There are many more zones than previously thought, and the growth rate shows no signs of levelling off. There are at least 850 zones worldwide, and that is not counting all the new provincial and city-level zones in China, which may now total 1000 or more. Reasons for this growth are numerous, but it remains true that many developing countries see foreign investment in export industries as a positive factor in promoting industrialisation, creating jobs and boosting foreign exchange earnings and economic growth. Globalisation is also playing a part as zones can provide links in the global production chains that supply world markets.

The contribution of economic zones to employment creation is beyond doubt. In China foreign funded firms employ some 18 million people, and Mexico's maquiladoras employ one million. The downside to all this employment growth, however, is that the simple processing and assembly functions that characterise many zones require mostly low-skill and therefore low-wage workers. Zone-operating countries need to move up the production chain from assembly towards integrated manufacturing operations using local inputs. The creation of such backward and forward links, and the technology and skill transfer that should accompany them, remains one of the most elusive objectives of the zone strategy. In Mexico, for example, the amount of local content used in maquila production is still only two percent.

The impact of globalisation is forcing zone enterprises to produce more rapidly and cheaply than ever before and to continuously improve. This leads many enterprises to introduce new technology and to seek ways of enhancing labour productivity through financial incentives and training. This shift results in better wages and working conditions, and in the most advanced situations enterprises are using career path systems, self directed teams and profit sharing to ensure that they increase speed and quality while cutting costs. Zone enterprises are addressing some of the social problems that undermine productivity by providing transport and child care facilities, or helping workers find housing.

Many zones are now full of blue-chip investment using technology intensive production processes. Penang in Malaysia, for example, has 190,000 jobs in electronics plants making hard disk drives, microprocessors and other computer components, and the Philippines seems to be well on its way to recovering its status as the semiconductor producer of preference. In fact, many zones have become too expensive for the small garment factories which had such a reputation for bad working conditions, and the technological advances in semiconductor production have greatly improved working conditions in that industry. Thanks to pressure by NGOs and concerned consumers, the garment industry that does still operate in zones is increasingly bound by codes of conduct that set standards for working conditions.

Although very few countries formally bar trade unions from operating in zones, many still make it practically impossible for unions to organise and bargain collectively. Countries like the Dominican Republic and the Philippines have shown that it is possible to bring zones into the normal labour relations system with positive results, and trade unions are making headway in countries from Mexico to Malaysia. Many countries still have no formal system of labour-management relations, however, and this lack will continue to give rise to conflict and instability.

The position of women may well be the greatest of the challenges that zones and their managers need to tackle. Most zone workers are women but few policymakers commission gender audits so the position of women is too rarely taken into account in reforms of policy and practice

Auret Van Heerden
International Labour Office,
CH-1211 Geneva 22,
Switzerland
T: +41 (22) 799.61.56
F: +41 (22) 799.87.49