A Feasibility Study of Introducing Free Economic Zones in Zimbabwe

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MIDLANDS STATE UNIVERSITY

FACULTY OF COMMERCE

DEPARTMENT OF BANKING AND FINANCE

A Feasibility of introducing Free Economic Zones in Zimbabwe

HANYIRE LUCKMORE

REGISTRATION NUMBER: R114962F

SUPERVISOR: DR N. NKOMAZANA

This disser tation is submit ted in parti al ful fi lment of the requirements of the Bachelor of

Commerce Honours Degree in Banking and F inance Honour s Degree at

Midlands State University

Gweru: Zimbabwe

OCTOBER 2015



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APPROVAL FORM

The undersigned certify that they have supervised the student Noel Gumbo. Dissertation entitled:

A feasibility study for the introduction of free economic zones in Zimbabwe submitted in

partial fulfilment of the requirements of the Bachelor of Commerce (Honours) degree in Banking

and Finance at Midlands State University.

.................................................... ....................................................

SUPERVISOR DATE

.................................................... ....................................................

CHAIRPERSON DATE

.................................................... ....................................................

EXTERNAL EXAMINER DATE



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RELEASE FORM

NAME OF STUDENT HANYIRE LUCKMORE

DISSERTATION TITLE A feasibility study for the introduction of

Free Economic Zones in Zimbabwe

YEAR THIS DEGREE GRANTED 2015

Permission is hereby granted to the Midlands

States University library to produce single

copies of this dissertation and to lend or sell

such copies for private, scholarly or scientific

research purposes only. The author does not

reserve other publication rights and neither

dissertation nor may extensive extracts from it

be printed or otherwise reproduced without

the author’s written permission.

SIGNED --------------------------------------------------

PERMANENT ADRESS 17814/5 Mbizo

Kwekwe

OCTOBER 2015

DATE --------------------------------------------------



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DEDICATION

To my mom and our dad and to all those who aim higher keep on trying your effort will be

rewarded.



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ABSTRACT

The rational of the study sought to do a feasibility of introducing FEZ in Zimbabwe. The research

used primary data obtained from the questionnaires that were given to corporate senior managers

and the personal interviews. Research instruments used were questionnaires that were given to

Research and Development personnel and personal interviews. The sample consisted of 10

research subjects but only 8 respondents managed to participate in the study. STATA 13 was used

to analyse both primary and secondary data and the results were presented using tables and

percentages for clear understanding. Questionnaires were tested for reliability.The literature

review was also used to provide information on the relationships of FEZ and the economy. The

study showed that the policies, systems are not investor friendly meaning there is need for a

complete panel beating which will be of great importance to the economy. The study found out

that FEZ introduction is very feasible in Zimbabwe if and only if the success factors of FEZs are

considered in the establishment process. This study recommends that restructuring and coming up

with new policies is necessary to revamp the economy through boosting exports and attracting

FDI. It is also necessary for organizations to build or uphold their operational systems as well as

equipping staff with all necessary skills to produce world class quality. Finally, it is recommended

that further research be undertaken, in order to establish the sustainability of FEZ in Zimbabwe

and in other developing countries.



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TABLE OF CONTENTS

APPROVAL FORM ................................................................................................................................... i

LIST OF FIGURES ................................................................................................................................. xii

CHAPTER ONE: INTRODUCTION ..................................................................................................... 1

1.1 Introduction ........................................................................................................................... 1

1.2 Background to the Study ....................................................................................................... 1

1.3 Problem Statement ................................................................................................................ 4

1.4 Research Objectives .............................................................................................................. 4

1.5 Research questions ................................................................................................................ 5

1.6 Assumptions .......................................................................................................................... 5

1.7 Significance of the Study ...................................................................................................... 5

1.8 Limitations ............................................................................................................................ 6

1.9 Delimitations ......................................................................................................................... 6

1.10 Definition of Terms ............................................................................................................. 6

1.11 Organization of the Study ................................................................................................... 6

CHAPTER 2: LITERATURE REVIEW ................................................................................................ 8

2.2 Theoretical literature review ................................................................................................. 8

2.2.1 Concept of FEZs ............................................................................................................. 8

2.3 Empirical literature Review ................................................................................................ 27

2.3.1 Export Development and Export .................................................................................. 28

2.2.6 Investment Promotion................................................................................................... 31

2.3.10 Adequacy of infrastructure ......................................................................................... 32

2.3.11 Economic outlook ....................................................................................................... 32

2.4 Summary ............................................................................................................................. 33

CHAPTER THREE: RESEARCH METHODOLOGY ...................................................................... 35

3.1 Introduction ......................................................................................................................... 35

3.2 Research Design .................................................................................................................. 35

3.3 Research Population ............................................................................................................ 35

3.4 Judgemental Sample ............................................................................................................ 35



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3.5 Data Collection Methods and Instruments .......................................................................... 36

3.5.1 Primary Data Collection ............................................................................................... 36

3.5.2 Secondary Data Collection ........................................................................................... 38

3.6 Data Presentation and Analysis Plan ................................................................................... 39

3.7 Summary ............................................................................................................................. 39

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS ................................................... 40

4.1. Introduction ........................................................................................................................ 40

4.2 Analysis of Response Rate .................................................................................................. 40

4.2.1 Questionnaire Response Rate ....................................................................................... 40

4.2.2 Interview response rate ................................................................................................. 41

4.3 Reliability Test .................................................................................................................... 41

4.3 Data Presentation and Analysis ........................................................................................... 42

4.3.1 Duration in the Current Employment ........................................................................... 42

4.3.2 Exports after the adoption of the multi-currency regime ............................................. 43

4.3.3 FEZ fertile grounds availability .................................................................................... 44

4.3.4 Skills and robust system to meet export standards ....................................................... 45

4.3.5 Visibility of firms operating within/outside the FEZs .................................................. 46

4.3.6 Relationship between FEZ and economic growth ........................................................ 47

4.3.7 Impact of FEZ on FDI .................................................................................................. 48

4.3.7. Impact of FEZ on revenue ........................................................................................... 49

4.3.8 Impact of FEZ on Human development ....................................................................... 50

4.3.9 Impact of FEZ on employment creation ....................................................................... 51

4.3.10 Zimbabwe capacity to accommodate the business and sophistication in the zone area

............................................................................................................................................... 52

4.3.11 Challenges associated with FEZs ............................................................................... 53

4.3.12 The Legal and Regulatory Environment .................................................................... 55

4.3.13 Summation of the impact of all factors ...................................................................... 56

4.4 Summary ............................................................................................................................. 57

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ..................... 59

5.1 Introduction ......................................................................................................................... 59

5.2 Summary of the study ......................................................................................................... 59



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5.3 Conclusions ......................................................................................................................... 59

5.4 Recommendations ............................................................................................................... 61

5.5 Suggestions for future research ........................................................................................... 62

APPENDICES .......................................................................................................................................... 66



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ACKNOWLEDGEMENTS

I wish to express my gratitude to those who generously helped me colour this mosaic piece with

the tiles of their knowledge, I have taken literal license; but any factual errors are my

responsibility alone. My grateful thanks go to the following:

First and notable, I would like to thank Jesus Christ, my deliverer, for giving me the opportunity

and determination to carry out and complete this study

In addition, I would like to thank Dr Nkomazana, my supervisor for allowing me to study under

him and for his guidance, assistance and intuition that made this study possible. His reviews and

comments on the drafts of this study were invaluable.

I would also want to thank Tanaka Hungwe and Simon Nyamuvurudza for the encouragementsand support during the hard times.

To all those I have omitted, your efforts and support have not gone unnoticed, I thank you very

much and may God greatly bless you. Thank you all for the sacrifices you made in making this

journey towards my academic excellence a success.

To all those who participated in the project, May God richly bless you.

To those not mentioned it will be you tomorrow.

May God bless you all.

Luckmore Hanyire



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LIST OF ABBREVIATIONS AND ACRONYMS

AML Anti Money Laundering

BACOSSI Basic Commodity Supply Side Intervention Facility

CFT Controlling Financing of Terrorists

CZI Confederation of Zimbabwe Industries

ESAP Economic Structural Adjustment Program.

FATF Financial Action Task Force

FDI Foreign Direct Investment.

FEZ Free Economic Zone

EPZ Export Processing Zone

EPZA Export Processing Zone Authority

GAZ Giant Awakening Zone (hypothetical)

GDP Gross Domestic Product.

GNP Gross National Product.

ILO International Labour Organisation

IMF International Monetary Fund.

IIP Index of Industrial Production.

IDC Industrial Development Cooperation

MDC Movement for Democratic Change

MNCs Multinational Corporations.

MNEs Multinational Enterprises.

PSF Productive Sector Facility

RBZ Reserve Bank of Zimbabwe.

R &D Research and Development



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SEZ Special Export Zone

SME Small to Medium Enterprise

SSA Sub-Saharan Africa.

UNCTAD United Nations Conference on Trade and Development.

UNIDO United Nations Industrial Development Organisation

UNDP United Nations Development Programme

WDI World Development Indicator.

WEPZA World Export Processing Authority

ZAZ Zim Asset Zone (Hypothetical)

ZIA Zimbabwe Investment Authority.

ZIDP Zimbabwe Industrial Development Programme

ZIMPREST Zimbabwe Programme for Economic and Social Transformation.

ZIMSTATS Zimbabwe National Statistical Agency



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LIST OF TABLES

Table 1.1: Maize, wheat and soya bean production trends from 1999 to 2008. ............................. 3

Table 2.1 .The evolution of terminology ...................................................................................... 10Table 2.2 shows the whole package of incentives provided to investors. .................................... 22

Table 4.1: Response Rate for Questionnaires ............................................................................... 40

Table 4.2: Interview Response Rate ............................................................................................. 41

Table 4.3: Reliability Test Results ................................................................................................ 42

Table 4.4: Duration in the Current Position .................................................................................. 43

Table 4.5: Exports made up to the current date ............................................................................ 44

Table 4.7: Impact of FEZ on FDI ................................................................................................. 49

Table 4.8: Impact of FEZ on revenue ........................................................................................... 50

Table 4.9: Effects of FEZ on the social environment ................................................................... 55

Table 4.10: Summation of all variables ....................................................................................................... 57



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LIST OF FIGURES

Figure 2.1 Territorial and regime types of FEZs .......................................................................... 12

Figure 2.3 FEZs typological diversity based on industrial structure and evolutionary stage ....... 14

Figure 2.3FEZs typological diversity and the evolution based on locations and industrial

structure......................................................................................................................................... 15

Figure 3.1: Research Instruments Used ........................................................................................ 36

Figure 4.1: FEZ fertile grounds .................................................................................................... 45

Figure 4.2: Skills and robust systems to export quality ................................................................ 46

Figure 4.3: Visibility of firms ....................................................................................................... 47

Figure 4.4: FEZ and human development..................................................................................... 51

Figure 4.5: Employment creation ................................................................................................. 52

Figure 4.6: Capacity to accommodate zone business ................................................................... 53

Figure 4.7: Illicit dealings ............................................................................................................. 54

Figure 4.8: The Need for sound policies that encourage FEZ ...................................................... 56



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LIST OF APPENDICES

APPENDIX A: COVER LETTER ............................................................................................... 66

APPENDIX B: QUESTIONAIRRE ............................................................................................. 67

APPENDIX C: INTERVIEW GUIDE ......................................................................................... 70

APPENDIX D: MEAN AND VARIANCE OF THE DURATION ............................................. 71

APPENDIX D: RELIABILITY TEST RESULTS ....................................................................... 72

APPENDIX E: FACTOR ANALYSIS ......................................................................................... 73



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CHAPTER ONE: INTRODUCTION

1.1 Introduction

The study serves to assess the feasibility of the introduction of free economic zones in Zimbabwe. One of

the supplementary noteworthy trends allied with the increasing intercontinental integration of theeconomies of developing countries has been the proliferation of free economic and export processing

zones (EPZ). The chapter will mainly look at background to the study, problem statement, objectives,

research questions, scope, significance, delimitations and the limitations of the study.

