Quite alot of new economic theory coming from Southeast Asia, and especially India, involves the analysis of macro economic development theory in light of some of the micro economic costs being paid by developing countries. Im passing on an excellent article by Ujjaini Halim that summarizes most of the critical thinking about Special Economic Zones---how they do not, in effect, provide benefits to the host countries--and generally do more damage than good on the human scale. Here it's been edited to roughly half its size, and all the bold face is my addition.
This is for all those entering the debate over the PMIZ as a SEZ being proposed for Madang.
SPECIAL ECONOMIC ZONES (SEZs):UNTOLD AGONIES-- Experiences from Asian Countries
By Ujjaini Halim
Expansion of SEZs under Neoliberalism
Background
Special Economic Zones or SEZs are taking centre-stage in the debate concerning development in Asia today. The rapid expansion of SEZs in various Asian countries have initiated a widespread debate on the impact of such zones on the economic growth and development of the concerned nations. As evident from its name, an SEZ refers to an
economic zone which receives very special and preferential treatment from the national government. These SEZs in Asia and elsewhere serve international as well as domestic markets with a focus on exports. Other economic zones with a similar nature include Export Processing Zones(EPZs), Free Trade Zones (FTZs), Special Industrial Belts, etc. Despite the existence of different types of economic zones, the SEZ is emerging as the most dominant model in Asia in the twenty first century.
...The main argument of this paper is that economic growth, as demonstrated in rising Gross Domestic Product(GDP), is not necessarily the same as economic development nor does it always mean an improvement in the well-being of the majority of the people in a country. Moreover, a nation’s development path should be defined by the people’s aspirations and priorities rather than corporate interests; and the development process should respect human rights standards. Growth devoid of the above attributes is destruction in disguise.
The paper concludes that it is erroneous to claim that SEZs would foster all- round development in Asian countries and would result in poverty reduction. ..
Neoliberalism: the Driving Force behind SEZs
The SEZ epitomises the principles of the neoliberal economy. It is the neoliberal recipe for rapid economic growth in developing countries in Asia, highly promoted by multilateral institutions and eagerly accepted by governments throughout the region. The table below explains the differences between different economic zones as per their size, location, activities and markets. Despite some differences these zones are basically similar in nature as per their economic policies.
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Table 1. Types of Economic Zones
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Zone
|
Objective
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Typical Size
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Eligible Activities
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Markets
|
|
Industrial Zone
|
Industrial
development
|
< 100 hect
|
ares
|
Mixed Industry
|
Domestic and
export
|
|
Free Trade Zone
|
Support trade
|
< 50 hecta
|
res
|
Ports, airports Mostly trade-related processing and services
|
Re-export, domestic
|
|
EPZ
|
Export manufacturing
|
< 200 hect
|
ares
|
Ports, airports
Mostly manufacturing
|
Export
|
|
Enterprise Zone
|
Urban area
renewal
|
< 50 hecta
|
res
|
Inner city areas
All
|
N/A
|
|
SEZ/FEZ /Freeport
|
Integrated development
|
> 100 km2
|
|
Mixed Multi-use
|
Domestic, internal, export
|
|
|
|
This SEZ policy is an opportunistic alliance between the neoliberal agenda of less state intervention and policies of state-led development aimed at maximizing profits from the open market regime.
A strong motivation of the governments behind the promotion of SEZs is the desire to overcome economic crises and debt burdens. In order to cope with deteriorating economic conditions and in a few cases to overcome economic stagnation, these countries introduced trade liberalisation policy (as part of structural adjustment programmes or SAPs), an important component of which was the development of free trade zones or SEZs. The irony was that in doing so most of these countries further exposed themselves to a greater degree of vulnerability and risk, which was manifested in economic disasters faced by some of these countries at a later stage.
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Table 2. World-wide Growth of Economic Zones
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1970s
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2003
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30 countries
|
|
120+ countries
|
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80 free zone projects
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2,000+ zone projects
|
|
No private zones
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1,200+ private zones
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|
Total exports: $6billion
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Total exports: $600+ billion
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Source: FIAS Bearing Point, Inc. 2004
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Table 2 illustrates the rapid growth of economic zones in the world. ...China is the leader in SEZ development in Asia followed by Indonesia, the Philippines and India. An estimate shows that SEZs in China employ more than 30 million people which comprise 60% of the total working force in SEZs globally (ILO 2007) . India is emerging as the new leader in SEZ and as per statistics available from the government, 63 SEZs are in operation in the country as of 2007 and 234 SEZs have obtained formal approvals so far (GOI 2007).
