One of the new approaches that can be used to foster trade development in Africa is establishment of export processing zones (EPZs). EPZs or duty free zones are areas where domestic and foreign firms locate their production facilities for manufacture, assembly or processing of goods. (Din, 1994) The advantages that EPZ creation offers include the rapid expansion of the industrial base, stimulation of the domestic sector through linkages with the rest of the economy, and alleviation of the problem of unemployment in the host country. The Asian and Pacific countries have used free trade zones as instruments of development more than any other developing nations. The establishment of EPZs has been a huge success in Hong Kong, Singapore, China, Taiwan and South Korea.
There are divergent views on the role of EPZs in stimulating and sustaining economic growth. Rondinelli (1987), in his review and reassessment of EPZ as a means of promoting growth, increasing employment, and promoting economic development in Asia, argued that EPZs have created new employment, generated foreign exchange, expanded national revenues and increased export flows. He however added that large EPZs might promote undesirable in-migration from rural areas and produce more dependence on foreign-owned firms. Nevertheless he concluded that the benefits that EPZs confer are usually more than the cost.
Heron (2002) presents an assessment of the contribution EPZs in the Caribbean in terms of the costs and benefits associated with offering preferential treatment to export-oriented investment, the backward linkages fostered between assembly operations and the domestic economy, as well as the extent of technology transfer. He concludes that even though the EPZs offer the host country undeniable benefits in terms of employment and foreign exchange earnings, their contribution to industrial transformation is not substantial. However, in practical terms, it seems clear that the establishment of an EPZ would normally lead to the creation of new employment, generate foreign exchange, increase national revenue, increase export flow and also attract foreign investment.
While, this is not without a cost, the benefits produced by EPZs are usually quite significant.
The success of the newly industrializing countries of South-east Asia (Hong Kong, Singapore, South Korea, and Taiwan) in developing through industrial export-led growth has demonstrated that this is a bone fide avenue for rapid economic development, Iyoha (2003). A pre-requisite for successful growth that is driven by the exportation of manufactured goods is domestic industrialization and vigorous export promotion. In addition to the production of high-quality manufactured goods, successful exportation requires creative marketing, attractive packaging, acquisition of information on demand conditions in foreign markets, flexibility, adaptability and zeal in penetrating foreign markets. Africa has the potential in terms of human resources, raw materials, and access to the requisite technology. What are needed are the will, organizational acumen and persistence to succeed.
For several reasons especially the success of export-led growth in South East Asia, the current international orthodoxy is in favour of export-oriented trade policy. A critical feature of such a strategy is export promotion. The policy of export promotion is being canvassed for many reasons including:
· the improvement of the balance of trade and balance of payments; · a source of export-led growth; · in order to promote capital inflows and improve the competitiveness of domestic industries; and · a means of encouraging the diversification of production and exports.
African Development Bank Economic Research Working Paper Series Enhancing Africa’s Trade: From Marginalization to an Export-Led Approach to Development Milton A. Iyoha Professor, Department of Economics & Statistics University of Benin, Nigeria Economic Research Working Paper No 77 (August 2005)
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The African Development Bank is the
premier financial development institution
of Africa, dedicated to combating poverty
and improving the lives of people of the
continent and engaged in the task of
mobilizing resources towards the economic
and social progress of its Regional Member
Countries.The Bank’s s mission is to
promote economic and social development
through loans, equity investments, and
technical assistance.
The ADB is a multilateral development bank
whose shareholders include 53 African
countries and 24 non-African countries
from the Americas, Asia, and Europe. It
was established in 1964, with its
headquarters in Abidjan, Côte d’Ivoire,
and officially began operations in 1967.
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