Incentives can be shifted to attract digital nomads in wake of global corporate minimum tax, Thibault Serlet, FDI Intelligence
Even though the world has surpassed the heights of the Covid-19 pandemic, analysts predict that 25% of workers will continue working from home indefinitely.
The closure of office buildings is bad news for special economic zones (SEZs) reliant on traditional commercial real estate. The past three years have come with many shocks, all of which threaten to disrupt traditional business models. The pandemic, the supply chain crisis, inflation, war in Ukraine, and the OECD’s 15% minimum corporate tax have all taken their toll.
Unsurprisingly, the past six months have seen a wave of SEZs running into bankruptcies, including in Vietnam, India and the Philippines.
A very different type of SEZ has emerged to cater to so-called “digital nomads” — office workers and entrepreneurs who, thanks to the internet and trends following Covid-19, no longer need to be tied to a physical location.
Most SEZs look like industrial parks. Some, catering to digital nomads, look more like beachfront resorts. To see examples of SEZs successfully tapping into this new market, look no further than the Cayman Enterprise City or Prospera in Honduras. Some planned future SEZs — like Malaysia’s $1.2bn Iskandar Waterfront — are taking this strategy to an extreme.
The most savvy digital nomads practice ‘min-maxing’ — a video game term referring to the practice of using the mathematics behind games in order to win more using fewer resources. In the context of digital nomads, the term means maximising how far one’s income goes by deciding where to temporarily relocate. Typically, digital nomads attempt to min-max three key metrics: cost of living, tax rules and living standards.
If SEZs want to attract digital nomads, the first question that they must ask themselves is whether they can offer a low cost of living.
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