Zone Practices: Policy, Planning, and Strategy
157
Box 6.2
Policy Reversals in Senegal’s Economic Zone Program In Senegal, weak policy design in the zone program resulted in unintended consequences when it rolled out. Often, the reaction to problems was to abruptly cancel policies, initiate new ones, or return to old ideas, creating an unpredictable environment for investors. Senegal’s policies flipped on many issues, including these: 1. Eligibility requirements: Under the initial 1974 law, strict requirements on capital investment and employment creation and an explicit exclusion of domestic investors limited investment to large foreign direct investors. This policy was amended in 1983. 2. Corporate tax exemption: The 1974 law offered 100 percent exemption from corporate tax; under the 1995 law, a 15 percent corporate tax was applied; under the 2007 law for the Dakar Integrated Special Economic Zone (DISEZ), 100 percent exemption is also offered. The 1974 and 2007 laws relate to specific enclaves, but the 2007 law brings back the distinction between enclaves and the national territory that the 1995 law attempted to eliminate. 3. Access to local market: The 1974 law allowed 40 percent of output to be sold locally; under the 1995 law, this was reduced to 20 percent; the 2007 DISEZ law places no restrictions on local market sales, which face a 2 percent tax. 4. Enclaves versus national territory: Under the 1991 law creating the “points francs.” the government attempted to extend benefits beyond the Dakar Industrial Free Zone (DIFZ) enclave to the national territory. As a result of poor controls on eligibility, the entire program had to be cancelled. The 1995 law effectively reextended the benefits beyond the enclave; however, as noted above, the 2007 DISEZ restablished the distinction between exporters in the national territory and those in the free zone enclave. Source: Author.
From Policy to Practice: Strategic Planning in SEZs A critical foundation for SEZ programs is thorough strategic planning based on a rigorous assessment of demand. Development of an individual zone should be guided by the market demand study for location, investment phasing, and marketing and promotion. One of the striking features of many SEZ programs in Sub-Saharan Africa (with exceptions such as Mauritius, Madagascar, and Kenya) is that the