1.2 Background to the Study

In the year 1990 Zimbabwe embarked upon export led economic structural reforms that were designed to

create a deregulated market driven economy by 1995. Economic reforms are intended to improve

economic growth and employment creation through the attainment of higher levels of investment andexternal trade. One of these reforms is trade liberalisation which is a major component of the economic

reforms. Economic structural adjustment program (ESAP) was envisaged to last for five years, that is,

from 1990 to 1995 in which the economy was expected to grow to prosperity and the manufacturing sector

was expected to expand rapidly and more job opportunities (Mlambo, 2000.p110). ESAP sought to

achieve an economic rejuvenation by implementing the following:

Liberalising the economy to allow foreign direct investment and competition ( UNDP Zimbabwe,

2010 and Hawkins and Ndebele, 2009)

Dismantling import controls through removal of tariffs

The programme failed to sail through because of the 1991/92 and 1994/95 droughts, the dismantling of

the tariff regime and the liberalisation (opening up the economy to foreign competition). The droughts

destroyed the agricultural sector upon which the manufacturing sector depended heavily on for inputs and

foreign exchange. According to Riddell (1990) Zimbabwe’s manufacturing and agricultural sectors are

heavily interdependent in such a way that by 1980, agriculture accounted for 60% of the inputs used in

manufacturing while agriculture consumed 44% of the manufacturing sector’s output.

After such an unexpected experience, the government was left with no option but to abandon ESAP in

1996 and adopted the Zimbabwe Programme for Economic and Social Transformation (ZIMPREST). This

was meant to overcome the existing challenges as well as addressing the ills that were conceived by ESAP.

ZIMPREST was also supported by the revised industrial policy document which mainly emphasised on



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indigenisation through the promotion of SMEs. ZIMPREST failed because of two developments which

are the birth of the opposition party Movement for Democratic Change (MDC) and the fast track land

redistribution program. The effect of this was a decline in agricultural output which in turn starved the

manufacturing sector of inputs since the two are inter dependent. Zimbabwe’s agricultural sector supplied

60% of the manufacturing sector inputs and that 95% of the 60% was from the manufacturing sector inputs

and that 95% of the 60% was from commercial farms which were redistributed.

After the 2002- 2005 elections, the country was isolated by the international community and the World

Bank also announced that it would not extend loans to Zimbabwe (Besada and Moyo, 2008). The

developments drastically affected the agricultural sector which starved the manufacturing sector as shown

by the table below.



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Table 1.1: Maize, wheat and soya bean production trends from 1999 to 2008.

Maize Wheat Soya bean

Year Area Output(t) Yield

Kg/ha

Area Output(t) Yield

Kg/ha

Area Output(t) Yield

Kg/ha

1999 1477940 1606538 1087 47438 260909 5500 52931 120685 2280

2000 1373117 1619651 1180 42551 229775 5400 60650 135417 2233

2001 1239988 1526328 1231 37269 197526 5300 64009 140793 2200

2002 1327368 604758 455 39000 195000 5000 51282 84441 1647

2003 1352368 1058786 783 40809 122427 5000 25390 41197 1623

2004 1493810 1686151 1129 70585 247048 3000 25390 85827 1731

2005 1729867 915366 529 65454 229089 3500 49572 56730 1355

2006 1712999 1484839 867 67207 241924 3600 47137 70273 1491

2007 1445800 952600 659 60000 180000 3000 69900 112300 1607

2008 1724844 435160 250 51000 132600 2600 72311 48320 670

Between the years 2006 and 2008 manufacturing sector declined by 73, 3% and GDP reduced by 11% in

2008 (ZIDP, 2012).

Other strategies employed to boost industry

In 1997 EPZs was conceived in Zimbabwe whose aim was to promote exports and employment creation

(UNDP, 2010). The EPZs was managed by the Export Processing Zone Authority, the formation of the

Zimbabwe Investment Authority through the ZIA act repealed the EPZA act, which was the legal

instrument governing the operations of the EPZA. With an employment of 37000 and $172 million worth

of investments the programme’s performance was deemed unsatisfactory and issuing of licenses to



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to establish the challenges and possible solutions to the challenges associated with free economic

zones

to identify how government regulations can be used as enablers for the implementation of FEZs

1.5 Research questions

Is it possible for FEZs to be used as a strategy to resuscitate the economy of Zimbabwe?

How can the concept of FEZs be applied to third world countries like Zimbabwe to revamp the

economy?

How can government regulations be used as enablers for the implementation of FEZs

What are the possible challenges associated with FEZs and what can be done to solve them?

1.6 Assumptions

There were a number of assumptions that were made in carrying out this study. These are as follows:

The political environment is appropriate for FEZs to be implemented.

Information collected from respondents is accurate and can be relied upon.

The findings of the research are representative of all the stakeholders in the financial sector.

The research assumes that no change will occur at the strategies being implemented by the

government and the industries up to the completion of the study

1.7 Significance of the Study

This study is of importance to various stakeholders including the government, relevant authorities, legal

practitioners, regulatory bodies and manufacturing companies, investment firms and also the university.

As the study seeks to look at all plausible areas around FEZs which involve the trade policies, investment

policies and success factors that may be considered to having a successful FEZ, the government as a policy

maker will benefit a lot from this study since it unveils all relevant information on FEZs. The study we

also impart knowledge to manufacturing firm management on how they can utilise the FEZs and the

benefits associated with FEZs to their operations.

The regulatory bodies will be assisted in the consideration of how the concept of FEZs can be

implemented in the economy and what regulations to set so that they won’t be illicit dealings as

well as making sure that the businesses environment in the country is favourable. To the university,

this study can be used by fellow researchers if accepted using findings as foundations to further

study this matter of interest. Other instruments that are involved in the enhancement of economic



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growth can be used in the modelling for hypothesis, for instance trade, growth (GNP and GDP),

technology and knowledge transfers.

1.8 Limitations

There are substantial impediments and constraints the researcher was subject to in carrying out the studyand these impacted somehow on the objectivity and dependability of the results. These constraints include

the following:

The researcher had limited resources

Some important information may not be disclosed for confidentiality’s sake

Lack of co-operation from some of the targeted respondents

Limited research time.

1.9 Delimitations

The research addressed to the challenges being faced by the Zimbabwean economy hence the feasibility

study of free economic zones to the country. As broad as the coverage of the topic much emphasis was

put on factors with direct impact on FEZs as well as the economy and some of the areas that include

geographical locations and the construction of zones were just summarised in the concept of free trade

zones. The study focused on commercial banks in Zimbabwe, ministry of industries and economic

development and companies from the manufacturing and technology spaces all headquartered in Harare

and the ministry of industries where the researcher was conducting the surveys.

1.10 Definition of Terms

In the course of research, the following terms were defined in order to narrow their broader universal

meanings.

Multicurrency- refers to the use of American dollar and the South African rand in Zimbabwe

Free economic zones- all sorts of free trade zones be it export processing zones, industrial free zones, tax

free zones, trade free zones, Maquiladoras, technological free zones amongst other names.

1.11 Organization of the Study

This chapter presented the topic that is the feasibility of introducing free economic zones in Zimbabwe. It

gave a brief background of FEZs and issues around the FEZs in Zimbabwe and the problem statement.



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Objectives of the study under research was also given and some questions to be answered during the

research. The scope of the study, significance and assumptions were also outlined.

Chapter two will review the theoretical and empirical evidence put forward by different authors in relation

to FEZs. The techniques used to gather data in undertaking the research will be outlined in Chapter three.

Chapter four will include the findings of the research and data is going to be presented using graphs, tables

and charts. The summary of the research, conclusions and recommendations and suggestions for future

research will be drawn in the final chapter.



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CHAPTER 2: LITERATURE REVIEW

2.1 Introduction

The objective of this chapter is to give the detailed theoretical and empirical evidence on the concept of

FEZs and other information surrounding FEZs. A detailed history of FEZs is provided and it also shows

other contributions from different authors on FEZs. The chapter highlights and analyse comments and

evaluate their aids towards the topic Feasibility of free trade zones. It also give a brief of performance

where different cases of FEZs from other African countries are well described. The cases picked are

different in the sense that there is one successful FEZ while the other one is an unsuccessful FEZ. The

benefits, regulation, and potential caveats are also explained in this chapter. A detailed summary will be

given at the end of the chapter on FEZs.

2.2 Theoretical literature review

Theoretical literature in this research reviews what FEZs are all about. This literature also provide an

understanding on how the FEZs work and the history of performance of established FEZs in different

countries.

2.2.1 Concept of FEZs

2.2.1.1 History post 1960s

The FEZ model has grown in terms of size and number of FEZs across the globe. The need for accelerated

development in developing countries has brought this to action but the FEZ model is as old as western

civilizations, having existed in the Phoenician city of Tyra and at 300 BC in the Greek Island of Delos,

which as a result became one of the wealthiest islands in the world for nearly a century (Haywood, 2000)

During that time free trade zones under the Roman Empire were set up along commercial routes. Being a

marginal element in a mercantile economy, FEZ were used for storing duty free goods before they were

re-exported. Their use continued in the British Empire (Singapore, Gilbraltar and Hong kong) (Martioz

and Szymanski, 1996). The 20th century ended leaving free trade zones, used also for production hence

industrial revolution, colonial expansion and the internalization of liberal economies.

Modern FEZ Revival and Expansion: 1960s and Beyond

The establishment of the Shannon FEZ was meant to save jobs of 1500 employees at the Shannon airport.

Their jobs were at risk because of technological advances in aviation which made it unnecessary for



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transatlantic flights to refine at Shannon (Shoesmith, 1986). The threat posed by the transatlantic jet

resulted in the airport being turned into a duty free production zone for goods with a high value added.

The plan managed to surpass all expectations with nearly 440 jobs being created in the first year. Ten

years later the zone employed an additional 4750 people giving a new life to the airport whose staff grew

from 1250 in 1960 to 2200 in 1975. Other nations seeing this, they jumped aboard and by 1970 more than

10 countries had set up FEZs. In Asia, the first zone was created in Kandla, near Bombay and in the year

1986, there were already 175 spread across countries. Since then FEZs have spread worldwide mainly in

developing countries (Martioz and Szymanski, 1996).

