Special Economic Zones in the OIC Region:
Learning from Experience
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Examples from OIC Member Countries
Malaysia – Penang FIZs
The PDC adopted a proactive approach to promote domestic linkages and increase domestic
inputs to MNCs. This included encouraging MNCs to develop local subcontracting relationships
through providing institutional support and creating links with local vendors. In the early
formation of this zone this included compiling a database of local vendors and their capabilities.
The Malaysian government also assisted in supporting domestic vendors through the
introduction of minimum capital requirements on foreign machine tool firms and expanding
incentive schemes to local firms.
6.3.3 Economic Impact Performance Indicators
A successful zone is one where there are key economic impacts achieved – through job creation,
FDI, exports, contributions to the gross value add of the economy, technology and skills transfer,
and linkages to the local economy. In addition, SEZ programmes can have broader
transformational impacts on the economy, such as economic diversification and
industrialisation.
In order to achieve these impacts, there should be a clear vision from the beginning, which
impacts are being targeted and the extent of the impacts. Unfortunately this is often not done in
a precise way and specific targeted impacts are not identified or the extent of the impacts are
not properly quantified.
It is key for an SEZ programme to identify targeted economic impacts through the sectors being
targeted, the size of the zone, the markets being targeted and the types of investors that could
be attracted.
6.3.4 Investment Promotion
Evidence from a number of successful zones both within OIC Member Countries and globally
indicate the importance of effective investment promotion, particularly with regard to attracting
inward investment and FDI. SEZs should develop specific marketing strategies to promote the
value proposition of zones to investors.
In some circumstances, SEZs can be used to demonstrate to foreign investors that a country is
open to new investment or that identified zones offer enhanced conditions, be they economic,
physical or regulatory, that are more attractive for investment than the domestic economy.
Investment promotion activities are therefore crucial in demonstrating the value proposition of
SEZs to foreign investors and stimulating FDI inflows. Our analysis has shown that these
activities are most effectively coordinated by either central entities responsible for the
operation, development or regulation of zones. In addition, case studies such as Malaysia