adminOliver Kazunga and Temba Dube Business Reporters
THE government has approved three pilot projects – two of them from Matabeleland North – for the implementation of Special Economic Zones (SEZs) whose Act will be promulgated in June. The pilot projects on the petroleum-chemical industry will be undertaken in Lupane, tourism in Victoria Falls and the diamond cutting and polishing one in Mutare and Harare.
SEZs are designated geographical regions which operate under special economic regulations that are different from other areas in the same country.
Economic Planning and Investment Promotion Permanent Secretary Desire Sibanda told International Business Conference delegates at the Zimbabwe International Trade Fair (ZITF) in Bulawayo that the initiative would offer special conditions and incentives to promote international competitiveness.
“The focus of SEZ is on exports. SEZs have been established by most governments seeking to attract foreign direct investment, promote export-oriented growth, acquire new technology by bringing foreign companies to manufacture goods in their countries thus generating employment and increasing the share of manufacturing over the Gross Domestic product (GDP),” said Sibanda.
He said the SEZs offer fiscal regimes that are different from those of the domestic economy hence the government, through ZimAsset, identified the introduction of SEZs as a vital pillar of its strategy to turnaround the economy.
Sibanda said the economic zones would aid resuscitation of ailing industries and increase international competitiveness in the production of goods and services.
He said they are also aimed at promoting value added manufactured goods, creating jobs and boosting economic growth and development.
“The government has approved the following pilot SEZs for implementation as pilot cases: Mutare and Harare diamond cutting and polishing, Lupane petroleum-chemical and in Victoria Falls tourism-focused SEZ. The SEZ Act will be promulgated by Parliament in June,” Sibanda said, adding that the Act would create investor confidence.
“The Act will be required to legislate and give effect to the new institutional and incentive framework to achieve the objectives of the SEZ in Zimbabwe.
“This is the practise in most countries. It creates confidence among the investors”.
He said once constituted, the SEZ board would conduct further feasibility studies for other sectors or geographical zones and products.
“And these can be replicated to the rest of the economy once the intended results are yielded. The medium and long-term development of SEZ infrastructure is one of the challenges that will need to be addressed,” said Sibanda.
He said a new Act of Parliament will be required to legislate and give effect to the new institutional and incentive framework to achieve the objectives of the SEZs in Zimbabwe.
Sibanda said while the proposed operating framework for the SEZs in Zimbabwe was aimed at supporting the country’s comparative advantage as well as exploiting the present stock of infrastructure given that industry was operating below optimum capacity level, among others, construction of the zones was subject to the availability of capital and infrastructure.
He said the government, development partners and the private sector would set up industrial parks that qualify for incentives under the SEZ regime.
He said the effectiveness of a SEZ initiative drawing from the experiences of other countries was determined by the underlying legal and institutional framework.
“A strong and clearly defined framework is an indispensible aspect of a successful SEZ initiative. In light of the overarching requirement, there will be need to institute some legal and institutional reforms,” Sibanda added.
In setting up SEZs, he said, the country needed to avoid falling into the problems that were experienced in the case of the now defunct Export Processing Zone Authority.
These included multiple pieces of legislation that were administered by different government agencies that led to poor institutional coordination, complicated customs administration due to the fact that EPZ companies were scattered across the country, and proliferation of tax incentives outside the zones that eroded the incentives for firms participating in the zones. Sibanda pointed out that to avoid falling into these problems, it had been suggested that in line with international best practice, the envisaged SEZ Act should define clearly the goals and functions and responsibilities of the SEZ Authority.
Against this background, it should among others cover constitution roles, responsibilities and relationships with existing investment institutions, the determination of incentives and designation criteria.
In the context of Zimbabwe, Sibanda said, the proposed SEZ model would be based on the country’s special needs.
“Thus, a context-specific framework has been explored in order to minimise the possible challenges of adopting exotic models that are divorced from Zimbabwe’s situation and economic realities.
“Each country has its own distinctive characteristics. We highlight the potential benefits to the country. In coming out with the final incentive structures for the SEZ Authority, we will carry out a cost benefit analysis to ensure that the fiscus isn’t prejudiced through a plethora of incentives as has happened in other countries,” he said.
In Zimbabwe, Sibanda said, the introduction of SEZs comes at a time when industrial capacity utilization has plummeted from around 57 percent in 2012 to around 33 percent.
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