The world Economic Processing zone Authority’s ( WEPZ) 1997 edition of the international directory of

free zones contains information of 847 zones in 102 nations for which some are EPZ and many facilitate

both trade and export manufacturing ( Bolin, 1999). According to ILO’s figures, the numbers of FEZs has

gone from 79 in 25 countries in 1975 to 3000 in 116 in 2002 ( ICFTU,2003).

2.2.1.2 Internationally used definitions

UNIDO

A FEZ is a fairly small, geographically detached area inside the host country, the tenacity of which is to

entice export-oriented businesses, by offering them exclusively favorable investment and trade conditions

as compared to the local economy of the host country. In particular, the EPZ provide for the importation

of goods to be used in the production of exports on a bonded duty free basis (UNIDO, 1980).

UNCTAD

EPZ are industrial estates which form enclaves within the national customs territory and are usually

situated near an international port and/or airport. The entire production of such zones is normally exported.

Imports of raw materials, intermediate products, equipment and machinery required for export production

are not subject to customs duty (UNCTAD, 1985: 10).

ILO (International Labor Office) /UNCTC (United Nations Centre on Transnational Corporations)

An EPZ could be defined here as a clearly delineated industrial estate which constitutes a free trade

enclave in the customs and trade regime of a country, and where foreign manufacturing firms producing

mainly for export benefit from a certain number of fiscal and financial incentives (ILO/UNCTC, 1988: 4).



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The World Bank

An EPZ is an industrial estate, usually a fenced-in area of 10 to 300 hectares that specializes in

manufacturing for export. It offers firms free trade conditions and a liberal regulatory environment (World

Bank 1992: 7).

WEPZA (World Export Processing Zone Association)

EPZ are all government authorized areas such as free ports, free trade zones, custom free zones, industrial

free zones or foreign trade or any other type of zone, as the Council may from time to time decide to

include (Statutes of the WEPZA, ID/W.6/266/6, 28thFebruary 1978). (Source Kusago and Tzannatos,

1998.

The definitions provided by the organizations mentioned above are specific and they don’t accommodate

other types of FEZs. A broader definition is going to be used in this study to accommodate all the FEZs

used around the globe. The broader one defines FEZs as deemed exceptions to national tariff/ fiscal policy,

upon their existence FEZs will come up with better production conditions, laxer legal provisions and trade

facilities.

2.2.1.3 Terminology in FEZs

FEZs have become widely used trade policy instruments across countries since their modern revival in

the late 1950s especially in developing countries. SEZs, FEZs, EPZs, TFZs, IFZs, enterprise zones,

specialized zones, logistic zones, Maquiladoras, all these are names assumed by free economic zones. Due

to extensive discussions in literature FEZ have been given such whole host names. The names given to

the FEZs refer to differences in their industrial specialization for example technology, services, logistics,

characteristics such as geographic form (concentrated or widely spread) and lastly the business type.

Among the commonly used names, we have the special economic zones (China), free trade zones and free

economic zones (Kusago and Tzannatos, 1998). The below shows the evolution of terminology used

across the globe and the country that uses that special type of term.

Table 2.1 .The evolution of terminology

Free trade zone Traditional name since (1982, ILO) and one

currently being built in Nigeria



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Foreign trade zone Individual authors (R.S Toman 1964) India

(1983)

Free zone UNCTAD (1973), USAID (1982), United

Arab Emirates (1983)

Industrial free zone UNIDO (1971), Ireland (pre -1970)

Maquiladoras Mexico early (1970s)

Export free zone Ireland 1975, UNIDO (1976)

Duty free export processing zone Republic of Korea (1975)

Export processing free zone Harvard University (1977), ILO (1983),

Economist (1979)

Free production zone Sternberg Institute (1977)

Tax free zone Individual authors (W.H. and D.B. Diamond,

1980)

Special economic zone China (1971)

Investment promotion zone Sri Lanka (1981)

Free economic Zone Individual author (H. Grubel, 1982)

Free export zone Republic of Korea (1983)

Free export processing zone OECD (1984)



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Privileged export zone Individual author (N.N. Sachitanand, 1984)

Industrial export processing zone Individual author (P Ryan 1985)

Source: Kusago and Tzannatos, 1998

2.2.1.4 Types of FEZs

Figure 2.1 Territorial and regime types of FEZs

Design: Meng Guangwen

The horizontal arrows are showing the link between FEZs and other sub types while vertical arrows

show the regime type as a special case of territorial type of FEZ

Territorial have a special defined territory with infrastructure of high quality and administration

facilities staffed with better trained people than elsewhere in that country which cannot be granted

by a regime FEZ. Due to its specialization territorial avoids technical difficulty of organizing and

allocating various fiscal, monetary privileges of the FEZ regime to larger numbers of corporates.

Basically there are two sub-types of territorial FEZs depending on the linkages with domestic

economy.

The policy of customs supervision differentiate them as open and an enclave type. An open type

has no closed customs supervision which implies that it is not strictly defined or separated from the

FREEECONOMICZONE

ENCLAVE TYPE

REGIME TYPE

TERRITORIAL TYPE

OPEN TYPE

BONDED

FACTORY

DUTY FREE SHOP

HIGH TECH

ENTERPRISE

SPECIAL ECONOMIC

ZONE

FREE FINANCIAL ZONE

FREE TOURISM ZONE

EXPORT PROCESSING

ZONE

FREE TRADE ZONE

FREE PORT

SPECIAL ECONOMIC

ZONE



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domestic economy than the enclave type. Example of an open type include SEZs, SIPs, Free

financial zones. The enclave type has a closed supervision carried out to ensure less or no direct

linkages with the local economy which means it is strictly defined. Examples of enclave types

include FPs, FTZs and EPZs.

Some of the zones are both enclave and open at the same time for example SEZs. This means that

they have a part which is open and the other part which is closed.

2.2.1.5 Regime type

The regime type grants benefits to companies located anywhere in the host country as long as they

meet the requirements /suit the criteria of the FEZ. This type is strictly a regime type not a zone

thus it is a special type of a territorial type. This type allows for a strong network linkage with the

local economy and gives the foreign firms to choose the optimal location for their activities. Regime

types are subdivided into bonded export oriented factory, bonded warehouse and high tech

enterprise. Territorial do not have linkages but they are fewer than in the regime type which also

implies that the regime type can coexist with and evolve from the territory type. An instance can be

that of LDCs, as the goals and roles of FEZs shifted, many of the incentives were applied to areas

outside the zones. Taiwan is one of the examples where incentives such as export benefits have

been granted to bonded factories which are not geographically restricted.

2.2.1.6 Typological classifications of territorial zones

Territorial zones can be further classified into business specialties for example trade, manufacture,

service, cross border, science based. These classes are based on the importance of the industrial

sector, the evolutionary stage and location.



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Figure 2.3 FEZs typological diversity based on industrial structure and evolutionary stage

TRADE BASED FEZ

FIRST GENERATION

MANUFACTURE BASED FEZ

SECOND GENERATION

SERVICE BASED FEZ

THIRD GENERATION

• Free port

• Free city/state

• Bound house zone

• Customs bounded Warehouse

• Customs free zone

• Customs zone

• Duty free zone

• Tax free trade zone

• Tax free zone

• Free trade zone

• Forei n trade zone

• Duty free exp. processing zone

• Export free zone

• Export processing zone

• Free export-processing zone

• Free export zone

• Free production zone

• Industrial exp.-processing zone

• Industrial free zone

• Investment promotion zone

• Joint enterprise zone

•

• Free professional zone

• Free service zone

• Free banking zone

• Free insurance zone

• Free red light zone

• Free gambling zone

• Free medical zone

COMPREHENSIVE FEZ

FIFTH GENERATION

SCIENCE BASED FEZ

FOURTH GENERATION

• Growth triangle

• Cross-border economic

cooperation zone

World Economic

Integration

CROSS BORDER FEZ

SIXTH GENERATION

Cross-National Regional

Economic Integration

• Incubator

• Research park/area

• Research triangle

• Technology park

• Science park/Scientific

park

• High-tech park

• Science-based park

• Science & technology park

• Free zone

• Free economic zone

• Special economic Zone

• Comprehensive free port

• Comprehensive free trade zone



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Source: development with other numerous sources from: 1) UNCTC Current Studies (1990):The

Role of Free Economic Zones in the USSR and Eastern Europe>>, United Nations, New York, p.

2; 23; 2) Kreye, O., Heinrich, J., Fröbel, F. (1987), Export Processing Countries: Results of a New

Survey, Working Paper No. 43, International Labor Office, Geneva, p. 7, 15

Horizontal arrows show the evolution of the key types of FEZ. Vertical arrows show the relationship

of subordination of FEZ. The FEZ in square frames are sub types.

Figure 2.3FEZs typological diversity and the evolution based on locations and industrial structure

Design: Meng Guangwen

Horizontal arrows show the ties and evolutionary direction of typologies based on the location and sectoral

structure of FEZs, the vertical arrows show the typology of FEZs based on macro middle and micro

Typologyb

asedonthemacro,mid-sizeandmicro

locations

Typologybasedonindustrialsecto

rs

PORT FEZ URBAN FEZ SEPARATED FEZ

• Trade-based FEZ

• Manufacture -

based FEZ

• Comprehensive

FEZ

• Comprehensive

FEZ

• Service- based

FEZ

• Science- based

Service- based

FEZ

Trade-based

INTRA-NATIONAL FEZ

COASTAL FEZ INLAND FEZ

Cross-borderFEZ

Cross-Na

tionRegionalEconomicIntegratio

n

• Growth triangle

• Cross-border economic co-operational zone



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location and the ties between the two systems based on the location and sectoral structure. At the first

glance FEZs have no common location pattern. You can find them in the coastal region or in the interior

thus urban or rural locations or in a cross border region between two or more countries. With this one can

conclude that accessibility of FEZs should be very high in order for it to perfectly link with the

international markets.

Some FEZs are based on the criteria of macro location (coastal, inland, cross border). Others can also be

based on mid-size location, micro location where we have urban and ports. FEZs can evolve from intra-

national to cross border FEZs and inter to cross border national REI.

2.2.1.7 Incentives of FEZs

According to Kusago and Tzannantos (2001) FEZ incentives are divided into two categories namely hard

and soft ones. Hard incentives are those that are physical (tangible/ visible) in nature for instance provision

for infrastructure and services (roads, power supply, transport facilities) that facilitate and augment

production. Soft incentives are the intangible ones, tax allowances such as generous and long term tax

holidays, free flow of currency, full repatriation of profits, flexibility in labour laws in the zone than in

the domestic markets and other special trade concessions.

2.2.1.8 Benefits of FEZs

The existence of FEZs in an economy is more beneficial to the host country and also other countries

trading in the zone. Since it will be a more robust industrial sector of some sought below are some of the

benefits to the host country and everyone in it.

Create utilization of local materials

Increased foreign exchange earnings

Additional capital equipment

Liquidity

Additional tax revenue collects

Job and income creation

Average wage in the zone is higher than the average wage outside the zone

Brings about management and supervisor training

Catalyst effect

Efficient industrial structures



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Technology spill over

2.2.1.9 Potential caveats to benefits above

The benefits above may come with its own potential caveats that may affect the zone and the economy

negatively. Among the caveats, some possible caveats to the benefits aforementioned are stated below. Note that they are some of the benefits with no caveats for instance managerial training, catalyst effect/

demonstration effect and technological spill-over.

