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28 January, 2022

Five unexpected strategies for high-performing SEZs to adopt

What makes for a commercially successful special economic zone? An expert panel give their recommendations.

By Investment Monitor

Why do some economic zones significantly outperform others despite sharing many common attributes? This is the key question for zone leaders. Some surprising recommendations emerged when former executive director of the seven-times winner of fDi Global Free Zone of the Year DMCC, Krysta Fox (now director, operations, Economic Zones Development Alliance [EZDA]) pondered this question along with Ekaterina Evdokimova, managing partner and co-founder of Russian SEZ Stupino Quadrat; CEO of Rezekne SEZ in Latvia Krista Freiberga; and EZDA director of investment Zoë Harries in a panel session during Barcelona New Economy Week in October 2021.

Look inside

Firstly, Harries, who has supported the growth of more than 50 economic zones globally, pointed out the number one mistake made by zone leaders: that is, ignoring the needs of existing investors. She has seen zones experience major growth upon turning their attention inward and focusing on nurturing the leaders and employees of the zones’ companies. Likewise, when Fox stepped into DMCC in 2012, her team made it their number one goal to raise satisfaction levels among existing member companies. Soon word got around and within 12 months more than 50% of the zone’s new growth was coming from referrals. Similarly, Freiberga says the main priority of her economic zone authority is to continue cooperation with existing companies. The core message from the discussion was for zone leaders to focus on keeping existing clients happy.

Give back time

Ease of doing business is not a new concept, but Freiberga and her team see themselves “selling time as a valuable asset”, and that means Rezekne focuses on ready-made properties, right down to the figurative ‘milk in the fridge’, to allow entrepreneurs to take immediate and uninterrupted action to grow their businesses. The team at Stupino share a similar philosophy, with Evdokimova talking passionately about the extra “30 miles” her team goes for their fascinating and growing company base; if it means they can solve an issue in Moscow on behalf of their clients, it is another game changer. Fox’s team measured every service turnaround time in minutes, constantly striving to give time back to clients – in some cases service delivery improved from five weeks to five minutes through streamlining and digitalisation – and client satisfaction rose from 50% to 90%. The group agreed that the key challenge is to find all the ways zones can give time back to their clients for them to invest in their business.

Build an ecosystem

According to Fox, “clustered diversification” was a term she coined to describe the success of her former zone through its work to put in place the connections, standards and platforms to offer a deep level of support to a particular industry, and then “rinse and repeat” across new industries. This is the way DMCC built multiple ecosystems. Rezekne similarly succeeded by forming tripartite cooperation between the authority, entrepreneurs and educational institutions with the benefit of building valuable industry-specific talent. Harries took the conversation global by pointing out the importance of adapting the value proposition to meet shifting global value chains, citing the example of Atlantis in South Africa with its focus on sustainable development with solar farms, and shared resources in the pharmaceutical sector. It was unanimous: SEZ leaders should look at how top performing zones deeply support the entire value chain of their target sectors.

360° digitalisation

As a lawyer, Evdokimova inspired the group through her tireless work to create digital integration between Stupino and Russia’s government services infrastructure, and that resulted in digital platforms for document exchange, digital services and shared data centres, with her team all the while carefully deploying digital security measures. The group agreed that highly digitalised zones were not only more efficient but also resilient to Covid-related lockdowns, rendering them able to remotely verify identities and issue documentation. When deployed by Fox’s team, digital signatures were a game changer for the zone, dramatically speeding up services while improving compliance. The four leaders agreed on the criticality of zone leaders doing their homework when planning and executing new SEZ systems.

Sharing is caring

From Stupino in Russia to DMCC in Dubai, Coyol in Costa Rica to Atlantis in South Africa, successful zones are investing in industry infrastructure such as joint production facilities, shared tech hubs, co-working spaces and clean labs for pharmaceutical research and development. Zone leaders can facilitate economical ways for companies to share assets and facilities and reduce their cost burden. As one example, Fox advocated for allowing companies to share their tenancies, thereby enabling them to lease or buy sufficient space to meet their long-term growth needs, known as ‘future-proofing’, while sub-leasing to other tenants in the short term to manage costs. There was a common view among the discussion participants that there are plenty of clever ways to create shared facilities without incurring large investment – this is where SEZ leaders need to get creative.

On a global stage where every economic zone talks about location, infrastructure and trade routes, it is difficult to convey compelling differentiation. The experienced zone leaders agreed that the five strategies discussed have significantly impacted their zone’s growth.

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