Special Economic Zones in East Asia: Form, Purpose and Development

Walsh, John, “Special Economic Zones in East Asia: Form, Purpose and Development,” paper presented at the International Symposium on Global Public Policy and Administration (Yonsei University, Seoul: 24th-26th, August, 2014).

Abstract:

The special economic zone (SEZ) has become an absolutely central central symbol and representation of the Factory Asia paradigm: low labour-cost competitiveness in export-oriented, import-substituting manufacturing in geographical areas bound in space and time where the interests of capital are placed above those of labour. The success of this approach in promoting rapid economic development is attested to by the enormous spread of SEZs to every country in the East Asia region. Using them in this way is very logical for governments eager for the benefits of rapid development. However, that desire for growth is not always matched by a desire for democracy and SEZs have been used to funnel resources towards important international and domestic investors while allowing just enough to trickle down to prevent widespread social disorder, at least for some period of time. Until the Lewisian point is reached, wages can be repressed through drawing more workers from the agricultural sector because no matter how exploitative or alienating workplace conditions within SEZ factories might be, jobs within them remain popular because they offer the ability to purchase consumer goods. After the Lewisian point is reached, greater use of force is usually used through suppression of freedom of speech, freedom of association and collective bargaining, as well as the use of violence. Eventually, the limits of the Factory Asia growth model will be reached as part of the Middle Income Trap that means that the methods by which a state can raise itself from low income to middle income status are not the same as the methods by which it can move from middle income to high income status. SEZs can play an important economic role in moving to the high income stage through becoming centres of connectivity that link together the places of production with the places of consumption. As Alfred Marshall pointed out in the nineteenth century, the presence of complementary firms in close proximity with each other provides numerous forms of innovation and productivity improvements. These areas then join international investment with local small and medium-sized enterprises and can transfer technology to the benefit of domestic companies, institutions and consumers. However, the theoretical benefits that SEZs might bring are often not realized in practice owing to factors such as poor governance and mismatch of objectives. This paper examines the different types and forms of SEZs and looks at how their role changes through time and through the development trajectory followed by most East Asian states.

Keywords: East Asia; economic development; labour; Middle Income Trap; special economic zones.

The symposium was held at Yonsei University in Seoul, which I had not visited before. It is very pleasant and the facilities were all good. This is the Sangnam Institute of Management, which has some guest rooms for purposes such as this.

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The whole campus is picturesque, with plenty of public space and parks, trees and so forth (there is also a large part of the campus that is a building site but I will not dwell on that). 

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There is also the typical Seoul/Korea phenomenon of everything being up or down a hill, which takes a bit of effort to walk anywhere until one acclimatizes. 

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