Special Economic Zones (SEZs)

SEZs have expanded rapidly over recent decades, increasing from a few hundred zones in the 1990s to more than 5,000 globally in 2026, with the majority located in in countries from the Global South seeking to attract foreign direct investment and integrate into global value chains (UNCTAD, 2021; World Investment Forum, 2021). SEZs are generally designed to stimulate economic activity by attracting investment, boosting exports and creating employment. Governments expect that the incentives offered will lead to increased foreign investment and broader economic benefits, including innovation and knowledge spillovers (UNCTAD, 2021). However, evidence regarding their effectiveness is mixed. While some studies identify positive impacts on growth and employment, others point to limited broader benefits and highlight that those zones do not always contribute to the socioeconomic development of surrounding areas (UNCTAD, 2021). In addition, SEZs can entail significant costs, including infrastructure investments and forgone fiscal revenues for the state due to tax incentives (Akinci et al., 2008). Governments are increasingly using SEZs as tools to promote industrialisation and economic growth in a context of intensifying global competition for investment. 

China hosts several thousand SEZs, including development zones, high-technology parks, and free trade zones and, therefore, with more than 1600 SEZs, substantially exceeds the number found in any other country (Construction Placements, 2024; OECD, 2025). Its early flagship zones, notably the Shenzhen SEZ, subsequently served as influential models that were replicated both domestically and internationally (Zongyuan, 2023). China’s Belt and Road Initiative was launched to extend its industrial model abroad, building on the success of SEZ-led growth exemplified by Shenzhen and relocating industries through global economic corridors such as China–Pakistan Economic Corridor. While this creates opportunities for countries like Pakistan to adopt SEZ-driven industrialization, progress has been constrained by persistent internal and external challenges (Jahangir et al., 2020). Further, the EU’s Global Gateway supports transport corridors that improve connectivity and enable value chain development, which can create the infrastructure conditions typically associated with SEZ formation. In this sense, it functions less as a direct SEZ policy and more as an enabling framework for SEZ-like industrial and logistics clusters to emerge along these corridors (Kavalov et al., 2025). Within the Middle East and North Africa region, the United Arab Emirates hosts approximately 47 SEZ, representing the highest concentration in the region in the year 2026 (Statista, 2026). The African continent in total covers around 47 SEZs (Construction Placements, 2024).  

Success stories of SEZs highlight their potential to drive investment, job creation, and regional economic growth. In Poland, SEZs have generally been viewed as effective tools for regional development, initially concentrating state aid and tax incentives in areas most affected by the industrial transitions of the 1990s before expanding these benefits nationwide (OECD, 2025). Evidence suggests these zones have attracted investment and increased capital formation in less developed regions, while also boosting employment both within host municipalities and in nearby areas (OECD, 2025). However,  some SEZ success stories, like the one of Shenzhen, demonstrate that SEZs emerged in contexts with weaker institutions and deeper industrial gaps, meaning their policy lessons must be carefully adjusted when applied to advanced OECD economies (OECD, 2025). 

In addition to the rapid expansion, SEZs have raised significant human rights concerns. These include risks related to land expropriation, labour rights, and public revenues, with concerns that SEZ frameworks may not adequately protect affected communities and workers (IIED). The challenges are partly rooted in the special legal regimes underpinning SEZs, which in some cases exempt zones from certain national laws and in others apply them differently or enforce them weakly (IIED) or where access to remedy and accountability avenues are non-existent. The creation of separate regulatory frameworks for SEZs can, therefore, lead to gaps in the protection of human rights. The legal and policy frameworks governing SEZs play a central role in mitigating their human rights impacts. SEZs are typically established through national legislation or provisions within customs and investment frameworks, which define the related incentives, flexible governance arrangements and regulatory scope (WIR, 2019). However, the flexibility of these frameworks can also create risks. SEZs are often characterised by relatively light regulatory requirements and reduced administrative burdens, and, in some instances, may be used to circumvent or limit the application of broader legal obligations (FDI, 2023). This underscores the importance of ensuring that SEZ regimes remain aligned with national and international human rights standards.  