Overstated foreign exchange earnings that maybe real on paper but untrue in real values

Net imports not as impressive because of high import content of exports

Lack of job security due to prone to demand shocks

Forgone tariff revenues and taxes

Opportunity cost of public investment related to the zone maybe higher

Environmental damage and pollution

Labor and work safety issues due to lax regulation ( Mandani, 2001)

2.2.1.10 Potential static benefits

Earnings from foreign exchange and export increase are two main benefits of FEZs. An increase in

exports does not represent economic progress especially if the import bills increase at a correspondent

rate. Actually what really matters is not the absolute volume of exports but it is the difference between

export earnings and import costs (Shoesmith, 1986). According to Mandani, 1999 FEZs provide

foreign exchange earnings that have the capacity to allow low income economies to slacken the foreign

exchange constraints regarding their import needs for the rest of the economy and provides the

government with development funds. Mandani, 1999 explains that the inflow of foreign exchange can

be allocated to policies supporting the development of the local economy public investment and also

to allow for a more graduated adjustment for countries undergoing ESAPs. On the same note, the hotel

level of exports and imports of the zone are the determinants of the impact of FEZ on foreign exchange.

Tekere, 2000 argued that because FEZ rely on imported raw materials and capital goods in the long

term the inflow of foreign exchange from exports would be at a minimal level. He went on to decline

that, the failure of firms to remain profitable in the export business will then results in a negative net

impact on foreign reserves. Kusego and Tzannatos, 1998 asserted that FEZ workers are paid in foreign

currency indirectly and from an economic perspective, this is similar to the direct export of labor. With



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the above assertion, the hiring of new workers help increase the foreign exchange earnings of the host

country in the form of wage payments. FEZs can be preferable to immigration given the social effects

in the host country and in the country of origin of the foreign firms that accompany dislocation of

labor.

2.2.1.11 Vulnerabilities

The proliferation of FEZs has spread remarkably across the globe in these recent years such that there

are now 3000 FEZs 135 countries with profits totalling billions of dollars. In addition to boosting

economic opportunity, the incentives package provided in FEZs can result in a reduction in finance

and trade controls and enforcement, creating room for MLs and TFs. The same characteristics that

makes FEZs attractive to formal businesses also attracts abuse from illicit dealers. FEZs have

weaknesses depending on the way they have been setup and how they are being run. These weaknesses

creates opportunities to illicit dealers which will leave the domestic economy exposed to risks

emanating from the FEZ. A summary of weaknesses is provided below.

Inadequate anti money laundering and combating financing of terrorism safeguards

These begin from the policies set by the zone management or the policymaker’s up to the

infrastructural setups. Inadequate safeguards will undoubtedly leave the economy exposed.

Relaxing oversight by competent domestic authorities

Relaxing in a serious environment is very risky especially in the zone. Having a pilot view on

everything is not good for the zones authorities. Closer inspection is the most recommended way of

operating when in the inspection department. Taking this part for granted will pave a way for these

illicit dealers to transport illegal goods or even commit fraudulent activities and also tax evasion.

Weak procedures to inspect goods and register legal entities

This does not only allow for illicit dealers to operate at their will but also shuns foreign investors for

they will be fearing for their investments.

Lack of cooperation and coordination between customs authorities and zone management

Poor coordination creates a series of bottlenecks and red tapes in all activities of the zone, this will

hinder the production of every company located in the zone and the new entrances.



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The World Customs Organization which is the only global standard setter of free trade zones has also

developed reference tools for the development of FEZs. The FATF TBML typologies and best practice

papers published in 2008 and 2006 presented areas of continued improvement thus red flag indicators

and best practices relevant to FEZs.

The misuse of FEZs affect both jurisdictions with zones and with not. This is because FEZs connect

legal entities to the international markets. A number of zones are located in regional financial centers

linking the international trade hubs with access to global centers of finance. With the varying zones

from country to country there are high chances that an individual jurisdiction the operators, regulators

and requirements maybe different. As there are no set standard approaches within zones it can be a

global snapshot. As the customs areas are set to encourage trade and FDI, FEZs phases are subject to

unique laws and regulation.

The features set provide optimal environment for legitimate business but also do the same for illicit

dealers. The existence of vulnerabilities in systems makes it easy for ML to tape in.

Relaxed oversight and lack of transparency

Lack of oversight on all high volume containers create room for illicit dealings. MLs and TFs make

use of high volume containers because they know that the inspection of those containers is very

tedious. This calls for strict and very close inspection and transparency on all inspections.

Vulnerable types of goods

Cigarettes, alcohol and other tariff items are more vulnerable to smuggling and contraband due to the

increased revenue generated by not paying tax. The tax for such goods is very high and by evading,

the tax shield that was supposed to go to the authorities will be added to the profits. Luxury goods and

other goods most of them used in violation of IPR are also vulnerable. IPR violations are difficult to

detect and are difficult to substantiate at the time of the cargo inspection. To avoid too much

inspections, smugglers make use of repackaging, re-labelling and export the goods. This is done to cut

the links from origination. Carousel VAT and electronic items are also vulnerable to smuggling.

Electronic items constitute high volume of trade so with the high demand and supply, they are left

vulnerable. Other strategies used by the illicit dealers is redeeming tax illicitly and the higher the

volumes of the goods, the higher the refund.



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2.2.1.12 Regulation

There are a set of regulatory bodies that govern FEZs in different countries. Depending on which side

of the globe the country is, zones are governed by some of the bodies given below.

FATF

The FATF is an independent inter-governmental body that develop policies to protect the global

financial system against money laundering and terrorist financing. Recommendations given by FATF

are standard for defining regulatory measures and criminal justice that should be implemented to curb

challenges faced (Durham, 2003). These recommendations also include international cooperation and

preventive measures to be taken by stakeholders affected by these illicit dealings. Examples of such

we have financial institutions, real estate and lawyers. The introduction of FEZs to the international

community has also brought ML and TF. The favorable incentives of FEZs can result in a reduction

in finance and trade controls and enforcement thereby creating room for ML and FT. this is because

the same characteristics that makes FEZs attractive to formal businesses also attracts abuse by illicit

dealers. The FATF recommendations are regarded as the global AML and CFT standards.

Country customs board

Country customs play a very vital role in maintaining order in the zone area. They are the ones who

are responsible for searching of vessels and make sure that every documentation required to enter the

zone has been provided. They also take the standards suggested by the FATF, WEPZA and other

international bodies to practice (Mohammed and Omade, 2011).

World Bank

The World Bank’s role is to work hand in hand with the FATF since it is the bank of the whole world.

Its inquisitive wide network helps the FATF recommendations to be descended to the right parties at

the right time. The conventions like the Kyoto and WEPZA help customs to do their jobs efficiently

and effectively through the provision of guidelines.

2.2.1.13 Traditional concept of FEZs

Objectives

Promotion of exports



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Promotion of FDI

Policy features

Duty free area 70%-80% export requirement

Manufacturing oriented: Neglected services, intermediaries and logistics

Tax holidays

Limited or no selection or performance criteria

Development approach

Limited or no demand analysis

Public sector develops, manages and regulates

Public subsidies of services and facilities

Political influence on site selection

2.2.1.14 Performance and evaluation of FEZs

The actual experiences: Two African cases

Many countries have established free economic zones while some are considering forming FEZs. Two

FEZs with opposite experiences will be briefly reviewed making the comparison highlighting the

material importance of the institutional and policy environment as well as the incentives.

Dakar FEZ, Senegal

The FEZ was established in 1974 and is considered by many experts as an example of an unsuccessful

zone. Its operations began in 1976 but failed to achieve its goals in creating employment and FDI

attraction. The employment rate grew rapidly to 1200 in1986 and dropped back down to 600 in 1990.

Firms operating in the zone managed to export a meagre 4million of FCFA (US 14.7million) out of

the zone despite a stable political environment and favourable financial promotions. Its fiscal benefits

matched those of its neighbours and competitors. They included duty exemption, no tax on machinery,

tax free corporate income and dividends and unrestricted repatriation of capital and profits.

The failure if this zone was because of a series of problems. First of all, bureaucratic delays which

ended up demoralizing potential investors. The investment flows averaging 100000nand minimum

employment of 150 workers discouraged many national and foreign entrepreneurs. Due to government



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mandated labour market rigidities, hiring and firing became very difficult. Considering the fact that

wages should be backed by returns, the Dakar FEZ had a different case. Their salaries and wages were

competitive with other countries like Egypt, Tunisia and China but the productivity was very low

compared to the same countries.

Factory rental space was very limited which implies that investors were required to lease and build

their own factories hence forth discouraging FDI through imposition of increased risks. Moyo (2013)

claims that costs of utilities and transportation are rather high in Senegal (ranging 25% of the cost of

the final exported goods)

Mauritius

The Mauritius FEZ is one of the most successful FEZ in Africa. Having its FEZ law being passed in

1971 which was in response to the failure of import substitution policies and the concern about ever

growing population and mono commodity export (sugar). The incentive of the FEZ included

exemption from excise and duties on productive machinery and parts , raw materials and other

productive components ; free repatriation of profits, capital, dividend from FEZ firm and also received

preferential interest rates . Initially the firms in the zone were not subject to corporate tax for 10years

and income tax on dividends for 5 years. The law was amended later and now they are paying 15%

corporate tax but there is a compensatory increase of income tax exemptions on dividends from 5 to

10 years. There are conducive hiring and firing laws and all goods produced should be exported.

Table 2.2 shows the whole package of incentives provided to investors.

Country Year Tax Tariff Other Incentive

Namibia 1995 Exemption from corporate taxes

(normally 35%) sales taxes duties

forever.

Liberal customs regulations

exemptions on customs

duties,

transfer, stamp and imports

, (for exports out of SACU)

forever

Liberal labor laws (national law

revised to prohibit strikes and

lockouts); conditional reimbursement

of up to 75% of EPZ personnel

training costs.



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Togo 1990 10 year tax holiday after which the

rate is 15%; no dividend taxes for 10

year; tax on salaries is reduced from

7% to 2%; firms can open foreign

exchange accounts or transfer funds

abroad without any hindrance;

preferential tariffs also apply on port

charges, electricity and

telecommunication services; no

restriction on level of foreign

ownership

No tariff or import duty Firms given ample freedom with

regards to hiring, firing and

grievances. Government intervened

mid-1996 to strengthen labor

protection; in 1990 labor costs

averaged US 40c.

Kenya 1990 10 year tax holiday; 25% tax for the

next 10 years; no withholding taxes

for 10 years; VAT exemptions

Import duty exemptions

and no foreign exchange

controls

No labor regulations

Mauritius 1971 Free repatriation of capital, profits

and dividends from EPZ firms.

