By MASATO MASATO, 16th May 2011 @ 12:00, Total Comments: 0, Hits: 2787
NO wonder African countries are ferociously competing to win the attention of potential investors in the Free Trade Zones (FTZs). Within the zones, which are steadily becoming suitable option for industrial development, there seem to be prospects of job creation, poverty eradication and wealth creation.
While investors who have for years been subjected to the pains of delays and red tape in African countries embrace FTZs as proven policy tool that governments can use to ease the business environment, African countries perceive the schemes as their road maps to achieving Millennium Development Goals (MDGs).
“The (Free Zone) concept puts in place all necessary machinery to accelerate economic growth through poverty alleviation, job creation and revenue generation...these are the key indicators of the Millennium Development Goals,” Prime Minister Mizengo Pinda told the second African Free Zones Association (AFZA) 2011 convention in Dar es Salaam last week.
FTZs or simply Free Zones means an enclosed area with supervised entry and exit points where certain economic or fiscal advantages—import duties and taxes relief, exemption from trade restrictions and formalities as well as relief from rules on minimum wages, social charges and labour conditions are granted to facilitate world market trade.
International trade and domestic resources are expected to contribute an increasing share of development financing as African economies grow and integrate into the global economy. And, provided that a country implements active policies and comprehensive strategies for increased competitiveness, FTZ schemes have huge potential to accelerate international business.
Experts have through researches concluded that FTZs have great potential of addressing transport woes, unreliable power supply, communication hitches, water and sanitation problems as well as other infrastructure services that impinge on economic growth, trade and poverty eradication across Africa.
FTZs were the viable strategy for promotion of international trade and regional development and many African countries, including Tanzania, have widely embraced the schemes as credible means of attracting new foreign direct investments and fighting poverty. And, investors, particularly Chinese are more than willing to invest in African FTZs, provided that the host countries embark on concerted efforts to redress the business hurdles in the continent.
Speaking at the AFZA conference, the Chinese cited erratic water and power supply as well as poor transport infrastructure and stinging government bureaucracies as some of the issues that frustrate investors in Africa.
“The (Free Trade) Zones have proved great potential of contributing to industrial development and job creation but the critical challenges that delay implementation of the projects have to be addressed,” Mr Ding Yong Hua whose firm is investing heavily in Nigeria told the conference.
He asked African governments to put in place straight forward investment policies and speak with one voice: “An investor wants to hear one voice from the government, but when two contradicting statements come from one government, they create unnecessary confusion to investors.” Mr Hua was referring to cases of governments offering special incentives to
investors, which however are sometimes denied by agencies of same government.
Even though erratic supply of water and power, inadequate funding and poor infrastructure in terms of serviced land, factory buildings, roads, ports and railways are always perceived as hurdles that impede investments, they could sometimes offer immense opportunities for investment. AFZA Secretary General Chris Ndibe told the three-day conference that, “The poor roads, lack of factory buildings and inadequate water and power supplies are
in themselves opportunities for investments.”
He challenged potential investors to explore investment opportunities in infrastructure development through the public private partnership. Recent studies by the World Bank, UN Industrial Development Organisation and the World Trade Organisation have shown substantial growth in the number of FTZs, with increased prominence of private sector developed and operated zones and use of public-private partnership for development of zones.
But experts warn that free zones were not a panacea to African development problems, arguing that the zones were bound to fail unless respective host countries introduced effective policy and legislative measures to free up economic development within the zones.
An international trade expert with the World Bank, Mr Thomas Farole, cited Korea, Malaysia, China, Costa Rica and Mauritius for high profile zone successes but reminded of existing failures too: “We have to understand the performance and factors that contribute to sustainable success.”
He said free zones have huge potential of addressing key problems of unemployment and favourable investment climate in the African continent, but noted that African zones were yet to deliver on their potential due to limited investment. Mr Farole said most African countries were not well positioned to be global export platforms for labour-intensive assembly, challenging them to consider re-orienting to better exploit comparative advantage and regional markets.
“This will mean re-focusing on zones as spatial industrial strategy – promoting clusters and value chains,” he argued, noting that African countries have to improve strategic planning and have in place a transparent, robust legal and regulatory framework to attract and retain investors.
Transparency, well developed structure and policy stability are all that investors look for to have flourishing investments in the region—efficiency in service provision is thus the best that African governments can guarantee to attract and retain serious investors in their respective countries.
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