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Special Economic Zones in Africa
according to a number of scenarios. From this, Ge comes to the following conclusions: (1) In light of the technological externality (the learning factor between the multinational and the domestic firm), EPZs should not be developed through the enclave model but should be opened to extensive domestic participation, both inside and outside the EPZ; (2) conditions for exchanges and learning between domestic firms and foreign firms in EPZs, and between the EPZs and the domestic economy, should be improved so that technology transfers can occur throughout; (3) if this occurs, new firms from previously nonindustrial countries will successfully compete against firms from previously industrial-monopoly countries; and (4) EPZs thus play a catalytic role in creating the conditions for multinational enterprises (MNEs) to invest and, under the appropriate conditions, transfer crucial knowledge, willingly and not. The author concludes by proposing that EPZs are a component of a progressive strategy of economic opening and liberalization.
Other Notable Perspectives on the SEZ Question In their survey of EPZs, Kusago and Tzannatos (1998) conclude that EPZs have a proven record for absorbing surplus labor in the early stages of industrialization, but that this absorption diminishes as economies transition upward, as in the cases of South Korea and Taiwan, China. Other benefits are found to be less important. Cling and Letilly’s (2001) contribution is to answer one question: “Can [free zones] represent a durable focal element of development policy?” (p. 5). They come to three main conclusions: (1) EPZs have worked mostly in a few emerging markets in Asia and South America and, with the exception of a handful of countries, have not succeeded in LDCs; (2) the experience of these emerging markets shows that EPZs are, at best, one of several components of export-oriented industrialization, and one with limited effect on skills and economic value added; and (3) EPZs are undermined by changes in trade rules, notably the WTO’s rules on subsidies and countervailing measures,12 the end of the MFA,13 and regional trade agreements. Schrank (2001) asks who is right in the EPZ debate—those who argue “that they offer a gradual ‘two-track’ alternative to neoliberal ‘shock therapy’” (p. 224) or those who believe that they endanger reform by creating liberal enclaves that allow governments to continue protecting inefficient domestic economies. The author provides three narratives to inform an answer: (1) the EPZ life cycle perspective; (2) a historical analysis comparing South Korea, the Dominican Republic, and Mexico; and (3) a quantitative analysis testing variations of national