Many of the world’s most important innovations in the genetic engineering sector are now occurring within the confines of special economic zones (SEZs).
US and EU government regulations make it difficult for scientists doing genetic engineering research to get approval for their projects. Seeking it costs tens of millions of dollars, making research only accessible to very large pharmaceutical firms. Small venture-backed start-ups have been entirely shut out of US and EU markets.
It should come as no surprise that small genetic engineering start-ups are seeking out more ‘science-friendly’ jurisdictions.
In October 2021, we published the world’s first comprehensive map of SEZs throughout the world — the Open Zone Map. We were soon flooded with various requests for information. Most surprisingly, five different genetic engineering start-ups contacted us looking for a good location to establish their new laboratories.
SEZs are business parks or cities that have been exempted from major rules and regulations at the national level. Typically, they enjoy various tax and labour law incentives. Other incentives might include streamlined regulatory approval via one-stop shops, semi-privatised arbitration, special visa rules or exemption from currency controls.
One firm that contacted us, Spira, grows algae for use in various food products, such as dye. The growth in the vegan food industry, consumer demand for environmentally friendly products and recent supply chain shocks have caused a boom in demand for Spira products.
Spira founder Elliot Roth described why Spira plans on growing genetically modified algae: “We start with wild-type algae then, if necessary, we enhance the algae to absorb carbon dioxide; treat wastewater; effectively biomine; and produce pigments, proteins, plastics and pharmaceuticals.”
The company plans on growing genetically modified algae to expand its line of products and increase crop yields. However, getting approval from the US Food and Drug Administration (FDA) to grow new genetic species in the US is prohibitively expensive. Instead, Spira will have to grow their algae overseas.
Mr Roth continues: “The best environment would be one that emphasises speed, prioritises and funds impactful projects, and does not put draconian or unclear requirements on safety regulations for growing engineered organisms. Categorical approvals would be helpful — if you demonstrate safety for a type of engineered organism, you should be able to get approvals for other similar organisms.”
Another venture-backed startup that contacted us, MiniCircle, is developing DNA technology to treat people with HIV/Aids. Like Spira, it found that carrying out its research in the US was too expensive. Instead, it relocated to an SEZ in Central America with a streamlined approval process.
During our research, we found that there are already 82 SEZs worldwide vying to attract genetic engineering start-ups. The largest industrial cluster is in India’s Genome Valley — an agglomeration of three adjacent SEZs and home to roughly 200 companies that enjoy streamlined regulatory approval. Other large SEZs targeting the industry include the South Korean Yeongdeungpo Smart Medical Zone; the Keystone Knowledge Park located in Haryana, India; and the Hainan Medical Tourism Zone in China.
Due to Covid-19, dozens of new genetic engineering and biotech SEZs have been announced in the past two years in countries such as Pakistan, South Africa and Jamaica.
At least one start-up is already trying to cash in on the boom of genetic engineering SEZs. Levee Industries is creating software to help small biotech firms share information about their manufacturing processes with one-another. Their go-to market strategy is to partner and work with zones to access their tenants in the biotech industry.
Kalon Boston, CEO of Levee Industries explains: “The regulatory burden for drug development in the US is probably suboptimal. This is largely a function of FDA's incentives. By working across several jurisdictions — including SEZs — companies have more freedom to optimise their regulatory burden and improve patient outcomes more efficiently.”
My prediction is that by 2030, most genetic engineering research will be done in SEZs.
Thibault Serlet is the director of research at the Adrianople Group, a business intelligence advisory firm.
This article first appeared in the February/March 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.