adminLovemore Chikova In Beijing China
Special economic zones, set to be established soon, have the potential to change Zimbabwe’s economic status if they are implemented well.
Now that the Bill to establish such designated areas is awaiting President Mugabe’s assent, those responsible should start tightening up their act.
There should be no hitches once the Special Economic Zones Bill becomes law and everyone is expecting this venture to be a resounding success.
This will not be the first time Zimbabwe is embarking on such trade zones.
In 1998, Government launched the Beitbridge Industrial Park under an Export Processing Zone project, which is similar to a special economic zone, except in name.
The Beitbridge project has not worked according to expectations.
A careful study should be done on what held this project back and ensure that such hitches do not affect the special economic zones.
Lessons should also be drawn from countries that have successfully implemented special economic zones.
One such glaring example is China which embarked on such trade zones in the early 1980s as part of its economic reform programme.
And the move is paying dividends, as cities which were established 35 years ago as special economic zones are now driving the economic success story of China.
China is the second largest economy in the world after the United States, yet this feat could not have been achieved without the aid of the special economic zones.
Writing a paper for the Investing in Africa Forum recently, Chinese expert Mr Douglas Zhihua Zeng said the definition of special economic zones varied and covers a broad range of such areas.
Mr Douglas’ paper was aptly titled: “Global Experiences with SEZ — With a focus on China and Africa”.
“The term “SEZ” here covers a broad range of zones such as free trade zones, export processing zones, industrial parks, economic and technology development zones, high-tech zones, science and innovation parks, enterprises zones and others,” he wrote.
“The basic concept of SEZs includes several specific characteristics: (a) it is a geographically delimited area, usually physically secured, (b) it has a single management or administration; (c) it offers benefits for investors physically within the zone; and (d) it has a separate customs area (duty-free benefits) and streamlined procedures.”
In other words, special economic zones “are set up when a country delimits a special area where, through exemption of customs duty, it formulates various preferential conditions and provides public facilities so as to attract foreign investors set up factories whose products are mainly for export”.
What needs to be observed in implementing the special economic zones is to offer a package of attractive incentives that will entice the investors.
The fact that such zones operate under different rules is already a good incentive to attract the foreign investors.
What Zimbabwe needs at the moment is to build its foreign currency reserves and the special economic zones have the potential to unlock the foreign currency.
The foreign investors will bring in not only foreign currency, but also high-tech equipment, new technologies and create employment for the host nation.
Many countries in Asia began to realise economic growth once they established such economic zones, which ensured the flow of foreign direct investment.
China has extraordinarily moved from a backyard economy in 1979 to one of the most powerful economies in the world because of its openness and reform.
This openness meant a deliberate attempt to reach out to those with capital to come and invest in the country.
Areas that were known to be little villages were overnight turned into mega cities once they were designated as special economic zones.
China has four major special economic zones created in 1980 and these are Shenzhen, Zhuzai and Shantou in Guangdong province and Xiamen in Fujian province.
There are a host of other areas where this concept applies throughout the country, but these four places have witnessed extraordinary growth in the last 35 years.
Among these, it is the story of Shenzhen that summaries the success story of special economic zones in China.
A visit to Shenzhen last week in southern China showed that the city’s growth has been phenomenal in this short space of time.
It is now ranked among the top four cities in China and is often referred to as the city of innovation.
Many have often wondered how a small fishing village in 1980 has grown into a world-renowned city in such a short a period.
Yet, it is the special economic zone status that has turned the city into a symbol of China’s reform and modernisation.
Many international companies have taken advantage of Shenzhen’s attractive incentives to establish branches and factories in the city.
Official statistics indicate that between 1979 and 2011, Shenzhen’s average annual growth rate of GDP was as high as 25 percent, an unprecedented performance in modern history.
The city has become a centre of China’s securities and capital markets, with a total of 139 financial institutions in China setting up their headquarters there.
International financial institutions such as HSBC, Citibank and Standard Chartered Bank, in addition to other transnational institutions, have also been attracted to the city.
This has made Shenzhen a booming trading hub.
The city is now the leading manufacturing base in China, as both local and foreign companies take advantage of relaxed rules and tax concessions that govern the special economic zone.
But Shenzhen could not have witnessed such phenomenal success without sacrifices and commitment from the authorities.
If Zimbabwe is to succeed in establishing special economic zones, much more needs to be done to make such areas attractive to investors.
By coming up with the Special Economic Zones Bill, the country is on track and the economic fortunes can be turned around within a short period.
It is important that the Bill is now before the President and is expected to be operational within the next few months.
Government has already taken the first steps of encouraging foreign investors to come by exempting them from the Indigenisation and Economic Empowerment Act and the Labour Act.
Separate rules for conditions of service, termination of contract, dismissal from service and disciplinary hearings will apply in the special economic zones.
The Bill establishes an authority charged with setting up economic zones where “export-oriented industrial activities will take place whether by way of manufacturing, processing or assembling”.
Investors will be allowed to import capital goods, consumer goods, raw materials, components and any articles intended for use in the zone.
There are many other incentives that will be on offer for the prospective investors in the special economic zones, as provided for by the Bill.
By coming up with the Special Economic Zones Bill, Government has already demonstrated its willingness to attract foreign direct investment at a higher scale.
What is needed now is to look at the infrastructure, which will play a crucial role in aiding the success of the special economic zones.
The dualisation of the Beitbridge-Harare and Harare-Chirundu highways, which is expected to start soon, is a good incentive to attract the investors.
This road will be crucial in transporting the exports and its rehabilitation must be an urgent issue.
Many other related issues like the availability of electricity, a reliable railway system and constant water supplies also need to be looked into.
Online Reporter