19 June 2019

Zimbabwe: How to Make Special Economic Zones Special

opinion

Special Economic Zones are an important part of the investment strategy being pursued by the New Dispensation through the Zimbabwe Investment Development Agency (ZIDA). The concept is not new to the country, with the Special Economic Zones Act having been passed in 2016.

But the bare fact is that for the last four years, special economic zones have been regularly talked about, but did not realise the touted potential, especially their impact on the economy.

With the coming in of ZIDA, the Special Economic Zones Act will be repealed, with the development concept now being incorporated into the One-Stop Investment Services Centre under the new investment agency.

The other Acts to be repealed by ZIDA are the Zimbabwe Investment Authority Act and the Joint Venture Act, the institutions set by these Acts will be incorporated into ZIDA.

According to Zhihua Zeng in an article titled; "Special Economic Zones: Lessons from the Global Experience", "the basic concept of special economic zones includes several specific characteristics: (a) it is a geographically delimited area, usually physically secured, (b) it has a single management or administration; (c) if offers benefits for investors physically within the zone; and (d) it has a separate customs area (duty-free benefits) and streamlined procedures."

The term special economic zones covers a number of areas including industrial parks, export processing zones, enterprise zones, science and technology parks and free trade zones.

The special economic zones are a modern concept of development, which many developing countries are going after as an instrument to promote industrialisation and attract new technologies.

In Zimbabwe, the establishment of special economic zones was expected to restore the economy's capacity to produce goods and services competitively, and to attract foreign direct investment that could change the economic outlook of the country.

The first attempt at establishing such trading zones in Zimbabwe was in the late 1990s, when the first export processing zone was launched in Beitbridge by the then Minister of Industry and Commerce Nathan Shamuyarira.

After the ground-breaking ceremony at the site of that export processing zone, nothing tangible happened and the area remains designated, just in name.

Even after the Special Economic Zones Act was enacted in 2016, there has not been much movement in terms of implementing the concept on the ground, except the identification of certain areas for such trading zones.

What is clear from the previous scenarios is that attempts to embark on special economic zones have not yielded the positive results envisaged to contribute to economic revival.

But now, things are expected to change for the better.

The incorporation of the special economic zones into the one-stop investment centre under ZIDA is expected to quicken development in those designated areas, and attract more investors.

It is necessary that those spearheading ZIDA make a thorough assessment of what really went wrong with previous attempts to set up such special trading zones.

This time around, the special economic zones are part of the reform process being undertaken by President Mnangagwa under the New Dispensation.

The reforms being carried out are expected to bring a positive economic outlook in no time, and this will create an atmosphere conducive for the thriving of the special economic zones.

One of the reasons why the previous attempts at special economic zones did not bring the desired results had to do with the state of the economy that was characterised by uncertainty due to a number of factors like corruption.

But the anti-corruption crusade embarked upon by President Mnangagwa is bound to instil confidence in investors, who will be assured that they will not lose their cash to unscrupulous individuals.

Investors in special economic zones are interested in getting a worth from their investments, and the stabilisation of the economy is set to assure them of such a benefit.

The establishment of infrastructure in the areas designated for the special economic zones is also important, as it conforms with the expectations of international investors based on their experience elsewhere.

In many countries, especially in Asia where the industrial parks development model is popular, investors find factory shells already in place, all they do is to bring in their machines, install them and start work.

A whole city, for example, can be declared a special economic zone, meaning that all products from that area are produced under a special dispensation.

For example, Shenzhen City in China's Guangdong Province is a special economic zone, and has since grown into a major technological hub for China because of the status it has gained.

It is expected that ZIDA should institute friendly policies that offer incentives to potential investors to attract them to the new economic zones, in addition to the ease of doing business expected to be instituted through the investment agency.

There is no doubt that ZIDA will require a strong information services targeted at marketing the country and the special economic zones to attract the attention of investors.

Investors do not flock to a destination if they are not aware of what is at stake. They need deliberate persuasion through appropriate information that makes them appreciate the benefits accruing in investing.

It is important that the Zimbabwe Investment Development Agency Bill spells out the expectations from the special economic zones.

The Bill has been published for the first time and is expected to sail through Parliament soon, without major amendments.

The Bill is clear that a special economic zone can only be registered if it will be beneficial to the country.

Projects under the zones should be licensed on the basis of their orientation towards export or import substitution and how they will promote industrialisation of the domestic economy.

Skills transfer is also emphasised, as well as the creation of employment and development of human resources.

The special economic zones projects, according to the Bill, should be able to value add local raw materials, among many other considerations that are expected to uplift the economy.

It is clear that special economic zones are an important aspect of ZIDA, and are bound to drive the fight for economic reform and rejuvenation.

If implemented well and according to expected standards, special economic zones can result in the industrialisation and modernisation of the country.

It is imperative that ZIDA gets lessons from those who have successfully implemented such industrial parks, and these examples are abound in many countries in Asia and to some extent Latin America.

Examples driven from such countries clearly show that special economic zones are a viable model for modern economic development, although they need astuteness from the implementers.

Such zones can actually offer a quick fix to the problems of low growth, low level of investment and low level of technological know-how.

The country can also earn more foreign currency from such initiatives, while at the same time creating the much needed employment through the industrial parks.

What also makes the special economic zones a viable model of economic development is that they are implemented on a win-win basis, with both sides -- the country and the investor -- set to benefit.

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