Definition[ edit ] The World Bank defines free trade zones as "in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipmentand re-export operations. In other countries, they have been called "duty free export processing zones," "export free zones," "export processing zones," "free export zones," "free zones," "industrial free zones," "investment promotion zones," "maquiladoras," and "special economic zones. Free zones range from specific-purpose manufacturing facilities to areas where legal systems and economic regulation vary from the normal provisions of the country concerned.
For three decades, the state of Penang in Malaysia proved highly effective in attracting quality investment in hi-tech manufacturing, with the number of plants increasing from 31 in to in and the number of employees rising from around 3, to nearlyduring the same period.
Similarly, much of the growth in technological and financial prowess in Singapore developed on the basis of investments and steady productivity increases in EPZs, which succeeded both in raising the quantity and quality of jobs offered and in building the necessary linkages between the domestic and international economies.
So What is Wrong with EPZs The ILO Meeting will debate the report and examine ways in which the labour and human resource problems of EPZs can be addressed in such a way as to improve wages and working conditions and increase productivity and interlinkages between EPZs and the domestic economies of the countries in which they are located.
Special attention will be given to the plight of women workers in EPZs. Women not only make up the majority of the EPZ workforce, but they tend to suffer more from the inherent problems of EPZs, including the long working hours, low wages, the almost total absence of social welfare facilities such as child care and the often arduous nature of the work.
The report says that "it is a regrettable feature of many zones that both male and female workers are trapped in low-wage, low-skill jobs.
They are viewed as replaceable and their concerns do not receive sufficient attention in labour and social relations.
The ILO report identifies five factors that contribute to this unsatisfactory state of affairs: Most zone operating countries have an abundant supply of available labour, which tends to keep wages down, although the negative image of much zone work sometimes obliges to pay a premium to get labour; Zones are particularly attractive to labour-intensive industries such as garments and footwear and assembly of electronic components, which use relatively basic technology and thus require a low-skill workforce.
High labour turnover is not a problem because replacements are abundant; The generous incentives and low costs to entry attracts simple processing industries to invest in the zones; such companies often lack professional management, particularly in human resources and management. They also tend to be unable or unwilling to invest in new skills, technology or productivity improvements.
They are also likely to provide few if any social benefits to their employees; The labour intensive nature of much processing and assembly work means that enterprises compete largely on the basis of price; with labour costs a large component of total costs, companies see labour as a cost to contain rather than an asset to develop; Very few governments have managed to implement policies to ensure that zone investors transfer technology and skills to local industry and workers, with the result that the human capital base remains low.
According to the ILO, the shortage of appropriate human resource development strategies may well limit the potential for EPZs to improve productivity and upgrade jobs. The report says that "labour relations and human resource development remain two of the most problematic aspects of zone functioning.
Auret Van Heerden, the main author of the report, "the frequent absence of minimal standards and poor labour-management relations have predictable outcomes, such as high labour turnover, absenteeism, stress and fatigue, low rates of productivity, excessive wastage of materials and labour unrest are still too common in EPZs.
The report notes that in Singapore, which has a very strong tradition of tripartism, "there is no question of the investment policies infringing workers rights. In Mauritius, one of the most successful of all EPZ operators, the zone workers "are covered by the labour laws and labour relations system.
Mauritius has a high degree of trade union activity in some sectors of the domestic economy, but in the EPZs only 9 per cent of the workers are unionized. The Philippines, according to the ILO report, "provides an excellent example of a zone-operating country in which no adequate system of labour regulation and labour-management relations existed in zones, but which, after years of industrial conflict, made the necessary reforms and established a stable system of labour-management relations", including respect for trade union rights.
However, not all zones in the Philippines are developing apace. The report notes that "a number of private zones appear to have adopted a "Trade union free" policy which conflicts with the labour laws.
EPZs in Costa Rica are also covered by national law, "however trade union activity in Costa Rica is not well developed and the free zones are no exception," the report says. There are very few countries which openly and officially exclude EPZs from the national labour legislation and system of labour-management relations.
However, in Bangladesh, EPZs are excluded from the scope of the country's Industrial Relations Ordinance, which provides for organising and bargaining rights in other sectors. There are, however, labour regulations that do apply in the zones relating to such matters as job classification, minimum wages, leave, holiday periods, termination of employment and welfare facilities such as clinics and canteens.
Pakistan has also excluded its zones from the scope of the Industrial Relations Ordinance and prohibited all forms of industrial action in them. Panama is the only country in Central America to have adopted special labour legislation for its EPZs, replacing the labour code.
Initial legislation sought to strictly limit the influence of trade unions in EPZs. After much opposition and some revision to restore the recognition of trade union freedoms, the report says "the controversy has not been fully resolved and freedom of association is not well established in the zones.
If the full employment and productivity potential of EPZs is to be met, a proper human-resource development strategy will be necessary.
If EPZs are to realize the full knock-on economic effects desired by the host countries, greater linkages with the domestic economies need to be forged.
Finally, much needed investments in social infrastructure, particularly of the sort needed by women workers for example, child care facilities, safe transport and sanitary living and working conditions could go a long way toward making EPZ employment more stable and attractive.
International Labour Office, Geneva, GENEVA (ILO News) - As global competition for jobs and foreign investment intensifies, Export Processing Zones (EPZs) are proliferating worldwide, growing from just a handful a few decades ago to over today, according to a new report 1 published by the International Labour Office.
An export-processing zone (EPZ) is a specific type of FTZ, set up generally in developing countries by their governments to promote industrial and commercial exports.
According to the World Bank, "an export processing zone is an industrial estate, usually a fenced-in area of 10 to hectares, that specializes in manufacturing for export.
Definition of export processing zone (EPZ): Type of free trade zone (FTZ), set up generally in developing countries by their governments to promote industrial and commercial exports. In addition to providing the benefits of a FTZ, these zones.
Disadvantages of the Export Processing Zone Groups such as the International Labor Rights Forum (ILRF) have found that in some developing nations the majority of the workers in the EPZ's are female and comprise as much as ninety percent of the cheap labor pool.
To encourage and facilitate international trade, countries all over the world have established export processing zones (EPZs) of many types, including free trade zones, special economic zones, bonded warehouses, free ports, and customs zones.
Export Processing ZonesExport Processing Zones An explanation of Export Processing Zones (EPZs) and how exporters can utilize them. This information is from "A Basic Guide to Exporting" provided by the U.S.
Commercial Service to assist U.S. companies with exporting.