Controversy

Land alienation

Special Economic Zones require land - and lots of it - often over 1,000 hectares for just one SEZ and they can cover up to 10,000 hectares.

In PNG, where 97% of land is customary owned, this means a big land grab.

The World Bank has previously run into trouble in PNG when it has tried to run its land registration agenda - most famously in 2002 when its plans led to student riots and deaths on the streets of Port Moresby.

SEZs will require large areas of land to be taken from customary owners with no provision made for the on-going subsistence lifestyle of those displaced or future generations, no proper compensation and no management of the social problems caused by displacement.

PNG Department of Lands, which will handle any sales or leases, is riddled with corruption.

Using scarce public money

SEZs need high quality physical infrastructure such as roads, electricity and telecommunications.

All these will be provided by the PNG government using public funds, and while this high-quality infrastructure is being made available for the foreign companies to use inside the fenced SEZ areas, PNG people themselves will continue to struggle to get garden produce to market and access health and education services because of the very poor state of infrastructure in the rest of the country.

SEZ's also need policing to make sure companies follow the rules and this means government will have to spend more public money and take resources away from front line health and education services to monitor and police what is going on inside the SEZ.

Externalizing costs at the expense of local people

As well as high quality infrastructure the SEZs will also offer foreign companies reduced business entry and operating costs.

This means the SEZs will offer exemptions from minimum wage laws, health and safety laws, environmental controls and taxes and duties and offer subsidies on essential supplies and services.

All these 'reduced costs' really mean that you allow the foreign companies to maximize their profits at the expense of local people and by contributing as little as possible to the local economy.

In economic jargon, the real costs of the enterprise are being externalized so they are born by workers and the general population rather than by the company.

Poorly paid jobs

Poor employment standards are a prevalent problem in SEZs around the world and many zones lack proper labor requirements that keep employees safe, healthy, and properly paid.

Most of the work in SEZs is low-skilled, low cost assembly-line work with extremely low wages, repetitive tasks that are carried out in pollution-filled environments. Suppression of unions and workers rights groups to prevent employees from demanding better conditions is common.

Gender inequality and the exploitation of female workers is another big problem in SEZs. Females can account for 60–70% of the SEZ workforce because many companies regard women as better suited for the repetitive textile- and electronic-based manufacturing industries that made up much of the initial SEZ work.

Environmental damage

SEZs are frequently associated with problems of pollution which degrade the environment and cause health problems for local people. These problems arise because often lower environmental standards are applied within SEZs in order to attract investment or because government lack the resources to effectively monitor and enforce standards.

Also investors will look to avoid any environmental controls as they reduce profitability. Ironically, environmental controls and oversight are especially important in SEZs because rapid growth and insufficient infrastructure often lead to large increases in waste and environmental devastation.

Shenzhen in China, a highly-polluted trade area where the sky is gray most of the day from the polluting industries, is a perfect example of the environmental impacts that rapid SEZ growth can have on an area. In certain areas within an SEZ in Mumbai, the creeks are so polluted that no one can fish. Many attribute the pollution there to the fact that no environmental laws apply to the SEZs. In Tijuana, Mexico, the Rio Grande is so polluted from maquiladora waste that it has caused an increased risk of Hepatitis [Megan Murray, 2010]

Social problems

SEZs will draw thousands of people from all over PNG to work in low paid jobs. But what about proper housing and the infrastructure to support these workers and their families?

Squatter settlements are already causing massive problems in our major centers - do we really want more?

Poor financial returns to government

The World Bank disingenuously says the SEZs should NOT be tax free. Income tax rules should apply says the World Bank, BUT the companies can import and export duty free.

PNG raises very little revenue from corporate income taxes and multi-national corporations are expert in ensuring their local operations do not make a paper profit and therefore avoid any income tax liabilities.

What the PNG government does rely on is import and export duties - and these are the biggest costs to business. These duties won't apply in the SEZ making them effectively tax free zones.

A race to the bottom

In order to attract investment into its SEZs PNG is going to have to offer greater incentives (lower costs) than multinational companies can already get in other countries - otherwise why will the companies come here?

This creates a race to the bottom - or constant downward spiral - as different countries compete with each other to offer greater and greater incentives as they compete for investment.

With the greater incentives come lower wages, more environmental damage, less revenue to government etc etc - while the big corporations reap greater and greater profits.