Definition of the SEZ and its Expansion in Asia
A common definition of the SEZ could be derived from various literature: an SEZ (or an economic zone) is an isolated foreign enclave in a host country for industrial activities. It is entitled to enjoy a very special status in the country and has liberty to run the activities within the enclave as per its own rules and regulations (Sharma2006). It is essentially a duty free zone which receives very generous production incentives from the state. These incentives include complete exemption from excise duties, custom duties sales and income taxes, etc. Moreover it has provisions for 100% Foreign Direct Investment (FDI); exemption on income tax on infrastructure, capital fund and individual investment; and an assurance of steady electricity and water supply. These zones are even commonly exempted from important environmental regulations and labour laws even as states often have very limited power to intervene in their activities. ...
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Table 3. Distribution of Economic Zones in Asia and their contribution in national economy
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Countries
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No. of Zones1
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Total
Employment
|
Investment in
USD miliion
|
Zone export in USD million
|
Zone export as % to total export
|
|
China
|
164
|
40,000,000
|
17.03 bn
|
145.06 bn
|
59.33
|
|
Indonesia
|
1152
|
6000,000
|
11.31 bn
|
18.4 bn
|
na
|
|
Philippines
|
78
|
1128197
|
1.270 bn
|
32.03 bn
|
60
|
|
Thailand
|
32
|
451599
|
1.442 bn
|
8.242 bn
|
na
|
|
Malaysia
|
213
|
491488
|
5.512 bn
|
12.6 bn
|
83
|
|
India
|
83
|
100650
|
7.96 bn
|
4.9 bn
|
na
|
|
Sri Lanka
|
16
|
410851
|
287
|
1263
|
38
|
|
Bangladesh
|
8
|
3438394
|
1035
|
11716.98
|
75.6
|
|
Pakistan
|
26
|
888312
|
3872.50
|
8073.1
|
na
|
|
Vietnam
|
18
|
950000
|
1067
|
|
80
|
|
Korea republic
|
3
|
39000
|
11.56 bn
|
30.61 bn
|
na
|
|
Taiwan
|
5
|
67646
|
24,628,508
|
343
|
na
|
| |
|
|
|
|
|
|
Source: ILO database on export processing zones 2007
State efforts to promote SEZs through incentives
Despite favouring neoliberal policies, states have not left SEZs to their own fate or to comparative advantage for ensuring profit. On the contrary, states have strongly intervened in developing these zones, thereby ignoring open market principles. Asian countries are virtually in competition to draw FDI and they have offered several incentives to attract investors particularly to these zones. In China, SEZs have received incentives like preferential tax status to foreign investors, lower tariffs, better infrastructure, more flexible labour markets, and less bureaucratic control (Panagariya, 1993). Various industries have grown in Chinese SEZs like manufacturing, ser-vice industries (such as hotels, retail and tourist industries), agriculture, housing construction, infrastructure development, etc. and have attracted considerable FDI (OTA 2003)....
Since the introduction of the new policy for promoting FTZs, Indonesia experienced a 194%increase in foreign investments. In 1993, as part of the negotiations for the General Agreement on Tariffs and Trade (GATT) and the Asia-Pacific Economic Cooperation (APEC), the country eliminated all restrictions on foreign investments. Indonesia’s first EPZ, Nusantara Bonded Zone (KBN), was opened in Jakarta (West Java) in 1986. The Surabaya Industrial Estate Region (SIER) was established in 1991 in East Java. Later that year, a third zone, PIER, was built in East Java. The fourth, the Batarn Industrial Zone, was also located in East Java.
Most of Indonesia’s EPZ factories produce garments and shoes. Recently the Indonesian and Singapore governments signed an agreement to develop the province’s [East Java] three main islands into an SEZ investment magnet. The government’s newly established special economic zone that embraces Batam, Bintan and Karimun islands have seven initial investment projects worth US$566.4 million (Hudiono 2006).
India, Bangladesh, Sri Lanka and Pakistan are also not lagging behind in offering incentives to lure investors in SEZs. The Indian central commerce ministry’s web site has declared that the state will provide land, develop infrastructure and render other support services at a subsidised rate to the industries in SEZs. To date, the Government of India has approved 234 SEZs out of which 162 are approved on principle, and 63SEZs have been notified in different states (GOI2007). Bangladesh, besides offering tax holiday for ten years and a reduction to 50% of total tax attributable, exempted the zones from three major labour laws since 1989. These include the Factories Act, the Industrial Dispute Act and the Employment of Labour (Standing Orders) Act. These were replaced by two instructions on labour relations and all EPZs considered this step as a major incentive. The country formulated the Export Processing Zones Act of 1980, Foreign Private Investment Promotion and Protection Act of 1980, and the Private Export Processing Zone ct of 1996 to facilitate the growth of EPZs.
