Malaysia and other ASEAN countries were among the first to successfully use Export Processing Zones (EPZs) to increase exports and thus reduce the foreign exchange constraints arising from import substituting industrial risk. More importantly, these zones were used as a ‘test base’ for liberalisation of trade, tax and other policies that were then gradually applied to the rest of the economy. More recently, China has been the most successful practitioner of this instrument, and has taken it to new height what might be called the “FDI-Expert model” of economic development and growth. Experience suggests that the geographically defined and restricted zones are suitable for “Export Processing” as their name (EPZ) implies.
