Assessing the Outcomes in Africa’s SEZs
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Lesotho, exports are down 25 percent since 2004 and although employment has held firm since 2006, at least 8,000 jobs have been lost since 2004. In Kenya, job losses in the SEZs are nearing 10,000 from their peak. Tanzania was unfortunate in launching its program just as the MFA was being phased out. The program originally had commitments from a significant number of garment manufacturers, almost all of whom eventually decided against investing or have closed down. Despite the success of Ghana’s free zone program in other sectors, it has been unable to rescue the apparel sector (see Box 3.4). But in the face of these competitiveness challenges, some zone programs have been successful in at least beginning the process of adjustment. In the Dominican Republic, for example, the flat export picture since 2000 masks substantial sectoral shifts. As shown in Figure 3.10, textile exports declined by more than half between 2000 and 2008, but this was offset by 60 percent growth in nontextile exports.14 Sectors such as jewelry, electronics, pharmaceuticals, and even call centers are taking over from the traditional garment sector. This shift has contributed to rapidly increasing value added in the zones (value added per worker grew nearly 12% annually between 2004 and 2008). But it has come at the cost of the SEZs maintaining their traditional role as a generator of large-scale employment: Employment in the free zones declined by more than 70,000 (36%) from its peak of over 195,000 in 2000. Kenya has also shown some evidence of shifting sectoral structure inside the zones. While apparel exports declined some 10 percent between 2004 and 2008, nonapparel exports more than doubled during this period, contributing to steady overall export growth in the program. Indeed, while apparel accounted for 84 percent of Kenya’s EPZ exports in 2003, by 2008 it represented less than half. Other sectors—such as horticultural and food processing, call centers, and human and veterinary pharmaceuticals—have emerged in the zones. Productivity is rising steadily in Kenya’s EPZ program, in part owing to a shift toward higher value production but also to growing price competition within the apparel sector, which is forcing the remaining apparel companies to maintain volumes with fewer workers. We now turn to intermediate measures of zone outcomes; specifically, the extent to which SEZs are facilitating spillovers of knowledge and technology to the local economy. The first channel through which these spillovers may occur is through product market links between SEZ firms and firms in the domestic economy. These links can be either forward or