Are Enterprise Zones good for Sustainable Development?

Posted on 08/03/2016 Updated on 08/03/2016

Amanda Janoo points out in the magazine Making It, Number 19 , that development institutions, agencies, and consultants elaborating in developing countries encounter undoubtedly that the majorities of economist still push old economic policies such a freeing the market by trade liberalization, financial deregulation, privatization of state-owned enterprises, which repeatedly delivered disappointing social, economic and environmental outcomes. Maybe it works well in large emerging countries, but not in small developing or emerging nations competing with giants like China. One of the targets of national policies is to establish Enterprise Zones (EZ) to improve economic growth.  But not considering that the main subject is to generate jobs for the citizen to make them happy. Indeed, as Philip Monoghan and Amanda Janoo (in Making It, Number 19) argue many of the EZ worldwide enjoy fiscal and deregulatory incentives such as tax relief, relief in environmental- and social regulations rules which are in the opinion of the author of this posting contra-productive to CSR (Corporate Social Responsibility) and the TBL (Triple Bottom Line Approach). But the word “relief” is well-suited for political framing and PR (Public Relations), – best practices for politicians. The political preference of EZ to other types of economic instruments to achieve economic growth and to create jobs such as education, vocal training, community enterprise is not convincing to Philip Monaghan which points out the many failures of EZ. Additionally, there is the permanent threat of relocation of the FDI when the state or community doesn’t complement the sponsor and/investor: Developing, emerging as well as a developed country hold a weak position in particular to multinational corporations: Developing countries are more exposed to high risk with little prospects for the future. Christian Felber criticizes the neo-liberal approach to private investment and free trade with the motto “free trade, not aid”. He considers these Foreign Direct Investment not as “aid” but as “profit” that destroy the habitat of many people and puts them into poverty, in particular, farmers and craftsmen who can not compete against wealthy companies and don’t get any form of “relief” from the government. Felber and other experts fear the competition between EZ locations where the population gets blackmailed and politicians corrupted. Amanda Janoo suggest “… that there are three major obstacles that must be overcome in in order to make industrial policy in developing countries more successful: (1) Beware of bad economical advice  as stated above (2) beware of roaming capital (FDI) as discussed above and (3) beware of those  development agencies and private consultants who assert that they can offer their “best case” to increase the national economic growth and generate job opportunities. Perhaps the concept developed and implemented by those multilateral development agencies; transnational corporations or consultants work well in country A but not in country B.

Although Enterprise Zones (EZ)  have a long history such as Hong Kong, opponents of neo-liberal policies point out that there is little evidence the EZ contribute to the sustainable economic growth and create new long lasting employment. But there is evidence of best practices in Shenzhen, China, the Isle of Dogs/Canary Wharf. The author observed as consultants in project management (PM)for a Landscape Architect in Philadelphia/USA, – who was responsible for landscaping of Canary Wharf -,  the development of the Canary Wharf in London during 1985-1986: a  spectacular reverse of the city decay in London. The sponsor (financier) of this project was the Jewish Orthodox Family Reichmann, who fled persecution from Vienna/Austria and emigrated from Tangier/Morocco to Toronto/Canada, where the family became wealthy with real estate developments. The community of real estate brokers and other project developers worldwide were puzzled about the high-risk Paul Reichmann took and ultimately 1992 he triggered the largest business failure in Canadian history at the time. Paul Reichmann was an honest Capitalist not stopping his project because of presentiments by politicians and economists. The family Reichmann lost their fortune but the City of London gained economically, ecological and social tremendously and the further decay at the Isle of Dogs/Canary Wharf ended. (http://www.theglobeandmail.com/report-on-business/legendary-canadian-real-estate-developer-paul-reichmann-dies/article15084013/

Sources:

1. Philip Monaghan, Ecological Enterprise Zones: next generation industrial strategy or fool’s gold, Making It, Number 19, Industry for Development.
2. Three keys to successful industrial policy in developing countries, Making It, Number 19, Industry for Development.

Making It is the quarterly magazine issued by The United Nations Industrial Development Organisations (UNIDO). The publication can be viewed online and to participate in discussions: www.makingitmagazine.net

3. Christian Felber, 50 Vorschläge für eine gerechtere Welt, Gegen Konzernmacht und Kapitalismus.