Creation and Development of Free Zones as a Regional Development Policy: The Case of Two Neighbor Free Zones in Iran

Ali Maleki

Assistant Professor, Research Institute for Science, Technology & Industry Policy, Sharif University of technology

 Amir Ali Karimi

Researcher at Research Institute for Science, Technology & Industry Policy, Sharif University of technology

 Behzad Doosti

Researcher at Research Institute for Science, Technology & Industry Policy, Sharif University of technology

Ali Esmkhani

Researcher at Research Institute for Science, Technology & Industry Policy, Sharif University of technology

a r t i c l e   i n f o

Regional Innovation Policies Conference

۲۰۱۹

Florence, Italy

a b s t r a c t

The Creation and development of free zones is one of the regional development policies implemented in developed and developing countries. Failure to understand the fact that the success of this policy depends on the structural context of each region could lead to different results in them. The unbalanced development of Iranian Free Zones is a good example of this type of policymaking. Free zones in Iran are located on lagging regions which are on the borders of the country. Although each region has its own special economic and social characteristics, the Iranian government designed and implement the same policies in each region. Applying these neutral and ineffective policies, which ignored the differences between regions, didn’t have the same results in the regions. In this paper, Iranian government policies for the development of free zones and its results on two neighbor regions, Aras Free Zone(AFZ) and Maku Free Zone (MFZ), in the north-west of Iran are analyzed. In this applied research, both quantitative and qualitative methods were used. To do this, the authors of the paper has ten in-depth interview with central and regional government officers, investors, entrepreneurs, and other stakeholders. Moreover, to provide some good quantitative indicators, formal statistics were analyzed. To more precise analyzing, the mentioned indicators and important notes of interviews categorized into 4 groups. These 4 groups include governance, economic, technological and social indicators. The results of this research show that from a governance perspective, because of the smaller size (1/10 of MFZ) and more stable and powerful government, AFZ has been more successful. From an economic view, according to the short distance between AFZ and Tabriz metropolitan which is the sixth industrial city in the country, there are vast economic ties between peoples. This friendly adjacency and the easier regulation for starting a business in Free zones, attracted Tabrizi investors to AFZ. Today the rate of investing in AFZ is twice of MFZ. Moreover, The export from AFZ is 251 million dollars which is 5 times greater than MFZ. from a technological insight, because of the advanced infrastructures and high-tech industries, 22 new technology-based firms (NTBF) registered in AFZ. Moreover, the first VC in northwest Iran established there. However, there are just 5 NTBF is MFZ and there is no funding institution. from a social perspective, MFZ due to the ethnic and linguistic conflicts and the predominantly low-educated rural population, couldn’t agglomerate it’s potentials to produce high value-added products. On the other hand, in AFZ. because of the ethnic integration and high rate of education, most of people are engaged in higher value-added industrial activities. As a result, the findings of this paper show that implementing identical policies without considering governance, economic, technological and social structure of each region doesn’t have an identical result. Therefore, the policymakers in the central government should design special policies for each region according to its multi-dimensional context. Moreover, they should participate native stakeholders in the policymaking process to design effective policies.