Export promotion via industrial enclaves: The Philippines’ Bataan export processing zone

Abstract

The economic merits of export processing zones as a form of export promotion are studied in this article by focusing upon a large, long‐established zone in the Philippines. It is shown that although the absence of trade duties and other regulations led the zone to generate significant benefits for the Philippines, through employment and foreign exchange earnings, this was outweighed by the heavy public infrastructure investment necessitated by the choice of location. Moreover, although firms occupying the zone are predominantly foreign, over 90 per cent of their investment was financed by government‐guaranteed borrowings at controlled interest rates from within the Philippines.