Saturday, November 19, 2005

Is Free Trade Zone (FTZ) good enough?

In this modern world, the gap between the rich and poor country are becoming wider through the years. One of the popular economy development policies is the development of free trade zone, which is believed to boost the economy and increase demand of workers. Although it is good theoretically, practical evidence is required.

The first argument is that the free zone could stimulate the economy. Through special privileges, free zone offers a lower cost of production. For example, there is no tax for raw products; this means the production budget can be reduced. Moreover, interesting policies could attract new investors. It brings more investment to the country, which eventually boost more economy activity.

Secondly, the new investment in the zone will open new employment demand. Following the growth of new investment and companies, new workers are needed. In addition, qualified Indonesian people can get a job so the number of unemployment can be reduced.

Lastly, by opening free zone, there would be knowledge and skill transfer from the foreign company expertise to local workers. This agree with the main reason that forced the foreign company to enter the free zone - to cut the production cost - through low cost labor, less expert labor, and cheap locations.

On the other hand, there still economies and experts who do not agree with this new economy approach. One of the reason is the labor in developing countries are forced to work over time without an appropriate salary. Moreover, often they do not get good place to live.

In conclusion, the new economic development approach, free zone, does seem accurate to stimulate the economy activity. It boosts each sector; the activity, the investment, the salary, and it demand many workers. But, with some critics that is implied, the concept still need some improvement, not only by the economies, but also by the demographer, government, companies, and engineers.

*****For your information, there are many FTZ such as Batam (Indonesia), Tanjung Pelepas (Malaysia), Subic (Philipines), Shenzhen, Futian, Yantian etc (China), and many more

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