Preferential interest rates. Initially:

no corporate tax for 10 years, no

payment of income tax on

dividends for a periods of 5 years;

Law revised: now must pay 15%

corporate tax over the lifetime of the

company; compensating increase of

income tax exemptions on

dividends

from 5 to 10 years

exemptions from excise

and duties

on productive machinery

and parts,

raw materials and

components

Favourable labor laws for termination

of employment over time

Senegal 1974 exemptions from taxes on corporate

income and dividends; unrestricted

repatriation of capital and profits

Exemptions from customs

duties on machinery, semi-

finished goods and finished

goods

Government mandated restrictions on

hiring and firing of workers

Guatemala 12 years income tax

exemption

No duties, levies or quotas

on imports and exports

Free repatriation of profits

Source: Mauritius: Alter (1991), Curimjee (1990). Namibia: world Bank (Namibia desk officer);

Namib Times, Nov 7, 1995, pg. 18. Offshore Outlook, volume 3, issue 290, March 1995.Togo: Africa

Analysis. 1990. “Togo’s Open Door to Hong Kong”, No. 91, February. Seshie, D. 1996. “Togo: La

Franchise est-elle Payante? In Jeune Afrique Economies (France), no. 220, pg. 60-62.



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Kenya: World Bank reports no. 13886 and 14698, and Mark Ocheng’s article “export-processing

zones draw lukewarm investor response” in the April 1991 of African Business. Senegal: Information

on Senegal EPZ was gathered from three sources: Background paper on the 1992 World Bank paper:

Export.

The FEZ is considered a success because they managed to meet their primary goals which are

employment creation, export diversification, gross and net export increase, FDI attraction and being

on the receiving end of the demonstration effect and human capital build up. In the 1970-80s FDI did

not play any vital role (Alter, 1991), but now it has become the most influential tool in development

of FEZs. 1988 statistics shows 25% being accounted by FDI of all the FEZ total investment. Today

foreign firms now control an estimate of 45% of the FEZ sector, largely concentrating in garment

production. The firms are taking advantage of the abundant educated labor. By 1976, 84 firms had

started production and in 1983, 129 firms employed 23424 workers. The number increased to 90861

workers being hired by 586 firms. By 1995 the number dropped to 481 companies with 80466 workers

which is 17.10% of the entire national labour force.

The labour market has been tight since 1980 and was estimated to be 1.6% causing salaries to increase.

These wage increases are somehow putting Mauritius FEZ at a competitive disadvantage and some

foreign firms are now moving out of the country to relocate elsewhere where there are labour costs.

An example can be the 1991 wage levels of the garment workers which was at $1.28 per hour while

in China was at $0.25 per hour. Beside the wage part, firms do not only consider that but they look

also at other factors such as political stability, policies infrastructure amongst others. The overall net

exports of the country have been increasing ever since the zone’s establishment which resulted in the

share of FEZ in gross exports growing steadily.

In 1986 the zone gross exports constituted 54%of total exports while in 1992 it reached 63% and

in1995, 67%. This increase resulted in the net exports to exports ratio increasing from 22% in 1985 to

40%in 1995. With the statistics above, there is an element of backward linkage of the zone to thedomestic economy. This is because the exports of domestic economy are also increasing at an

increasing rate Rhee (1990). Cuhrimjee, 1990 argues that there is extreme inter link between zone

firms and the local economy. Alder, 2003 suggest that the FEZs overall performance is not

independent of the rest of its host economy. He went on to say during 1978-82 when the economy was



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facing both internal and external difficulties, FEZ growth slowed and later recovered with the whole

economy.

The coming together or fall application of the success factors has brought success to the Mauritian

FEZ. Everything is favourable from the incentive package, educated pool of labour, stable government

and provide stream lined services. The country is continually benefiting and amongst its benefits

included the ECI arrangement (LOME) and Multi-Fibre Arrangement. Good timing upon the

establishment of the zone, an economically attractive environment and also considering non- existence

of competition are some of the factors behind its success.

2.2.2.1 Success factors and importance of FEZs

Strong government commitment and support of the government to pilot market oriented economic

reforms. They are a set of approaches that are key to the success of every FEZ, there is the gradualist

approach which put more emphasis on stabilizing the macro-environment, Decentralization which talks

about sound business environment and the administration and lastly the administration systems for

instance one stop shops.

Land reforms

There should be favourable laws governing the land reforms within the zone. Examples of favourable laws

include land leases 20-25 years to investors and making use of the land auction systems

Investment incentives and institutional autonomy

Fiscal and non-fiscal incentives, Preferential policies, Flexibility in hiring workers, Policies should be

inviting so as to encourage investments from diasporas and FDI.

FDIs and Diasporas

Skills, technology and capital are brought into the country by these parties. Technology is in the form of

technology learning, innovation, upgrading and strong links thus creating base for innovative cultures.

Benchmarks, objectives and competition in the zone by the zone firms should be at their optimal to ensure

boosted activities and full capacity utilization within the zone which will in turn help attain the main goals

of the FEZ establishment.



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Location advantages

Location plays a vital role in the success of the FEZ. The best location of FEZ should be the one which

expose the FEZ to international trade and where other countries can easily access the goods and services

being manufactured and offered in the zone.

2.2.2.3 Models of FEZs

FEZs models differentiated by the type of the leadership controlling them. These are at times called

institutional features, institutional features play a crucial role in determining the success of a FEZ. A

number of FEZs in Africa have failed because of their institutional features.

Zone Authority owned model

In this model the zone authority operates and regulates the zone

Government owned model

This is where the government has funded everything in the zone and with that they assume control of the

zone. The services and facilities offered in this type of zone are typically subsidized services and facilities.

Zone authority in collaboration with government bodies model

This model is a hybrid of some sort in the sense that there are two separate parties coming together to

build one thing. In this model, depending on the agreement of the parties power sharing varies from zone

to zone but most of them are characterized by the zone authority exerting little power.

Separate customs area model

This one is different from all other models in the sense that it is recognized by the Kyoto convention.

2.2.2.4 Theories of economic growth

Foreign direct investment is not the only catalyst to economic growth, different studies have been

done that shows that this is not the only variable that is needed in a country for economic

development, other factors like spill overs, technology, human capital and inflation have major

impacts on economic growth. Theories have been done in order to spell out other factors that

enhance economic growth and to act as a pillar for the studies above:



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2.2.2.5 Neo-Classical Theory by Solow (1970)

This theory suggests that increasing the capital base will lead to decreasing marginal returns. This

therefore implies that increasing capital has impermanent and restricted impact on increasing the

economic growth. As the capital increases, the economy upholds a sturdy rate of growth. For one

to increase the growth there is need to increase labour productivity, size of the workforce or improve

technology. For there to be economic growth there should be an increase in all factors that affects

the growth thus employing all factors of production. Growth hinges on increasing the stock of

capital goods to expand productive capacity, higher savings that is delaying consumption to fund

increased apportionment of resources towards investment, net investment and the necessity for

adequate saving to fund investments. There is also need for capital widening (this is when capital

stock rises at a rate which keeps leap with labour force growth) and Capital deepening which is

when capital stock grows faster than labour force which is considered more important.

Quality of capital goods – these are affected by the research and development and Innovation. A

combination of capital deepening & technological improvement explains major trends in economic

growth:

Prediction - Adding more capital goods to a fixed amount of labour will lead to diminishing

returns to capital.

Increased capital accumulation drives the rate of return on capital down.

Eventually, the rate of return may be so low that no further net capital accumulation takes

place.

Technological advancement is presumed to be exogenous i.e. lies outside the growth model. This theory

was fused by Caves (1971), in his study on foreign direct investments on economic growth when he

postulated that technological proficiency derived from investment in research and development (R&D),

are expected to be strongly correlated with diversity proficiencies.

2.3 Empirical literature Review

A number of studies on FEZs have been carried out in various countries using several methodologies to

come up with conclusions. Empirical studies in this research covers contributions by several authors in

different countries under the topic of FEZs.



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2.3.1 Export Development and Export

UNIDO, (1980) in the study, “Export Processing zone (EPZ) in developing countries”. The main objective

of this study is to review the development of EPZs by comparing and studying different stages of growth

of EPZs in Asia. It then examines the objectives of the host country in establishing its EPZ, while doing

so; the study assesses the impact of the EPZs in terms of their economic and social consequences

in the host country. The main findings of this study were: 1. EPZs have succeeded in attracting foreign

direct investment, 2. In the long term, success of EPZs relies on the education and human resources

policies in the host country, 3. Qualifying the employees and transfer of technology are primarily limited

to the nature of the production process used by the investors and the lack of complex production

processes).

As opposed by Tekere (2000) in his study, Export led growth strategies. The main aim of his research is

to review the role of establishing FEZs in Africa (Developing countries). The study points out that most

established FEZs in developing countries have been unsuccessful in reaching the goals of establishing

successful FEZs due to the lack of government commitment in the FEZ program that will lead to setbacks

of the FEZs set objectives, government bureaucracy, the high cost of infrastructure development of the

FEZs, the poor management and inadequate promotion of FEZs, the poor selection of location that led

it a failure to attract investments, the lack to continue with further trade reforms. The study

concludes that FEZs are not a viable strategy for economic development in African countries and he

further alluded that FEZs are no longer viewed as a solution towards the development of exports for

African in view of trade liberalization policies, regional trade integration, and new multilateral trade

regime.

The Impact of Export Processing Zone Development on Employment Creation in Kenya.

Caleb Mireri (2000), in his study to scrutinize the practise of EPZ in Kenya which was done by making

comparisons of the circumstances of labours inside and outside the EPZ. According to this study, there

are negative results from establishing the EPZ such as the insecurity of the workers due to the variability

in the number of companies operating in the EPZ and employees inside the EPZ could be worse off

than those who work outside the zones with respect to the wages paid inside and outside the EPZ.

Furthermore the situation becomes shoddier in the zones because companies will intentionally block trade



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union activity hence safe guarding their position and in the end, the study shows other problems

concerning the employees such as the lack of opportunities for training and promotion, racial

discrimination, risks of industrial accidents and pollution.

Special Economic Zones (SEZ) In Developing And / Or Transition Economics: A Policy Proposal

Sehweinberger, A.G (2003), tries to analyse the main function of FEZs in the host country with respect to

taxes and his main finding was that the introduction of FEZs should be accompanied by appropriate tax

policies that will lead to government revenue. The revenue attained may be used to fund other investments

in infrastructure or other public goods.

Type of Tax Concessions for Attracting Foreign Direct Investment in Free Economic Zones.

Chang, W.N (2004), tries to measure the disposable contemporary value of free economic zones (FZEs)

which mainly do a comparison of the tax incentive effects with inflation and without inflation. He then

analysed the effects of incentives offered to the foreign investors in the FZEs. The study concludes that

imposing a lower commercial tax rate or tax holidays in the FEZ can be desirable. The study also shows

that using depreciation as a tax concession when inflation is zero, guarantees a higher net present value

to the investor rather than when using an investment tax allowance and accelerated depreciation

Impact of Special Economic Zone on Human Development and Poverty Reduction: An Indian

Experience

Abdul Raheem (2011) in his paper : “Impact of SEZs on human development and poverty reduction”,

examines impact of special economic zones on human development and poverty reduction in India.

The study concludes that the employment creation has thus far been the most significant channel,

through which SEZ have impacted on human development and poverty reduction in India. India’s FEZs

are manufacturing intensive not assembly intensive in terms of their operations. They mainly concentrate

on value addition hence the generation of employment is rather vast. Albeit their contribution to general

employment has been limited, their contribution to employment generation is of significance at regional

level.