Sri Lanka, in the beginning, followed the way of offering incentives to investors like other countries. These included 100% foreign ownership; a tax holiday up to ten years with complete tax exemption for remuneration of foreign personnel employed, royalties and dividends of shareholders during that period; and duty exemptions for the importation of equipment, construction material and production inputs (Aggrawal 2005). In addition, EPZ units were provided with industrial services such as land, power, water and telecommunication services at subsidized rates. However, in the late 1990s, the government curtailed the incentives. Tax holidays were gradually reduced to 3-5 years. Furthermore, conditions for tax exemptions on dividends, exemptions in turn-over tax and expatriates’ incomes were made more stringent. All labour laws were made applicable. The ban on trade unions in these zones was removed .
...The literature describing the promotion of these economic zones in Asia is quite rich in detailing the incentives and other forms of support provided to investors by governments for the steady growth of these zones. Several arguments have been put forward by the champions of SEZs in justifying the incentives provided to these zones. The existing literature have mostly argued in favour of SEZs, citing their potential in creating employment, developing skills and knowledge, and infrastructure in the host countries, all of which would eventually lead to all-round economic development. The following chapters critically examine these claims and try to determine the impact of these zones on the livelihoods of common people in various Asian countries.
SEZs as Engines of Economic Growth in Asia: A Critical Appraisal
SEZ and Economic Growth: Lessons from Asia
The advocates of SEZs claim that these zones would be the engine of growth and motivate industrialisation. However, experiences from Asian countries are not uniform enough to come to this general conclusion. The literature reviews indicate that while some countries have been able to benefit from these zones temporarily ,others have not. In this context, it is imperative to question the model of SEZ-centred growth imposed on developing countries by the neoliberal global order. ...
FDI and Economic Growth
The most common expostulation in favour of SEZs is that it fosters quick economic growth.The key indicators which are used to determine his growth include increasing flow of FDI [Foreign Direct Investment], growth in export-oriented production, and growth in GDP. There is no doubt that countries like China, India, Singapore and Indonesia have registered growth in GDP over the last 20 years and this was partly due to their success in attracting FDI and increasing export production.
In China, for example, GDP growth in 2006-2007 was 10.7% while India recorded a 9.2% growth. These figures coincided with increasing FDI and export earnings of these countries. Whether increases in GDP and FDI have contributed to the all-round development of these two countries, however, remains a question. During the same period of GDP growth, these two big Asian countries continued to suffer from unemployment, acute poverty and hunger. Despite exemplary economic growth, China and India performed poorly in Human Development Indicators over the same period. China’s Gini coefficient touched 0.496 in the year 2006 which was worse than many other Asian countries including India (ADB 2007). The rural-urban gap in terms of economic development has also widened in China. India experienced several starvation deaths over the same period and the poverty situation remains appalling.
The impact of FDI on growth is far from clear and the impact varies across countries under different economic conditions. To ensure the steady inflow of FDI, Asian countries need to maintain their growth momentum in order to improve market size, frame appropriate labour policies, improve infrastructure facilities, and follow more open trade policies. In other words, further integration with the open market system is a precondition to ensuring steady inflows of FDI. However, uncontrolled or unregulated integration with the open market has resulted in serious economic crises in several Asian countries; the widely known Asian economic crisis in 1997-98 was just one example among many.
The ability of FDI to create employment opportunities in a country largely depends on the labour market of the country, and the degree of knowledge and skills of the labour force. Moreover, FDI displaces domestic investment due to technological superiority, better management and more efficient production processes (Sahoo 2006). The relationship between FDI and domestic investment depends, among other things, on the quality of FDI, domestic regulatory environment, etc. which are increasingly determined by global actors and not by poor nation-states.
An estimate of the impact of FDI on domestic investment in South Asia was done by Sahoo (2006) for two periods, 1970-2003 and 1990-2003.... However, according to him, the large inflows of FDI failed to contribute significantly to domestic investment.
FDI is considered a powerful tool for export promotion. However, whether FDI would actually contribute to export-promotion depends upon the motive of investment. If the FDI aims to make use of cheap inputs and capture domestic markets, thereby displacing domestic producers, then no considerable export-promotion would occur. On the other hand, FDI could also be motivated by the desire to exploit the country’s comparative advantages to tap the export market, leading to export growth. But as in most cases, the profits are not essentially reinvested in the host country by multinational corporations (MNCs). It is therefore difficult to conclude that export-promotion due to FDI would automatically translate into the economic well-being of a host country.
