2. Types of economic zones

Economic zones generally fall into the following categories:

a. Special economic zones – designated areas where trade regulations, such as tariffs, quotas, or duties, differ from those in the rest of the country. Free trade zones and export processing zones are types of special economic zones

b. Industrial parks – areas developed and subdivided into plots according to a comprehensive plan, with provision for roads, transport, and public utilities, with or without built-up (advance) factories or common facilities, for use by a group of industrial enterprises.

c. Technology parks – areas managed by specialised professionals whose main aim is to increase the wealth of their communities by promoting a culture of innovation and the competitiveness of their associated businesses and knowledge-based institutions.

d. Innovation districts – urban technology or science parks that have the ultimate objectives of accelerating the process of innovation and strengthening the competitiveness of the surrounding location.

In practice, many economic zones operate as hybrid models to leverage multiple incentives and regulatory frameworks. For example, the Vietnam–Singapore Industrial Parks integrate industrial park infrastructure with the tax and customs incentives available to special economic zones. The Nongsa Digital Park in Batam, Indonesia, similarly combines a technology park with the benefits of a special economic zone to attract digital enterprises.

3. Key issues

While economic zones present countless commercial opportunities, both incoming Operators and Tenants face complex risks that must be considered and managed carefully.

a. Regulatory framework

Local laws may be subject to abrupt changes and differing interpretation. Operators should work closely with the relevant government authorities that oversee the economic zone to gain a clear understanding of the applicable regulatory frameworks. Tenants should seek clarity as to whether, and to what extent, zone-specific incentives available to Operators may extend to their projects.

Operators: Operators need to (i) understand the applicable regulatory frameworks governing (and state support available to) the development and operation of the economic zone; (ii) determine whether the economic zone has been designated as strategically important at the national or regional level to help fast-track approvals and offer other forms of business-friendly initiatives; and (iii) identify the local authorities responsible for issuing permits and approvals. Working with a local partner (often the landowner or a prominent enterprise with government links) helps Operators navigate legal, political, and social challenges and maintain an effective dialogue with local authorities.

Tenants: Tenants need to understand (i) the regulatory frameworks to which the Operators are subject; and (ii) whether any state support given to, or special regulatory status held by, the Operators may potentially extend to or indirectly benefit them. For example, Tenants operating within a national strategic project (Proyek Strategis Nasional – PSN) in Indonesia and the Eastern Economic Corridor in Thailand may be able to benefit from accelerated and streamlined business licensing processes, which many Tenants will find crucial in regions where local government procedures and registrations can be unpredictable and slow.

b. Location

Economic zones should be optimally positioned to provide both Operators and Tenants with access to infrastructure, logistics, and raw materials.

Operators: Selection of the location is primarily guided by the type of industry or sector that the economic zone is intended to serve. If the economic zone is to be powered by renewable energy, the availability and reliability of renewable sources will also be critical. Consideration must also be given to the geographical features of the location and to its proximity to key infrastructure such as ports, highways, power grids, and digital networks. For example, the Nongsa Digital Park is not only strategically located away from seismic fault lines to offer a safe location for data centres but also has direct access to subsea cable systems connecting Malaysia and Singapore.

Tenants: Tenants should additionally focus on access to raw materials, logistics, and the local workforce. Many downstream smelting facilities in many member states are located in industrial parks that are in close proximity to neighbouring mines and have access to a network of roads as well as port facilities.

c. Land acquisition and zoning

Being able to secure clean title to land that is zoned for the intended purpose and bankable is fundamental. Acquiring land and obtaining requisite zoning and building approvals are some of the most time-consuming processes that Operators face.

Operators: Economic zones cover vast areas. Operators must ensure that land title and land-use rights to the land plots acquired are clean, registrable, and bankable. This is often particularly challenging in rural areas, where certain land plots may include forested areas that are unclearly demarcated or unregistered, and ownership could be disputed. In parallel, Operators need to engage with local governments to ensure that appropriate zoning and spatial planning regulations are complied with. Land acquisitions are often fraught with local squatting issues, and care must be taken to ensure that the acquisitions are undertaken in compliance with all relevant laws and practices.

