The Special Economic Zone (SEZ) can be an effective instrument for African countries to achieve industrialization, and they can learn from China's experience in this regard, a World Bank (WB) report has said.
Traditional export processing zones have been in existence on the continent, but proved to be weak in creating jobs and boosting the export sector, mainly due to high cost of doing business and the poor state of infrastructure and management.
"In most Sub-Sahara African countries, the costs of doing business are high due to overall constraining environment in terms of registration, licensing, taxation, trade logistics, customs clearance, foreign exchange, and service delivery. Many one-stop- shops for investors do not live up to their names," said the report released Tuesday at the Investing in Africa Forum jointly held by the WB, China and Ethiopia in Addis Ababa.
Between 2004 to 2007, Africa's economic zones created one million direct employment and 8.60 million U.S. dollar exports, while for the same period, the figures were 61 million and 510.66 million U.S. dollars respectively for Asia and the Pacific region, according to the WB.
"In terms of investments, exports and employment generation, the African zones are in general falling behind their peers in other continents," the report said.
Many economic zones in Africa are "politics-driven" instead of market-driven while for some others, the management lack plans and experience, according to the report.
Unstable power supply and inefficiency in custom clearance are also among major challenges impeding the growth of Africa's SEZs.
China began establishing SEZs since 1980, mainly in its coastal cities, and they have greatly promoted the economic development, attracting foreign investment, creating jobs, increasing exports, and bringing in know-how and modern management practices.
Some of China's experience include creating a sound legal and regulatory framework, effective management and long-term plans, developed infrastructure, and providing good services for investors such as one-stop shop, according to the report.
And linkages with local economy whereby zones need to build on comparative advantages in the regions they stand and include local suppliers/clusters into the value chains.
"These lessons should not be taken as given and need to be carefully tailored into the local context of African countries, just as China did when it implemented its own SEZ programs in the 1980s," the report said.
Meanwhile, the WB warned Africa about avoiding the pitfall of environmental degradation that was experienced by China at the cost of economic development.
