“Lotta Moberg, PhD, Analyst at William Blair & Co. LLC
Most SEZs are political projects. Vietnam has many reforms that it should pursue country wide. Instead, it is happening within confined areas in the form of zones. There are two ways to interpret the government’s choice to pursue SEZs:
- There is not enough political support for broader reforms, so SEZs is the best among feasible solutions.
- If this is the reason, the people protest against the zones suggest that it has not been successful. The government will need to show the people that they benefit from it. If not the job creation and supply chain effects are evident enough, they should consider setting up a scheme where the people get checks from the government’s proceed s from the zones.
- The government may pursue SEZs to look like reformers when they are actually trying to avoid reforms.
- This is a common rationale for SEZs. The protests against the zones suggest they may not be the right way to go. More-general reforms may evoke less opposition while also being less economically distortionary than SEZs tend to be. The government is nevertheless pursuing SEZ because it makes them look like reformers and they can point to particular projects ad take credit for them. Meantime, they can maintain the level of protectionism in the rest of the country that prevails today.