The ambition of many African countries to industrialize by transforming raw materials on site can find in SEZs the tool for rapid success. Provided to deploy the “12 golden rules of Special Economic Zones”, that Moubark LÔ presented at the webinar on SSEZs organized on 28/09 by Ipemed-AEZO-La Verticale AME.
A contribution from Moubarack LÔ, Director General of the Bureau de Prospective Économique (BPE) of Senegal.
For a developing country, subject to the constraint of scarcity of resources and capacities, the promotion of Special Economic Zones (SEZs) makes it possible to build, in a relatively short period of time, islands of global competitiveness and “Quick Wins”, in a national environment facing enormous challenges of upgrading.
The establishment of public or private SEZs has thus become an obligatory way to insert African countries into regional and global value chains with increasingly demanding standards in terms of quality and delivery time.
Experience shows that the lasting success of SEZ development policies is closely linked to their coherence and alignment with the major strategic choices identified in the National Development Plan or similar. This is the sine qua non condition for ensuring good resource mobilization for SEZs and good coordination with policies outside SEZs.
Several African countries have now set themselves the goal of becoming emerging countries in the medium or long term. Their objectives include: developing industrialization and processing of agricultural and mineral natural resources; promoting export diversification and integration into the global economy; promoting a strong domestic private sector; attracting foreign direct investment to accelerate technological progress; creating jobs and income, especially for the large numbers of young people entering the labor market; and developing the entire country, while maintaining a sound macroeconomic framework.
SEZs can actively contribute to achieving these goals if the following conditions, which I call the “twelve golden rules of SEZs,” are met:
Golden Rule No. 1 – The inclusion of SEZ development policy in the national planning document, basing it, as a priority, on the sectoral (including promoting the same clusters) and horizontal strategic options of the Plan.
It is therefore necessary to carry out truly integrated planning, drawing up coherent and complementary blocks of public policies that meet the specific needs of the SEZs and mobilizing the attention of all the Government’s sectoral departments and agencies.
The orientations defined in the Plan will make it possible, in a second phase, to define a medium-term development strategy for the SEZs that is aligned with the priorities defined at the global level and articulated with a clear, costed, and dated action plan.
Golden Rule No. 2 – Proper spatial planning of SEZs, with a view to networking the national territory with SEZs, taking into account the specificities of regional economic hubs and avoiding the establishment of SEZs on fertile agricultural land or in areas that are landlocked, poorly connected or difficult to develop, or unable to accommodate quality human capital.
Golden Rule No. 3 – Properly prepare the human resources that are to fill the jobs in SEZ enterprises. This may require identifying specific actions in the National Plan to set up specialized technical training schools, as well as defining incentives and support actions to promote the initial recruitment of graduates in SEZs.
Golden Rule No. 4 – Infrastructure development within and outside SEZs. This requires the inclusion in the National Development Plan of adequate resources to build world-class connectivity infrastructure (transport, energy, telecommunications, water, sanitation) linking SEZs to the rest of the country, not just confined to SEZs).
Golden Rule No. 5 – Maintain a proper balance in financing SEZ infrastructure to avoid overburdening the government’s budget, resulting in a negative cost/benefit ratio.
The promotion of SEZs developed by the private sector and the creation of investment companies involving the private sector and international financing institutions (African Development Bank (ADB), International Finance Corporation (IFC), Afreximbank, etc.) alongside the government could help. The latter institutions are in favor of this and have already mobilized resources to respond to requests from countries.
Golden Rule No. 6 – The definition of a good regulatory and fiscal framework for the promotion of SEZs, based on international best practices, setting a time limit on incentives and avoiding uncompetitive firms choosing to set up in SEZs solely to avoid taxes.
A good balance also needs to be struck between developing exports and promoting import substitution, since both strategies contribute to the same goal of improving the current account balance.
However, experience shows that countries that promote exports perform better in terms of productivity and growth than those that promote import substitution.
As for the tax system, it is not the most important factor in attracting investment to SEZs. African countries could therefore establish world-class industrial zones and agropolises as models for SEZs, housing in the same space highly competitive firms geared to the domestic market or to the external market; the latter receiving export credits in the form of tax rebates for external sales operations.
Golden Rule No. 7 – Establish effective SEZ administrations with good human and operational capacity and real management authority, based on a continuously assessed roadmap.
Golden Rule No. 8 – Accelerate the improvement of the overall business environment in the country, as the competitiveness of the SEZ is impacted by both internal factors and those in its overall environment within the country.
Golden Rule No. 9 – Encourage SEZ-based firms to establish joint ventures and subcontracting links with domestic SMEs outside the SEZ, as well as partnerships with national research networks, to build an ecosystem of integrated and technologically innovative clusters.
The country will gain in terms of developing the local content of SEZs, reducing imports of raw materials and intermediate goods, and transferring technology and good organizational practices to the rest of the economy. This could be a clearly identified conditionality in the incentive system put in place.
Golden Rule No.10 – The inclusion in SEZ development policies of actions that contribute to national development objectives other than economic ones, such as the promotion of decent employment and social welfare of workers, social responsibility, and environmental sustainability.
In doing so, SEZs can be powerful instruments for achieving the United Nations’ Sustainable Development Goals (SDGs) and the African Union’s Agenda 2063, and serve as testing grounds for new ways to promote sustainable and inclusive development (i.e., the establishment of Green SEZs).
Golden Rule N. 11 – The establishment of quality coordination between direct and indirect SEZ actors. Coordination between the SEZ administrator, the promoter/developer, the operator, and the installed companies, whose roles and responsibilities must be clearly defined in texts.
A framework for ongoing consultation must then be established between them to identify any difficulties very quickly and correct them. Coordination should also be established between SEZ actors and other public administrations, through the establishment of a true one-stop shop, as far as possible dematerialized, the identification of an autonomous SEZ regulatory framework (involving the private sector), and the institutionalization of concerted actions to promote investments and exports in SEZs and outside of SEZs
Golden Rule No. 12 – Institutionalize a good system for monitoring and evaluating the performance and impacts of SEZs by identifying appropriate indicators in advance, including them in the overall monitoring framework of the National Development Plan, and collecting data on the ground regularly.
An inter-ministerial monitoring committee could be set up to oversee this SEZ monitoring work. It would meet periodically at the political level (ministers, under the coordination of the head of government, once a quarter) and at the technical level (among the agencies and directorates general concerned, once a month). The success of SEZs must indeed be a top priority for the authorities, at the highest level of government, who must champion SEZs and give them political support.
Ultimately, the success of SEZs in Africa will not come by chance or luck. It will be the result of intense efforts that are harmoniously coordinated and implemented methodically and with a spirit of voluntarism and transformational leadership.
Each African country should conduct its own self-diagnosis to assess the degree to which the twelve rules identified have been achieved. Lessons should also be learned from the experiences of the thousands of SEZs operating around the world and the continental SEZs grouped in the African Special Economic Zones Organization (AEZO). Upgrading actions can then be selected to close, as soon as possible, the gaps observed in relation to best practices and accelerate the productive transformation of the continent’s countries, in accordance with the wishes of the African Union.