Tax-free lure for foreign factories draws in technology and peasants

P. Ti Lin's days on an electronic-parts assembly line in Taiwan are a long hoe from her family's rural rice paddies. After six years as a worker in Asia's first "export processing zone," she has moved up to become a supervisor (rare for Taiwanese women), earning an above-average income --$3,000 (US) a year. The 22-year-old unmarried woman now wears blue jeans, takes cosmetic classes, and recently was crowned "disco queen" in her factory.

"I have a bright future," she says.

Export processing zones, or EPZs for short, have proven to be a seed of technological as well as social change in Taiwan. The rest of world sees only "Made in Taiwan" labels on such EPZ products as Sunbeam hairdryers or Marantz stereos. But Kaohsiung's special zone for foreign factories has helped bring the country into the industrial age.

For once-rural people like P. Ti Lin, "the traditional Chinese way of thinking that women should stay at home has been completely changed," says Kwei-Jeou Wang, deputy director general of the export processing zone.

Kaohsiung's EPZ, first formed in 1966 out of 173 reclaimed acres by the national government, has been successful in providing jobs for unemployed farm women, earning needed foreign exchange, and bringing new technology to this island nation.

Kaohsiung itself bustles with traffic, department stores, and thousands of Taiwanese riding bicycles and motorbikes to work at steel mills, the EPZ, or companies near the shipping port (now 10th largest in the world). As more rural folk flock to this polluted but job-filled city, housing complexes are shooting up like bamboo after a rainstorm.

The financial honey that attracts industry bees to the zone is a five-year tax "holiday" and free duty on imports and exports. The zone's government-built factory buildings are a standard four stories high, provided to investors on a convinient 10-year loan. Water, communications, banks, easy port access, and other infrastructure are guaranteed -- as well as no labor strikes.

Kaohsiung has become the model for dozens of other nations seeking to set up similar zones -- including the People's Republic of China, which has opened a 500-square-kilometer "economic special area" on the mainland at Shenzhen across from Hong Kong.

Taiwan combined two old ideas, a free trade zone with an industrial park, to create the export processing zone. In 1967 a UN report urged less developed nations to stop concentrating on protecting domestic industries to develop "import substitution" and to use their inexpensive labor to develop export-oriented industries.

Soon after, South Korea followed Taiwan's model, and Malaysia, Hong Kong, and Singapore were not far behind. In the last few years Thailand, Philippines, Indonesia, and Sri Lanka have jumped on the EPZ bandwagan --(Indonesia's attempt to develop Batam Island opposite Singapore has so far flopped.)

Kaohsiung's economic success led to creation of two other EPZs in Taiwan: another in the same city and one in the rural area of Taichung. With 80,000 workers in all and $300 million in investment, the zones accounted for $1.4 billion in exports last year -- nearly half the nation's balance of payments.

About 50 export processing zones now exist worldwide, mainly for their appeal as a possible "quick fix" in obtaining foreign exchange and technology without having new plants tied to the domestic economy and long-term national development plans. An estimated 350,000 workers in Asia now work in such zones, mainly filled with ever more complex electronic assembly plants.

"These countries really joined the 20th century fast with EPZs," says Dr. Mark Lester of the East-West Institute in Honolulu, who also is a World Bank consultant.

Although garment manufactures were first to take advantage of the cheap labor offered in Kaohsiung and other zones, the electronics industry dominates today. The number of wigmakers, for instance, went from 11 to 0 at Kaohsiung. Factory closings here are common -- 116 in the last 13 years -- as the industrial mix transforms into replacement factories with higher technology.

Since 1973 the zone's average wages have risen almost fourfold to about $1 an hour, forcing a gradual shift from labor-intensive to capital-intensive industries -- thus, increasing automation and worker training.

Besides creating jobs and foreign exchange, the zones develop a cadre of capable foremen and industrial workers (often trained abroad by the multinationals), who then are able to run domestic plants outside the zones. In 1969 only one-thirteenth of supplies used in the zone were from Taiwan suppliers , the rest being imported. Today, half of the factories' procurement comes from domestic companies. "This proves our quality of products is improving," says Mr. Wang.

Men generally are trained for the higher-skilled jobs. Over 4,000 have received special training for technical or managerial jobs. Although women are taking on more complex tasks on assembly lines, they are preferred for routine work because they "have less difficulty in maintaining discipline and have more patience to handle delicate jobs," contends Mr. Wang.

The zones proved to be magnets for farm girls, entering a new urban life with very little cultural tradition. In countries such as Malaysia, with over three-quarters of the 80,000 zone workers being women, "traditional muslims did not like the new values and lack of tradition. They find the young women too independent," says Dr. Lester.

"The girls occupy a new social niche and nobody quite knows what to do with them," he adds.

In Kaohsiung a special effort has been made to "protect those teen-agers who are far away from home and are likely to have their souls smeared by the bustling city life," says Mr. Wang. Dormitories have been set up and various classes offered in sewing and make-up to help create a "home" for the newly rootless women. Production competitions and beauty contests help organize the women's life around work. The Geneva-based International Union of Food and Allied Workers Associations questions whether the zones bring more social costs than economic gain.

Executives report high turnover rates of 8 to 15 percent, and stiff competition in salaries for young women workers.

"Its an awful lot to expect company loyalty from a 17-year-old girl fresh off the farm," says Ken Selzer, Far East operations manager for the US-based electronics firm, CTS Corporation. Only about 20 percent stay beyond five years before leaving. "Chinese society is not yet ready for wome n managers," he adds.