AP Syllabus focus:
‘Outside the core, new manufacturing zones—special economic zones, free-trade zones, and export-processing zones—have expanded industry.’
New manufacturing zones reshape global production by attracting investment, stimulating export-oriented growth, and reorganizing labor and industrial landscapes in regions outside the economic core.
Special Economic Zones (SEZs)
Special Economic Zones are geographically designated areas where governments offer regulatory and economic incentives to attract foreign and domestic investment. These zones play a pivotal role in shifting industrial activity toward the semiperiphery and periphery, reinforcing global patterns of economic restructuring.
Special Economic Zone (SEZ): A designated area within a country where economic regulations differ from the rest of the nation to encourage industrialization, trade, and investment.
SEZs emerged as part of broader development strategies in many newly industrializing countries seeking to integrate into global markets. By lowering the cost of doing business, they help governments transition from agriculture-based economies toward manufacturing and high-value exports.
Shenzhen’s Convention and Exhibition Center lies in the heart of the Shenzhen Special Economic Zone, illustrating the concentration of advanced infrastructure typical of SEZs. The image highlights dense commercial development and transport access designed to attract investment and export-oriented activity. The specific location details exceed syllabus requirements but provide a concrete real-world example of an SEZ’s transformative impact. Source.
Key Characteristics of SEZs
SEZs typically contain industry-supporting infrastructure and a policy environment shaped to reduce obstacles to production. They operate as targeted growth poles within national economies, drawing firms through a combination of incentives.
Tax incentives such as reduced corporate income taxes or tax holidays
Simplified customs procedures facilitating faster import of inputs and export of finished goods
Relaxed regulatory frameworks, including labor or environmental rules (varies by country)
Purpose-built infrastructure such as ports, power grids, and transport corridors
Foreign direct investment (FDI) incentives encouraging multinational corporate activity
These features create a spatially concentrated industrial landscape that can spur employment, technology transfer, and urbanization around the zones.
Free-Trade Zones (FTZs)
Free-trade zones represent another type of new manufacturing zone designed primarily to support international trade and logistics. Their regulatory environment centers on easing the movement of goods through customs without the typical tariffs or bureaucratic delays.
Free-Trade Zone (FTZ): A designated area where goods may be imported, stored, assembled, processed, or re-exported without customs duties until they enter the domestic market.
FTZs frequently develop around strategic transportation hubs, enabling firms to optimize global supply chains.
Export-Processing Zones (EPZs)
Export-processing zones are more narrowly focused industrial districts dedicated almost entirely to manufacturing goods for export. Most EPZs combine physical infrastructure with policies favoring labor-intensive, export-oriented production.
Export-Processing Zone (EPZ): A type of industrial area in which goods are manufactured primarily for export, often supported by incentives such as tax reductions, duty-free imports, and streamlined regulations.
EPZs typically appear in countries working to increase their participation in global value chains. They often specialize in light manufacturing such as textiles, electronics assembly, and consumer goods.
The Cavite Export Processing Zone shows the spatial concentration of factories, warehouses, and transport corridors that characterize EPZs. Its organized industrial blocks demonstrate how EPZs streamline export-oriented production. The specific Philippine context includes extra detail but offers a clear real-world illustration of an EPZ. Source.
This specialization reflects broader international patterns in which periphery and semiperiphery regions undertake labor-intensive manufacturing for markets in the core.
Characteristics and Purposes of EPZs
EPZs are designed to create competitive export environments that attract multinational firms and generate employment.
Duty-free access to imported raw materials and machinery
Export requirements, meaning firms in the zone must sell most output abroad
Lower production costs, often due to cheaper labor or simplified regulation
Purpose-built industrial parks with reliable utilities and transport links
By focusing heavily on exports, EPZs shape global manufacturing networks and reinforce spatial divisions of labor.
