Can Special Economic Zones Attract FDI

This study approaches the development of Special Economic Zones(SEZ)by comparing foreign direct investment flow before and after SEZ law.It mainly focuses on whether SEZ can attract Foreign Direct Investment(FDI)or not with the examination of the Golden Triangle SEZ.The study was based on secondary data from Golden Triangle SEZ from 2004 to 2019.The study found that the Golden Triangle SEZ development was successful under economic cooperation between Laos and China.A lot of infrastructure and facilities within the zone have been developing;the site also has contributed to the economic development of Laos(FDI,Employment,Export promotion,and Revenue).Additionally,the zone was found as a win-win and mutual benefit project between countries,in which Laos side gained FDI increased,foreign capital,market,job generation and Revenue.While China side gains a lot of trade and investment opportunities,tax exceptions,low labour costs,and own resources at low prices.Furthermore,it found that there were both investment opportunities and challenges for investment within the Golden Triangle SEZ.This paper also finds that FDI inflow by countrywide investment to Golden Triangle SEZ increases mainly in China due to political stability,the right business environment,and development infrastructure.Increasing numbers of Chinese companies are investing in Tonpherng District,Borkeo Province,and most investments are also growing.It also observed that all sectors’ investment in Golden Triangle SEZ surprisingly increased in 2019 because FDI law and SEZ law have also improved their economic and foreign investment policies.Therefore,Golden Triangle SEZ successfully attracts FDI despite the need to improve in other sectors.In the future,FDI inflow is expected to increase sharply by giving incentives for an improved investment environment,infrastructure development and the establishment of Golden Triangle SEZ.The other result shows that FDI inflows since introducing the SEZ policy have had an upward trend.The coefficient of Different in Different(DID),which is the leading indicator of interest,shows that FDI inflows into the treatment group(SEZ regions)since the introduction of the SEZ policy is,on average,3.409 higher than the inflows of FDI in the control group(nonSEZ areas).Duration after SEZ policy also has been increasing on average by 1.610,then the inflows of FDI in the control group(non-SEZ regions).