Tenants: Understandably, the absence of clean title or rights to project land is a common dealbreaker in the region due to the many significant risks involved, including land ownership disputes, delays in obtaining construction permits (and, in turn, commencing construction), difficulties securing financing, and potential operational disruptions.

d. Permitting and environmental impact assessments

Obtaining the requisite permits and completing environmental impact assessments are critical steps to ensure operational readiness, especially as the region is growing increasingly conscious of legal compliance and environmental sustainability.

Operators: In addition to obtaining the necessary permits for the development of the economic or industrial zone, Operators are expected to conduct feasibility studies and environmental impact assessments early to assess the suitability and sustainability of the proposed development and to determine and mitigate any potential negative impact on the environment. Most jurisdictions require Operators to obtain the requisite environmental permits before any development works can commence.

Tenants: Tenants should check whether the type of proposed project is one that is covered under the master plan and/or environmental permits covering the zone or park. Individual projects may be required to obtain separate building and environmental licences or permits under local laws.

e. Infrastructure

Infrastructure in certain regions is either limited or unreliable. Operating within an economic zone gives Tenants access to purpose-built shared infrastructure that would otherwise be expensive and time-consuming to develop independently.

Operators: One of the hallmarks of a well-developed economic zone is the availability of reliable shared infrastructure. Shared infrastructure allows Operators to optimise investment (at times with shared contributions from certain anchor Tenants) in utilities, roads, digital networks, and logistics facilities, thus reducing capital expenditure and maintenance costs. These features often help enhance the overall attractiveness and competitiveness of the economic zone.

Tenants: Whilst the readily available shared infrastructure helps Tenants to save on significant upfront capital investment, Tenants should still conduct their own due diligence on the reliability of available infrastructure and assess whether any tariffs charged are reasonable and comply with local laws. Tenants should also determine the potential impact that any maintenance or downtime will have on their projects.

f. Utilities and procurement of raw materials

Shared utilities and access to centralised procurement arrangements allow Tenants to benefit from cost efficiencies and utilities that they would otherwise need to source independently.

Operators: Certain private Operators (directly or through their service providers) offer utilities (such as power, water, telecommunications, and waste management) and raw materials procurement and supply arrangements to Tenants on a centralised basis, allowing economies of scale to be achieved. Where available, such arrangements may allow an Operator to facilitate the reallocation of excess utilities (to the extent permitted under local laws) and supplies of raw materials to other projects within the economic zone, particularly where the Operator also has an interest in such projects.

Tenants: Tenants should conduct due diligence to assess whether the Operators (or their service providers) hold the requisite permits and regulatory approvals to provide and allocate utilities, and ensure that appropriate service-level agreements with the Operators (or their service providers) are in place.

g. Environment, health, and safety (EHS)

Strong EHS performance is critical to both Operators and Tenants across ASEAN because it underpins legal compliance, operational continuity, corporate reputation, and investor confidence in a region where authorities are increasingly focused on environmental and social responsibility.

Operators: Strict compliance with local health and safety laws, together with the implementation of robust EHS rules tailored to the level of risk inherent in the underlying projects, as well as effective monitoring and emergency preparedness, reduces incident risk, protects shared utilities, safeguards community relations and investor confidence, and makes economic zones generally more bankable.

Tenants: Tenants are accountable to investors and, where applicable, their customers for sustainable and safe supply chains. Engaging in good industry practices and maintaining effective EHS systems and robust internal policies will help lower downtime and production costs and preserve eligibility for zone incentives while mitigating regulatory enforcement actions, penalties, or loss of zone privileges.

4. Summary

Economic zones offer immense potential for businesses exploring opportunities in ASEAN. To capitalise on these opportunities, businesses must be able to stay agile and navigate the complex regulatory frameworks and market-specific risks that differ from country to country. Success will ultimately depend on careful planning, deep local understanding, and robust internal governance.

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