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Davison Todson Gomo
THE imminent introduction of Special Economic Zones (SEZs)in Zimbabwe is as interesting as it is worrying to a very large measure. Firstly, what is very important is that if government gets this right and in the process, avoid all problems and shortcomings of this strategy that other countries have experienced, that will be a plus for Zimbabwe.
Presumably, a lot of background research and due diligence has been conducted in order to make sure that all avoidables are identified and dealt with in advance so that there is minimal negative uptake on this programme.
Ordinarily, a policy of this nature calls for extensive consultations across society to encourage a buy in because of the history of the so-called free zones in their different nature and types.
Ordinarily, Special Economic Zones are a predominant feature of the developing world. Although China seems to have done exceedingly well in this respect and is accredited with revolutionising the modern concept of the SEZs, it must be noted that the country that introduced the first SEZ is probably long forgotten because not much happened there that the world can remember.
The difference can be put down to size of the country, internal dynamics, political history and culture, the will and determination to succeed, the abundance of cheap labour, investment in research and a commitment to root out corruption and to foster conditions for sustainable and equitable economic growth.
True, we are all keen to have our economy perform well because if that happens, not only will the economic confidence return but we will be able to address the current problem of unemployment including enhancing revenue collection that we desperately need to deal with a number of social and public infrastructure challenges.
SEZs are generally introduced to meet fiscal, social and public infrastructure policy objectives with the most important of all being the fiscal goal to facilitate economic growth through the use of special economic, legal and administrative concessions to foreign investors.
The hallmark of this policy is a deliberate decision by government to set aside a geographic region, town or district that has economic laws that are more liberal than the country’s general economic laws and regulations.
The logic is that when these conditions are put in place, they will act as an incentive to foreign investors who once they commence business, are able to generate competitive exports and thus earn the country the requisite foreign currency.
All being equal and everything going according to plan, this strategy becomes a good business and trade development policy. But is it that smooth? Maybe not, because empirical evidence suggests that there may well be a lot of problems at different levels of society and each of these addresses itself to a specific question.
One of the questions that have been asked over and over is, why should government wait for the foreign investor in order to create an efficient system of investment approval and management? Secondly, if a relaxed policy regime and environment is good for the foreign investor, what evidence is there that this will not work well if extended to the local investors?
Research suggests that only one in ten of the SEZs make it despite over 120 countries embracing this concept. The majority of the 3,000 plus world wide SEZs are in Asia, Central America, Caribbean, India, Russia, central Europe, North Africa and the Middle East.
In Sub Saharan Africa, SEZs have not been that successful to the extent that the World Bank has undertaken a study to find out why the SEZs have generally done badly. I suspect that one of the reasons is that a policy needs to have the general support of the people and there is need for the public to be very clear what the objectives are and how these will be achieved.
Zim Asset has enjoyed wide debate and rightly or wrongly, the public have some kind of opinion on it. I think it is important that Special Economic Zones be debated extensively so that we can avoid it being seen as one piece of policy that is being imposed on people in similar fashion to Esap.
Assuming that we succeed in introducing the SEZs, there is need to be clear how all the foregone revenue will be recovered especially that the foreign beneficiaries of tax concessions and holidays are subsidised by the poor people who pay taxes to government on very limited incomes.
No doubt that if successful, the SEZs will generate employment and perhaps a lot of people will find something to do inside these zones. However, the big question based on evidence from other countries is, to what extent are jobs created in these enclaves of comparably good quality? Evidence seems to suggest that unless there are minimum rules put in place, most SEZs tend to exhibit features of sweat shops.
No one is suggesting that people must be paid unreasonably high wages, but exploiting workers in order to raise the profit levels of already very rich people will widen the gap between the rich and poor with serious long term social cohesion challenges.
The amount of benefits that accrue to the SEZs are so massive that they constitute a huge cost to the host government because by their very nature, the players in this field are looking for next to nothing in terms of running costs and yet they are quick to seek guarantees of investment protection and the right to move out their profits in toto.
Granted, if government is able to ensure that SEZs are able to create a balanced economic growth in Zimbabwe and that their management prevents room for corruption, I believe that the SEZs will have a chance to produce the intended outcomes and the public might be willing to take a knock on some benefits in return for long term growth and development.
Another potential challenge is selecting the location of SEZs. This must be done in such a way that the outcome does not look like government is promoting selective development. If one area succeeds due to the location of SEZ, the other areas are tempted to think that they have been deliberately excluded.
This perception can be contained if the overall benefit and the opportunities are made transparently available to all people in Zimbabwe.
Finally, it might be useful to think about how these SEZs are likely to function in the short term because of erratic electricity supply, water problems, bad roads, inefficient internet connectivity and of course the endemic corruption problem.
Secondly, to what extent are SEZs a direct downgrading of our own economic policies including Zim Asset? If in fact that is true, are we not encouraging lopsided development?
Thirdly, how do we address the inherent potential of the lack of the miracle power attributed to SEZs? Evidence suggests that at global level, only a handful have generated the level of exports envisaged from the beginning.
What are the expected areas of focus, that is biotech, energy, pharmaceuticals or is it all and sundry?
What are the rules on subcontracting in SEZs and is subcontracting open to all or to locals only?
The issues that require attention are many but we can only raise questions on some of them. I must confess that except for China and to some extent India, the rest of SEZs do not have an outstanding record hence they lack immediate public recognition. South Korea and Singapore are not perfect examples because they grew on the back of Japanese support and technology.
I must confess that I am not an adherent of policies that risk putting the entire Zimbabwean business community on the periphery of economic activity.
Dr Davison Todson Gomo is the executive director of the Affirmative Action Group and writes in his personal capacity.
derick.khumalo