Special Economic Zones in the OIC Region:
Learning from Experience
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Box 8 - Thailand’s SEZ Programme
Box 9 - Kaesong SEZ Programme
Thailand approved its SEZ programme in 2014 with the primary aim of driving regional economic
growth and targeting cross border trade. At present it is estimated that cross border trade
accounts for approximately 10% of total trade volumes within Thailand, but the SEZ programme
aims to increase this to 50% once fully deployed.
The programme aims to target investors interested in accessing labour and importing goods,
including raw materials and parts from countries neighbouring Thailand. The zones will aim to
develop supply chains and increase the domestic consumer market along Thailand’s border.
Target industries and activities include agriculture, manufacturing of textiles, ceramics, furniture,
gems, medical equipment and electronics as well as logistics, pharmaceuticals and tourism.
SEZ programmes can also be used to promote reform and encourage diplomatic relations as in
the case of the Kaesong SEZ which was established by North and South Korea. Formed in 2003,
the Kaesong Industrial Complex, when it was operational, employed approximately 47,000 North
Korean workers and 121 South Korean enterprises generating a total of $300 million in output.
The initial concept of the SEZ was to allow South Korean firms to utilise cheap North Korean
labour within manufacturing activities. The secondary benefit was to promote liberalisation and
economic reform within North Korea as well as provide the North Korean economy with much
needed foreign currency accumulation. It is estimated that the North Korean government
accumulated approximately $2 million per month from workers fees, land lease fees and other
payments. In addition, the government received a $12 million lease payment from the Hyundai
Asan Company who developed and operated the zone.
Key perceived factors of success included an increase in North and South Korean political
cooperation and acceleration of economic reform within North Korea as well as benefiting the
South Korean economy. However, overall economic performance has been low primarily due to
relatively small numbers of SMEs located to the zone and decreases in productivity. In addition,
there has been little evidence that the North Korean economy has improved since the creation of
the zone (Nam, 2012)
Unfortunately due to some political developments within the region, the Kaesong Industrial
Complex is currently closed demonstrating the fragility of cross border zones, particularly within
geographies of conflict.