6. Development in Zones

Question 1

What are EPZs (Export Processing Zones)/SEZs (Special Economic Zones)?

Answer 1

EPZs/SEZs are economic free zones that usually have more relaxed policy such as low tariffs and low labor protection in order to attract FDI for export-oriented growth

EPZs and SEZs are almost the same; former specializes in manufacturing goods that are largely aimed at export markets

SEZs

• geographically delimited areas, many times physically secured, usually - outside customs territory of the host country;
• usually under a single management either gov or private company
• relaxed environmental regulation, reduce or totally ban trade union activity (fail to provide good stable jobs)
• traditionally long-oriented, usually taking over a decade to mature and are evolutionary and flexible by nature, as it develops, its objectives and priorities change

Both are not a long term solution for development, because they mainly benefit investors and FDI in the short term. They tend to cost more to establish than they actually bring in trade benefits.

• > According to the UN report, 2015, EPZs face challenges because traditional tax incentives are becoming incompatible with international trade law and exemptions for developing countries are expiring
• > EPZs according to the UN could re-package themselves to become champions of sustainable business

Many look at the Asian tigers as successful examples of development starting from opening up these zones. BUT, today’s industrializers face a different competitive environment from that faced by the early ones. The number of states competing for investment is increasing while the incentives offered by all the zones are basically the same.

• > led to rise in private zones that are basically just real estate speculation
• > workers over time become a form of industrial waste easily discarded and replaced

Question 2

Are special zones a potential catalyst for development?

Answer 2

Case Study: Ethiopia
The EIZ in Ethiopia has been established as a result of China wanting to share its experience with the African countries
- supposed to act as a catalyst for innovation and development (industrial spillovers and establishment of zone-domestic linkages)

The industrial zone in Ethiopia is not likely to have a positive effect domestically because the country lacks a broad and more dynamic national economic development strategy

Ethiopia’s involvement is limited to providing cheap labor and supply of some basic low-grade input materials

The incentives are purely in favor of Chinese companies:

• land cost very low
• cheap labor
• no restrictions on equity ownership in joint ventures with domestic investors
• exemptions from custom duty, voucher schemes
• full repatriation of profits
• right to employ expatriate staff

Question 3

What is the role of labour within GPNs (Global Production Networks)?

Answer 3

Global Production Network (Azmeh, 2014)

• focuses on labor dynamics and the relationships between the GPN and the socio-economic context of a certain locality in the network
• includes the economy of production and the sphere of reproduction (norms, local institutions, and gender regimes in different contexts)

Classical global value chain models look at the inter-firm relationships and issues around governance; labor in that framework was either a factor of production or victim of power asymmetries

But both frameworks (GPN and GVC) fail to look at how labour impacts the accumulation process and shapes the wider developmental process

In the examples of Qualifying Industrial Zones in Egypt and Jordan, “labor discipline” seems to be a key element in location comparisons, showing that GPNs demand certain production regimes and labour controls to meet the needs of low cost, time to market and shifts in demand