Strategic Approaches to Free Economic Zones for the Digital Economy: Lessons from a Comparative Study

Abstract

The paper addresses the importance of redesigning strategies for resilient and sustainable regional economic development – by applying strategic approaches to free economic zones for the digital economy. The purpose of the paper is to provide a broad comparative perspective on developed versus developing country efforts to use free economic zone programs to enhance various economic and social objectives. First, the paper introduces the chronicle experiences of free economic zone programs in South Korea and mainland China – developed versus developing economies. The main results of the analysis indicate that (1) achieving the goals and objectives of free economic zones is challenging over time; (2) trying to upgrade the technical component, develop knowledge-based and eco-friendly new industries, or value- added to the economy through free economic zone policies is even challenging; and (3) incentives and other program-specific variables are highly context-specific and not structurally correlated with free economic zone performance. In addition, the paper shows that the initial conception of the role of free economic zones has undergone significant change as individual countries have tried to enhance the contributions and avoid damages from incorporating free economic zones into their development strategy respectively, over time.

Keywords: Free Economic Zone, Special Economic Zone, Free Trade Zone, Comparative Advantage, Competitive Advantage, Regional Economic Development, Sustainable Development

JEL Classification: F02, F16, F18, F21