By Davison Kaiyo
Harare - Zimbabwe has been struggling to attract meaningful foreign direct investment despite the mantra that the country is open for business.
It follows that the country must continue to implement policies that improve the ease of doing business and to further open up the economy in order to attract investment.
One such strategy is the Special Economic Zones (SEZ) which the country has adopted to try and build a more open economic system that will place the country on a development path.
Zimbabwe needs not re-invent the wheel; a salient example which Zimbabwe should emulate is China’s attitude and efforts in the implementation of the SEZ strategy and how over the years it has led to the growth and transformation of the economy.
The Chinese SEZ journey started in 1979, at the beginning of Deng Xiaoping’s Reform and Opening Up policy with the establishment of Shenzhen and under President Xi Jinping the strategy has since been accelerated and further transformed to focus on the free trade zones (FTZ) model of special economic zones.
The Chinese Special Economic Zones (SEZs) vary in scope and function. Some are designated geographical spaces where special policies and measures support specific economic functions. Others include industrial parks, technical innovation parks and bonded zones that facilitate experimentation and innovation over a wide range of industries.
SEZs provide local and international businesses with incentives to invest in development and infrastructure through reductions in tax and regulation.
Tax benefits are the most common form of incentive and can take the form of a tax break or a tax holiday and they take various forms and models. Currently, the Chinese are focusing on the FTZ model and Zimbabwe can choose a model that works for her.
A free trade zone is a tax-free area where goods can be landed and ‘value added’, through handling and manufacturing, and re-exported without the intervention of customs. These zones generally focus on labour intensive manufacturing goods, such as textiles and electrical equipment and often have reduced regulations. It is geographically confined.
The strategy has also been initiated by the ruling Communist Party’s Central Committee, which is headed by President Xi, to explore new ways to deepen reform and further integrate the country into the global economy.
So important is the strategy to the Chinese that the 17th CPC National Congress in 2007 listed it as a national strategy; and the 18th Congress in 2012 quickened the pace of implementation of FTZ. Again in 2013, a resolution was made to accelerate the implementation of the strategy to create a global high standard FTZ network.
In his book, The Governance of China 2, President Xi reiterated the importance of such a strategy in the achievement of the Chinese vision and goals.
“To achieve the two centenary goals and the Chinese dream of national rejuvenation we must adapt ourselves to the new trends of economic globalization, correctly evaluate the changing international situation, thoroughly understanding the new demands in domestic reform and development take more effective action to drive opening up to a higher level, and quicken the pace of implementing the free trade zone strategy (FTZ),” said President Xi.
Such urgency in the implementation of the strategy is what seems to be lacking in Zimbabwe. The country needs to adopt the attitude exhibited by the Chinese in order to catch up with the rest of the world.
The Chinese together with President Xi recognizes how such reforms leads to progress. While addressing his party’s Political Bureau in 2014 President Xi said “expanding and advancing opening up, and promoting reform and development through opening up, is a powerful instrument through which China can achieve continuing progress.”
“Opening up brings progress while isolation leads to backwardness,” he said.
Special Economic Zones were instrumental in making China's economy the way it is today. Successful foreign investments galvanized capital formation and spurred urban development what with the proliferation of office buildings, banks, and other infrastructures and Zimbabwe can tap into that experience.
In 2014, there were six SEZs and four pilot free trade areas and as of today, the country has 18 free trade zones. President Xi announced the decision to launch the six new free trade zones on June 28 in Osaka, making them a critical part of Beijing’s new economic initiatives to further open up its market and provide incentives for more foreign investment. This showed the seriousness the Chinese take this strategy.
According to President Xi, China’s economic development is underpinned by the implementation of FTZs.
“We should therefore move forward at a quicker pace and allow the FTZs (read SEZ) to facilitate trade investments, so as to expand international markets of Chinese enterprises, and inject new energy into and open new space for China’s economic development,” he said.
For Zimbabwe to be able to attract more investment, both local and foreign, to restore the economy’s capacity to produce goods and services competitively, the SEZ model should be adopted and its implementation accelerated. Zimbabwe can learn from the Chinese on the aggressiveness in driving the reform agenda as well as opening up the economy in order to achieve the Vision 2030.
This means that the Zimbabwe Investment and Development Agency (ZIDA) Bill which lapsed in the last session of parliament must be taken back and its passage expedited. The ZIDA Bill is aimed at improving reforms on ease of doing business as well as to attract the much-needed foreign direct investment into the country.
ZIDA will replace and take over the functions presently entrusted to the Special Economic Zones Authority and this means that the Special Economic Zones Act will need to be repealed. Such reforms are what President Xi said are powerful instruments through which a nation’s progress can be achieved.
The most successful SEZs specialize in specific products or industries, are located close to transportation outlets and are supported by efficient infrastructure like the Chinese it is imperative for Zimbabwe to invest heavily in infrastructure development.
China’s experience indicates that geography, resources, market, human resources and capital are all necessary for successful SEZs and Zimbabwe is not poor when it comes to such.
Seeing the impact the SEZ has had in China, Zimbabwe must therefore expedite the implementation of the strategy as a panacea of some of the challenges the country is facing and also to achieve a middle income economy by 2030 as pronounced by President Mnangagwa.