Export Processing Zones

This note focuses on export processing zones as potential, useful tools in export promotion, and, outlines the general features, and objectives of these zones, highlighting country experiences, and offering policy recommendations for establishing them. It identifies three main goals of export processing zones: provision of foreign exchange earnings; job creation, and income generation; and, attracts foreign direct investments, which enhances knowledge, and technology transfer. While common features are generally shared, export zones are differentiated by public, or private ownership, or management, and, by dependent qualities of management, facilities, and services they provide, namely, defined as "high-end" or "low-end". Recommendations suggest that export processing zones is one of a number of tools, used to off-set anti-export bias, in distorted economies. But just like other export promotion tools, export zones are a second-best policy choice. Zones can play a dynamic role in the development of a country, provided they are adequately managed, and integrated within national reform, and liberalization programs. However, zones should not be established in liberal, low-protection economies, due to the potential of lower than expected foreign direct investments, as a result of unattractive laws, and regulations, and because they may distort trade instruments, introducing discretionary elements in policy framework.