Zone Practices: Operations, Management, and Learning
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Box 7.6
Programs to Support Local Linkages: Vietnam and Kenya Vietnam-Japan Joint Initiative In Vietnam, Japanese organizations have been particularly prominent in promoting a support industry network within the electronics and automotive sectors. Specifically, the Vietnam-Japan Joint Initiative to Improve Business Environment with a View to Strengthening Vietnam’s Competitiveness, signed in December 2003, calls for the “development, introduction, and utilization of supporting industry in Vietnam.” The Japan External Trade Organization, in association with investment and trade promotion centers in northern and southern Vietnam, holds an annual exhibition in which Japanese buyers are matched with Vietnamese suppliers. In early 2009, Vietnam’s first dedicated industrial zone for supporting industries was established in Bac Ninh province near Hanoi. Kenya’s incubator program at Athi River Recognizing the opportunities for the local SMEs and the interest shown by local small enterprises to enter the export market, Kenya’s Export Processing Zones Authority (EPZA), along with partners Kenya Industrial Estates Ltd. and the Kenya Export Promotion Council, established the EPZ Business Incubator Program at Athi River to help local SMEs grow into exporting enterprises. The program provides purpose-built infrastructure and support services at subsidized rates and offers standard EPZ tax benefits and a special dispensation for incubator firms to sell a higher percentage of their output to the local market than is normally allowed during the first four years of operation.10 The program helps incubator firms establish direct exporting and subcontracting relationships with larger firms (not strictly limited to EPZ firms). Source: Author.
Effective training programs and vibrant local labor markets are critical to facilitating knowledge spillover. Besides supply relationships, the main channel for spillovers from FDI are likely to be through the movement of skilled labor across firms. Low worker skills, limited vocational training, and rigid labor markets are major barriers to integration, particularly in the countries studied. Countries such as Senegal and Ghana—in which high proportions of local management are employed in the zones—have some of the most rigid labor markets in the world, according the Doing Business ratings (World