However due to the inertia, their ability to engross additional labour has been diminishing. This is being

caused by the shrinking in the export demand and the only way to reverse the effect is by carrying out

heavy promotional strategies that can help attract fresh investment in the zone. The link between poverty



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and employment lies in the degree to which revenue bred from employment permits labours and their

dependants to acquire goods and services necessary to meet minimum needs. Poverty reduction thus

require the formation of paying, consistent and respectable quality jobs in the labour market. There is need

for heavy promotions to FEZs so that they can act as an initiator in the development of human development

and poverty assuagement in India.

The study reviews the key literature regarding the concept of SEZ but, a vital point to be noted here is that

no comprehensive research has been undertaken as yet, for SEZs in Gujarat and Surat Special

Economic Zone. The research examines the applicability of the FEZ concept with the Surat SEZ. The

research helps in analysing that how far the concept of SEZ is relevant to the Surat SEZ by studying

various issues. The research helps in designing the policy relating to SEZs as the study examines

the various issues of the units operating in the Surat Zone viz. importance of incentives availability,

infrastructural problems, labour related issues, marketing of the products, employment, growth, margin

on sales, market share and many other factors hence providing a valuable guidance in crafting the

appropriate policy for FEZs as well as the general investment policy.

David K.Y.Chu, (1982): the costs of four special economic zones to China

This study analyses the capex (capital expenditure) of establishing SEZs in developing countries. It shows

that there are two kinds of cost combined together when the counter established SEZs for which the first

one relates to the construction of infrastructure and the second to the urban development of SEZs. It then

shows that most of the capital cost of establishing SEZs is largely the responsibility of the country. The

study concludes that the gain from establishing SEZs should not be assessed by its financial rewards, as

there are other non-monetary benefits of SEZs.

Zwena Ryal,(1997): free zones and development, study in industrial export zones the case of

Tunisian, Morris island and Algeria

This paper tries to assess the practise of some African countries in establishing industrial export

zones (IEZ) in their economies. It then went on to determine the reasons behind the success and failure

of these zones by clarifying their concept from a theoretical point of view and while doing so, the study

found that establishing IEZS by developing countries should be combined with a national strategy and a

commitment from the government. In the end, the study concludes that establishing IEZs is costly to

developing countries



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2.2.6 Investment Promotion

The conception of a favourable business environment, may be vital for a prospective host country

toward formulating investment-promotion programs to correct opinion and perception breaches that

may deter FDI inflows. By definition, investment promotion refers to all activities that disseminate

information about, or attempt to create an image of the investment site and provide investment

services for the prospective investors (Wells and Wint, 1990). Investment promotion strategies must

be geared towards the following: (1) investment-service activities tailored to prospective and

current investors’ needs; (2) raising the percentage of the FDI approvals translated into actual flows;

(3) image building activities promoting the country and its regions and states as favorable locations

for investment; (4) investment generating activities through direct targeting of firms by elevation

of explicit sectors and industries, and marketing and inaugurating direct interactions with potential

investors. A FEZ can be set up to promote investment by being a one-stop investment promotion

agency. The need and logic for an FEZ appears to have been embraced by a number of countries,

about 160 nationals IPA and over 250 sub-national ones (UNCTAD, 2001).

Special economic zones: Are they good for the host country

Ram Krishna Ranjan (2006): Special Economic Zones: Are they good for the country? The research

paper analyses SEZ policy in terms of export performance, FDI inflow, employment generation and

overall physical and financial infrastructure building. This paper tries to investigate whether having these

policies are good for the country or not, SEZs are a large variant of Export Processing Zones

(EPZ), thus performance of EPZ has also been discussed briefly.

The research paper notes that after the failure of EPZs, a significant change has been made in the rules /

regulations and a new package of fiscal an non fiscal incentive is also being offered to developers and

units. According to Finance Ministry, the government has to forego about Rs. 90,000 crore in direct and

indirect taxes over the next four years on account of SEZs. Despite so many incentives, performance of

these privileged enclaves over the last five years indicates failure of this scheme.

Peter Warr, (1989): Export Processing Zones: The Economics of Enclave Manufacturing

This study examines the effects of FEZs on the host country. The findings unveils that establishing FEZs

is vital for attracting foreign direct investment while at the same time they are not useful for the domestic

economy. The study also indicates that the gains from technology transfer have not been realized



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because the EPZs are generally isolated from the domestic economy and the EPZ companies have

contributed little to the tax revenues. The study concludes that introducing these zones could be

extremely costly to the host country but the benefits associated with the FEZs are vast.

Saeed Khan (2008): India’s SEZ Economic performance, Social / Environmental Impacts

The paper concentrated much on various issues relating to India’s SEZs. The issues include the

background of Indian SEZ, SEZ regime, SEZ and Indian experience, Indian context, the SEZ act, the land

acquisition act role of SEZ in Indian Economy, opposition of SEZ and how it affecting India. The paper

notes that the SEZ is the need of today’s economy to support India’s target of becoming developed nation.

The exports done in the period 2007-08 were Rs. 66637.682crores from SEZs. According to the Indian

Industry and Commerce Minister Kamal Nath, the FDI would be in excess of $35 billion by the end of

fiscal year 2008. The formation of SEZs provided employment to around 3.5 lac persons. Nevertheless,

SEZ policy espoused by India to revive the economy, the transformation of productive fertile land into

industrial land may craft food crises in near future. The use of the wasteland available in India (around

552692 sq.km.) for SEZ development will ensure that the farmers are not displaced from their farmland,

the development not concentrated near cities and the fertile land will continue to be used for

agricultural use.

2.3.10 Adequacy of infrastructure

For business to be successful in a country, there is need for Infrastructure, if business is successful

then investors can be motivated. High road networks, electricity, telecommunication systems, water

and warehouses are very crucial in FEZs. These will in turn attract foreign investors henceforth

FDI. The sustainable availability of the aforementioned factors is vital for a country ‘s FEZ to be

successful, Noorbaksch, 2001). For investors to be lured, there I need for adequate infrastructure so

that they me be accommodated, currently Nigeria is in a process of setting up a FEZ and they are

investing much on Capital expenditure thus infrastructural development.

2.3.11 Economic outlook

Forthcoming Economic Outlook is very essential as it is able to define the imminent insights and

tendencies of investors to continue investing in the particular host country UNCTAD, (2002). As

investors envisage unclear and waning economy, governments should act quickly in conducting

necessary macroeconomic restructurings intended to ease up business regulations, strengthening



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property rights, improving labour market flexibility thus mainly the hiring and firing part, and

increasing firms’ access to finance in order to retain the existing investors and attract more FDIs as

this is the most important determinant that makes them confidence of investing in the country.

Failure to do that can result in a FEZ failure like the Mauritian FEZ which was later abandoned by

investors because of unadjusted laws, regulations and policies.

Various authors who contributed in the FEZs topic were in support of FEZs as being the key to success

of developing countries while some were disagreeing to that fact. UNIDO (1980) postulated that FEZs

are an essential tool for economic growth, Wells (1990) also supported that FEZs help attract FDI as

well as creating employment hence economic growth. Abdul (2011) carried out his study assessing the

impact of FEZs on poverty reduction and human development.

However they are some authors who criticised the idea of FEZs being key to the development of third

world countries. These include Mireri (2000), Chu (1982) and Zwena (1997), they claimed that FEZs are

costly to establish in developing countries (capital costs), the conditions on labour policies sometimes do

not offer security to the labours who end up quitting jobs and they went on to stress that there are high

levels of pollution from these designated places hence making them not of any use to developing countries.

This clearly shows that there is a high level of confusion and this research seeks to eliminate that confusion

by clearly scrutinizing FEZs

2.4 Summary

This chapter concentrated on the literature surrounding economic growth in relation to FEZs

stipulating various theoretical and empirical views of researchers and researches done in different

countries. Theories in support of the literature review were stipulated and analysed. Strategies that

countries need to take to attract FDI were also looked at and the benefits and costs of FDI. The

following chapter dwells on the methodology used when the research was carried out and diverse

diagnostics to be carried out in the research.



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CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction

This chapter outlines the research design, the research method, the population under study, the sampling

procedure, and the method that was used to collect data. The reliability and validity of the research

instrument are addressed. Moral considerations pertaining to the research are also discussed and it also

looks at the data presentation and analysis plan.

3.2 Research Design

The study uses an exploratory research design in the form of a survey where qualitative data through

questionnaires and interviews will be gathered in undertaking the contemporary research on assessing the

feasibility of introducing FEZs in Zimbabwe. The justification for the use of exploratory research design

is that little research has been conducted on FEZs in Zimbabwe hence exploratory research design will beused.

3.3 Research Population

Polit and Hungler (1999:37) refer to the population as a totality of all the matters, subjects or members

that conform to a set of stipulations. In this research the population that will be used includes the 15

commercial banks in Zimbabwe targeting the Research and Development department in the various banks,

10 corporates, the ministry of industry and economic development and the revenue authority. These people

will be selected because they are considered to be in a better position to know more about FEZs and alsoconsidering the fact that they are the ones who will participate when the FEZs are established.

3.4 Judgemental Sample

Judgemental sampling will be used in selecting firstly the parties outlined above and secondly the persons

to interview and hand questionnaires to. This will embroil the assortment of key informants within the

organisations. From the sample frame available the researcher will also use personal judgements based on

accessibility of the corporates in terms of location, accessibility of references within the organisation,

likelihood of obtaining information from the chosen bank as well as own knowledge and experience of

the corporate.

Judgemental sampling will be use since it facilitates an all-inclusive and precise analysis of data. In terms

of cost and resources, judgemental sampling is economical compared to statistical sampling designs and



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also it is efficient and easy to use. Overly, sampling allows greater control over reliable information since

it is a manageable technique.

However the major disadvantages are that the sample is not totally representative of the overall population

as the corporates selected may not be the only ones involved in FEZs establishment.

3.5 Data Collection Methods and Instruments

This research will be constructed making use of both primary and secondary data sources in order to come

up with a valuable and meaningful conclusions. Below is an illustration showing the link of all data

collection methods that will be employed.

Figure 3.1: Research Instruments Used

Kane (2001, 109)

3.5.1 Primary Data Collection

Primary data will be used because the data is very useful and direct, thus meeting the exact needs of this

research work. Kotler (1988) defines primary data as the data collected from the original source. The data

provided is up to date and very fresh thus making the research more objective especially to the feasibility

study of introducing free trade zones in Zimbabwe. The data is also ostensibly reliable to use as it will

come directly from the various parties involved in the export market.

InterviewsQuestionnaire

Primary

Secondary

Analysis



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Conversely, the primary data collection method is very costly and it will take quite a lot of financial input

in order to fairly distribute the questionnaires, conduct interviews as well as obtain feedback from the

various respondents. With that sending questionnaires using emails will reduce costs to reasonable

amounts as well as saving the resource time.

