Korea’s Policy Experiences and Implications for Brazil and Latin America by Prof. Sung-Hoon Park, Korea University Comments on Export Processing Zone (EPZ) Development

Table of Contents I.Introduction II.Korea’s Policy Experiences 1.Successful EPZs 2.Failed EPZs III.Determinants of Success of EPZ Development IV.Factors to be Considered by LAC Countries When Considering the EPZ Development 2

I. Introduction 1.Export Promotion Emerging as one of Most Effective Policy Instruments for National Development (1) Asia: Asian NIEs (1970s/1980s); China and Viet Nam (1990s/2000s) (2) Latin America: Chile (1980s); Mexico (1990s), etc. 2. Many Countries Adopting EPZs Successfully as a Part of Export Promotion Strategy (1) Taiwan: Kaoshiung (2) Korea: Masan and others (3) China: Shanghai and Shenzen 3

1.MASAN EFZ One of Most Successful EPZs 2.Evaluation (1) Establishment: 1970 (2) Location: Southern Part of Korea, near to Busan (3) Primary Investors: Japanese  European/US (4) Main Achievements i. Exports Growth ii. Employment iii. Industrial Linkage with Local companies iv. Technology Transfer v. Foreign Exchange Earnings II. Korea’s Policy Experiences: Successful EPZs

1.IRI (Now Iksan) EPZ Failed for Various Reasons 2.Reasons for Failure (1) Establishment: 1973 (2) Location: Southwestern Part of Korea (3) Failed Due to i. Inappropriate Location (  Popularity) ii. Insufficient Support from Central and Municipal Government (Infrastructure, Inconsistent Land Policy, etc.) iii. Attraction of FDI Firms Unsatisfactory iv. Critical Mass Not Secured v. Therefore, Forward and Backward Linkage Not Materialized II. Korea’s Policy Experiences: Failed EPZs

1.Successful EPZs Have in Common (1) Excellent Policy Supports (Incentives, Infrastructure, High-quality Human Resources, “Strong “Political” Leadership) (2) EPZ Development in Harmony with National Vision for Industrial Policy, FDI Attraction, Clustering, etc. (3) Development of Local Industries esp. Important - Forward and Backward Linkages - Technology Transfer and Skills Development - Foreign Exchange Earnings (4) Sequencing of Light Industries  Heavy and Chemical Industries Strategically Targeted 6 III. Determinants of Success of EPZ Development

1.Localizing Success Stories a Pre-requisite, by Considering Regional Characteristics (1) Resource Abundance (2) Tradition of Extended Import Substitution (3) Relatively High Level of Economic and Social Development (4) Long Experiences of Regional Cooperation and Integration (5) Strong Orientation to US and European Markets 7 IV. Factors to be Considered by LAC Countries in Developing EPZs

1. However, Common Features of Successful EPZs Providing Valuable Points of Reference for LAC Countries (1) Maximizing the Locational Advantages i. Do not Depend too Much on Regional Markets ii. Cultivate US and European Markets More Effectively (2) Exploiting Dynamic Comparative Advantage Fully i. Do not Rely too Much on Processing of Agriculture ii. Enfold Capabilities for Industrial Development in Manufacturing 8 IV. Factors to be Considered by LAC Countries in Developing EPZs

1. However, Common Features of Successful EPZs Providing Valuable Points of Reference for LAC Countries (3) More Effective Pursuit of Comprehensive Development Strategy i. FDI Attraction Strategy ii. Industrial Development Plans iii. Industrial Clustering and Synergies (4) Make Coalition with Strategic Partner Countries i. Korea: Japan  European and US Firms (Critical Mass) ii. China: HK, Germany  East Asian Countries 9 IV. Factors to be Considered by LAC Countries in Developing EPZs

A New Strategy on FDI Thank You Very Much! 10