Economic Zones
Special economic zones are specially-designated geographical region/s within a country that enjoy a more liberal interpretation of that country’s economic laws. Fiscal and non-fiscal incentives are offered to potential investors to induce them to locate their businesses inside these zones. The primary reason for establishing special economic zones (SEZ) is to increase foreign investments. Some articles do not distinguish between special economic zones and free economic zones anymore although there is a slight difference. There are many kinds or types of SEZ such as free trade zones (FTZ), export processing zones (EPZ), industrial estates (IE), light industry parks (LIP), IT-enabled zones and urban enterprise zones. Establishing special economic zones requires a national policy change from the concerned government towards a more liberalized economy. But some academic studies suggest SEZ have only a limited impact on the nation’s economic growth. It appears though that they can help expand the local regional economies.
The link below is that of a book by author Wei Ge who examined the links between special economic zones and the economic transition in China since 1949. This was the time the Communists won the civil war and stared imposing their own economic agenda.
Conceptually, they can be characterized as a specific geographic area within a country’s territory where certain economic activities are promoted by a set of national policy instruments not available to the rest of the country. They are intended to function as zones of rapid economic growth by attracting foreign investments with a combination of tax, fiscal and business incentives. The idea is to do away with the usual permits, licenses and other administrative requirements (red tape) that hinder the establishment of business activities. Additional inducements include an infrastructure that is superior to the rest of the country, a strategically advantageous location and a stable investment and political climate. Other attractions for the investor are assured industrial peace by prohibiting labor unionism within the zones, a more lenient implementation of certain environmental regulations and guaranteed repatriation of its original investments and profits.
The website below gives a brief history of export processing zones and their effect on labor. This article wants labor laws incorporated into the World Trade Organization (WTO) through the initiative of the International Labor Organization (ILO). Some of its demands are safeguards against repressive anti-labor provisions within most of the zones today such as abolition of forced labor, minimum age requirements for zone workers, and equal pay for equal work of equal value. The article advocates the adoption of minimum labor standards such as “freedom of association” and “right to collectively bargain”. At present, one of the main attractions of special economic zones is abundant cheap and compliant labor with the prohibition of trade unionism. The site gives the reader an idea on the dark side of labor exploitation existing in SEZ.
http://www-old.itcilo.org/actrav/actrav-english/telearn/global/ilo/frame/epzicftu.htm
The host country can expect additional job opportunities, increased foreign exchange inflow, trade expansion with the outside world, transfers of more cutting-edge foreign technology and improved productivity gains. These factors will hopefully put the country into an export-oriented growth path and hasten its integration into the global economy. The benefits of establishing special economic zones within a country can either be static or dynamic. Static gains refer to new jobs being created and the additional foreign exchange. Dynamic gains refer to some potential benefits that become clear only after a certain period of time. These include the learning curve of new foreign technology and gradual shift of the economy from being inward-looking to an outward-looking one. Dynamic gains require a deliberate and conscious effort on the concerned country’s economic managers.