Export Processing Zones in Asia: A Comparative Study

Abstract

By 1970, some twenty export processing zones (EPZs) had been established in less than ten developing countries (LDCs); by 1986, there were 175 such zones in more than fifty LDCs. Over this period, employment rose from 50,000 to 1.3 million, while the estimated value of EPZ exports increased from US$150 million to US$10 billion.1 This rapid geographical spread represented an important policy change in the global economy and in North-South relations. Normally, EPZs are seen as vehicles for outward-oriented economic growth, based on the theory that active participation in international trade is an engine of growth, and second-best type solution for a country wanting to profit from a greater and more efficient integration into the international division of labour without subjecting the entire economy to trade liberalization and deregulation.2 The enclave nature of the zones minimized the exposure of the domestic economy to any uncertainty, while their openness supplemented and facilitated the state's overall outward-oriented development strategy. A variety of incentives were offered to attract foreign direct investment (FDI) to export processing zones. Customs duties were usually waived on imported materials, intermediate