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

By Clayton JonesStaff correspondent of The Christian Science Monitor / April 28, 1981

Kaohsiung, Taiwan

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.

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"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.