---------- Forwarded message ----------
Date: Tue, 29 Sep 1998 10:18:41 -0700 (PDT)
From: "Camp. for Responsible Technology" <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED]
Subject: ILO on Export Processing Zones
Dear all, This press release was sent to us by our friends in London. It
is a copy of an ILO press release on the topic of Export Processing Zones.
I thought you would find it interesting.
In solidarity, Leslie Byster
__________________________________________________________________________
EMBARGO: 00.01 MONDAY 28 SEPTEMBER 1998
ILO 98/34
Export processing zones growing steadily
Providing a major source of job creation
Labour / productivity problems continue to mount
ILO to hold tripartite meeting of experts
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 850 today, according
to a new report 1 1/ Labour and social issues relating to export
processing zones. International Labour Office, Geneva, 1998. ISBN
92-2-111357-4. Price: £8.10. Available from ILO, London./ published by the
International Labour Office.
While acknowledging the huge economic and employment potential of EPZs, the
ILO warns that their rise to ubiquity on the global manufacturing scene
poses increasingly serious questions for the world’s 27 million strong EPZ
workforce (as much as 90 per cent of whom are female) and for the legions
of development strategists who see EPZ investment as a quick way for
developing countries to acquire the industrial skills and resources
necessary to compete in the global economy.
The report defines EPZs as “industrial zones with special incentives to
attract foreign investment in which imported materials undergo some degree
of processing before being exported again.” In some countries, these zones
are indistinguishable from organized, modern business complexes, but in
many others they take the form of ring-fenced enclaves of industrial
monoculture. No matter what form EPZs take, the free trade,
foreign-investment and export-driven ethos of the modern economy has
transformed them into “vehicles of globalization.”
The ILO analysis says that while EPZs are undoubtedly huge employment
generators, particularly for women in developing countries, too many of
them continue to be hampered by a reputation for low wages, poor working
conditions and underdeveloped labour-relations systems. In addition, the
ILO says that while the combination of direct manufacturing investment,
employment and technology transfer can provide an important boost up the
development ladder, the evidence thus far points to pervasive absence of
meaningful linkages between the EPZs and the domestic economies of most of
the host countries.
While many zone-operating countries had anticipated that the low-skilled
processing and assembling of imported parts would be a necessary, but
temporary first step up the ladder toward higher value- added
manufacturing, only a few (for example Malaysia, Mauritius and Singapore)
have actually managed to develop a wide range of domestic export industries
on the basis of EPZ investment.
ILO/98/34 – Page 104
These and other concerns relating to the employment and development
potential of EPZs will be examined at an International Tripartite Meeting
of Export Processing Zone-Operating Countries to be held at the ILO
headquarters in Geneva from 28 September to 2 October. Delegations
representing employers, workers and governments of 10 countries --
Bangladesh, Barbados, Costa Rica, China, Dominican Republic, Mauritius,
Mexico, Philippines, Sri Lanka, Tunisia are expected to participate.
Global Growth in EPZs
The ILO report, which was prepared for the meeting, says that the largest
numbers of zones are in North America (320) and Asia (225). But the
concentration of EPZs is rising in developing regions such as the Caribbean
(51), Central America (41), the Middle East (39) and the figures are likely
to increase throughout the world. The Philippines, for example, currently
has 35 EPZs operating but has approved plans for 83.
Currently, the United States and Mexico together are the most active EPZ
operators, with respectively 213 and 107, most of which are maquiladora
assembly plants clustered around border cities such as Tijuana, Ciudad
Juarez and Matamores. Maquila plants in these cities are linked to
production chains on the US side of the border. Originally established in
1965 as an emergency measure to combat unemployment, the maquila industry
today produces exports worth US$5 billion annually, more than 300 per cent
of total exports from Mexico. Manufacturing investment in the maquila
sector is expected to grow in the aftermath of the elimination of tariffs
resulting from the North American Free Trade Agreement, particularly in
such areas as clothing and textiles.
