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Special Economic Zones in Africa
Box 3.1
Local Entrepreneurs in Latin America’s Free Zones: Catalysts and Catalyzed Honduras The Honduran government realized early on the need for private sector participation in the establishment of SEZs. Only a few years after the enactment of the free zone law of 1976, the law was extended from the public enclave of Puerto Cortés to a number of other counties to allow private entrepreneurs to establish and operate SEZs. However, while the initial law was neutral with regard to country of origin, in implementation it allowed only foreign exporters to enjoy the benefits for many years. It was not until the enactment of the EPZ law in 1987 that de facto discrimination between domestic and foreign manufacturers ended. Local entrepreneurs, already active in the garment sector, responded quickly to set up not only manufacturing facilities but larger industrial parks. This local participation was seen as an important signal by interested foreign investors, and it played a major role in catalyzing the large FDI that flowed into the maquila sector during the 1990s. Dominican Republic In the Dominican Republic, the free zone program was also exclusively foreign at the start. Unlike in Honduras, there were no local entrepreneurs with significant investments in the garment sector, but the free zone program helped create a new and sophisticated national entrepreneur class that mastered export strategies and instruments. Local investment grew rapidly during the 1980s and 1990s, rising from 11 percent of free zone firms in 1985 to 35 percent by 2000 (Schrank 2008). A large number of the Dominican companies now operating in the free zones are owned by entrepreneurs who started as employees of foreign-owned companies. Source: Author.
chart in Figure 3.5, which shows that, outside of Lesotho and possibly Ghana, investment in the zones is spread across a variety of sectors (mainly in “Other manufacturing”), with little evidence of clustering. Why might African zones be different in this regard? Most investment in SEZ programs is of the export platform variety: It is primarily efficiencyrather than market-seeking. And for most traditional export processing