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|
|Free Zones and special processing zones||Peru|
|Free Economic zones||Russian Federation|
|"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|
|Middle East||39||Turkey-11, Jordan-7|
|Asia||225||China-124, Philippines-35, Indonesia-26|
Source: WEPZA and ILO
What is produced?
Garments, electronics, footwear, apparel, jewelry, velcro, furniture, pharmaceuticals, aeromatics, etc...
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