Do special economic zones really work? Economists break down Doug Ford’s controversial Bill 5

In just 49 days, the Doug Ford PC government pushed through Bill 5, despite strong opposition from Indigenous communities, legal experts, civil society organizations and environmental advocates. The justification? The Premier and his PC MPPs have declared that Ontario is engaged in an “economic war” with the United States, and extraordinary measures are necessary.

But critics say this crisis framing masks a deeper truth: the policy direction behind Bill 5, dubbed the Protect Ontario by Unleashing our Economy Act, was already underway well before trade tensions were ever on the radar.

Central to the legislation is the Special Economic Zones Act, or Schedule 9, which gives sweeping authority to the Lieutenant Governor in Council to designate special economic zones (SEZs) and exempt “trusted proponents” from a range of existing laws—including municipal by-laws—meant to safeguard public health, safety, and the environment in regions like Peel and beyond.

The legislation’s provision that "certain causes of action are extinguished" raises concerns that affected individuals or communities would be prevented from seeking legal recourse, which would  weaken local control while prioritizing economic interests over community needs and environmental protection.

(Bill 5)

One such SEZ that the province has publicly identified is the Ring of Fire in northern Ontario, a region rich in critical minerals. The government has framed its development as an urgent economic necessity, a way to reduce reliance on the U.S. in response to President Donald Trump’s tariffs.

But according to Teresa Kramarz, an associate professor at the University of Toronto’s School of the Environment, who co-directs the Environmental Governance Lab, this framing doesn’t hold up to scrutiny.

“I understand that politically, that's the messaging,” she told The Pointer. “But I think any kind of pretty superficial review of the statements and the political agenda before the trade war would contradict that.”

In 2018, Ontario Premier Doug Ford promised to move the Ring of Fire mining project forward immediately if elected.

(Doug Ford/X)

Kramarz points out that the Ford government has long promoted what it calls a "full value chain approach" to renewable energy technology, positioning Ontario as a leader in the full electric vehicle supply chain, from mineral extraction to battery production to vehicle assembly.

“Ontario has a unique position to extract minerals, process them, manufacture batteries, and assemble EVs,” she said. “So this isn’t just a trade war response. The Ring of Fire and mineral exploitation predates all of this.”

"If I have to hop on that bulldozer myself with Vic on the other one, we're going to start building the roads to get to the mining…there's over $60 billion up there. It's going to benefit local people but it's also going to benefit everyone in Ontario," Ford said in 2018.

"Give us a chance. I'm going to be crisscrossing the north like you've never seen before." 

Protesters have filled the oval space beside Queen’s Park with signs and posters opposing Bill 5, while many have camped out to highlight the controversial legislation.

(Anushka Yadav/The Pointer)

It’s now 2025. The roads haven’t been built. But Bill 5 has been fast-tracked to clear a path, without meaningful consultation from First Nations and with little regard for the environmental consequences. All in the name of economic prosperity.

But is that promise built on solid ground or sinking sand? And are Special Economic Zones really the answer to ‘protect Ontario’ and ‘unleash’ the province’s economy?

Bill 5 dismantles core environmental safeguards, bypasses Indigenous consultation and gives the provincial cabinet broad authority to fast-track development in designated zones, free from the constraints of local laws.

(Anushka Yadav/The Pointer) 

“The zones can be effective instruments to promote industrialization if implemented properly in the right

context. Some emerging economies, especially those in East Asia, offer examples of success. However, such zones are expensive, risky endeavours that require careful planning,” World Bank senior economist Douglas Zhihua Zeng stated in his 2016 report for the UK government.

“They can be a tool for political speculation rather than a tool for economic development, and some zones, the so-called ‘white elephants’ fail entirely.”

In economics, a "white elephant" refers to a costly project or asset that offers little or no real benefit, often draining resources without generating meaningful returns. The term draws from a popular legend in Siam (modern-day Thailand), where a ruler, to ruin a subject, would gift him a rare white elephant. The animal, considered sacred, could not be sold or discarded, yet its upkeep would be financially ruinous. Many argue the tale is likely a myth, since white elephants were regarded as symbols of virtue and prestige, but the story has endured in economic thought, serving as a vivid metaphor for investments that become financial burdens rather than valuable assets.

(Public Domain Review) 

A 2017 World Bank study cast doubt on the effectiveness of SEZs. It examined 600 zones worldwide, analyzing detailed data on 344 across Africa, East Asia and the Pacific, Europe and Central Asia, Latin America, and South Asia, and found that “on average, SEZs are not catalysts for national growth. In fact, the average zone underperformed compared to the rest of its national economy,” Andrés Rodríguez-Pose, Princesa de Asturias Chair and Professor of Economic Geography at the London School of Economics, and lead author of the report, told The Pointer.

