The success and failure of Russian SEZs: some policy lessons

Abstract

This paper examines the economic efficiency of Russian special economic zones (SEZs) established by federal authorities since 2005. The results are mixed: the payback of SEZs is low, but they continue to attract residents; SEZs have greater attractiveness for foreign investment, but their sectoral structure is fundamentally no better than the country-wide structure; SEZs' enterprises have higher labour productivity than the country, but mainly owing to their recent creation. The common bottlenecks of SEZ development are the instability of legislation on SEZs, the low level of federal authorities' activity in SEZ development before the economic crisis, competition with other preferential regimes for investors and the long period of searching for the optimal system of SEZ management. Differences in the efficiency of particular SEZs are explained by the peculiarities of the territories where SEZs are established. SEZs are successful if they are created on sites that enjoy a favourable geographic position and in regions that have advanced levels of industrial development.

The effects of culture, attitudes and perceptions on industrial cluster policy: The case of Russia

“…In order to examine the impact of political and social context on the dynamics of industrial clusters, we undertake a detailed study of industrial SEZs and IPs established in Russia since their start in the mid-1990s. Previous studies of cluster policies in Russia are limited to descriptive accounts (Maslikhina, 2016; Sandler and Kuznetsov, 2015; Yankov et al., 2016) reliant on secondary data about the SEZs and IPs that had been implemented from 2005 (Kuznetsov and Kuznetsova, 2019; Turgel et al., 2019; Zhukovskaya et al., 2016). Our study is more comprehensive and involves primary data.…”

“…The pharmaceutical sector was mostly located in the Kaluga and Belgorod regions. SEZs offered greenfield 4 modes of investment to their potential tenants, whereas in IPs, tenants could choose between greenfield and brownfield 5 (Kuznetsov & Kuznetsova, 2019;Sandler & Kuznetsov, 2015). According to survey results, there were notable differences between zones and parks in terms of these different investment modes.…”

“…But, in practice, SEZ and IP initiatives have been motivated by a desire to overcome particular political, economic or organizational challenges, rather than as part of a coherent regional development plan. As a result, while some projects developed as exemplars, most of them struggled (Kuznetsov and Kuznetsova, 2019).…”

Leveraging low state capacity for economic development: a case study of Tajik–Afghan cross-border markets

“…Excessive distance from existing economic activity can also stymie the success of an SEZ (Aggarwal 2005;Frick, Rodríguez-Pose, and Wong 2019). For example, Kuznetsov and Kuznetsova (2019) highlight how an SEZ was created in the lesser developed Lyudinovo district of Russia's Kaluga Oblast to balance economic development in the region. However, much of Kaluga's economic success is attributed to its proximity to the Russian capital, Moscow, and, consequently, the SEZ's location at the opposite side of the oblast failed to entice investors.…”

“…These FEZs resemble the traditional industrial production SEZ model. Saxer ( 2020) is pessimistic of the Ishkoshim FEZ's potential for success: it appears that the project seeks to attract investment, albeit with little connection to the existing economic activities of the region, and thus faces the challenges outlined by Kuznetsov and Kuznetsova (2019) in a Russian context. 4.…”