3.5.1.1 Questionnaires

Questionnaires will be used to acquire primary data needed to in relation to the study. Normalisation of

data obtained will be enriched as the same questions will be distributed to various institutions throughout

the process. The survey will also consist of fifteen close ended question with the twelve based on a 5 point

Likert scale (5=strongly agree, 4=agree, 3=In between, 2=disagree, 1=strongly disagree) in order to avoid

intricacy in answering of questions. The questionnaire will be used as a complementary data collection

technique to personal interviews. Some questionnaires will be physically handed to the respondents while

some will be sent via online email. An aggregate of two personnel from the Research and Development

of each organization will be targeted from each Corporate. A pilot study will be conducted to the ministry

of industry and economic development as the finishing point where four questionnaires will be sent.

Questionnaires were chosen because they are inexpensive, easy to administer and covers a large number

of respondents compared to other methods like focus groups and with the use of Likert scale five pointer,

the data will simple to collect and analyse. Questionnaires allow respondents to have enough room to

respond to questions at their own spare time especially in instances where the respondents are busy to be

interviewed. Self-completion of questionnaires also guarantees privacy and confidentiality. Moreover

with close ended questions answers will be standardised and this will help in the interpretation of

responses.

However, questionnaires limit the ability of the researcher to observe non-verbal communication.

Questionnaires are also very strenuous in terms of preparation, distribution and very costly in terms of

feedback through increased transport costs.

3.5.1.2 Personal Interviews

Interviewing is a technique that is primarily used to collect first hand data and they provide the interviewer

with an understanding of the motives behind people’s attitudes, likings or behavior. They can be done on

a personal one-to-one basis or in a group. The research will undertake the personal one on one basis; two



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interviews will be taken on each representative in in the sample frame and these will be mainly done to

personnel working at the finishing point organisation.

Interviews are associated with more advantages which makes them dependable, these include; their

capacity to make available instant feedback required by the interviewer, provide a better understanding of

the respondent’s answers through both verbal and non-verbal communication and provide room for

respondents to clarify their answers. These advantages show that interviews can be the best instrument on

collecting high quality data, Mathers et al (2015)

However interviews are very costly, time consuming and permit interviewer and interviewee bias. Some

respondents may be unwilling to provide more information in addition to their questionnaire responses.

This will however be overcome by establishing good relationships with the respondents.

3.5.1.3 Validity and Reliability

To guarantee the validity and reliability of data, the research instruments will be submitted to the

researcher’s supervisor for critical analysis before piloting and administration. The valuable

recommendations from the researcher’s supervisor as well as results obtained through pilot testing these

instruments provided scope for refining the validity as well as reliability of the research instruments.

Questionnaires were distributed to ten colleagues who had their work related learning in the various

institutions and corrections were made. Reliability test was also measured by the Cronbach alpha as well

as factor analysis, which checked constancy of the research questionnaire. Cronbach (1951) states that

rule of thumb for questionnaires to be considered reliable or acceptable has to be in the range of 0.6 ≤ α <

0.8. The research also checked reliability by checking the closeness of responses attained from

questionnaires and interviews.

3.5.2 Secondary Data Collection

The secondary data sources includes published sources like textbooks, internet journals business

magazines, government publications, newspapers, Reserve Bank of Zimbabwe reports and corporate

annual reports. These sources are useful in providing important information used during the process of

designing the questionnaires for the research. Although secondary data in some cases may not give enough

detail and fail to meet the exact requirements of the research, it is less expensive to use than primary data

collection. According to Taylor (2000), the use of document reviews saves administrative time and costs

and thus time and a lot of money is saved through the use of secondary data.



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However the information is not designed to meet the needs of the research and some of the information is

out dated given the drastic changes that take place in the financial sector on a daily basis and some may

be biased especially when using newspapers which seeks to attract people’s attention. There is also no

control over the procedure used for collecting, analysing and interpreting the data, thus accuracy of the

secondary data is subjective.

3.6 Data Presentation and Analysis Plan

The study will be summarized, organized and analyzed using STATA 13 statistical package. This will be

structured with the service of analytical tools like the tabular system. After doing this analysis, figures,

tables and percentages will be used as tools for presentation and analysis of data gathered. Tables will be

used as they aid relationships among data to be visualized which then facilitates comparison. Tables also

enhance comprehension as tabulated data are easier to understand and reminisce and errors and omissions

can also be easily noted.

3.7 Summary

The chapter explained the methodology used to carry out the study. The research design, the sample

population and plan as well as instruments used in the research were also highlighted. The chapter went

further to look at the data collection methods and concluded by outlining, explaining and justifying data

presentation and analysis plan for chapter four.

The next chapter will look at a critical analysis of primary data in terms of key areas of research questions.



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CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1. Introduction

This chapter provides a depth analysis, presentation and interpretation of research findings. STATA 13

and Microsoft Excel 2013 were used to properly analyse cross sectional primary data and panel secondary

data. Responses from questionnaires were presented using some different analytical tools such as, tables

and descriptive statistics. Responses from interviews conducted were presented under the theme. This was

done in line with the objectives, research questions and research design as well as data collection

techniques. Results from secondary data were presented using tables and descriptive statistics.

4.2 Analysis of Response Rate

This section covers responses from questionnaires and interviews. The total of 120 questionnaires were

placed to 15 companies in distinct sectors which are manufacturing, SMEs, technology, insurance,agriculture and food. Interviews were done the revenue authority with branches located in Harare and

Gweru. To complement this, ten interviews were targeted mainly at ZIMRA, Ministry of Industry and

Commerce and a few selected large corporates located in Harare. The responses that were obtained from

questionnaires and interviews are presented below.

4.2.1 Questionnaire Response Rate

Table 4.1 below shows the number of questionnaires administered and those returned and the percentage

response rate.

Table 4.1: Response Rate for Questionnaires

Questionnaires administered Questionnaires returned Response rate

120 99 82.5%

Source: Raw data

Of the 120 questionnaires administered to the institutions, 99 were returned thus the research represents

an 82.5% response rate. Of all the 120 organisations targeted 99 managed to return the questionnaire

administered to them, this will be shown in detail in Appendix D. This high response rate shows that

companies are keen to operate in a FEZ. The responses will be used to represent the views of the whole

business sector in Zimbabwe.



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The response rate is in line with Bryman and Bell (2011) who postulated that the response rate of more

than 50% is enough to justify presentation of the findings, so it is acceptable. The response rate was high

because most of the questionnaires were self-administered to bank employees in the banking halls. The

questionnaires were drawn-out to respondents who were keen to be involved in the research.

Questionnaires which were not successfully answered were as a result of other work commitment by the

respondents who then fail to answer the questionnaires

4.2.2 Interview response rate

Response rate for interviews conducted are shown in the table 4.2 below.

Table 4.2: Interview Response Rate

Scheduled interviews Conducted interviews Response rate

10 8 70.0%

Source: Raw data

Of the 10 scheduled interviews 7 were conducted, the other 2 could not be conducted because some of the

individuals were out of reach while some were busy. The 70.0% response rate will represent the whole

business population and this is justifiable by Bryman and Bell (2011). Interview response rate was low

due to limited time to secure appointments, long procedures to book appointments and travel to the

designated places.

4.3 Reliability Test

Reliability test was measured using the Cronbach alpha which checked consistency of the research

questionnaire. Cronbach (1951) states that rule of thumb for questionnaires to be considered reliable or

acceptable has to be in the range of 0.6 ≤ α < 0.8. The results obtained are as follows but full results from

STATA given in Appendix.



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Table 4.3: Reliability Test Results

Average inter item covariance: 0.1837168

Number of items in the scale: 15

Scale reliability coefficient 0.7304

Source: Raw Data

The Cronbach alpha was at 0.7304 which is acceptable reliability and which also reflects that there is

consistency in the answering of questions.

Factor analysis

All the variables in the uniqueness section shows that they are relevant to the factor model. The variable

“employment” does not share with other variables in the overall factor model because of its high

uniqueness of 0.5268 (the greater the uniqueness, the lower the relevance). Factor 1(Exports) has an

eigenvalues of 2.9309 it suits well with the model and with that it should be retained as according to Kaiser

Criteria.

4.3 Data Presentation and Analysis

This section of the research presented, interpreted and gave an in-depth analysis of the findings from a

number of respondents on the feasibility of introducing FEZ in Zimbabwe. The results gathered will be in

conformity with the objectives and research questions set. The researcher used various statistical graphics

to determine if it is feasible to introduce FEZ in this current state of the economy.

4.3.1 Duration in the Current Employment

The essence of getting information on the duration of the respondent in the current job position is that it

gives the researcher the guarantee that the information provided to him/her is meaningful and accurate.

The results are presented below in table 4.3.



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Table 4.4: Duration in the Current Position

Source: Raw data

According to the data provide above, the minimum period of respondents’ current position was 2 and the

maximum is 46.The mean number of years for the 58 respondents was 2.137931 and the standard error of

0.1165346 at a 95% confidence level. This shows that all the respondents provided meaningful

information as they were in the current position since dollarization and it suits the scope of this study

which is looking at this current situation. With the average years of respondents, there is no doubt that the

majority of the respondents are experts in their specialised fields and are well vested with what is

happening in the country. This create new insights when approaching the introduction of FEZs in

Zimbabwe.

4.3.2 Exports after the adoption of the multi-currency regime

Figure 4.1 below shows the researcher’s findings on the actual value of exports made. Responses are

shown below.

Total 99 100.00

20-more 39 39.39 100.00

10-20 18 18.18 60.61

1-10 42 42.42 42.42

period Freq. Percent Cum.

average

. tab averageperiod



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Table 4.5: Exports made up to the current date

Source: Raw data

The results show that only 30.3% of the total respondents were exporting while 69.70% were not exporting

anymore. The figure is not attractive since there should be a huge value of exports being made in order to

have a balanced B.O.P and economic growth at the same time.

A study by Ranjan (2006) on special economic zones shows that exports are the major reason of

establishing free zones. Some of the zones are called EPZ (export processing zones) which means they

are only there for international markets.

4.3.3 FEZ fertile grounds availabilityThe researcher asked respondents if they were prepared to undertake securitisation as the originators of

the process. The results gathered are presented in the Figure 4.1 below.

Total 99 100.00

agree 69 69.70 100.00

strongly agree 30 30.30 30.30

economy Freq. Percent Cum.

contribution to

exports



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Figure 4.1: FEZ fertile grounds

Source: Raw data

Figure 4.1 above shows that out of the 99 respondents, 42 agreed that Zimbabwe have the fertile grounds

necessary for FEZ establishment (32 strongly agreeing and 20 agreeing). 9 were uncertain of their

positions and 48were in total disagreement of the availability of fertile grounds in Zimbabwe.

For FEZ introduction to be successfully implemented there is need for the fertile ground that is a well set

systems, well developed infrastructure, availability of laws governing the FEZ and supportive policies.

From the interviews held it was however noted that companies were keen to operate in FEZs but werewaiting for the government to initiate the FEZ. With the harsh current business conditions, companies

couldn’t wait knowing the benefits that are associated with FEZ establishment.

However it can be concluded that FEZ are feasible in Zimbabwe since 50% of the respondents said that

they were prepared to jump ship.

4.3.4 Skills and robust system to meet export standards

The researcher did an assessment of how many of the respondents had the skills and robust systems to

meet the exports standards in their company. For a company to be successful in the export market, there

is need for well set systems and human skills in order to combat the competition in the international

market. The results of the findings are shown below.