Rodríguez-Pose points out that while some Chinese SEZs like Suzhou and Tianjin saw success, these were exceptions, fueled by unique political conditions and significant foreign investments from places like Singapore.

Other countries such as Pakistan, Turkey, Ghana, Kenya, Thailand, Argentina, Lesotho, Malaysia, and Jordan have tried and struggled. 

In wealthier nations, enterprise zones and innovation parks, like those attempted in the UK, Spain, and Italy, have delivered “mixed and inconsistent” results.

“I’d caution against overusing the term 'success’ because even successful SEZs often struggle to sustain their impact long term. They usually show short-term gains that fade,” he noted.

Demonstrators gathered in front of Queen’s Park on June 2 to protest Bill 5.

(Anushka Yadav/The Pointer)

“The zones also tend to have very limited spillover effects on the surrounding economy. In many developing countries, SEZs are designed to be export-oriented and insulated from the domestic market. Even those designed to foster technology transfer and local integration often fail in that goal.” 

He noted that enthusiasm for SEZs is often based on a few well-known successes, but “even in China, where everyone thinks that this was a success, most special economic zones have not worked.”

Shenzhen, one of China’s first zones, was promoted by the former chairman of the Chinese People's Political Consultative Conference, Deng Xiaoping, in the late 1970s, and it quickly evolved from a small fishing village into a global hub for manufacturing and technology.

But not all SEZs have followed that path—Qianhai, a much-hyped financial zone within Shenzhen, offers a cautionary tale.

Qianhai launched with a staggering $45 billion investment and was hailed as China’s future financial crown jewel, but now tells a very different story. In 2013, office vacancy rates hovered near 29 percent, far above Shenzhen’s average and nearly double those of Beijing and Shanghai; its gleaming skyscrapers continue to stand half-empty, motorways mostly silent. Many companies have simply parked their names there to enjoy tax breaks or hefty subsidies reaching over $4 million for property purchases, without setting up real operations.

This highlights a key risk of Special Economic Zones: opportunity cost. As Andrés Rodríguez-Pose explains, SEZs often rely on public subsidies, offering cheap land, tax incentives, and infrastructure to attract investment. But this comes at the expense of other policy priorities, such as supporting small- and medium-sized enterprises, investing in workforce training, or developing broader industrial strategies. 

Then, how is the government making the local economy stronger?

The little success in Shenzheng also came at a cost, including serious water crises in the form of stormwater pollution, reduced environmental capacity and resource shortages. It has been estimated that Shenzhen will face shortages of 890 million cubic metres by 2030, according to the International Water Association.

A 2006 study of four major rivers in the region found that all had suffered significant pollution, particularly within the SEZ boundaries, with high concentrations of petroleum hydrocarbons, phosphates, and organic waste found especially in the Buji River, once considered among the most polluted in the city.

While remediation efforts began in the late 1990s and some water quality indicators improved, the long-term environmental damage has proven difficult and costly to reverse.

“The (environmental) impact really depends on the sector the SEZ is targeting. If it's mining, there are inherent risks of environmental degradation. But whether it's done by Canadian firms or foreign firms incentivized through an SEZ framework, the core environmental risks remain,” Rodríguez-Pose explained.

The Ring of Fire sits atop lands that many First Nations consider sacred, known as “breathing lands,” living ecosystems that sustain not just wildlife, but culture, identity, and ancestral connection. These carbon-rich peatlands are more than environmental assets; they are spiritual landscapes that breathe life into Indigenous worldviews and must not be reduced to mere resource deposits.

(Ontario Society of Professional Engineers)

In Ontario, the government is looking to mine in the Ring of Fire, a mineral-rich region located 500 kilometres northeast of Thunder Bay, which is also home to fragile, low-lying swamp ecosystems that store vast amounts of carbon in their waterlogged soils and layers of peat, making the area critical for climate regulation.

Bill 5 scraps Ontario’s Endangered Species Act, 2007, replacing it with a weakened Species Conservation Act, seen by many as the culmination of years of environmental backsliding.

(Government of Ontario)

Threatened and at-risk species will also suffer under Bill 5, gutting nearly 20 years of protections by narrowing the definition of “habitat” to just nests and dens, ignoring vital forests, wetlands, and feeding grounds wherever these SEZs are identified.

Kramarz warns that mining is a “very long-term prospect, decades in the making.” She explains the province can attract investments, but whether they pay off, and whatever part of those investments actually translates into revenues for the province, that “doesn’t really materialize for decades.”

Another major concern with SEZs is their impact on labour rights and social protections. Many SEZs, especially in remote or underdeveloped areas, lack basic integration with urban infrastructure and planning, leading to serious deficiencies in housing, transportation, healthcare, education, and other essential services for workers.

