Mekong special economic zones bring progress but need better governance

Special economic zones (SEZs) in the Mekong region have helped in industrialization and national economic growth, however there are cases of mismanagement, poor governance and exploitation of locals, which are giving the SEZs a bad name, and if left unaddressed, will have the potential of turning the local communities against these developments.

SEZs have a long history in the Greater Mekong Subregion (GMS) member countries. Over the past decade, all five Mekong region governments – Laos, Cambodia, Myanmar, Vietnam and Thailand – have reformed their laws and institutions to promote SEZ development, attract private sector investment and facilitate access to land for factories and infrastructure.

Governments presented SEZs as a necessity to attract domestic and foreign investment into manufacturing, commerce, tourism and other sectors to achieve economic growth. SEZs are promoted as a key policy that will boost production and exports of goods and commodities, help diversify national economies, and stimulate economic development by creating jobs and building infrastructure.

East-West economic corridor

Savannakhet, the second-largest city of Laos, after Vientiane, is connected by the Second Thai–Lao Friendship Bridge to Mukdahan in Thailand, and from there it is 720 km to Bangkok Port. The bridge opened to the public in early 2007, finalizing the part of the GMS East–West Economic Corridor in Lao.  The bridge plays a major role in giving Lao access to seaports in neighbouring countries.

The Savan–Seno SEZ, established in 2002 within the East-West Economic Corridor, benefitted from its closeness to the Second Lao-Thai Friendship Bridge.  For example, tourist arrivals increased substantially after the opening of the bridge, hotels increased from 115 in 2009 to 196 in 2015. The casino in the SEZ is especially good at attracting tourists from Thailand, where casinos are not permitted.

Other benefits of the bridge included a reduction in cost and time for cross-border activities, boost to local economies, increased freight traffic, more transport operators and more jobs for locals. 

In 2011, the number of personal vehicles and buses which used the bridge increased by 560 percent and 412 percent respectively as compared to 2007.  After the completion of the bridge, cross-border traders could transport their goods by public buses and cars as compared to boats via the Mekong River in the past.

According to a survey of clients by ANZ Bank, investors indicated that they would not put money into Lao if there is no SEZ.  Key attractions included logistics facilities, road and sea linkages, relatively low cost, tax holidays and exemptions.  Another survey, the Tak survey, conducted in 2016 in the Thai town Mae Sot on the border with Myanmar, found that Thai companies set up factories in the SEZ to take advantage of low-cost labor from Myanmar. 

Locals are exploited

While SEZs have generated numerous benefits for the country and people, there were also social and environmental consequences like land dispossession and conflicts, loss of livelihoods, and environmental harm and degradation.

Unethical and poorly managed land acquisitions have brought about suffering to the rural communities. Land concessions were often granted to SEZ developers without informing or consulting local communities living in the area, which were sometimes forcibly evicted with a lack of transparency and fair compensation. 

Sometimes, public information regarding the SEZs is missing, like feasibility study, environmental impact assessment, resettlement and compensation plans, and approval processes. Usually, decision making took place behind closed doors with very few or no public discussion or involvement. 

Photo credit: iStock/Toa55

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