The promise and perils of Special Economic Zones

Feb 05, 2026 Features / Columnists, Peeping Tom

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(Kaieteur News) – Special Economic Zones (SEZs) occupy a curious place in the modern development canon. They are often presented as compact spaces where infrastructure is concentrated, and where growth can be jump-started by design. The promise is alluring. The evidence, however, is sobering.

The economic literature is clear on one central point: SEZs are not a guaranteed path to growth. Comprehensive reviews of global experience suggest that only about 40 percent of such zones can be considered successful when measured against standard growth criteria—investment, employment creation, export expansion, and productivity gains. Even among those that do succeed, the benefits are frequently confined within the fence, with limited spillovers to the wider economy.

This mixed record is not accidental. It reflects the conditions under which SEZs are established and governed. Where SEZs work well, they are rarely ad hoc or politically improvised. Successful zones tend to be embedded in a coherent national development strategy, aligned with a country’s comparative advantages, and supported by high-quality infrastructure—reliable power, ports, logistics, and digital connectivity. Equally important are institutions: transparent regulation, predictable rules, efficient customs administration, and credible dispute resolution. In such environments, SEZs function less as enclaves and more as demonstration effects, showing what the broader economy could achieve under better governance.

Critically, successful zones are also integrated with domestic supply chains. They encourage local sourcing, skills transfer, and technology diffusion. Without such linkages, SEZs risk becoming little more than offshore platforms—importing inputs, exporting outputs, and leaving few lasting domestic capabilities behind. By contrast, where SEZs fail—and most do—the causes are well known. Excessive reliance on tax holidays rather than productivity improvements attracts footloose capital that departs as soon as incentives expire. Poor infrastructure raises costs. Weak governance breeds uncertainty. And discretionary decision-making, rather than rules-based administration, deters serious investors while inviting carpet baggers. In these cases, SEZs become fiscal sinkholes rather than engines of growth.

It is this latter danger that should concern Guyana most acutely.

In small, resource-rich economies with concentrated political power, SEZs can easily mutate from development tools into mechanisms of favoritism. Instead of correcting market failures, they can institutionalize political ones—channeling preferential access, tax concessions, and regulatory exemptions to friends, family, and favorites of the governing elite, while other investors operate under less favorable conditions.

Guyana’s own experience is instructive. The People’s Progressive Party/Civic (PPPC) government once designated Region 10 as a Special Development Zone, yet kept the criteria, benefits, and eligibility conditions opaque and discretionary. Investors were left guessing. The public was left uninformed. Such opacity is not a technical oversight; it is a governance failure. It creates precisely the conditions under which corruption and cronyism thrive. The risk is compounded when concessions are granted or withheld selectively, outside a clear legal framework—as occurred when the same administration later denied concessions for a timber operation in the very region previously declared a special development zone. When incentives are dispensed through executive discretion rather than statutory rule, economic policy becomes indistinguishable from patronage.

The international evidence is unequivocal on this point: SEZs governed by discretion fail more often than they succeed. Investors value predictability more than generosity. Economies grow through competition, not connection. And development collapses when policy becomes a private favor rather than a public rule. This is why, if Guyana is to pursue SEZs at all, it must do so with institutional rigor. The government must indicate in advance where such zones will be located, what specific economic activities they are intended to support, and how they fit within a national development strategy. It must establish clear, transparent, and non-negotiable criteria governing eligibility, concessions, and duration. And critically, the entire regime must be anchored in law, not ministerial discretion.

Absent these safeguards, SEZs will not accelerate development; they will merely redistribute advantage upward and inward—away from the many and toward the connected few. The PPPC has shown itself adept—some would say wily—at devising mechanisms that blur the line between public policy and private benefit. That history demands vigilance. Guyana’s citizens, civil society, and Parliament must therefore examine any proposal for special economic zones with the eyes of a hawk, not the optimism of a brochure. SEZs can be tools of development. But without transparency, legality, and integration, they become something else entirely: instruments of exclusion, inequality, and elite capture. The literature warns us. Experience confirms it. The choice before Guyana is not whether to create zones—but whether to govern them fairly and honestly.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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• Peeping Tom, PPPC, promise, Special Economic Zones

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