Thus, it is perceptible that increasing flows of FDI in SEZs are not synonymous with economic growth of a country, or empowerment of domestic industries. Neither does FDI ensure sustainable employment generation nor does it guarantee skill-upgrading of the host country. On the contrary, the SEZs — which are the magnets of FDI — have increased economic disparities in many countries and contributed to disproportionate economic growth within the different regions of a country. Moreover, cases from different countries have proven that fostering economic growth that is mainly dependent on FDI is risky and unsustainable in the long run. These concerns are further detailed below:
SEZs: Promoting Regional Disparities
The major SEZs in China are confined in Guangdong and Fujian Province. Within a few years, these two provinces became economically powerful due to profits from SEZs. Between 1979 and 1995, China received the largest share of FDI in the developing world amounting to US$128.1 billion (OTA 2003). But the distribution of the FDI that flowed into China has been severely skewed with the coastal areas accounting for over 90% of all FDI inflows since 1979. Among coastal regions, Guangdong, Fujian, Shanghai and Jiangsu received the most substantial amounts of FDI. This has triggered uneven economic growth within the country. Enticed by the economic boom in the coastal districts, thousands of SEZs were likewise established by local governments in other parts of the country in an effort to attract FDI, but with little success (Wei and Liu, 2001).
Regional disparities had not been reduced, but rather worsened in this period. Income inequality in China, measured by the Gini coefficient, reached 0.403in 1998 and has continued to increase. However, policy makers have chosen to prioritise macroeconomic growth even at the cost of equity in income distribution and opportunities. The income gap between provinces increased and the relative position of provinces as “rich” or “poor” became rigid (Okushima et al 2005).
In the Philippines, the 1997 Philippine Human Development Report noted the uneven geographical concentration of development and growing regional disparities in the country (HDNUNDP, 1997). Similarly, Tadjoeddin (2003) has observed the uneven development of trade and industrial centres in Indonesia evident in growth enclaves and worsening inter-regional disparity.... The propensity of SEZs to concentrate in a few [geographic] pockets nullify the claim of their promoters that these would lead to infrastructure development all over the country, particularly in the poorer regions...
Unsustainable Economic Growth Fostered by SEZs
Country experiences have illustrated that the benefits accruing from SEZs are often short lived. SEZs are based on free market and liberalisation policies as well as on increased privatisation. However, many researches have dispelled the idea that further liberalisation—increased privatisation and the imposition of “free market” principles—will lead to sustained economic growth (Beams 2003). A report by the United Nations Conference on Trade and Development(UNCTAD) confirmed that the replacement of state interventionist policies by market-led development policies have failed to yield all round development for poor countries. Policies based on downsizing the public sector often undermined growth and hampered technological progress. The report noted that industrial progress had halted in much of the so-called “developing world” with only eight of 26 selected countries experiencing an increase in the share of value-added by manufacturing to GDP between 1980 and 2002. In many countries, liberalisation had led to inconsistencies in trade, macroeconomic development, foreign investment and financial policies (Beams 2003). Moreover, foreign investments in SEZs depend largely on global market demands and the world economy which is quite volatile; and increasing global competition combined with volatile markets make SEZs unsustainable.
“SEZs baffle the country’s statistic and metric by short-term spurts but just like administering steroids it kills slowly the country in any middle to long-term tenure - it is capital de-formation on a longer tenure — a bad proposition!” (Bose2006, pp. 2).
SEZs Leading to Loss of Revenue for Countries
Almost all Asian countries have offered lucrative packages to investors for FDI in SEZs. The investors are also allowed to repatriate their profit freely. The experiences show that all these relaxations lead to loss of revenues for these countries and do not contribute to the long-term economic development and self-reliance of the host nations.
The Finance Minister of India, P. Chidambaram, the central Reserve Bank of India and even the International Monetary Fund warned the Indian government that tax benefits accorded to industries operating in SEZs would lead to massive revenue losses. The estimated at 900
billion rupees, or $19.5 billion during the initial phase.
Tejal kantikar et al (2006) observed that experience in China had been that of companies wrapping up their industries once the tax holidays expire. According to the new tax policy of China which would be put into effect starting January 2008, SEZs would continue to enjoy preferential treatment and this new policy would lead to are venue loss of 93 billion approximately.5 Thus, if the number of SEZs continue to grow, the nation-state will be losing more potential income. ... In the neoliberal regime, the soft targets of these reductions are often the social sectors which will result in the worsening of the economic conditions of the poor, and would weaken the economic future of the country in the long-run. Bose (2006) observed that reliance on SEZs will also increase the debt burden of the country:
“With every additional SEZ in the country the marginal productivity of one invested dollar loses its comparative sheen after the number of SEZs had reached a critical number. A country cannot sustain that as the public funds will soon be depleted for domestic operations. They will have to borrow money from financial institutions beyond the nation-state boundary”. (Bose 2006,pp.3)
The little profit acquired from SEZs would be spent for paying the interest on the borrowed funds, concluded Bose (2006). He further pointed out that in a normal nation-state, protectionism at the initial stage helps domestic industries and enables them to compete in the open market. But in the case of SEZs, public subsidies do not build up any value proposition. ...The SEZs will also not contribute to strengthening national currencies by earning revenue for the country in the international market. The profits earned in SEZs would either be repatriated abroad or used to import more foreign goods, observed Bose (2006). Therefore, the increase in foreign exchange reserves would also be shortlived...
