CENTER FOR INTERNATIONAL BUSINESS EDUCATION AND RESEARCH
(GT CIBER)
WORKING PAPER SERIES
95003

The Role of Export Processing Zone for Host Countries and Multinationals : A Mutually Beneficial Relationship?

by John R. McIntyre, Rajneesh Narula & Len J. Trevino

Abstract

This paper examines export processing zones (EPZs) and the reasons behind their limited success in the development of host countries' economies especially in terms of employment, technology transfer and foreign earnings. It is posited that :1) the extent to which host governments derive net benefits from EPZs is a function of the location-specific advantages they provide; net benefits to the host country increase as location-specific-advantages increase;2)net benefits tend to decrease at any given level of location-specific-advantages as the number of countries offering equivalent advantages increase;3) host countries' net benefits are generally high when EPZ oeprations are not insulated from the domestic economy, but this policy can be risky; and 4)there is little difference between EPZ-related foreign direct investment (FDI) and more traditonal forms of FDI when the EPZ is not insulated from the domestic economy.