Responses by governments
Government agencies responsible for investment promotion, zone management and labour administration are having to:
The labour laws of many developing countries are a legacy of the colonial era. They are often cumbersome and heavy on administration. Many governments simply do not have the resources to implement the provisions of the law, and the international trend towards smaller government means that they are not likely to expand their labour administrations in the future. The most effective legislative reforms provide for systems which are less administration-intensive, simple, easy-to-use and can be quickly adapted to take account of changing circumstances. Many zones have their own system of labour administration, often staffed by ex-officials of the Ministry of Labour, but now paid for by the zone, and with responsibility for monitoring minimum standards, resolving conflicts and providing labour relations advisory services to employers and workers.
Recent examples of reform of labour and investment laws include Panama where two 1996 Decrees(9) set up a special department within the Ministry of Labour to handle individual and collective disputes and to promote improved working conditions in the zones. A tripartite commission within this department endeavours to conciliate in the case of conflict or deadlock in collective bargaining. In the Dominican Republic a Presidential Decree of 27 March 1977 established a tripartite commission to develop a policy and a programme of action on social services in export processing zones. Child care, housing and transport are amongst the priorities to be addressed and the means of action may include the establishment of cooperatives and the provision of credit. In the Philippines new ecozone legislation(10) provides for tripartite councils at national and zone level to advise on policy issues, particularly human resources and labour relations.
A number of zone-operating countries have revised their incentive systems to promote investment in higher value added activities, raise the human capital base or improve the social infrastructure. Mauritius, for example, has introduced a Technology Diffusion Scheme to promote the use of new technology; another initiative is aimed at increasing the use of information technology. Sri Lanka has included training providers in the list of investors eligible for incentives. In the Dominican Republic Act No. 8-90 provides partial or total exemption from import duties for companies importing vehicles, equipment and materials with which to provide housing, transport or other services for their workers.
The competitive potential of zones is being improved through enhanced support services. In Costa Rica the main zone legislation (Act No. 7210, supplemented by Acts Nos. 7293 of 4 March 1992 and 7638 of 30 October 1996) provides for:
This network of services formed part of the package that convinced the United States multinational enterprise Intel to invest in Costa Rica. The Government of Costa Rica put together a special package for Intel consisting of human resource development provided by leading technology and training institutes, streamlined administrative procedures and a new source of electric power at a reduced rate. Intel's US$500 million investment in Costa Rica is the largest single private investment ever made in Central America, providing employment for 3,500 workers. The plant manufactures Pentium II processors with 35 per cent local added value. Intel expects to earn US$700 million in exports from this operation in 1998, which could be worth more than coffee and bananas, Costa Rica's two main traditional exports, combined.
Tunisia has launched an upgrading programme run by the Ministry of Industry to help firms adjust their production systems and organizational practices to meet the demands of international competition. A special Development Fund for International Competitiveness allows the programme to finance activities to improve the quality of products, restructure enterprises, sponsor sectoral studies and subsidize technical centres.
Many governments have authorized the development of privately owned and managed zones which nonetheless qualify for the same incentives as government zones. In some cases foreign developers have been allowed to establish zones, on their own or in joint ventures with local partners. Bangladesh has approved the development of a new zone by a Korean company, while the Philippines has seen a dramatic growth in local and joint venture zone developments. The Carmelray Industrial Park for example, is a joint venture with JTC International, an arm of the Jurong Town Corporation of Singapore. This allows the Philippine partner, Carmelray Industrial Corporation, to draw on the experience and expertise of a world-class partner. Toyota Motor Philippines has developed the Santa Rosa Special Export Processing Zone in Laguna, Philippines, as a purpose-built facility for itself. A zone dedicated to the leather industry, with the necessary environmental infrastructure, has been set up in Istanbul in Turkey. Other innovations in zone development in Turkey include a space camp and the Istanbul International Securities Market Free Zone, which provides for stock purchases, sales and barter within the Istanbul Stock Exchange. There is a trend towards targeting zones such as high-tech or science parks, chemicals parks, agro-industrial parks and even "intelligent" parks.
Given that global competition places a premium on speed and quality as well as cost, and that constant improvement is vital to success, governments need to upgrade their human resource development and labour relations strategies. Too many countries continue to rely on cheap labour as an incentive to investors, overlooking the fact that this will only attract the lowest quality of investor who is least likely to succeed in global competition. The most effective enterprises are looking for productive labour which can adapt to the frequent changes in technology and the organization of production. Such companies are also concerned to retain their skilled and experienced workforce and to reduce absenteeism, tardiness and other manifestations of labour-management conflict. Zones which can offer high-quality human resources, training facilities and labour relations services such as conciliation and mediation are more likely to attract and retain investors of world standard.