Employment and Labour Rights a Major Concern in SEZs
SEZs in Addressing the Unemployment Crisis in Asia
SEZs are considered sources of large-scale employment generation (both direct and indirect) in host countries thereby contributing to economic growth and poverty alleviation. Moreover, SEZs are supposed to contribute to the skills development of the labour force and technological upgrading in the host countries through sharing of knowledge with domestic firms. ... But the fact remains that employment generation in SEZs have largely failed to address the unemployment problems in the host countries, as the jobs created by these enclaves are nominal compared to the annual increase in the size of the labour force in these nations (Aggrawal 2007)....
Scope, quality and nature of employment in SEZs
... The quality, nature and sustainability of employment created in SEZs should also be critically evaluated in order to estimate how far these jobs would contribute to decreasing the number of working poor and the absolute number of unemployed workers in the region. Experiences from various Asian countries show that the nature and quality of employment created in SEZs depend largely on the labour market (availability and skill) of the host country and on global market demands. The main attraction for the big investors in Asia is cheap labour, and different countries have projected ‘cheap labour’ as an incentive to lure FDI. Thus, jobs created in SEZs in Asia are mainly sector-specific, low-skilled jobs and temporary in nature... For example in Bangladesh, the majority of garment factory workers are unskilled and semi-skilled rural women who have migrated to the cities to work in EPZs. There is no conclusive evidence that SEZs promote skill formation of workers and improve technological knowledge in the host countries. On the contrary, the experiences of China, Bangladesh, the Philippines and other countries illustrate that during the initial phases SEZs are dominated by labour-intensive industries such as clothing, footwear, and electronic component assembly, etc. These industries are based on low cost technology which do not require highly skilled workforces and do not provide much skill development opportunities for the workforce (Aggrawal 2007).
Matthews and Kaplinsky (2001) further observed that even in these low-skilled jobs, the employers prefer workers with previous experience, thus, zones benefit from experienced labour and not the other way around. In the present process of globalisation, global scale ‘informalisation’ and so-called ‘flexibilisation’of labour make the workers increasingly disposable (Daeoup 2003). Throughout Asia countries are in fierce competition to attract more FDI by offering lucrative incentives to investors. This has resulted in the increased mobility of capital which has made the workers in SEZs severely vulnerable. The workers are always afraid of losing their jobs due to the flight of capital to another country or region — and states use this ‘risk factor’ as an excuse to curb workers rights and movements.
During the period of 1960-70s — well before the installation of Chinese SEZs — EPZs were setup in South Korea and Taiwan on a large scale. These EPZs were mainly producing export products for US, Japan and European markets and were not serving the domestic market. In time, as the wage-levels in those EPZs increased and therefore deemed ‘uncompetitive’, foreign capital flew to the low-wage EPZs of Indonesia, Thailand, Mexico, etc. Within two decades, when the labour of these countries became costlier, China became the next favoured destination of FDI due to relatively cheaper labour in comparison to those countries. As a result, while new jobs were created in SEZs in China in the mid-90s, many workers in Indonesia, Thailand and Mexico lost their workplaces in SEZs (Ali 2007).
Employment created in SEZs are often temporary in nature, and there is no job security for the low-skilled workforce. Often the workers in SEZs do not have proper contracts and in many cases they are employed not directly by the companies but by the intermediary contractors....Labour laws are usually poorly enforced in SEZs and the government has little power to monitor the respect for labour rights inside SEZs. Daeoup (2003) observed how transnational corporations (TNCs) often exercised their ‘collective ’power to pressure national governments to implement ‘business-friendly’ labour control policy. ... In the Noida EPZ in India, workers were dismissed when they demanded the enforcement of existing labour laws in that enclave (ICFTU 2003)...
Violation of Labour Rights in SEZ
Labour rights are enshrined in the Universal Declaration of Human Rights (UNDHR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), the International Covenant on Civil and Political Rights (ICCPR) and Conventions of the International Labour Organisation (ILO) such as Convention 87 - freedom of association; Convention 98 - the right to collective bargaining; Conventions 29 and 105 - the prohibition of forced labour; Conventions 100 and 111- covering non-discrimination in employment and remuneration; and Convention 138 – minimum age for employment to eliminate child labour. Virtually all nation-states have ratified these conventions and have committed to enforce such standards accordingly.
