Second best ? investment climate and performance in Africa's special economic zones

As an instrument of trade and investment policy, special economic zones have played a catalytic role in processes of industrialization, diversification, and trade integration in many countries, particularly in East Asia. However, in the African context, anecdotal evidence suggests the experience has been disappointing on the whole. Among the reasons why many zones underperform may be that they fail to establish a high quality investment environment -- this is, after all, one of the main promises that economic zones hold for investors. Drawing on original survey research, this paper presents a systematic analysis of the outcomes and the investment climate of economic zones programs in six African countries and four developing countries outside the region. The analysis finds that although performance across zones is mixed -- with Ghana and Lesotho in particular performing well on some measures -- African zones programs on the whole are underperforming in terms of attracting investment, facilitating exports, and creating jobs. Economic zones in Africa offer an improved business environment relative to what is available to firms based outside the zones; however, in comparison with the non-African countries in the survey, both absolute investment climate performance and relative improvements fall well short.Environmental Economics&Policies,Emerging Markets,Debt Markets,Investment and Investment Climate,ICT Policy and Strategies

Special Economic Zones: What Have We Learned?

It has been more than 50 years since the establishment of the first modern special economic zones. During this time, SEZs have been credited with underpinning the dramatic export-oriented growth of China and other East Asian countries. While they remain a controversial instrument, policy makers appear to be increasingly attracted to economic zones. Since the mid 1980s, the number of new zones has grown rapidly, with significant expansion in developing countries. But in this postcrisis environment, the context in which zones operate is changing. Increasingly, the effectiveness with which they are designed, implemented, and managed will determine their success. This note outlines key lessons that have emerged from the experiences of zone programs in developing countries over recent decades.SEZ, special economic zone, shenzhen, singapore, economic development, industrialization, employment, exports, exprot-led growth, trade

An economic integration zone for the East African Community : exploiting regional potential and addressing commitment challenges

Integration in the East African Community offers significant opportunities not only to expand trade among member states, but more importantly to scale up regional production to take advantage of much larger global market opportunities. Special economic zones are a potentially valuable instrument to facilitate the integration of regional value chains in support of this scaling up. They also have the potential to deliver powerful demonstration effects on the benefits of integration and to help entrench the integration process. This paper discusses the proposal for developing an"economic integration zone"in the East African Community. The benefits of such a zone could be substantial, as would be the practical challenges to implementation -- in particular the political economy challenges. However, a number of institutional and commercial solutions exist to address these challenges.Debt Markets,Emerging Markets,Economic Theory&Research,Banks&Banking Reform,Public Sector Economics

Trade finance in crisis : market adjustment or market failure ?

As world leaders have agreed to massively support trade finance, this paper discusses the singularity of the issues related to trade finance in the context of the global economic crisis. Why should international trade finance be a particular issue of concern in the current circumstances? Are there specific market or government failures associated with trade finance that justify a special and differential treatment of the issue by policymakers? If so, what would then be the most appropriate policy instruments to address those concerns? The paper cautions against the notion of a large trade finance"gap,"yet highlights the possible rationales and conditions for an effective intervention in support of trade finance.Debt Markets,Banks&Banking Reform,Access to Finance,Emerging Markets,

Trade and the Competitiveness Agenda

The global economic crisis has forced a major rethinking of the respective roles of governments and markets in the processes of trade and growth. Indeed, industrial policy seems to be back in fashion—or, at least, talking about it is. But a renewed “activism” by government in the trade and growth agenda need not mean a return to old-style policies of import substitution and “picking winners.” Instead, it may mean a stronger focus on competitiveness by unlocking the constraints to private sector–led growth. This note discusses the renewed role of government in trade and growth policy from the competitiveness angle, and it suggests some priorities for the new competitiveness agenda.trade, competitiveness, financial crisis, growth, industrial policy, import substitution, picking winners, trade policy, exports, imports

China’s Investment in African Special Economic Zones: Prospects, Challenges, and Opportunities

