Sunday, November 28, 2010

A Special Economic Zone in Burma. Boon or Bane?

Another great NY Times article today is on a development project in Burma.  It seems that a quite massive industrial project, including new port facilities and power generation, is being developed in Burma in a deal between Myanmar's government, the Thai government, and a Bangkok based corporation, Italian-Thai Development.

Generally, I favor special economic zones as a great way to develop an underdeveloped country.  They have several advantages, including a focus that allows truly modern infrastructure to be built in a small location (rather than spread too thinly across a country to have any major impact), a large enough industrial complex to change attitudes in a focused area, a focus on creating real economic gains that can create sustainability through being self supporting,  and the opportunity to separate this small area of the country from the broken and corrupt institutions present in the rest of the country.  If these programs are run like China's original special economic zones, they are something that I think is under-utilized by the foreign aid community.

While it is very early and I am basing my opinion on a single article (always a bad idea but acceptable as a provisional opinion in a blog), there seem to be a few reasons to have doubts about this project.  The biggest one is that this project seems to be as much about environmental arbitrage as it does about any real economic advantages to the location, though some economic advantages are mentioned.  The biggest reason I am sceptical about this project however, is that no mention is being made of special institutional arrangements.  The biggest advantage to special economic zones is that they can allow for a small island of relatively (I have no illusions about these things being paragons of virtue, just better relative to the mean in these areas) well managed activity where the standard problems of these states are reined in by the pressure of international investors.   None of this is mentioned in this particular project.  It may be that this was not reported on or that it is too early to tell but until I hear more I am sceptical if this project will do much more than pollute the area and provide cheap electricity and semi-finished goods to Thailand.  Though I hope it will instead be the thin wedge to a better developed economy in the longer run, much like the special economic zones were in china.

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