Tuesday’s blog post described. Exploring their ideas on how activist government policies can help shape development, their recent International Economic Association (IEA) roundtable and forum at the Bank was a reminder that there are many variations on the Industrial Policy theme.
Industrial Policy practitioners, learning from experience, have adjusted many of their old tactics and techniques. Using a modernized, market-sensitive policy toolkit, a promising new approach is now being implemented by the Competitive Industries Practice within the Bank’s Financial and Private Sector Development Network.
On Tuesday, we looked at the disappointing performance of 2005’s SEZ Act when measured against the Government of India’s stated goals.
But the Indian government has an ambitious new plan to spur industrial growth, create 100 million jobs and increase manufacturing’s share in the GDP from 16 percent to 25 percent within the decade. If ratified, the National Investment and Manufacturing Zones (NIMZs) will offer simplified regulation and better infrastructure to attract businesses. In this second installment of the series on India’s industrial zones, we assess its prospects.
In 2009, an EU-based chemical manufacturer opened a plant inside one of FYR Macedonia’s recently-established special economic zones. The plant began production of catalysts, a type of emissions-control component used in automobiles. Two years later, this investment drove chemical products to the third-highest spot on Macedonia’s export list, lessening the country’s reliance on metals and textiles.
In Nicaragua, low labor costs and high security compared to its neighbors have led zonas francas to expand dramatically, attracting producers of electronic wires and medical devices and expanding the country’s exports beyond an already-strong apparel sector. Between 2006 and 2008, for example, ignition wiring sets for vehicles were the country’s fourth biggest export.
How we took this approach to popularize SEZs in Bangladesh, against a backdrop of regional resistance
Imagine that you are starting an economic zones development program in a region while next door, riots are already flaring over a proposed Special Economic Zone (SEZ). Imagine that news of the protests is already all over the media in the country you are operating in and your clients and other stakeholders are bound to take note. How do you assuage their concerns and move ahead with the design of your economic zones program?