Why do some countries embrace Special Economic Zones (SEZs) as a development tool more actively than others? While SEZs are often viewed as vehicles for foreign investment and regional growth, the strategic motives driving their establishment remain underexplored. This study fills a critical gap by investigating the political and fiscal determinants of SEZ creation, hypothesizing that greater fiscal decentralization significantly boosts the likelihood of SEZ establishment. When local governments receive a larger share of central revenue, regional leaders gain incentives to champion SEZs, seeing them as levers to enhance local economic power and growth. By analyzing SEZs through a political economy lens, this research reveals how decentralization policies and intergovernmental dynamics shape the motivations for SEZ creation. It underscores the complex intra-country relationships that influence regional development strategies, showing how local governance decisions intersect with national economic goals to drive place-based economic policies, particularly in the development of SEZs.