Assessing the Outcomes in Africa’s SEZs
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that start with substantial FDI are eventually dominated by locally based firms. This was the case, for example, in Mauritius, Malaysia and the Republic of Korea,5 and a similar pattern is beginning to emerge in China. Looking at our sample countries, we find moderate share of local ownership in most countries, with substantial levels in Vietnam, Senegal, and Tanzania. However, this top-line figure may mask underlying differences in the nature of investment in the African and non-African zones. Specifically, the non-African zones have shown some evidence of the shift from foreign to local investment. For example, in Vietnam, local share of investment projects rose steadily from around 23 percent in 1995 to over 50 percent by 2008. Local investors have also played critical roles in the zone programs in Honduras and the Dominican Republic (see Box 3.1). In the case of the African zones, however, the same pattern does not appear to hold. For example, new programs, such as that in Tanzania, have had high shares of local investment from the outset. This, in combination with the low levels of FDI attracted into the African zone programs to date, suggests that the relatively high share of local investment may reflect a failure to attract FDI as much as success in attracting local investors. A second explanation—particularly in programs such as Senegal’s—is the existence of single unit licenses and the propensity of locally based firms to switch into the SEZ program. On a more positive note, this may reflect the relative perceived advantage of the SEZ operating environment even to local firms and perhaps indicates a pent-up demand for investment opportunities by the domestic private sector. From the available data, we are unable to determine which, if any, of these explanations is true. Focusing on FDI only, Figure 3.4 illustrates the main sources of investment in each of the zone programs, by region of investment origination. Several points stand out. The first is the general dominance of East Asian investors, particularly in programs focused on the garment and textile sectors (with the exception in the Dominican Republic and Honduras). Second, while the two Asian SEZ programs are mainly used as export platforms by regionally based (Asian) investors and the two Latin American zones (Dominican Republic and Honduras) play a similar role for U.S. investors, the African zones have no such dominant investor source. European investors play a relatively greater role in SEZ investment in the African zones, but they are by no means the dominant source. Indeed, the African zones tend to source investment from a wide variety of locations. For the most part, they have not established themselves as obvious regional export platforms. This is further evidenced by the bar