Business / View

Growth strategy needs to be nurtured

By YEMI CARDOSO (China Daily) Updated: 2015-07-27 10:03

The recent financial crisis has forced African governments to look for alternatives to attract capital, investors and businesses to boost their economies in order to sustain growth and improve the lives of all Africans. The introduction of special economic zones into the continent was one solution.

SEZs are widely used around the world as part of a country's overall economic development strategy, but the specific experiences of Malaysia, Singapore and China have been extensively documented. While many countries have set up SEZs, China has been the most successful in using them to attract foreign capital.

In the last 10 years, China's economic involvement with Africa has increased exponentially in contrast to trade with partners such as the United States and Europe. As part of its strategy of "going global", China is currently working on SEZs in sub-Saharan Africa. Five SEZs are under development in Zambia, Nigeria, Mauritius, Ethiopia and Egypt.

No two other countries in the China-Africa partnership have had their bilateral relationship evolve as fast or affect as many people as China and Nigeria.

The Chinese are developing two SEZs in Nigeria and are building new roads, railways and airports across the country.

It has been argued that the introduction of SEZs in Nigeria can improve the country's economy, boost industrial development, generate employment, and spread technological knowledge.

This can be achieved through incentives such as a 100 percent tax holiday, lower custom duties and levies, foreign ownership of investments, no restrictions on the hiring of foreign employees and a complete waiver on import and export licenses. But there have been fears, too.

Nigerians have sometimes expressed dissatisfaction with the labor practices of Chinese companies, the quality of imported goods, and the impact of those imports on domestic manufacturers, market vendors and workers.

There also have been some major setbacks to SEZs in Nigeria, attributed to poor business systems. The costs of doing business are high due to overall constraints in terms of registration, licensing, taxation, trade logistics, customs clearance, foreign exchange, and service delivery.

Also, power, gas, roads, ports and telecommunications are other key constraints, and some developers have complained because these have the potential to increase their operational or developmental costs in setting up and running a business.

Given the large investments required for the SEZs, a strong and long-term commitment from the government and active participation of the private sector is essential in overcoming such hurdles.

The concept of the SEZ and its impact on economic growth is gaining more recognition globally. Nevertheless, the mixed results of SEZ development in different countries show that it is not a "one-size-fits-all" concept and has to be implemented properly and carefully tailored to a country's specific situation.

Given the complex and diverse environments in which SEZ programs are implemented, it would be useful to establish a clear framework to guide the operations of SEZs in countries where they are considered applicable.

Yemi Cardoso is a former commissioner for economic planning and budget in Lagos state, Nigeria. Cardoso holds a first degree from Aston Business School and a second degree from Harvard University. The views do not necessarily reflect those of China Daily.

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