The Socio-Economic Impact of Special Economic Zones: Evidence from Cambodia

TitleThe Socio-Economic Impact of Special Economic Zones: Evidence from Cambodia
Annotated RecordAnnotated
Year of Publication2020
AuthorsBrussevich M
Paginationi-iii, 1-23
Key themesFDI, Gender, MigrationLabour
Abstract

This study examines the socio-economic impact of special economic zones (SEZs) in Cambodia--- a prominent place-based policy established in 2005. The paper employs a database on existing and future SEZs in Cambodia with matched household surveys at the district level and documents stylized facts on SEZs in a low-income country setting. To identify causal effects of the SEZ program, the paper (i) constructs an alternative control group including future SEZ program participants and districts adjacent to SEZ hosts; and (ii) employs a propensity score weighting technique. The study finds that entry of SEZs disproportionately benefits female workers and leads to a decline of income inequality at a district level. However, the findings also suggest that land values in SEZ districts tend to rise while wage levels remain largely unchanged relative to other districts. In addition, the paper tests for socio-economic spillovers to surrounding areas and for agglomeration effects associated with clusters of multiple SEZs.
URLhttps://www.imf.org/en/Publications/WP/Issues/2020/08/21/Socio-Economic-Spillovers-from-Special-Economic-Zones-Evidence-from-Cambodia-49679
Availability

Available for download
Countries

Cambodia
Document Type

Working Paper

Annotations

Overall relevance: 

The article investigates the Special Economic Zone (SEZ) programme in Cambodia in terms of local socio-economic consequences. Benefits are that SEZs in Cambodia help to increase the female employment rate and reduce income inequality within the districts where they are located.  Landlords received benefits from rising land prices.  For the negative consequences or unintended results, income levels for labour in SEZ districts does not differ from neighboring districts. This can be explained by a fixed minimum national wage. When it comes to educational attainment, SEZ districts attract low-skilled labour. This may affect the high dropout rate from school because working in SEZ firms requires no need for a high level of education.

Key Themes: 
  • FDI and land access: economic land concessions, contract farming, short term and long term renting - In 2005, The Council for the Development of Cambodia (CDC) was established to oversee and authorize Special Economic Zones (SEZs).  Up to 2019, the boom of SEZs took place in Cambodia, with 23 being operationalised and 7 being authorised.  SEZs in Cambodia also attract border investment through their benefits. SEZ products in Cambodia are the most exported goods. The SEZs in Cambodia also account for 22 percent of formal employment for Cambodian people.
  • Gender and land - SEZs in Cambodia help to increase the female employment rate. This is primarily through jobs in the garment industry. Women's employment account for 60% of SEZ companies.
  • Agrarian change and land: Migration and labour - SEZs can attract productive workers to migrate from nearby districts because there is more work in SEZs.
Research basis: 

The author mainly analysed household survey data of 202 districts and municipalities (as the unit of analysis) in Cambodia (between 2007 and 2014) from the Cambodia Socio-Economic Survey (CSES). SEZs data is provided by the Council for the Development of Cambodia (CDC). (Provided by Patchara Jaturakomol)