Controversy

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.

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]

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.