...International labour rights guarantee, among others, a minimum wage, defined working hours, a safe working environment, freedom of association, freedom to form and join labour unions, the right to strike and the rights of female workers, and the abolition of child labour. Almost all of these rights are constantly being violated in SEZs all over Asia.
Restricting Trade Unions and Banning Strikes
Trade union activism is either prohibited or highly discouraged in SEZs and other enclaves. A paper by the UK Department for International Development(DFID) on Labour Standards and Poverty-Reduction dated May 2004 observed that in the era of ‘growth’, labour rights are often ignored in China:
“The processes of liberalisation – as well as promoting growth and reducing poverty – have reduced the statutory protection that workers used to enjoy, and regional disparities are widening. Independent trade unions and collective bargaining (outside the framework of the official All-China Federation of Trade Unions) are banned, and attempts to organise such unions have been suppressed. In areas other than freedom of association, the Chinese labour code is strong, but inadequate regulatory capacity and corruption mean that enforcement is weak…” (DFID 2004, pp. 12)
...Enforcement of labour laws within SEZs in China is very weak and irregular. Moreover, regional labour laws (mostly in SEZs) allow the authority to dismiss and discriminate against such workers who try to organise independently outside of the official All China Federation of Trade Unions(ACFTU). Several reports suggest that prisoners are forced to work in SEZs virtually as bonded labourers (TUAC 1997).
...In Bangladesh, the government exempted EPZs from labour laws. ...A 2003 study carried out by the Trade Union Congress of the Philippines (TUCP) clearly revealed workers who were associated with any labour union faced discrimination in SEZs. ...In India many labour laws are not properly enforced and monitored within SEZs. Informal measures have been taken to exempt the zones from labour legislation, and in some states, such as Andhra Pradesh, the Department of Employment has been instructed not to carry out inspections in the zones (ICFTU 2003).Strikes are not allowed in SEZs in almost all Asian countries; though not necessarily by law...
Minimum Wages and Working Conditions in SEZs
Though it is difficult to make any general remark about minimum wages in SEZs, the experiences of some countries reveal that minimum wages are not fully enforced in economic zones. ...Often the workers in SEZs end up working overtime without any extra money and unable to protest against such malpractices, fearing dismissal. In some cases, workers are classed as apprentices for much longer than necessary before being accepted as regular workers and thus entitled to the minimum wage (TUAC 1997). As per an ILO study, workers in Asian SEZs were found working 10 to 12-hour shifts that could go up to 16 hours during peak periods. Some firms used a quota system, which workers had to meet in order to receive their day’s pay (Aggrawal2007). A garment worker in Bangladesh narrated how the quota was increased each time they fulfilled the target, thereby making it impossible for the workers to meet the demand of the employer (Berik et al 2007). In China, average working hours in SEZs vary from 54 to 77 hours per week and overtime is more a rule than the exception (Aggrawal 2007). In Vietnam EPZ workers are forced to work overtime often without extra payment.... Aggrawal 2007 also observed that health standards in these zones were often very poor. Workers were forced to live mostly in dormitories close to the enclaves. Safety regulations were not followed properly and factory fires were quite common in different Asian SEZs, claiming hundreds of lives. In the Guangdong SEZ in China, the most prominent SEZ district, the death rate is rising by 62% a year (TUAC 1997). In Bangladesh accidents in EPZs are quite common owing to inadequate safety measures. In Dhaka, three twelve year-old girls died in a garment factory fire in 1990 that killed twenty-five persons and injured about two hundred, the majority of them young women (Senser 2004). In 2000 a fire in a garment factory in Bangladesh once again claimed 48 lives including 10 minors. All exits had been locked and the security guards could not find the key at the crucial moment (Human Rights for Workers2006). In another incident in Savar, Dhaka (Bangladesh) in July 2005 a nine-story building that housed the Spectrum Sweater and Shahriar Fabrics factories collapsed, killing 74 workers and injuring more than 100 (Maquila Network 2005). In 2004, 188 Thai workers lost their lives in Kader factory in Thailand, when a fire broke out and they failed to escape as regular exits were locked or blocked (Senser 2004).
