Export Processing Zones



What is an export processing zone?



Table 1: Terms synonymous with export processing zones (EPZ)

Maquiladoras/maquiladora enterprises Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Panama
Free zones Costa Rica, Honduras, Ireland, Trinidad and Tobago, Turkey, United Arab Emirates, Uruguay, Venezuela
Special economic zones China
Industrial free zones Cameroon, Colombia, Ghana, Madagascar, Syrian Arab Republic and Jordan
Industrial free zones for goods and services Colombia
Free trade zones Bulgaria, Chile, Dominican Republic
Export free zones Jamaica
Free trade and industrial zones Islam Republic of Iran
Special export processing zones Philippines
Export processing free zones Togo
Tax free factories Fiji
Bonded zone Indonesia
Free Zones and special processing zones Peru
Free Economic zones Russian Federation
Industrial estates Thailand
"Points francs" (special industrial free zones) Cameroon

Source: Legislation and publications of governments and EPZ authorities


EPZs in the Dominican

As the old sugar economy died in the 1980s, both the Jorge Blanco and Balaguer governments embraced a new economic strategy based on tourism and “free-trade zone” assembly plants. The Reagan administration’s 1983 Caribbean Basin Initiative (CBI), which gave imports from Caribbean countries preferred access to the U.S. market, fueled the growth of free-trade zones-much as NAFTA later fueled the maquiladora economy of northern Mexico. The Dominican government used tax breaks and other subsidies to attract U.S. firms, which own almost half the factories in the free-trade zones.



What are some of the positives and negatives of an EPZ?

Provides jobs to alleviate unemployment or under-employment problems in the host country The zones are unable to sustain investment and employment growth because location may not be economically viable
Earnings in foreign exchange by promoting non-traditional exports There are insufficient backward and forward linkages
Boost the export sector, particularly non-traditional exports raise the standards of local industry The infrastructure is inadequate to meet the energy requirements of energy-intensive industries or to treat the industrial waste (in some countries, toxic waste is being pumped into rivers which empty into the sea and kill marine life, depriving the fishing and tourist industries of their livelihood)
Transfer skills and technology There is inadequate social infrastructure such as transport services to get thousands of newly employed people to work, or housing to accommodate the influx of new workers
Attract investors into specific activities regarded as strategically important to the economy...eg. electronics, information technology, research and development, tourism, infrastructure and human resource development The zones fail to attract sufficient investment (there are many half-empty zones to testify to poor planning)
May help kick-start the economy as a whole Makes the EPZ host country too dependant on the US economy--leaving it succeptible to fluctuations in the US market
Attract foreign direct investment (FDI) to the host country They attract the wrong brand of investment with the result that investors subsequently move to find more appropriate conditions (such as skilled labor)
Abundant cheap labor The abundance of cheap labor leads to exploitation (keeping wages low) and mistreatment of employees


Distribution of EPZs by region, 1997

Region No. of zones Key Countries
North America 320 United States-213, Mexico-107
Central America 41 Honduras-15, Costa Rica-9
Caribbean 51 Dominican Republic-55 (2000est.)
South America 41 Colombia-11, Brazil-8
Europe 81 Bulgaria-8, Slovenia-8
Middle East 39 Turkey-11, Jordan-7
Asia 225 China-124, Philippines-35, Indonesia-26
Africa 47 Kenya-14, Egypt-6
Pacific 2 Australia-1, Fiji-1
Total 847  

Source: WEPZA and ILO


What is produced?

Garments, electronics, footwear, apparel, jewelry, velcro, furniture, pharmaceuticals, aeromatics, etc...




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