In China’s Uyghur Region, the expansion of SEZs and related development zones illustrates how such models can be used to advance state-led economic integration alongside tighter territorial control (UHRP, 2024). Initiatives in areas such as Kashgar have created enclave economies characterised by regulatory exemptions and strong state involvement, reshaping local governance and limiting protections for residents (UHRP, 2024). In practice, these spaces of exception are associated with concrete human rights risks, including coerced labour, weakened labour standards, and the marginalization of Uyghur communities. Evidence from sectors prioritised within these zones, for example, textiles, electronics, and metals, indicates links to forced labour, often involving state-affiliated entities under international sanctions (UHRP, 2024). In Africa’s SEZs, similar patterns highlight the gap between economic performance and social outcomes. Evidence from zones such as Gabon’s SEZ and Ethiopia’s Hawassa Industrial Park (Joba, 2022) points to restrictions on freedom of association and persistent labour concerns, including excessive working hours, unsafe conditions, gender-based wage disparities, and allegations of forced labour. In practice, these dynamics have disproportionately affected vulnerable groups, particularly female workers, whose living and working conditions have, in some cases, deteriorated despite strong export growth (Joba, 2022). At the national level, SEZ-related legal and governance reforms can also generate tensions over land and resource control. In Madagascar, for instance, the 2017 SEZ law and subsequent proposals to formalise “special status land” triggered public protests, as they enabled the state to reclassify and administer community lands for investment purposes. Such measures illustrate how SEZ expansion can lead to the reallocation of land rights, raising concerns about displacement, loss of local control, and weakened protections for affected communities (CTFD, 2022).  

In addition, human rights risks are particularly evident when it comes to labour practices within SEZs. Historically, some zones have relied on low wages and weak labour protections as part of their investment promotion strategy, leading to concerns of poor working conditions and violations of worker rights (World Investment Forum, 2021). Documented issues include excessive working hours, occupational health and safety risks, and inadequate social protections. Gender-related concerns have also been identified, including unequal pay and insufficient protection during pregnancy in certain contexts (Akinci et al., 2008). Although efforts by trade unions, civil society and international organisations have contributed to some improvements, the consistent implementation of decent work standards across SEZs remains a challenge (Akinci et al., 2008). In addition to labour issues, SEZs regularly raise concerns related to land use and environmental impacts, as the establishment of zones has in some cases involved land expropriation (IIED; UNCTAD, 2021). Governance structures can further complicate accountability and remediation of impacts, as SEZs may involve multiple actors, including public authorities, private developers, local and multinational companies and public-private partnerships, operating under diverse governance and ownership models (WIR, 2019). 

There are emerging efforts to improve the sustainability and inclusiveness of SEZs. Newer models, including high-tech, science and ‘green’ zones, reflect increasing attention to social, environmental and sustainable development considerations (WIR, 2019; UNCTAD, 2021). Practical initiatives such as the Eco-Industrial Parks Programme in South Africa illustrate how SEZs can be designed to support greener industrial development, including through resource-efficient and cleaner production approaches (UNDP, 2022). Also, the Southern Corridor Development Initiative (SCDI) in the Tsau //Khaeb National Park represents a large-scale example of this shift toward greener and more sustainable industrial development. As Namibia’s first gigawatt-scale, fully vertically integrated green hydrogen project, the SCDI reflects the government’s strategic focus on advancing low-cost renewable energy while maximizing fiscal returns and supporting local development. Covering approximately 26,000 km², the initiative has the potential to produce up to 3 million tons of green hydrogen annually, positioning it as a model for integrating renewable energy investments with sustainable industrial growth (UNDP, 2022). 

The UN Guiding Principles on Business and Human Rights (UNGPs) further provide an important normative framework for addressing the human rights implications of SEZs. In line with Guiding Principle 3, States are expected to maintain an effective policy and regulatory environment that fosters business respect for human rights, including through a “smart mix” of measures. In the context of SEZs, this implies that any special regulatory regimes or incentives should be designed and implemented in a manner that does not undermine labour rights, environmental protections and the rights of affected communities. 

SEZs are closely linked to the Sustainable Development Goals, particularly those related to economic growth, industrialisation and employment. These linkages are especially relevant to Sustainable Development Goal 8 and Sustainable Development Goal 9, which emphasise the promotion of inclusive and sustainable economic growth, productive employment, and resilient industrialisation. 

In this context, SEZs can support Sustainable Development Goal 8 by creating jobs, fostering skills development and integrating workers into formal labour markets, particularly in developing economies. At the same time, their contribution depends on the extent to which labour standards are effectively implemented and enforced within zones. Similarly, SEZs can advance Sustainable Development Goal 9 by promoting industrial diversification, facilitating technology transfer and encouraging innovation through clustering effects and improved infrastructure.