Exploitation of Women Workers in SEZs
Women dominate the workforce in EPZs in most developing countries. For instance in the Philippines the share of women workers in total EPZ employment was 74% in 1994 (Aggrawal 2007).In Bangladesh more than 95% of the workers in the garment industries in EPZs are women. In spite of the large numbers of female workers in SEZs, a few economists have argued that SEZs have done almost nothing to reduce the unemployment rate since most female workers now working in SEZs were previously not part of the labour force. On the other hand, other researchers have argued that employment opportunities for women in SEZs have empowered them and increased their recognition in and outside their households. But the fact remains that the high incidence of abuse of female workers is a matter of grave concern in SEZs. Majority of female workers are young women between 16–25 years of age (Aggrawal 2007). Many researches point out the fact that women are paid less than men for similar jobs and are subjected to gender violence in these zones. Majority of women are engaged in low-paying, low-productive jobs with insecure contracts and without any social/health/maternal benefits. Over time, as the SEZs evolve with higher technological inputs, female workers are simply replaced by more skilled male workers. Country experiences illustrate the exploitation of women in SEZs. In China female workers are often dismissed by the age of 25 and they are forced to return to their villages since migrants cannot live in SEZ districts (TUAC 1997). In Malaysia the government rescinded the legislation that restricted women to work in SEZs in night shifts.
... All these confirm that SEZs are not the tool for women empowerment in poor Asian countries as claimed by some. SEZs do not guarantee long term employment for women and hence contribute very little in their sustained empowerment. On the contrary these enclaves are zones of special exploitation of female workers. ...
SEZs Shaping Access to Land, Livelihoods and Food Security
Land and SEZs are inseparable issues. The expansion of SEZs demand large amounts of land and as states assume the responsibility of providing infrastructure (except in a few cases), governments frequently resort to the Compulsory Acquisition of Land (CAL) which has intensified over the years. The large scale acquisitions of land entailed by SEZ development have had serious consequences on the livelihoods and food security of weaker and vulnerable communities in Asia. ...
...
Compulsory Acquisition of Land (CAL) or SEZs and Land Conversion
... In some countries the government even amended existing laws to make it easier to acquire land for big investments. The CAL has resulted in the eviction of hundreds and thousands of peasants and endangered their food security, thereby worsening the poverty and hunger scenario in the continent. The proactive role of the state in providing land to big investors at the cost of land reform unmasks the political priorities of the states — which clearly favour expansion of SEZs and ignores the need to address the structural causes of poverty for meaningful and sustainable development.
Chengri (2004) and Gopalkrishnan (2007) explained how land policy in China was changed to pave the way for SEZs. Efforts started as early as the 1980s to develop the legal basis for land use rights of private investors and to develop the lease system for the promotion of SEZs. ... National as well as provincial and local governments introduced several zones and offered lands as incentive to the investors to attract investments. By 1992 around 6,000 to 8,700 zones existed with an area of 15,000 square kilometres (Goplakrishnan 2007).The worst hit was the agricultural belt as the rapid conversion of land affected the landholdings of peasants. As of March 2005 (Qinglian 2007) more than 40 million Chinese farmers have been displaced from their land since the beginning of market-oriented economic reforms. ...
As a result, nearly all displaced farmers have been thrown into poverty. In some cases the local government paid little compensation to the persons affected by the land acquisition and afterwards sold that land at a much higher price.
Qinglian gave the example of the government of Conghua City in Guangdong Province. In this SEZ province, the government forcibly evicted merchants from their shops in the town’s Xiaohai District, paying proprietors 2,500yuan per square meter in compensation. Afterwards the government decided to sell the land for 13,000 yuan per square meter upon completion of the Xiaohai development zone project (Qinglian 007)...
Loss of Land and Livelihoods due to SEZs in India
India on the other hand has used the Land Acquisition ct (LAA) 1894, for CAL. This is a colonial act which does not require adequate consultation and participation of stakeholders in the acquisition. Different state governments in India have proposed to amend the land ceiling acts so as to allow large scale accumulation of land for SEZs, which currently is restricted by the land reform laws. ... Also important is the fact that often these CALs in India are associated with gross violations of human rights. Affected peasants seldom get adequate and fair compensation as well as economic and cultural rehabilitation. The process of CAL is generally marked with violence and involvement of armed forces. Women face severe gender violence in this process. ...Another big concern is the development of speculative land markets in SEZs in India. The SEZ Act states that as much as 75% of the area under an SEZ could be used for non-industrial purpose. This option will give rise to real estate business in SEZs which by no means would strengthen the local economy. On the contrary ,this is likely to introduce large scale real estate speculation. ...
Land Conversion for Big Projects in Other Countries
In Indonesia the government is ignoring customary rights of communities and acquiring land for big investors. AGRA (2006) noted that the Indonesian government acquired land for construction of, among others, large factories, luxury housing development, hotels, etc. Following the advice of the World Bank and the International Monetary Fund (IMF), the Indonesian government has launched the Land Administration Project which introduced Government Regulation No.24/1997 concerning Land Registration. This replaced the previous Government Regulation No.10/1961 which was the foundation stone for implementing land reform. ...
