Benefit–Cost Appraisals of Export Processing Zones: A Survey of the Literature

Abstract

This article surveys research on the performance of Export Processing Zones (EPZs) using a benefit–cost analytical framework. Results suggest that zones in South Korea, Malaysia, Sri Lanka, China and Indonesia are economically efficient and generate returns well above estimated opportunity costs. On the other hand, the heavy infrastructure costs involved in setting up the zone in the Philippines resulted in a negative net present value. The zones have been an important source of employment in all cases and have promoted local entrepreneurs in some. However, as industrial development proceeds, the gap between the market and opportunity costs of labour narrows and the interest in EPZs tends to disappear. It may hold only if the zones generate private profit to domestic shareholders.