Second Best? Investment Climate and Performance in Africa’s Special Economic Zones

As an instrument of trade and investment policy, special economic zones have played a catalytic role in processes of industrialization, diversification, and trade integration in many countries, particularly in East Asia. However, in the African con...

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Bibliographic Details
Main Author:	Farole, Thomas
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING AFFILIATED ORGANIZATIONS BENEFICIARIES BOND BONDS BUSINESS ENVIRONMENT BUSINESS REGULATIONS CAPITAL INVESTMENT CATALYTIC ROLE CITIES COMMODITIES COMMODITY COMPARATIVE ADVANTAGE COMPARATOR COUNTRIES COMPETITIVE ENVIRONMENT CORPORATE TAX CORPORATE TAXES DEREGULATION DEVELOPING COUNTRIES DOMESTIC ECONOMY DOMESTIC INVESTMENT DOMESTIC INVESTORS DOMESTIC MARKET ECONOMIC CHANGE ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIC VALUE ECONOMIC VALUE ADDED ECONOMISTS EMPIRICAL STUDIES ENVIRONMENTAL ENVIRONMENTAL IMPACT ENVIRONMENTS EPZ EQUIPMENT EXCHANGE CONTROL EXPORT GROWTH EXPORT MARKETS EXPORT PROCESSING ZONES EXPORTERS EXTERNALITIES FACTORS OF PRODUCTION FINANCIAL SERVICES FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OWNERSHIP FREE TRADE GLOBAL EXPORTS GLOBAL TRADE GLOBALIZATION GOOD GOVERNANCE GROWTH RATES HOLDING HOST COUNTRIES HOST COUNTRY HOST ECONOMIES INCOME INSTRUMENT INTERNATIONAL BANK INTERNATIONAL INVESTORS INTERNATIONAL TRADE INVESTING INVESTMENT CLIMATE INVESTMENT CLIMATE ISSUES INVESTMENT CLIMATE REFORMS INVESTMENT CLIMATES INVESTMENT CRITERIA INVESTMENT ENVIRONMENT INVESTMENT LOCATION DECISIONS INVESTMENT OPPORTUNITIES INVESTMENT PATTERNS INVESTMENT POLICY INVESTMENT PROJECTS INVESTOR INCENTIVE LABOR COSTS LABOR MARKET LEARNING LOCAL ECONOMY LOCAL INVESTMENT CLIMATE LOCAL INVESTORS LOCAL MARKET MARKET ACCESS MARKET INTEGRATION MARKET SIZE MATURITY METALS MULTINATIONAL FIRMS NATIONAL INVESTMENT NATIONAL INVESTMENT CLIMATE NATURAL RESOURCES OIL OPPORTUNITY COSTS OUTPUT POLICY ENVIRONMENT POLICY INSTRUMENTS POLITICAL ECONOMY POLITICAL STABILITY POWER OUTAGES PRIVATE ENTITIES PRODUCERS PRODUCTION TECHNIQUES PROFITABILITY PROGRAMS PROPERTY RIGHTS RAPID GROWTH RATES OF RETURN REGIONAL TRADE REGULATORY BURDEN REGULATORY ENVIRONMENT REGULATORY REQUIREMENTS RULE OF LAW SHARE OF INVESTMENT SMALL COUNTRIES STARTUP STOCKS STREAMS STRUCTURAL ADJUSTMENT TECHNOLOGY TRANSFER TECHNOLOGY TRANSFERS TELECOMMUNICATIONS TIMBER TRADE STATISTICS TRANSACTION TRANSACTION COSTS TRANSACTIONS COSTS UNEMPLOYMENT WORLD DEVELOPMENT INDICATORS
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101018102611 http://hdl.handle.net/10986/3930

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Summary:	As an instrument of trade and investment policy, special economic zones have played a catalytic role in processes of industrialization, diversification, and trade integration in many countries, particularly in East Asia. However, in the African context, anecdotal evidence suggests the experience has been disappointing on the whole. Among the reasons why many zones underperform may be that they fail to establish a high quality investment environment -- this is, after all, one of the main promises that economic zones hold for investors. Drawing on original survey research, this paper presents a systematic analysis of the outcomes and the investment climate of economic zones programs in six African countries and four developing countries outside the region. The analysis finds that although performance across zones is mixed -- with Ghana and Lesotho in particular performing well on some measures -- African zones programs on the whole are underperforming in terms of attracting investment, facilitating exports, and creating jobs. Economic zones in Africa offer an improved business environment relative to what is available to firms based outside the zones; however, in comparison with the non-African countries in the survey, both absolute investment climate performance and relative improvements fall well short.

Second Best? Investment Climate and Performance in Africa’s Special Economic Zones

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