The Role of Special Economic Zones in Shaping Viet Nam’s Local Business Environment

Katariina Nilsson Hakkala
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Katariina Nilsson Hakkala: Asian Development Bank

No 848, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This study examines the effects of special economic zones (SEZs) on firm growth and the regional business environment in Viet Nam, highlighting their key role as a policy tool to attract foreign investors. Using detailed panel data from Viet Nam’s 63 provinces from 2006 to 2020 and instrumental variables (IV) estimations, this study provides new insights into how SEZs impact firm growth and several dimensions of economic governance. SEZs are found to play a dual role. Provinces with broader SEZ coverage experienced increases in employment, revenues, and the number of foreign-invested enterprises. In contrast, domestic private firms faced declines in both revenues and numbers. SEZ exposure had negative effects on several aspects of provincial economic governance including land access, transparency in policy-making, and informal charges. In addition, the approval of the first SEZ was also associated with increased prevalence of informal charges and preferential treatment of foreign-invested enterprises and other big companies, which may indicate heightened inefficiencies and rent-seeking concerns.

Keywords: special economic zones; foreign direct investment; business environment and development (search for similar items in EconPapers)
JEL-codes: F21 F23 L53 (search for similar items in EconPapers)
Pages: 38
Date: 2026-05-29
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