Special Economic Zones and Structural Transformation in Ethiopia

This chapter argues that there is reason to be cautiously optimistic about the potential of Special Economic Zones (SEZs) to contribute to structural transformation in Ethiopia. It first reviews the development of SEZs in Ethiopia, including industrial policy, the facilitating role of the Ethiopian government, the demonstration effect of leading firms, technology and skills transfer, and learning by doing with Chinese state-owned enterprises. It then analyses four ingredients for success in Chinese SEZs—commitment by high-level leadership, dynamic experimentation and learning, targeting sectors in line with latent comparative advantage, and capable public administration. It further evaluates the prospects of Ethiopian SEZs from the theoretical perspective of New Structural Economics. In building this analysis, this chapter touches upon areas of interest to students of development, including the historical transitions and development of SEZs in both Ethiopia and China, and China’s engagement as a development partner in Africa.