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THE WORLD ECONOMIC PROCESSING ZONES ASSOCIATION
Celebrating 29 years of service to economic zones worldwide
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI), the source of most EPZ investment, remained flat at US$ 653 billion in 2003, down from a peak of US$1.4 trillion in 2000, according to UNCTAD. Economic uncertainty led to a decline in cross-border mergers, though foreign investment in the US tripled as its economy recovered strongly. This again makes the United States the largest recipient of FDI, surpassing China for the first time in two years. UNCTAD predicts that FDI will rebound strongly in 2004 as the world economy improves.
Services in FDI
Services play a large role in the world economy. In 2000 service accounted for 70% of the developed countries GDP, 58% of transition economics GDP, and 52% of developing countries GDP. Last year foreign direct investments in the service sector made up the majority (52%) of the flow in foreign direct investment (FDI).
In a recent document (TD/B/COM.2/EM.14/2), UNCTAD notes that access to efficient and high quality services is required for industrial firms to become productive and competitive. Developing countries have learned that competitive service industries are essential for initiating and accelerating the development process.
The UNCTAD document notes that while nearly half of the world’s production of goods is traded, over 90% of the services produced in the world are consumed locally. Many of the traded services are in the traditional trade related service sectors such as transportation, distribution, tourism, and financial services. These have long been a part of the international business landscape. But more recently there have been many indications that improvements in information handling and communications technologies are permitting the trading of non-traditional services such as investment research, software development, engineering, drafting, architecture, and legal research. Even the customer service function has become a tradable service as represented in the proliferation of offshore call centers.
Zone principles have been aiding countries in attracting service investment.
World Bank
At the World Economic Forum in Davos, Switzerland, David Dollar, the World Bank's Director of Development Policy, argues that globalization has had positive results for many countries such as China, India and Vietnam, where poverty rates have fallen. He also noted that integration with the world economy causes disruptions, and produces adjustment costs. "Globalization is a messy process that requires adjustment, and creates significant challenges and problems. But the evidence is pretty clear: integration (with the world economy) offers powerful net benefits for developing countries," he said. Dollar argues that countries can decide for themselves how they integrate with the world economy. "It is not simply an either-or choice. Countries can open up to trade and direct investment while managing other aspects of their relationship with the larger world economy."
He did not add, but it should be clear to any unbiased observer, that EPZs are one of the best policy choices available to open up to trade and direct investment, while managing the other aspects of the relationship! The EPZ minimizes the disruptions to the bulk of the country’s citizens and businesses, while at the same time building confidence in a country’s economic abilities. It is the only policy that allows a country to get the bulk of the benefits of trade without the disruptions and problems the World Bank recognizes so freely!
Turkey
The Turkish Free Zones have had another record year in 2003 with more than US$ 16.6 billion in total trade. This is US$1.6 billion higher than anticipated at the WEPZA Conference in October, and an increase of 50% from 2002! The zones bought US$2.1 billion from the domestic market, and employed more than 34,400 workers at the end of the year. 2004 looks to be an even better year.
Iran
The deputy head of the Qeshm Free-Trade Zone, Fereydoun Alimoradi, said Iran's government has approved the construction of a bridge linking the southern port of Bandar Abbas to the free-trade zone on the Persian Gulf island of Qeshm. The cost of building the 1,800-metre (1980 yards) bridge to the island is estimated at US$ 190 million.
News items shown here are selections from news reported in the Members Only WEPZA Newsletter.
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