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Special economic zones to fast track Kenya’s Vision 2030

By Mohamed Omar | June 27th 2015

NAIROBI: After decades of under-performance, the Chinese economy almost stagnated during the 1970s. This occasioned calls for systemic change and pervasive economic reforms, buoyed in part by signals from the top national leadership to institute open door policy. This was a qualitative shift from the centralised and planned economic policies hitherto adopted by the country. To move its economy towards modernisation and internationalisation, China chose Special Economic Zones (SEZs) which are perhaps the most emblematic of market-oriented economies only helped to underscore that dramatic shift.

By 1980, Shenzhen a tiny fishing village in Southern China bordering Hong Kong and with a population of about 300,000 people, was designated as an SEZ to engender economic transformation and attract foreign direct investment. SEZs are designated areas that enjoy preferential treatment in terms of economic laws and policies often with a view to spur export-oriented industries and create employment. They possess common features, strategic locations that enjoy close proximity to potential markets and supply lines and next ports. In the early years, Shenzehn was characterised by light industries where textiles, household goods, furniture and electronics were produced. Just half a decade after its formation, however, researchers and practitioners alike attested to the performance of Shenzehn. Not only did light industries flourish, but the desired heavy and high-end industries made their mark as well.

According to analysts, the zone’s IT and communication sectors contributed a substantial part of the TV sets produced nationally within five to six years of its inception. And 15 years later, it accounted for 14 per cent of the global output of floppy disks, eight per cent of hard drives and six per cent of PC motherboards while accounting for 30 per cent of PCs and 85 per cent of floppy disks in the Chinese domestic market during the same period.

Over the years, Shenzehn has witnessed an average growth rate of 30 per cent, with a GDP per capita of about USD12,000 today. Nearly 30 years after China embraced market economy through creation of Shenzhen and other SEZs, Kenya was going through its own transformative shift in planning for socio-economic development with the launch of Vision 2030.

Currently under implementation, the Vision 2030 builds on successive cycles of development plans and programmes since independence, including import substitution programme, structural adjustment programme and an economic recovery strategy. If the deeply ingrained and centrally planned economy in China was dichotomous to the capitalistic and profit-maximisation ethos of SEZs, then Kenya’s attempt to transition to an industrialising and knowledge-based society through long-term planning horizons with multi-component and complex projects, though not as drastic, was nonetheless a far-cry from the short-term planning and smaller projects of years past.

Industrialisation, employment creation and poverty reduction being central themes under Vision 2030, SEZs have been identified as flagship projects under the economic pillar. Mombasa, Kisumu, and Lamu have been designated as sites for the zones. SEZs can confer several advantages, if well managed. These include: creation of employment, development of logistics and supply chain networks, promotion of export-oriented industrial base, enhanced infrastructure, economies of scale and knowledge and technological transfer resulting from joint ventures with global firms.

Implementation of SEZs requires legal and policy frameworks; sound macro-economic fundamentals; tax breaks and concessions; streamlined administrative procedures and ease of doing business; skilled manpower; regional and international integration; infrastructure and the application of science and technology.

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