The Role of Special Economic Zones in Vietnam’s Economic Success

Photo: VoxDev

In an article by VoxDev, Tevin Tafese​​, Jann Lay, and Van Tran assert that Vietnam’s Special Economic Zones are not just attracting investment—rather, they are creating better, more formal jobs, with women in rural areas benefiting most.

Special Economic Zones (SEZs) are one of the most popular industrial policy tools for developing countries seeking to attract (foreign) investment, create ‘productive’ jobs, and stimulate growth. Globally, over 5,400 SEZs have been established across 147 countries, representing a massive public and private investment in place-based development (UNCTAD 2019). Yet, despite their proliferation, the central policy question of whether they achieve these objectives remains contentious, as the evidence is mixed.

China’s pioneering Special Economic Zone (SEZ) programme is widely credited as one powerful driver of its economic success, attracting significant foreign direct investment (FDI) and creating millions of jobs, particularly in the manufacturing sector (Lu et al. 2019, Wang 2013, Zhao 2023). Recent evidence from Africa indicates that households in close proximity to SEZs experience significant improvements in economic well-being, as evidenced by better access to utilities, improved housing, increased consumption of durable goods, and enhanced educational outcomes (Abagna et al. 2025). Similarly, research on India presents a more ambiguous picture:  studies find moderate productivity and employment effects (Hyun and Ravi 2018) but no positive socio-economic spillovers (Alkon 2018, Görg and Mulyukova 2024, Rothenberg et al. 2025). Furthermore, evidence from Cambodia indicates that, while SEZs do increase employment, this is predominantly in the form of informal non-manufacturing activities without positive effects on wages (Brussevich 2023).

Vietnam offers another compelling case study. Over the past two decades, it has achieved spectacular economic growth and poverty reduction, driven by its deep integration into global value chains (GVCs) and its success in promoting trade and attracting FDI (McCaig et al. 2022, McCaig and Pavcnik 2018, Baccini et al. 2019). A cornerstone of this strategy has been the establishment of over 300 SEZs, which have channelled much of this trade and foreign investment. This raises crucial questions: How have Vietnam’s SEZs contributed to its economic transformation, and what lessons can be learned from its experience? Our recent research (Tafese, Lay, and Tran 2025) sheds new light on the impact of Vietnam’s ambitious SEZ programme on local labour markets by combining georeferenced SEZ data with detailed micro-level employment data.