Annotations

 

Davies, Martyn J.  2008.  “Special Economic Zones: China’s Developmental Model Comes to Africa.”  China Into Africa: Trade, Aide and Influence. Washington, D.C.: Brookings Institution Press.

Martyn Davies’ chapter offers both the history of SEZs globally and the history of SEZs in Africa.  This distinction illustrates the model disbursement of the original SEZ agenda. He states that the goal of the original SEZs were not simply to attract FDI, but to attract FDI to a controlled free market environment.  In other words, the proliferation of SEZs is not simply the promotion of FDI as a means to development, as many believe, but the promotion of neoliberal policy as a means to “growth.”

Another significant point that appears unique to Davies’ research is that a mere 0.8% of the Chinese population that is affected by the SEZs’ “limited role in the country’s economic development” (Davies, p.139).  His point is supported by the change in GDP from 1980 to 1987. I find this interesting because he is the first author I’ve read to downplay the impact of SEZs in the Pearl River Delta.

Finally, Davies states that the strategies adopted by the Chinese to develop SEZ’s in Africa were “learned from the European colonists who obtained free trade concessions in China in the 19^th century” (Davies, p.152). I find this comment to be intriguingly antagonistic, and apropos.  This piece of Brookings research identifies the overarching Chinese economic scheme. China has strategically placed their African SEZs firmly in the extractive industries. The goal is to create parallel markets to those with prices set in the US and the UK. Contextualizing the Chinese agenda makes it easier to draw parallels to colonization. However, it is important to realize that these parallels are not an indication that history repeats itself.  It is not the role of this research to judge the economic strategy of any country beyond the use of SEZ policy to stimulate economic development.

Farole, Thomas.  2011.  Special Economic Zones in Africa: Comparing Performance and Learning from Global Experiences.  Washington, D.C.: The World Bank.

Farole addresses the debate over SEZs as a policy instrument and the limitations of existing research (consistent with or influenced by Moran). Most compelling to me, however, are observations that identify inconsistencies between research and policy. For example, “the traditional sources of competitiveness for zones—low wages, trade preferences, and fiscal incentives—are not found to be correlated with SEZ outcomes” (!) (Farole, p.4).  He goes on to suggest that open trade incentives are less significant to success than policy that directly promotes greater productivity. As I understand it, the sacrifices customarily made by host governments to attract FDI may not be what ultimately leads to growth. This is a very interesting point to explore in light of appropriate policy choices.

Stating the indicators he is used in his assessment, Farole’s factors of success include location, policy, planning, legal framework, infrastructure, and management. Additionally, he adds the element of good fortune to offer the right program at the right time (p.9).  He also articulates a point that has been alluded to in other works. “One of the main differences between zone programs that have been successful and sustainable and those that have either failed to take off or have become stagnant enclaves is the extent to which they have been integrated in the broader economic policy framework of the country” (Farole, p.9).  SEZs strive for catalytic impact.  They propose to be engines of change, but few are.  Farole clearly states that it is not enough for a zone to be a profitable economic node, it must stimulate the local economy, also known as spillover.

An SEZ program must be strategically integrated to the state’s economic plan for maximum benefit. Farole alludes to the necessity of national policy linking FDI to domestic enterprise, provides evidence to support this very element of my argument.

 

Moran, Theodore H.  2011. Foreign Direct Investment and Development.  Washington, D.C.: Peterson Institute for International Economics.

Moran has extensively researched the impact of FDI on host economies in the developing world.  Finding that the first generation of research on the subject is flawed in its aggregate approach, He states that a new wave of research should have a profound effect on policymakers. Moran argues that outcomes are largely contingent upon the policies of the host country and maintains that two important considerations are the type of FDI attracted and the form of governance that will dictate the business environment. Concluding that FDI is largely beneficial to host countries, he also warns that FDI creates an environment that is highly susceptible to corruption.  This means that policy (including anti-corruption policy)—and enforcement of that policy—must be directly related to any argument about the efficacy of FDI on development.

This work offers important data related to the success of existing SEZ policy.  I believe that reformed SEZ policy will get developing states closer to their goals.  Moran’s research helps me to identify the potential policy reforms that may bring states closer to more “dynamic” development goals.

 

Palit, Amitendu and Subhomoy Bhattacharjee.  2008.  Special Economic Zones in India: Myths and Realities.  Delhi, India: Anthem Press.

A rising issue in several Indian cities is the relocation of local business to SEZs. Incentivized by tax holidays of 10 to 15 years, businesses embedded in urban neighborhoods are now moving to remote economic zones (p.48)… taking their rupees with them to then spend at food court MNCs such as Costa Rica coffee and McDonald’s. The author acknowledges the data available is insufficient to support this claim but states that anecdotal evidence indicates truth.

