MASTERARBEIT Titel der Masterarbeit How Special Economic Zones Influence Economic Development in East Asia: A Comparative Study on the Impact of Zouping National Economic and Technological Development Zone and Daegu-Gyeongbuk Free Economic Zone on the Local Economic Development during the Era of Financialization Verfasser Teng Long angestrebter akademischer Grad Master of Arts (MA) Wien, 2016 Studienkennzahl lt. Studienblatt: A 066 864 Studienrichtung lt. Studienblatt: Wirtschaft und Gesellschaft Ostasiens Betreuer: Mag. Dr. Alfred Gerstl CONTENTS Acknowledgements ..................................................................................................................... i 1 Introduction ......................................................................................................................... 1 2 Terminology and Theory .................................................................................................... 4 2.1 Terminology ................................................................................................................ 4 2.1.1 Special Economic Zones ...................................................................................... 4 2.1.2 Economic Development ....................................................................................... 6 2.1.3 Financialization .................................................................................................... 6 2.2 Theories ....................................................................................................................... 8 2.2.1 Overview of the Relevant Theories ...................................................................... 8 2.2.2 Theories of Economic Development .................................................................... 8 2.2.3 Contemporary Theories of Economic Development .......................................... 10 2.2.4 Conclusion of the Theories of Economic Development .................................... 12 2.3 Theories of Financialization ...................................................................................... 12 3 Methodology ..................................................................................................................... 16 3.1 Overview ................................................................................................................... 16 3.2 Data ............................................................................................................................ 16 3.3 Framework ................................................................................................................. 16 3.3.1 Comparison of the Backgrounds of Zouping National ETDZ and the DGFEZ . 16 3.3.2 Impact of the SEZs on Economic Growth ......................................................... 17 3.3.3 Impact of the SEZs on Local Economic Development ...................................... 18 3.3.4 Impact of the SEZs on Local Economic Development during the Era of Financialization ................................................................................................................. 19 3.4 Explanation on the Results of Comparisons .............................................................. 21 4 Application ........................................................................................................................ 22 4.1 Comparison of Background ....................................................................................... 22 4.1.1 Overview ............................................................................................................ 22 4.1.2 Background of the SEZs .................................................................................... 22 4.1.3 Summary of Section 4.1 ..................................................................................... 28 4.2 Impact of the SEZs on Economic Growth ................................................................. 29 4.2.1 Comparison of Attraction to Investment ............................................................ 29 4.2.2 GRDP Growth .................................................................................................... 33 4.2.3 Growth of the Total Exports of Goods and Services ......................................... 37 4.2.4 Different Sectors to GRDP ................................................................................. 38 4.2.5 Change of Labor Force ....................................................................................... 43 4.3 Impact of the SEZs on Local Economic Development ............................................. 46 1 4.3.1 Comparison of the Impact of the SEZs on Local Economic Development ....... 46 4.3.2 Summary of Section 4.3 ..................................................................................... 47 4.4 Impact of the SEZs on Local Economic Development during the Era of Financialization .................................................................................................................... 48 4.4.1 GDP (GRDP) of Financial Sector to GDP (GRDP) of Real Sector ................... 48 4.4.2 Employed Persons in the Financial Industry ...................................................... 53 4.4.3 Growth of Individual Income per Capita ........................................................... 57 4.4.4 Growth of Private Consumption per Capita ....................................................... 61 4.4.5 Incremental Capital Output Ratio (ICOR) ......................................................... 65 5 Comprehensive Analysis .................................................................................................. 68 5.1 Overview ................................................................................................................... 69 5.2 How SEZs Promote Local Economic Development in a Landlocked Region .......... 69 5.3 How the Financial Sector Influences Local Economic Development ....................... 70 5.4 The Transplantation of a Successful SEZ Model to a Second Alike Region ............ 73 6 Conclusion ........................................................................................................................ 75 7 References ......................................................................................................................... 79 Abbreviations ........................................................................................................................... 93 List of Figures .......................................................................................................................... 94 List of Tables ............................................................................................................................ 94 Appendix I: Abstracts ............................................................................................................... 96 Abstrakt ................................................................................................................................ 96 Abstract ................................................................................................................................. 96 Appendix II: CURRICULUM VITAE ..................................................................................... 97 2 ACKNOWLEDGEMENTS I would like to express my deep gratitude to my master thesis supervisor Mag. Dr. Alfred Gerstl for his patient teaching, valuable guidance and useful advice. I cannot express enough thanks to University Professor Mag. Dr. Rüdiger Frank, who teaches me two relevant seminars on East Asian Economy and who arouses my interest in economic issues. Besides, University Professor Mag. Dr. Andrew Kipnis’s seminar on Urbanization in China, which systematically examines Zouping, provides me with some new ideas for the master thesis. The other faculty of the East Asian Economy and Society program greatly richen my knowledge, so I sincerely appreciate for the precious learning opportunities provided by the Program and the University of Vienna. In preparing this master thesis, I have greatly benefited from my peers, particularly the classmates in the Research and Master’s Colloquium seminar. My grateful thanks are also extended to my parents, Mrs. Lü Hua and Mr. Long Lianjie. Last, I am particularly grateful to Guo Fangzhou for discussing and proofreading this master thesis. i 1 INTRODUCTION Special economic zones (SEZs) are greatly welcomed by the governments worldwide. SEZs are believed as an effective tool for promoting local economic development (Zeng 2011, 3; Farole 2011, 7; Farole and Akinci 2011, 4; Wang 2013, 1). It was reported that, by 2015, more than 100 countries had established and operated about 4,300 SEZs, and a growing number of new zones were being under construction (Farole and Akinci 2011, 19; “Not so Special” 2015). These countries operating or intending to run SEZs include both developing countries and developed countries, and SEZs spread around almost every corner in this world. By 2013, a total number of 74 free zones had been set up within the European Union (Jong 2013, 1). And, a new wave of SEZs is sweeping Sub-Saharan Africa. A growing number of African countries have operated or planned to establish SEZs or industrial parks (Fruman and Zeng 2015). Thomas Farole, a senior economist at the World Bank, made such a conclusion, which can accurately describe the attitudes of the majority of the countries in the world towards SEZs, stating that “any country that didn’t have