HOW HAS GLOBALIZATION AFFECTED EPZs?

Countries which relied on the traditional EPZ package to attract investment are fast realizing that-

• competition for investment is intensifying, making it harder to attract and retain investors
• competition in international product markets is inceasing forcing firms to become more competitive New technologies are impacting on previously labour intensive production processes, with the result that many EPZ factories will employ less labour in future
• the increasing use of technology reduces the labour cost component and could mean that enterprises may move back to higher labour-cost production sites where the right skills, support services, infrastructure and technology are available
• changes in the international trade regime, and the rise of trading blocs like NAFTA are having a major influence on where investors decide to locate
• the end of the Multifibre Arrangement means that countries which relied on their quota to attract apparel companies will have to develop other attributes if they hope to retain that investment

Investors are now looking beyond cheap labour when selecting a production platform because of fundamental changes in the way companies compete. What are those changes?

• The growth of global production networks now enables companies to source goods and services all over the world, and to reconfigure their production chains relatively quickly and easily. This means that a country or supplier can be cut out of the network if conditions change and they do not adapt quickly enough.
• The life cycle of products is shortening all the time, with the result that production lines are changing more frequently, forcing workers to adapt.
• Production lead times are shortening all the time, obliging companies to improve their speed through innovation.
• Virtually instant market feedback means that companies are constantly adapting their products, forcing suppliers to respond rapidly and flexibly.
• Speed, quality and cost criteria are being constantly tightened.
• Changes in the organization of work (teams, QC etc) place greater responsibility on workers for productivity, quality and innovation, shifting the emphasis from the absolute cost of labour to the capabilities and potential of labour.