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Emerging People’s Resistance to SEZs
As SEZs expand into new regions, the victims of this offensive are also mobilising themselves to fight back. Civil society both at the national and international levels is becoming increasingly aware of SEZs and their impacts on the livelihoods of the poor in developing nations. The resistance to SEZs is advancing on two fronts: firstly, workers in SEZs are raising their voices against unjust and exploitative working condition and contracts; and secondly, peasants and other rural actors who are suffering due to the loss of their livelihoods. Besides workers and peasants, some concerned economists and many social activists have also raised their voices against SEZ policy and have unmasked the myth of economic growth fostered by SEZs...
Guangdong, the biggest SEZ province is also the worst affected district in terms of the ill impacts of SEZs. Social instability has reached alarming proportions in this province. SEZs like Shenzhen in Guangdong, which is known as the miracle in China, is plagued with a host of problems. Shenzhen is suffering from environmental pollution, increasing crime and labour problems arising from severe exploitation of migrant workers in the SEZ (Goswami 2007). SEZs in China are doing ‘miracles’ for a few, at the cost of irrevocable damage to the environment and the economy of the country. SEZs are making profits by exploiting workers. Violations of labour rights and the right to food and livelihood security of the weaker sections of the population are rampant in the country. People’s resistance against SEZs in China is intensifying. The profits accruing to the state from SEZs are spent on controlling pollution and pacifying mass unrest. SEZs will have to face the strongest challenge not from the global market but from this emerging people’s resistance in the country.
Farmers Fiercely Protesting Against SEZs in India
In India spontaneous resistance against the expansion of SEZs is also taking place, mainly concerning the issue of CAL and human rights violations. Farmers in different corners of India are raising their voices against the common concern, i.e. loss of land and loss of livelihoods due to SEZ expansion. Several civil society organisations and human rights groups have also come forward to express their solidarity toward the movements against SEZs. ...All over India several strikes and protest marches are being organized by farmers and other victims of SEZs. ...
Protest of Workers in SEZs Against Human Rights Violations
In Sri Lanka, Bangladesh, Vietnam and the Philippines, workers in SEZs protest against exploitation through demonstrations and strikes. ...SEZ workers in Noida India demanded the implementation of labour laws and staged demonstrations. Protests of workers against exploitation in SEZs multiplied in various Asian countries indicating the strong resentment of workers against these economic zones. With virtually no labour rules applicable in SEZs and with minimal state intervention in defence of workers in these enclaves, workers’ grievances were left unheard in the past. However, in time, braving the risk of losing jobs, workers in SEZs are now unionising to fight injustice and to claim their rights. As a consequence of protests, many workers have lost their jobs and have suffered harassment, even imprisonment. However, repressive measures taken by the SEZ owners have only strengthened the struggle of the workers. ...
Challenging SEZ policies with the People’s Alternative
SEZ: the Dead End
The emergence of SEZs in Asia and the large scale negative impact of these economic zones on the livelihoods of the poor leads us once again to question the existing model of development based on neoliberal principles. In most countries, development is still defined solely in terms of ‘economic growth’ rather than by the all-round prosperity of the common people.:”
Development” achieved through the expansion of SEZs has therefore remained restricted in certain pockets and among those who belong to privileged classes. Moreover, experiences in Asia and elsewhere confirm that the economic growth fostered by SEZs is not sustainable in the long run.
But the adverse impact of these zones on socio-economic and political environment has remained in all the host countries. These impacts include increasing socio-economic inequality in host countries; large scale violations of labour rights; gender discrimination and violence against women; the violation of the right to an adequate standard of living; and the denial of secure livelihoods for millions. At the national level the steady expansion of these zones has resulted in the disempowerment of the state by reducing its authority to define national priorities, and to ensure the well-being of its citizens, particularly the poor and marginalised. The SEZ, however, is merely one aspect of the neoliberal policy regime. Hence any critical analysis of SEZs is likewise bound to denounce the global invasion of neoliberal policies.
Confronting SEZs with Human Rights
The SEZ-centric model of development is devoid of human rights principles. ...SEZs are often exempted from respecting human rights standards in the host country. But it is the duty of a nation-state, however weak it may be, to ensure that human rights standards are implemented in EZs. If the government of the host country fails to take appropriate measures against any TNC destroying human rights standards, then the nation-state where this TNC originated from has obligations towards the people of the host countries to respect, protect and fulfill human rights by taking steps against the concerned TNC. ...In this context it is important to reaffirm the human rights obligations of nation-states related to the right to food and livelihood, and to demand for accountability of nation-states, thereby contradicting the neoliberal agenda of weakening state-intervention and strengthening open market policies.
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