The net contribution of the Mauritian export processing zone using benefit-cost analysis
AbstractAn EPZ is basically no more than a device whereby imports, to be used in the production of exports, can be acquired by manufacturers on a bonded duty-free basis. They are literally industrial zones with special incentives to attract foreign investors in which imported materials undergo some degree of processing before being exported again. The logic behind these zones was the creation of an area in which domestic policies do not hold and in which, therefore, a government could implement policies designed to enable individual firms to invest profitably on the basis of a country's comparative advantage. However, although there is significant literature on the impact of EPZs on host countries, nevertheless, the evidence has mainly been concerned with their benefits and costs and has stopped short of formal benefit-cost analysis. In essence, what the empirical studies have lacked, including those done on the Mauritius Export Processing Zone (MEPZ), has been an analytical framework within which the benefits and costs of EPZs can be identified conceptually and quantified empirically. In this respect, the objective of the current paper is to formally attempt to calculate the net contribution of the MEPZ using a modified version of the enclave model put forward by Warr (1988). The results show that although Mauritius has been able to attain its objective of reducing employment and raising foreign exchange through the creation of the EPZ, yet overall the EPZ has cost more to the economy than the benefits it has conferred to the economy. This is principally because of the incentives that were given to the producers working in the EPZ sector. The costs of these incentives were higher than the overall returns obtained from the sector. The two variables that negatively contributed to the sector were domestic borrowings and electricity usage. Copyright © 2008 John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.
Volume (Year): 21 (2009)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www3.interscience.wiley.com/journal/5102/home
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Warr, Peter G, 1989. "Export Processing Zones: The Economics of Enclave Manufacturing," World Bank Research Observer, World Bank Group, vol. 4(1), pages 65-88, January.
- Hamada, Koichi, 1974. "An economic analysis of the duty-free zone," Journal of International Economics, Elsevier, vol. 4(3), pages 225-241, August.
- Dean Spinanger, 1984. "Objectives and impact of economic activity zones — Some evidence from Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 120(1), pages 64-89, March.
- repec:fth:adelai:89-10 is not listed on IDEAS
- Eliot Brouthers, Lance & McCray, John P. & Wilkinson, Timothy J., 1999. "Maquiladoras: Entrepreneurial experimentation to global competitiveness," Business Horizons, Elsevier, vol. 42(2), pages 37-44.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.