Spatial Significance of New Manufacturing Zones
New manufacturing zones contribute to major shifts in global economic geography. They illustrate how places outside the economic core leverage targeted policy strategies to integrate into global production. The emergence of SEZs, FTZs, and EPZs has helped redistribute manufacturing activity toward Asia, Latin America, and parts of Africa.
How These Zones Transform Regional Development
These zones generate spatial, social, and economic impacts that reflect broader development dynamics.
Industrial decentralization as factories move from high-cost core regions to competitive newer zones
Urban growth as zones attract workers, support services, and related industries
Export-led development driven by integration into global value chains
Infrastructure investment that raises the capacity of surrounding regions
New manufacturing zones exemplify how states respond to global economic pressures by creating attractive environments for production and trade.
Incentives, Labor, and Global Production Networks
The success of new manufacturing zones depends on their ability to fit into multinational firms’ strategies. Incentives combine with labor availability and infrastructure to position these zones as essential nodes within wider production networks.
Role in the International Division of Labor
SEZs, FTZs, and EPZs contribute to the international division of labor, where countries specialize according to factor advantages. Zones in the semiperiphery and periphery often focus on labor-intensive manufacturing, complementing high-skill production and corporate functions located in core economies.
Labor-intensive tasks concentrated in EPZs and SEZs
Logistics and trade functions centralized in FTZs
Capital- and knowledge-intensive activities remaining in core regions
This global pattern highlights how new manufacturing zones reshape the spatial organization of industry and facilitate deeper economic interdependence across regions.
FAQ
Countries select zone types based on their economic goals, labour conditions, and trade strategies.
SEZs suit governments aiming for broad economic transformation, as they combine industrial production with services and investment.
FTZs are preferred when the priority is to streamline logistics and re-exporting rather than expand manufacturing.
EPZs are typically adopted when a country seeks rapid industrial job creation and export earnings through labour-intensive manufacturing.
Zone development can stimulate rapid urban growth as industries attract workers and related services.
This often leads to the creation of new residential districts, retail centres, and transport infrastructure.
However, growth pressures can also strain public services, increase housing demand, and contribute to informal settlement expansion if planning does not keep pace.
Firms select zones that best match the requirements of each production stage.
• Labour-intensive assembly may be placed in EPZs where labour costs are lower.
• High-volume warehousing or repackaging may fit FTZs with port access.
• Higher-skill operations or service functions might be based in SEZs with diversified infrastructure.
This allows firms to minimise costs while improving supply-chain efficiency.
Zoning incentives may weaken environmental oversight, making monitoring more difficult.
Governments must balance investment attraction with sustainable practices, often requiring:
• Specialised environmental agencies within zones
• Industrial waste-management systems
• Compliance audits for foreign firms
Insufficient regulation can lead to pollution hotspots or resource pressures near zone boundaries.
Zones can strengthen a country’s role by improving export reliability and attracting long-term investment.
A strong EPZ or SEZ network may allow a state to negotiate better trade terms by demonstrating consistent production capacity.
However, heavy reliance on foreign firms reduces leverage, as countries risk losing investment to competitors offering lower costs or more favourable regulations.
Practice Questions
Question 1 (1–3 marks)
Explain one way in which a Special Economic Zone (SEZ) can encourage industrial development in a country.
Mark scheme:
1 mark for identifying a valid mechanism (e.g., offering tax incentives, relaxed regulations, improved infrastructure).
1 mark for explaining how this mechanism attracts firms or investment.
1 mark for linking this effect to industrial development (e.g., increased manufacturing output, job creation, export growth).
Question 2 (4–6 marks)
Assess the role of Export-Processing Zones (EPZs) in shaping the international division of labour.
Mark scheme:
1 mark for defining or accurately describing EPZs.
1–2 marks for explaining how EPZs encourage export-oriented, labour-intensive production in semiperipheral or peripheral regions.
1–2 marks for describing impacts on the international division of labour (e.g., movement of manufacturing from core regions, integration into global value chains).
1 mark for a valid evaluative point (e.g., limited skill development, dependency on foreign firms, unequal gains).
