Growing demand for sustainability from companies and investors could see the rise of a new ‘green’ Special Economic Zones (SEZs) around the world – including those manufacturing textiles and apparel.
This year’s World Investment Report from the United Nations Conference on Trade and Development (UNCTAD) suggests a new wave of industrial policies and increasing competition for international investment has sparked a boom in the establishment of SEZs, of which there are now around 5,400 globally, compared with 4,000 five years ago.
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The zones, which offer fiscal incentives and streamlined regulations to attract foreign direct investment (FDI), are common in most developing and many developed economies.
Apparel producing giant China operated 2543 such zones in 2019. During 2018, China’s Shandong Ruyi Technology Group agreed to invest US$830m into the construction of a textile area in the Suez Canal Special Economic Zone.
The Philippines operated 528 SEZs followed by India at 373 and the US at 262. Turkey operated 102 while Bangladesh operated 39 – nine of which are Export Processing Zones (EPZ), specialised SEZs focusing on apparel and textiles.
In its report, UNCTAD says SEZs are remodelling as they look beyond manufacturing to attract more investment in line with shifts in the global economy. While some focus on new industries, such as high-tech, financial services, or tourism, others are targeting environmental performance, science commercialisation, regional development or urban regeneration.
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By GlobalData“Capital market policies and instruments designed to promote the integration of sustainability into business and investment practices are transitioning from niche to mainstream. A growing number of investors are integrating ESG factors into their investment decision making to enhance performance and mitigate risk. The positive track record of sustainability-themed products is reinforcing the views of asset managers and securities regulators that such factors are material to long-term investment performance. As these sustainable investment trends take root and expand, they can have a stronger influence on the operational policies and practices of multinational enterprises,” the report says.
UNCTAD says the 2030 agenda to drive the Sustainable Development Goals (SDGs) provides an opportunity for the development of an entirely new type of SEZ: the SDG model zone.
“Such zones would aim to attract investment in SDG-relevant activities, adopt the highest levels of environmental, social and governmental standards and compliance, and promote inclusive growth through linkages and spillovers.”
Modern SEZs, it adds, can make a positive contribution to the ESG performance of countries’ industrial bases. Controls, enforcement and services (such as inspectors, health services, waste management and renewable energy installations) can be provided more easily and cheaply in the confined areas of SEZs.