China’s recent moves to establish special economic zones (SEZs) in several African countries can make a significant contribution to industrialization in Africa. But the success of these projects is by no means guaranteed. Meeting the objectives of both China and African countries will require an active partnership and a framework for collaboration that includes engagement from host governments, processes for phasing-in local control, communication and enforcement of standards, and support for integration with local economies.China, investment, Africa, special economic zone, SEZ, industrialization, partnership, development, World Bank, foreign direct investment

Analyzing trade competitiveness : a diagnostics approach

Trade has proven to be a powerful engine of growth worldwide. But not all countries have benefited equally. Despite much effort to use trade policy to catalyze exports, many developing countries have failed to achieve successful, sustainable export and economic growth. Even with the benefit of preferential market access, many developing country exporters face a broad and diverse set of constraints that limit their potential to compete in export markets. This paper discusses the concept of"competitiveness"with respect to trade and the various dimensions on which trade competitiveness might be assessed. It argues there is a need for a framework by which trade competitiveness can be assessed in a systematic way. Inspired by the"growth diagnostics"approach, it outlines a possible framework for assessing factors that facilitate or constrain trade competitiveness.Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,E-Business,Currencies and Exchange Rates

Social capital, rules, and institutions: A cross-country investigation

Research on the institutional foundations of economic development emphasizes either rulebound systems of exchange or informal bonds between individuals and within small groups. This corresponds to a classical division in social science, between the forces of society and those of community. This cleavage largely ignores their interactions, which are likely to shape the institutions that underpin economic development in decisive ways. This paper operationalises and tests how the interaction of the forces of community (or social capital) and society (or rules) impact three types of institutions: those involved in problem solving, those that shape microeconomic efficiency and those that influence social policy, across fiftyeight countries. We find that both community and society are important determinants across all institutional domains, and are in many cases mutually reinforcing, but that different specific aspects of community and society are most relevant to different institutional domains. Instrumental associationalism, whether formal or informal, and a robust rules environment are the most important determinants of positive institutional outcomes.

Cohesion policy in the European Union: Growth, geography, institutions

Since the reform of the Structural Funds in 1989, the EU has made the principle of cohesion one of its key policies. Much of the language of European cohesion policy eschews the idea of tradeoffs between efficiency and equity, suggesting it is possible to maximise overall growth whilst also achieving continuous convergence in outcomes and productivity across Europe’s regions. Yet, given the rise in inter-regional disparities, it is unclear that cohesion policy has altered the pathway of development from what would have occurred in the absence of intervention. This paper draws on geographical economics, institutionalist social science, and endogenous growth theory, with the aim of providing a fresh look at cohesion policy. By highlighting a complex set of potential tradeoffs and inter-relations – overall growth and efficiency; inter-territorial equity; territorial democracy and governance capacities; and social equity within places – it revisits the rationale of cohesion policy, with particular attention to the geographical dynamics of economic development.

Community, society and adaptation: Assessing the institutional factors behind long-run growth in the local and regional economy.

The purpose of this thesis is to develop and test a framework on the role and dynamic interaction of group life (community) and societal rules (society) as one of the factors shaping patterns of economic growth and adaptation. Cross-country regression analysis is undertaken to determine the significance of the relationships between community and society (individually and jointly) and various institutional factors. Following this, two pairs of comparative city-region case studies explore how these dynamics play out in specific geographical and institutional contexts. The findings confirm the importance of the interaction between community and society in shaping individual incentives and territorial responses to change. In general, 'bridging' forms of community and strong societal rules facilitate positive outcomes, whilst 'bonding' forms of community have broadly negative impacts on growth and adaptation. Critically, the significance and impact of community appears to be dependent on the societal environment in which it operates. Community matters most when society is weakest, but community is not simply a substitute for rules; indeed community and society appear to potentiate positive outcomes in important cases, for example near the technology frontier. Diversity - of sectors, groups, and institutions - appears to be particularly important in facilitating positive forms of community and society interaction, and in promoting adaptive economies. Overall, there is strong recursivity in the relationships, suggesting path dependency (lock-in or evolution) may be the norm. The study contributes to understanding the 'black box' of institutions, particularly within the context of regional economies, and underlines the importance of the role of community- level forces and political economy in processes of economic growth and adjustment. It suggests there is value in pursuing the role of institutions still further, and exploring in more detail the agenda of an evolutionary economic geography