eBusiness Weekly
Levious Chiukira
The concept of Special Economic Zones (SEZs) being adopted by Government is a positive move towards economic development. The concept of SEZs dates back to the 1930s in the United States of America where they were established in cities such as the New York.
SEZs are areas granted special privileges in a country specifically for economic development through foreign businesspersons to invest into the country.
The privileges include special investment policies or regulations such as tax easing, financial support and issuance of work permits and special support in infrastructure. Major businesses which usually fall under SEZs are manufacturing, agriculture, commerce, tourism or any other operation that supports trade. If implemented accordingly, they assist in employment creation.
In the early stages of their development, SEZs were managed by governments and realising the challenges involved, governments later resorted to partnerships with private developers to maximise on benefits. There are basically six types of SEZs; free trade zone, export processing zone, enterprise zone, single factory, free port and specialised zone.
All these are established for a single purpose; that is economic prosperity but through different ways. In the US, one of the most critical factors on establishing SEZs that determines success or failure is the geographical location. It is advisable to set them near ports of entry and exit or inland port to ensure they serve their purpose and minimum support infrastructure is required. To cater for other scenarios, sub zones can be stablished at sites such as manufacturing plants or tourist attraction centres. For the establishment of these zones, there is need for political will from government, particularly guaranteeing policy consistency.
There is also need for expansive training programs for Government and departmental employees to work with the SEZs. In the Zimbabwean context, these include the Office of the President and Cabinet, the Zimbabwe Revenue Authority (Zimra), immigration, Reserve Bank of Zimbabwe and others. There should be willingness from all these employees, and clear understanding of the need to ensure that SEZs are a success. Capacity building is key if SEZs are to be a success and all bottlenecks and duplication in parastatals and departments are removed before kick-starting.
There is also need for simplification of processes and procedures in the movement of capital, goods and people especially by Zimra and immigration. From the initial stages of establishment, there is need to ensure that laws and regulations which address issues of gender, working conditions, human rights and security are well expounded and put into place to avoid failure. The national trade policy should incorporate the SEZs and clearly define embarrassment. Objectives and goals are supposed to be specific, measurable, achievable, realistic and time bound (SMART) to allow evaluation.
It should be noted that creation of SEZs should not be viewed as a substitute for the country’s large trade and investments reforms as these may lead to total failure of trade policy. There is also need for comparison of benefits and costs to the country and only be established if, in the long run, the benefits outweigh gains forgone.
The costs include environmental degradation, revenue forgone through tax suspension and duty waivers, relaxed immigration rules which may pose a security threat. All these should be taken seriously to ensure that investors do not end up benefitting and leave the country before the host country benefits.
As Government embarks on SEZs, it is of paramount importance to ensure that they opt for private SEZ or partnerships with private developers to ensure that they do not over-invest into them with taxpayers’ money. There is need also for Government to encourage public-private partnerships on infrastructure development and ensure that they are operated on a cost recovery basis.
The establishment of these SEZs should be in phases to ensure lessons are drawn from other cases and to avoid repeating the same mistakes. With proper legal policy framework, well trained and motivated employees and well connected and integrated government agencies, SEZs will be a success story in Zimbabwe.
The author, Chiukira, can be contacted on [email protected] <mailto:[email protected] and/ or 0773065062
