Summary
The EPZ strategy has demonstrated in countries all over the world that it can be effective in attracting investment and creating employment. For labour-surplus economies that represents a major step forward, even if the investment is largely in simple processing activities and the jobs are mostly on the lower rungs of the skill and wage ladder. In the longer term, however, few zone-operating countries have succeeded in upgrading those jobs in terms of skills and earnings.
Many zone-operating countries anticipated that their zones would spur economic growth and development, but very few have managed to create the backward and forward links necessary to achieve a wider economic impact. Zone activities have remained largely processing and assembly operations based on imported components, with very few local materials, goods and services required.
The typical pattern of zone investment has tended to produce an industrial monoculture with most firms involved in the same sector of activity. The bulk of the investment often comes from one country or subregion, and the output of the zone is frequently destined for one major market. Zone performance would be more stable and sustainable if the investment was drawn from a wider range of countries and was spread across a broader group of industries and if the output was destined for diverse markets.
Globalization is accelerating the construction of international production chains, using EPZs as export platforms. This provides considerable opportunities for zone-operating countries to attract investment and create employment, but the initiative in the construction of such production chains lies with firms in developed market economies, and zone-operating countries may find themselves isolated by sudden shifts in investment and trade patterns if they do not manage to diversify their investment and export profiles.
Labour relations and human resource development remain two of the most problematic aspects of zone functioning. The absence of credible and effective structures of labour-management relations is a source of instability in zones which may undermine their ability to provide an internationally competitive export platform and to achieve improvements in wages and working conditions. The shortage of appropriate human resource development programmes may limit the potential of zones to improve productivity and upgrade jobs.
The position of women zone workers deserves special attention, both because they constitute such a large proportion of zone employment and because the features of zone work and life impact differently on women and men.