I hope to collect more substantial data on this topic to argue the need for policy that supports small and medium domestic enterprise as well. As it exists now, local businesses are reinventing themselves to move to economics zones. This policy package may increase exports but prevents a more robust growth.

 

Sklair, Leslie.  1991. “Problems of Socialist Development: the Significance of Shenzhen Special Economic Zone for China Open-Door Development Strategy.”  International Journal of Urban and Regional Research.  Vol. 15, Issue 2, p. 197–215.

Sklair addresses human rights issues related to the development of Shenzhen and China’s other economic zones.  Special economic zones offered an experiment with a new labor system in competitive markets. In Shenzhen, a contract labor system was introduced to comply with the demands of foreign corporate managers. Most full-time employees maintained a nonpermanent nonresident status. By the end of the 1980s, approximately 75% of full-time workers in Shenzhen were contract workers, and half of Shenzhen’s 1 million residents had temporary status (p.204). Temporary employment denies many workers their rights.  Nonresident status also denies these workers rights of citizenship.  In general there is great disharmony in labor relations in Shenzhen.

This information is relevant to the argument that SEZ policy can determine positive economic growth (success?) within a larger contextualized plan.  This policy package cannot, however, be used as a model in another context with the expectation of growth.  The contract labor system combined with the non-resident permit system for inter-province “migrant” workers successfully eliminated the rights of workers.  This was essential for China to gain a comparative advantage in labor, and strategically catapult the developing nation into the realm of world leaders in export manufacturing.  This success is the result of a clear strategy in China’s state-led growth scheme.

The trade-off of workers rights is apparent in the development of Shenzhen.  Can a sincere interest in reform result in policy package aimed to restore the rights and dignity of workers or are they written off as externalities along with environmental degradation?

 

Wignaraja, Ganeshan.  2011.  Economic Reforms, Regionalism, and Exports: Comparing China and India. Honolulu, Hawaii: The East-West Center. 

Economic reform is defined as: open foreign trade and investment, the removal of restrictions on private sector activities, and the introduction of new markets within a centrally planned economy (p.1).  The focus of this paper is on the first criteria of reform, open trade and investment.  Economic growth in both China and India have been largely dependent upon export strategies that started in the late 1970s (p.IX). This period marks the transition from an inward to an outward-oriented economic approach for both countries, igniting a period of rapid growth that continues today. Recently, both countries have added foreign investing to their export strategies as part of a larger economic reform policy.  Wignaraja’s research appraises these reforms while comparing the two nations. China has excelled in manufacturing, challenging the world’s largest exporters.  India, on the other hand, has gained a leadership role in the service sector.  An open door policy towards export oriented FDI combined with cheap labor played a large role in the economic growth in both countries have experienced.  The author says “China has become Asia’s cost-effective magnet for the assembly of fine goods” and is now faced with rising real wages.  Both countries are challenged with a way to sustain their positions as the low-cost manufacturing and service options.

Wignaraja’s comparative analysis is important to my research as he offers data on two of the three regions I am currently exploring.  His data contributes to my understanding of 1^st generation SEZs and provides examples of projects deemed successful.

 

The Worldwatch Institute.  2008.  State of the World: Innovations for a Sustainable Economy.  New York, NY: Norton.

Well-documented is the fact that global poverty has risen with global economic output. As wealth has grown more than 18 fold in the past century, poverty has also grown. 40% of the world’s population lives with chronic hunger without adequate sanitation.  The economic growth surge in China (and India) has reduced global income inequality producing a rising middle class.  This was at the cost of the environment. China’s carbon dioxide emissions have surpassed those of the United States. “China’s course of development could not spread to Africa, South Asia, and other impoverished regions without catastrophic environmental ramifications” (p.8).  This point is relevant to my argument about model disbursement.  One-size-fits-all policy packages may be globally damaging in irreparable ways.  (This data only speaks to environmental concerns, social and economic consequences will also be addressed in my research.)  I must be aware of unintended finger pointing in this argument, as my focus is a call for contextualized policy that addresses the needs of a specific region balanced against the needs of a globalized world.

Our planet has a carrying capacity. Growth beyond that point will no longer benefit but harm society. This point introduces a discussion on environmental economics suggesting not just slow growth but limits to growth, explicitly stating that the global economy should be constrained (p.9).  This point demonstrates that goals other than increasing GDP exist and have merit.  Referencing the arguments of Herman Daly and other slow growth economists addresses distinctions between short-term and long-term policy framework.

 

Kane, Matthew.  2011.  “ChinaAfrica.”  World Policy Journal. Vol. 28 No1. P.8-9

“If China wants to dominate the world, it’s not our business to stop them. Who are we to close the door to them when we don’t have water or electricity?”

– Victor Kasango, former DRC Deputy Minister of Mines

“Whatever you can say about the Chinese, they are not missionaries. They have business interests, they have their own national interests, especially when it comes to resources.”

 – Morgan Tsvangirai, Zimbabwean Prime Minister