Brief History of SEZs and Overview of Policy Debates
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outcomes against measures of state capacity and market size. He concludes that both state capacity and market size are critical in affecting the success of EPZs and they act as effective catalysts for industrial upgrading and economic transformation. Surveying the latest trends, Milberg (2007) concludes that zones are here to stay but will need to adapt to four main challenges: (1) There is limited room for export-oriented growth in the world (someone must import); (2) the full entry into force of key WTO measures will be deeply felt; (3) the shift to higher technology production will challenge the EPZ model; and (4) there is a need for “social upgrading” to harmonize labor standards between zones and nonzones. Finally, the labor perspective is perhaps best summarized by two ICFTU publications (2003, 2004), which argue that EPZs are not viable because of the footloose nature of investments attracted by low labor costs, tax incentives, and subsidized infrastructure. The ICFTU considers the overall economic impact of EPZs to be negative because of the low value of the economic activities that are usually attracted to zones and the fact that they do not lead to technology transfer. From a labor rights standpoint, the organization indicts zones on the following counts: (1) lack of respect for freedom of association and the right to strike; (2) nonapplication of domestic labor law and lack of inspections; (3) difficulties with or interdiction of unionization; (4) institutionalization of job insecurity; (5) nonpayment of agreed-upon salaries and overtime pay; (6) abusive working hours; and (7) poor health and safety practices.
Conclusion—The State of the Debate SEZs’ Economic Contribution—Toward Convergence? The perspectives, theories, and methods summarized here highlight very real differences in perspective on the role and impact of SEZs. These differences are not simply on results but also on the economic policy objectives of SEZs and how they can be measured. The debate is best illustrated by a simple statement of opposition: on the one hand, SEZs as welfare-reducing enclaves that constrict countrywide liberalization; on the other, SEZs as catalytic exclaves that announce and prepare for liberalization. However, this opposition refers mostly to the debate as it was in the 1980s and 1990s. A survey of key perspectives shows that some convergence has occurred in the past 10 years or so on the evaluation of SEZs.