SUNS  4291 Wednesday 30 September 1998



LABOUR: DUTY-FREE ZONES A 'PARADISE LOST', SAYS ILO

Geneva, Sep 28 (IPS) - Duty-free zones attract investment and generate jobs, but they also constitute enclaves of low wages and exploitative labour conditions, the International Labour Organisation (ILO) concluded after 20 years of research into the phenomenon.

An ILO study on the question was drawn up for a gathering of representatives of governments, workers and employers from countries where industrial duty-free zones operate, meeting Monday through Friday at ILO headquarters in Geneva.

In the past few decades, developing countries have resorted to setting up duty-free industrial zones, fiscal paradises dedicated to the assembly of export products. The ILO concedes that the roughly 850 such areas operating in the world today with 27 million workers - 90 percent women - constitute an enormous potential for economic development and the creation of jobs.

But the actual results should be closely analyzed by development strategists who see duty-free zones as a fast way for developing countries to acquire the capacity and resources necessary for competing in the global economy, the report stresses.

Many countries saw duty-free zones as a way to stimulate economic growth and development, but few have been able to forge the links necessary for achieving a broader economic impact, according to the ILO.

The activities of such enclaves are largely limited to assembling products based on imported components, that require few local materials, goods and services, the report points out.

In Mexico, 'maquiladoras' or export processing zones provide some 900,000 jobs today. But after 30 years of operations, the volume of national inputs used by the factories still stands at a mere two
percent of the total.

Investment in duty-free zones tends to produce "industrial monoculture," with a number of companies concentrated in the same branch of activity.

Mexico's maquiladoras are grouped around border cities like Tijuana, where a number of Japanese and South Korean firms have set up shop to break into the U.S. market. The area is the top producer of TV sets in the Americas. Production of car-parts and automobile assembly plants
are concentrated in Ciudad Juarez, another city on the U.S. border. Factories in Matamoros specialise in electronics parts. The 3,200 factories of Mexico's maquiladora sector account for 30
percent of the country's exports, and sell around five billion dollars worth of goods to the United States.

Bangladesh's foreign assembly plants, most of which are concentrated in the apparel industry, sold some 3.4 billion dollars worth of products in the 1996-1997 financial year, equivalent to 70 percent of the country's total exports.

Fifty percent of the goods assembled in Bangladesh's duty-free zones are exported to the United States, and 40 percent to the European Union.

Another characteristic that concerns the authors of the study is the fact that the bulk of investment frequently comes from a single country or subregion, while the goods produced tend to go to a single market.

In China's special economic zones, cities in and of themselves, 54 percent of investment comes from Hong Kong, 8.3 percent from Japan, 8.2 percent from Taiwan and 7.9 percent from the United States.

Some 18 million people are employed by companies financed by foreign capital in China, with many million more working in Chinese firms operating in the protected areas.

The study warns that globalisation is fuelling the construction of international chains of production that use the duty-free industrial zones as platforms toward exportation, a phenomenon that provides
countries with major opportunities for attracting investment and generating jobs.

But the construction of such chains remains monopolised by companies from the most developed economies, it adds.

In consequence, warns the ILO, countries with duty-free zones could find themselves isolated due to unexpected developments in investment and trade, if they fail to diversify investment and exports.

Many duty-free industrial zones fall short in compliance with international labour norms and fail to develop a solid system of labour relations, the study adds.

Thus factors like high job turnover, absenteeism, stress and fatigue, low levels of productivity, excessive waste of materials and worker unrest are often observed in the zones.

The study urges that special attention be given to questions related to female workers, not only because they form a majority of workers in the duty-free zones, but also because living and working conditions have a different impact on them than on men.

In spite of their wage-paying jobs, which often make them the family's sole or main source of economic support, women are not usually relieved of their domestic burdens. Many have to get up early in order to leave everything ready at home before setting out for the factory. And after
a 10 or 12-hour workday, they come home to their domestic duties.