Other countries in the Western hemisphere are increasingly home to EPZs
established largely to provide manufactured goods for sale into the US
market: the Dominican Republic has 35 EPZs, Honduras 15 and Costa Rica 9.
The report cites Costa Rica as a case in point for how smaller, less
populous countries can profit from zone strategies. Since 1981, EPZs in
Costa Rica have created almost 49,000 jobs, mostly in the garment and
electronics sector, which have the added benefit of diversifying the
country’s exports away from traditional sectors such as bananas and coffee.
Nearly 30 per cent of all the manufacturing employment in Costa Rica is now
generated by enterprises operating in EPZs. The country’s unemployment
level is down to 5 per cent.
In Asia, China alone has 124 EPZs, many on the scale of full-sized urban
and industrial developments, complete with community infrastructure such as
education, transport and social services. Bangladesh, Pakistan and Sri Lanka
have extensive EPZ strategies. In Africa there are 47 EPZs, 14 of which are
in Kenya. In Mauritius, the entire territory has been zoned for export
processing and the judicious management of EPZs is probably the major
contributing factor to that country’s economic growth.
Distribution of EPZs by region, 1997
Region No. of zones Key countries
North America 320 United States – 213,
Mexico – 107
Central America 41 Honduras – 15,
Costa Rica – 9
Caribbean 51 Dominican Republic – 35
South America 41 Colombia – 11,
Brazil – 8
Europe 81 Bulgaria – 8,
Slovenia – 8
Middle East 39 Turkey – 11,
Jordan – 7
Asia 225 China – 124,
Philippines – 35,
Indonesia – 26
Africa 47 Kenya – 14,
Egypt – 6
Pacific 2 Australia – 1,
Fiji – 1
Total 845
Source: WEPZA and ILO.
Growth in the Asian Tiger economies was also fuelled by EPZs. 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 1970 to 743 in 1997 and the number of
employees rising from around 3,000 to nearly 200,000 during 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 work force in EPZs
worldwide is usually female in majority, but in certain activities, notably
textiles, garment manufacturing and electronics assembly, women can account
for 90 per cent or more of the workers.
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.” Mechanisms for improving labour standards are often
inadequate: “The classic model of labour regulation – with a “floor” or
framework of minimum labour standards and free trade unions and employers
coming together to negotiate binding agreements – is extremely rare in EPZs.”
According to Mr. 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 Law of the Zone versus the Law of the Land
The ILO report finds that in most but not all of the major EPZ operating
countries the national labour and industrial-relations legislations are
applicable in the zones. 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.” The authors note that the
policy dates back to the 1960s, a time when Singapore was desperately in
need of investment and at a very early stage of industrial development.
In Mauritius, one of the most successful of all EPZ operators, the zone
workers “are covered by the labour laws and labour relations system.”
However, a 1993 Industrial Expansion Act has provided enterprises with
greater flexibility, notably in the calculation of hours of work for
purposes of overtime, which has been persistently criticized by the labour
movement. 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.”
The Dominican Republic, like the Philippines went through a period of labour
unrest before instituting reforms which, the report says,“have gone a long
way towards enhancing respect for labour standards and improving labour
relations in the zones.” Today there are 14 trade unions operating in the
zones, although they are said to face considerable difficulties in
establishing collective agreements. 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.”
The ILO insists that only EPZs with high-quality human resources and stable
labour relations will be able to meet the high standards for speed, cost and
quality in the global economy. 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.
******************** Rory O'Neill, Editor Hazards Magazine Workers' Health
International Newsletter National Health and Safety Adviser, National Union
of Journalists PO Box 199, Sheffield S1 4YL, England Tel: +44 114 276 5695.
Fax: +44 114 276 7257
********************************************* PLEASE NOTE: Rory's new email
number for both Hazards and Workers' Health International Newsletter is:
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