THE ROLE OF SPECIAL ECONOMIC ZONES IN ATTRACTING FOREIGN DIRECT INVESTMENT TO DEVELOPING ECONOMIES

Abstract

The article analyzes the possibilities of developing countries to use special economic zones (SEZs) to attract foreign direct investment (FDI) as a source of economic growth, especially in times of global economic downturn. Special economic zones have played and continue to play an important role as drivers of the global economy, passing through themselves about 30 percent of world trade and affecting the growth of well-being and prosperity of people around the world. Each zone is unique and has its own specialization. Subject to a well-thoughtout concept, political will, the maintenance of an adequate infrastructure, and the use of world best practices, SEZs help to attract investments to create jobs, increase income and export, receive foreign exchange, connect to international supply chains and develop indirect employment outside the SEZ, but inside economies that accept FDI. The impact of SEZs on FDI inflows is examined using examples from different geographical regions. More than two thirds of the SEZ managed to attract FDI to their territory, and about half – significant. The leaders in attracting foreign direct investment are zones created on the territory of developing countries and especially Asian states. Among the top ten zones for attracting FDI, eight zones have been created in the developing world. In our opinion, these results can be considered essential for the further study, use and improvement of the SEZ instrument as an investment driver of developing economies.