Early Reform Zones: Catalysts for Dynamic Market Economies in Africa
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demonstration effect on adjacent firms in the distorted economy, but also through the establishment of additional ERZs. The dual-track strategy recently acquired greater interest for African economies because China is contributing to seven economic zones in the continent, partly to encourage the globalization of Chinese firms, and it may extend the total number (Brautigam and Tang 2010). The Chinese experiment is partly a response to the disappointing track record of most, but not all, previous SEZs in Sub-Saharan Africa. Watson (2001) attributes the failure of the continent’s EPZs other than Madagascar (and Mauritius) to implementation failures rooted in deficient infrastructure, unstable incentives, and inadequate government services (including export zone management). He might have added macroeconomic instability as a fourth cause of failure because macroeconomic conditions deteriorated in many Sub-Saharan African economies through the 1970s, and improvements in most economies were delayed (by entrenched rentseeking interests) into the late-1990s. Cling, Razafindrakoto, and Roubaud (2005) contrast the robust success of EPZs in Madagascar (until recently) with failures elsewhere in the continent, such as Senegal, Cameroon, Kenya, and Zimbabwe. Glick and Roubaud (2006) demonstrate the beneficial employment outcomes of the Madagascar EPZs, which predominantly employ young, semiskilled female workers. The workers earn significantly more than their counterparts in the informal sector and are remunerated at a similar rate to men, improving gender wage equity. Glick and Roubaud also report that EPZ jobs are comparable to (and some superior to) jobs elsewhere in the formal sector, although long hours and high worker turnover restrict the EPZ as a source of long-term employment. However, Cling, Razafindrakoto, and Roubaud (2005) also confirm the importance to successful zones of stability, including a sound macroeconomic environment, which few governments in Sub-Saharan Africa could sustain through the 1970s and 1980s, but more have managed since. Provided that macrostability is achieved, not least in regard to the real exchange rate, ERZs are designed to address the criticisms of first-generation SEZs. This chapter is presented in four sections. The next defines the ERZ in the context of related spatial policy tools for economic restructuring and identifies, and corrects, a basic confusion in both the terminology of zones and zone objectives. The following section analyzes the successful experiences with first-generation SEZs in China, Malaysia, and Mauritius, noting how their SEZs functioned as catalysts for economywide economic reform. The next section explains how ERZs can avoid the generally