The Regulator-Promoter Tension That Kills Zone Performance
When the same authority sells the product and writes the rules, one function always wins. It is never the one that protects long-term zone quality.
By Yaschin Mohabir · 10 August 2026 · 10 min read
A zone authority that both writes the rules and sells the product to investors is not a well-rounded institution. It is a structurally compromised one. The tension is not a management problem. It is an incentive problem baked into the founding mandate. When the same authority that must attract investment is also the authority that must discipline non-compliant investors, one function will dominate the other. Globally, promotion wins. Regulation loses. And zone performance degrades in ways that take years to surface and decades to reverse.
A zone authority that both writes the rules and sells the product to investors is not a well-rounded institution. It is a structurally compromised one. The tension is not a management problem. It is an incentive problem baked into the founding mandate. When the same authority that must attract investment is also the authority that must discipline non-compliant investors, one function will dominate the other. Globally, promotion wins. Regulation loses. And zone performance degrades in ways that take years to surface and decades to reverse.
The conflict is not a management problem. It is an incentive problem baked into the founding mandate.
Every special economic zone authority I have studied carries some version of this dual mandate. Attract investors, grant licenses, offer incentives. Also: enforce standards, audit compliance, adjudicate disputes, protect workers, and manage environmental obligations. These functions require fundamentally different cultures, different performance metrics, and different relationships with the private sector. The promoter needs to say yes quickly. The regulator needs to ask hard questions slowly. The promoter measures success in announced investment and job count. The regulator measures success in compliance rates, audit outcomes, and whether the incentives granted are delivering the economic activity they were supposed to deliver. Put both functions in one building, under one budget, reporting to one minister, and the institutional culture will resolve the tension by subordinating regulation to promotion. Always. This is not a hypothesis. It is the lived experience of export processing zones from the Dominican Republic to Bangladesh to Kenya. The pattern is consistent enough that the OECD's 2023 review of special economic zones across 24 countries treated structural separation as a...
The Dominican Republic shows the cost. Ireland shows the alternative.
The Dominican Republic's free zones are instructive. For two decades, the country ran a unified authority that was, in practice, a promotional machine. Compliance with labour and environmental standards was systematically deprioritised because enforcement threatened investor relationships. When the United States withdrew preferential access under CAFTA pressure in the mid-2000s and investors left, the Dominican government discovered it had no regulatory institutional memory to fall back on. It had no independent record of what was actually happening inside the zones. The authority had been so focused on selling the zone story that it had stopped reading its own data. The consequence was not just economic. It was institutional. The Dominican Republic had to rebuild its zone regulatory capacity from scratch at exactly the moment it was trying to attract a new generation of investors who were asking harder questions about labour standards and environmental compliance. The promotional machine had consumed the regulatory function so thoroughly that there was nothing left to credibly certify compliance to international buyers who needed it. Compare that with Ireland's model during the ...
The fix is legislative, not organisational. And the funding model matters as much as the structure.
For zone developers, the practical implication is that conflating these functions inflates short-term deal flow at the cost of long-term zone quality. Investors who care about operational predictability, which is the investor profile every serious zone wants, are reading your institutional structure before they read your incentive schedule. A promotional authority that also sets the rules is an authority that can also change the rules to protect its pipeline. That is political risk, not an investment destination. For investors, the question is simpler. If the entity offering you the deal is the same entity that will audit your compliance, you do not have a regulator. You have a relationship. Relationships are fine until they are not. When the political environment shifts, when a new minister arrives, when your sector falls out of favour, that relationship evaporates and you have no independent institutional protection. Zones with structurally independent regulators offer something more durable than goodwill. For policymakers, the implication is that incentive reform, the perennial favourite of zone improvement agendas, is treating the symptom. The deeper pathology is that no one ...
If the authority promoting your zone is also regulating it, who has the institutional incentive to say it is underperforming?
The answer is nobody. The promotional team has every incentive to attribute underperformance to external factors: the global investment climate, competitor zones, macroeconomic headwinds. The regulatory team, if it exists as a distinct function at all, has every incentive to stay quiet because its budget depends on the promotional team's success. The minister receives reports that confirm the zone is on track. The investors who left do not issue press releases explaining why. The institutional silence is not dishonesty. It is the rational output of a system that was never designed to produce honest self-assessment. You cannot design an authority that conflates promotion and regulation and then expect it to produce rigorous compliance data. The incentive structure does not permit it. Working on zone strategy, I have made the case that the most important governance decision in the next two years is not about incentive design or zone specialisation or infrastructure investment. It is about whether we build the regulatory function as a genuinely independent institution before the zone portfolio grows large enough that the promotional imperative makes separation politically impossible...