A COMPARISON STUDY ON FREE TRADE ZONE: DEVELOPMENT THROUGH SPATIAL ECONOMY CONCENTRATION ~ Abstract

In this globalization era, rich countries are getting richer and poor country getting poorer each year. Why only rich countries has higher turnover? With its limitation in resources, how could a second class country could compete?
Economy Geographic tries to answer with theories on agglomeration (concentration of economy activities). The economic analysis of agglomeration was based on Marshall, who identified three reasons for concentrations, which are pool market for workers and firms, specialize supplier and knowledge/technological spillovers. As a form of agglomeration, Free Trade Zone is established with infrastructure and privilege by the Federal Government to draw agglomeration. The areas usually are areas that have a good access to the production centre as well as to the market and predicted to grow rapidly with a Growth Centre position
This article tries to illustrate how this growth centre based concept practice in the real world. The comparison will be between three establish Free Trade Zone which are Batam (Indonesia), Subic (Philippines), and Shenzhen (People Republic of China). The comparison will be divided cause-effect list which are Competitive Factors and Performance Indicator Lists.
The comparison shows that Free Trade Zone will be more beneficial if it is supported with special privileges (tax holiday, special policy regime, etc). Moreover, alike with agglomeration, intermediate and final producer that has already located in the Free Trade Zone, will attracted more industries to the zone (self sustain). Lastly, there would be knowledge and skill transfer from the foreign company expertise to local workers. Overall, with additional statistical analysis, it is argued that Agglomeration through Free Trade Zone and additional policies will impact significantly on Developing countries like Indonesia

This paper was submited and presented at ISSM 2008 in Delft, The Netherlands, May 13th 2008

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