GENEVA — Increasing sustainability demands by enterprises and investors are spurring a growth in green Special Economic Zones in many developing countries with a focus in the new zones — including those manufacturing textiles and apparel — a U.N. report said.
The report says a wave of industrial policies and competition for international investment has sparked a boom in the number of SEZs, which has increased to 5,383 worldwide (including 474 under development), up from 4,300 in 2014 and only 500 in 1995. More than 145 economies operate such zones today, according to the report.
An additional 507 SEZs are in the pipeline, it said, of which 419 are in Asia — but none in China, the country with the most SEZs (2,543) — 53 in Africa and 24 in Latin America and the Caribbean.
Besides China, other major apparel exporting countries with a large number of SEZs include India with 373, Turkey with 102, Bangladesh with 39 and Cambodia, 31.
“There are many examples of SEZs that have played a key role in transforming economies, promoting greater participation in global value chains and catalyzing industrial upgrading,” said Mukhisa Kituyi, secretary-general of the U.N. Conference on Trade and Development.
UNCTAD’s flagship “World Investment Report 2019 “highlights that since [export processing zones] were launched in developing countries, concerns have been raised about working conditions and environmental impacts.”
The U.N. report highlights calls for stronger standards by investors and consumers to facilitate the promotion of facilities that adhere to stringent regulatory and eco-friendly standards.
For example, it outlines how the Hawassa eco-industrial park in Ethiopia — focused on textiles and apparel — being developed as a model of the Climate Resilient Green Growth Strategy, and which houses global manufacturers such as PVH Corp., is using state-of-the-art zero liquid discharge common effluent plant.
The report stated that PVH, which also owns brands such as Tommy Hilfiger and Calvin Klein, has provided input on many innovative elements related to environmental and safety standards.
In 2018, Hawassa industrial park reported exports of slightly less than $50 million, it said.
Moreover, Kenya’s Export Processing Zone authority, the U.N. said, has launched a strategic plan for an environmental management system standard certification for all of the country’s zones.
In 2017, Kenya’s EPZs accounted for 94 percent of the $340 million in apparel exports sent to the U.S. under the African Growth and Opportunity Act. Most of the apparel firms in Kenya’s EPZs are foreign-owned.
With regard to greenfield investment in 2018 worldwide in textiles, apparel and leather, U.N. economists estimate a $6.1 billion was earmarked for manufacturing and $17.9 billion for retail. Vietnam attracted $869 million for greenfield investments in manufacturing; China, $466 million, and Cambodia, $149 million.
On the retail side, the top destination for greenfield investments was the U.S. with $6.2 billion; China, $696 million; Canada, $604 million; Australia, $493 million; United Arab Emirates, $285 million; Italy, $238 million; Germany, $226 million; Singapore, $221 million, and Hong Kong, $206 million.
Overall, global foreign direct investment flows in 2018 declined by 13 percent to $1.3 trillion. The U.S. was the top destination for FDI inflows, with $252 billion, followed by China with $139 billion, UNCTAD said.