CUPE has already warned that Bill 5 could strip these protections away entirely, allowing the government to override all existing labour standards, creating zones where even basic rights, like meal breaks, the right to refuse unsafe work, or protections against child labour, could be suspended. 

“Under the cloak of an impending economic crisis and the guise of fighting tariffs, Doug Ford plans on delivering workers to the wild west of working conditions, all to the benefit of big business,” CUPE Ontario President Fred Hahn said.

“Doug Ford won the election by wrapping himself in the flag, naming himself Captain Canada, and claiming he’d defend Ontario workers and Ontario jobs. Now he’s using the tariff wars as camouflage to create the conditions in which corporate greed can flourish unchecked and without fundamental protections like labour rights. You can’t fight for Canada by bringing in laws that copy the very worst of the US laws.”

Kramarz explains that as a commodity-based economy, Ontario faces boom-and-bust cycles driven by price fluctuations. She recalls that in Sudbury, high nickel prices once boosted local prosperity, but when prices fell, social issues like domestic violence and alcoholism increased. 

This impact varies by location since big cities like Toronto have diverse economies to rely on, while small towns like Cobalt depend heavily on one commodity.

Bill 5 exemplifies a hands-off, market-driven approach, granting broad powers to private companies in Special Economic Zones while limiting government accountability, even to Indigenous communities.

More recently, there’s a shift toward governments acting as stewards, sharing risks with investors to attract investment while protecting public interests.

“The problem is that private sector logic is profit-driven, which isn’t the government’s role. The government should represent public interests, balancing economic prosperity with broader social and environmental needs,” she said.

AFN National Chief Cindy Woodhouse Nepinak was joined on June 2 by Indigenous Canadian leader and former AFN national chief Phil Fontaine, who urged Woodhouse to convene an emergency meeting of First Nations leadership across the country and present a list of demands to the provincial and federal governments: “We’re being excluded from all the very important discussions being held by governments that are supposed to represent us as well as the rest of the country. So we have to take matters into our own hands, and we will do it in the kindest way possible, but in a very determined way to express once again who we are: the First Peoples, treaty people. Treaty people have distinct rights that obligate governments to consult with us, both as a legal responsibility and a moral obligation,” Fontaine said.

(Anushka Yadav/The Pointer)

In its eagerness to fast-track mining and resource extraction, the Ford government might have dug a hole for themselves as many First Nations have vowed to protest, legally challenge Bill 5, and potentially shut down the economy under Idle No More 2.0.

“Social conflict is bad for investors and communities alike. I think it’s a mistake to assume a majority government mandate means there should be no checks or participation. Process matters, participation, consultation, and consent are crucial, especially from Indigenous communities who are often the most vulnerable to climate change,” Kramarz explained.

Rodríguez-Pose says, “whether or not you're in a trade war, the same question applies. Do SEZs make sense in your specific context? They might, if they attract investment you otherwise wouldn't get, if they spark innovation, build skills, and create supplier linkages.”

Ideally, such zones would generate knowledge spillovers, new technologies that permeate local firms, strengthen local supply chains and build skills that aren’t readily available within the existing workforce.

He emphasized that since Canada’s economy is far more integrated with the United States than most other countries are with any single partner, diversifying investment sources is a valid goal, especially given ongoing geopolitical and trade uncertainties.

But such diversification might be more effectively pursued through national policies, either at the federal level or in coordinated provincial strategies, rather than by carving out deregulated zones. A unified national approach could be far more attractive to major investors from East Asia or Europe than the piecemeal, uncertain landscape created by SEZs.

Liberal MPP Ted Hsu urges Ford to act beyond blaming Trump by accelerating procurement, like aluminum boats, to protect jobs after 21 layoffs hit aluminum producer Novelis, amid trade pressures.

(Ted Hsu/X)

He also questioned the logic of attracting foreign capital by offering heavy subsidies, tax breaks, and regulatory exemptions, concessions that could weaken long-term economic resilience.

“Instead of pouring public money into incentives for foreign investors, why not help Canadian firms, especially SMEs (small and medium enterprises), internationalize? Supporting them in expanding beyond the U.S. market could be a much more sustainable and rewarding strategy. It would reduce dependency on a single trade partner and build lasting capacity within the domestic economy.”

In Rodríguez-Pose’s view, promoting SEZs in Canada might not only be a misplaced economic strategy but also a missed opportunity to build a more diversified and self-reliant economy in the long run.

“Bill 5 raises a broader question: what trade-offs are we willing to accept as a society, as Canadians or Ontarians? How do we decide? And who gets to decide? Does Ford’s majority government mandate give him unchecked power? These are important questions if we want to maintain democracy and checks and balances,” Kramarz said.

“It’s important for people to look closely at what’s really being done in the name of trade wars or decarbonization. We need to ask ourselves if these are trade-offs we’re willing to accept.” 

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