0

. 2

. 4

. 6

. 8

i

1 2 3 4 5fertile grounds



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Figure 4.2: Skills and robust systems to export quality

Source: Raw data

From the above table it is evidenced that in Zimbabwe of the 99 respondents 56.56% rated the

Zimbabwean companies as having excellent skills and robust systems to meet the export standards,

26.66% were rated good skills and 17.78% had poor skills.

This will mean that revitalising exports through FEZ in Zimbabwe is feasible since the personnel involved

in the management and sales of the company’s line of products were rated to be skilled as far as exports

are concerned.

4.3.5 Visibility of firms operating within/outside the FEZsThe respondents were asked if they were sitting on quality loan books which could be securitised and the

results are presented below in table 4.6. The respondents were asked to indicate the degree of agreement

with the given statement by giving a rate, (5=strongly agree, 4=agree, 3=uncertain, 2=disagree, 1=strongly

disagree).

0

. 2

. 4

. 6

1 2 3 4 5

skills and robust firms of firms in Zimbabwe



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Figure 4.3: Visibility of firms

Source: Raw data

The graph above shows the responses on visibility of firms operating in zone and those outside. 48 of the

respondents strongly agreed that firms operating in FEZs are more visible compared to those outside while

31 agree to the notion. 11 of the respondents were uncertain, 9 disagreed. This clearly shows that firms

operating in zones are more visible compared to those outside.

4.3.6 Relationship between FEZ and economic growth

Generally there should be a positive relationship between economic growth and FEZ, since FEZ are asource of both exports and FDI which are the major drivers of economic growth. The researcher wanted

to find out if there is a positive correlation between FEZ and economic growth. The results to the findings

are shown below.

0

1 0

2 0

3 0

4 0

5 0

1 2 3 4 5visibility level of firms in zone and outside zone to the market



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Table 4.6: FEZs relationship with economic growth

Source: Raw data

From the results presented it is evidenced that most of the respondents agreed that there is a relationship

between FEZ and economic growth. 60.61% strongly agree and 15.15% agree, this gives a total of 75.76%

which support the fact that economic growth will be revitalised by FEZ establishment. There was a 7.07%

response of people who were uncertain if FEZ will bring an increase in the economic growth. However

17.17% of the respondents disagreed (7.07% disagreeing and 10.10% strongly disagreeing).

Wei Ge (1999) suggests that EPZs may serves as an effective policy tool in achieving greater

economic openness and growth implemented properly by the host country. This shows that there is a

positive relationship between FEZ and economic growth.

4.3.7 Impact of FEZ on FDI

As one of the main objectives of establishing FEZs, the researcher wanted to know the impact of FEZ on

FDI. In other empirical studies carried out in other countries, there was a huge impact of FEZ on FDI. The

researcher therefore wanted to know if these benefits can also be applicable in the Zimbabwean context

in the case of FEZ being established in Zimbabwe. The results obtained on the impact are presented below.

Total 99 100.00

strongly disagree 10 10.10 100.00

disagree 7 7.07 89.90

uncertain 7 7.07 82.83

agree 15 15.15 75.76


economic growth Freq. Percent Cum.

between FEZ and

correlation

possitive



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Table 4.7: Impact of FEZ on FDI

The results show that 51.52% of the overall respondents strongly agreed to the notion that FEZ has a

significant impact on FDI as well as the other 29.29%. A total of 5.05% had doubts or were uncertain on

whether FEZ impact on FDI while 5.05% were in total disagreement supported by 9.09% who also

disagreed.

Chang (2004) carried out a study finding out whether FEZ incentives attract FDI or not. His results were

positive and a study was carried out by Moyo (2013) explaining the relationship between FDI and

economic growth. The results were positive and a model was designed showing the link between FDI and

Economic growth. A relationship can be devised:

FEZ (FDI, Exports, Technology spill overs, Infrastructural development, training) =Economic growth

4.3.7. Impact of FEZ on revenue

The respondents supported that securitisation will increase the liquidity of the bank and the results

obtained are presented below in figure 4.6. A rating was required to the provided statement.

Total 99 100.00


disagree 9 9.09 94.95


agree 29 29.29 80.81


FDI Freq. Percent Cum.

FEZ attracting



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Table 4.8: Impact of FEZ on revenue

Source: Raw data

The results indicate that 35.35% of the respondents agree that FEZ play a vital role in increasing the

national revenue as well as to the companies operating in the FEZ. These are followed by the 54.55% that

strongly agreed and 7.07% that disagree and the other 2.02% that strongly disagreed.

It can be concluded that government and organisational revenue can be unlocked by establishment of FEZ.

This is because of the incentives and new market availability for the local domestic products. However

other respondents disagreed, but the percentage of those who disagreed is close to zero hence negligible.

Sehweinberger (2003) suggests that establishment of SEZs accompanied by appropriate tax policies,

will lead to an increase in government revenue. This revenue may be set to finance other investments

in infrastructure or other public goods.

4.3.8 Impact of FEZ on Human development

Respondents were asked if there was any impact of FEZ to human development in Zimbabwe. A table

below provides the responses that were gathered

Total 99 100.00


disagree 7 7.07 97.98


agree 35 35.35 89.90


revenues Freq. Percent Cum.

FEZ boosting



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Figure 4.4: FEZ and human development

Source: Raw data

The results shows that 38.38% of the respondents agreed that there is an impact of FEZ on human

development. 40.40% strongly agreed, 6.06% were uncertain followed by another 15.15% who disagreed.

Most of the respondents felt that the establishment of FEZ will benefit them in developing every

Zimbabwean. However some of them were uncertain, that is they were not sure if they would actually

benefit from the FEZ or not hence not able to see the impact of FEZ on human development.

According to Raheem (2011) the employment generation, both direct and indirect, has thus far been

the most important channel, through which SEZ have impacted on human development and Poverty

reduction in India. India’s SEZs are not dominated by assembly type operations. ‘Value addition’

component and hence employment generation potential of zones is rather large. Even though their

contribution to national employment has been limited, they have contributed significantly to employment

generation at the regional level hence human development.

4.3.9 Impact of FEZ on employment creation

One of the main traditional objective of FEZs is to create employment for the locals in the host country

since it also bring about economic growth and improved standards of living. With the current situation in

Zimbabwe where by more than 75% of the population that is supposed to be fully employed is seated at

home the researcher asked respondents on their views on the impact of FEZ on employment creation. The

results gathered are presented below.

0

. 2

. 4

. 6

. 8

1

i

1 2 3 4 5impact of FEZ on human development



52 | P a g e

Figure 4.5: Employment creation

Source: Raw data

88.89% (58.59% strongly agree and 30.30% agreeing) of the respondents agreed that the ever increasing

rate of unemployment can be reduced by the establishment of FEZ in the country. This is in total

agreement with Mireri (2000) who asserted that FEZ help create employment in the host country in that

production will be at its peak hence more workers needed. As evidenced by several successful zones like

the one in Mauritius, employment was created up to the extent that jobs were chasing people. This is

evidenced by the wages that were now being paid to the employees.

There are negative results from establishing the FEZ such as: the insecurity of the workers due to the

fluctuation in the number of enterprises operating in the FEZ (Mireri, 2000). The employees inside

the zones could be worse off than those who work outside the zones with respect to the wages paid inside

and outside the FEZ.

Agrawal (2007) in her working paper entitled “Impact of Special Economic Zones on Employment,

Poverty and Human Development,” . For the study, the primary survey based data were generated

through interviews of entrepreneur and workers across the three largest SEZs: SEEPZ, MADRAS

and NOIDA. The analysis reveals that employment generation has been the most important channel

through which SEZs lend themselves to human development concerns, in India.

4.3.10 Zimbabwe capacity to accommodate the business and sophistication in the zone area

The need for infrastructure and well set systems that can easily accommodate FEZ businesses is very

crucial. Below is a precise summary showing the responses from the respondents on the capacity issue.

The researcher asked respondents their view on the aspect and the results are presented in the table below.

0

2 0

4 0

6 0

1 2 3 4FEZ impact on employment



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Figure 4.6: Capacity to accommodate zone business

Source: Raw data

The results shows that 22.41 percent of the respondents agree that Zimbabwe do have the capacity to

accommodate FEZ business and these are supported by a 6.90% who strongly agree. 29.31% are not

certain of what can happen while 13.79 do not agree at all, these are supported by the 27.59 % who strongly

disagree to the fact that Zimbabwe have the capacity to accommodate FEZ businesses.

4.3.11 Challenges associated with FEZs

FEZs have a number of benefits both to the country and to the companies operating within the zone

jurisdiction. Benefits to the country include employment creation to the locals, FDI attraction, and boost

exports while benefits to the companies include fiscal and non-fiscal incentives, additional international

market and flexible labour laws. With that also comes challenges that are associated with the FEZs. Some

of the challenges are listed below.

4.3.11.1Vulnerabilities to illicit dealings

According to FATF (2013), whenever a free zone is established there are high chances of that illicitdealings are also conceived. With the trade between nations of different cultures and beliefs, money

laundering and financing of terrorism are evidenced in zones as well as goods smuggling and corruption.

The researcher asked the respondents if there are those chances of illicit dealings and the data is presented

below.

0

1 0

2 0

3 0

0 2 4 6capacity of company to operate in FEZ

Frequency

kdensity capacity

normal capacity



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Figure 4.7: Illicit dealings

The results show that 6.5 of the whole 10 points agreed that illicit dealing come also with FEZ

introduction. 2.5 of the 10 points were uncertain while 1 point of the 10 points were disagreeing. This is

supported by the FATF which asserted that the development of FEZs will create room for illicit dealings.

4.3.11.2 Environmental pollution

FEZ establishment comes with its on cases, most of them are advantages compared to the disadvantages.

Pollution of the environment is one of the main challenges associated with FEZs. Most of the companies

operating in a FEZ are manufacturing companies hence there are emissions of toxic gases in the

atmosphere as well as toxic liquids and other materials in the environment they are operating in as well as

in the water sources. Austerity measures should be taken in order to make sure that the level of pollutionis maintained at reasonable amounts to avoid health complications and destroying of the natural

ecosystem.

Another source of ecosystem destruction can be that of the infrastructural development by companies. Net

one is building network boosters that look like trees in order to avoid disturbing the ecosystems.

0 1 2 3 4 5 6 7

Strongly agree

Uncertain

Disagree

Points /10



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The Chinese government make use of environmental regulations set to reduce environmental pollution.

Amongst the laws that has been set include Environmental protection law (EPL), Environmental Impact

Assessment Law (EIAL) and Measures for Administration of the Control of Pollution by Electronic

Information Products often referred to as China RoHS.

4.3.11.3 Effects on the Social atmosphere

As a life thing, FEZ has certain effects on the social environment. The social environment involve the

way people live together, their culture and beliefs and all other ethical issues like religion. The researcher

asked the respondents if FEZ has any effects on the social atmosphere in Zimbabwe and the findings are

given below.

Table 4.9: Effects of FEZ on the social environment

The results show that 73.53 % ( 32.32% and 25.25%) of the respondents agree that FEZ has effect on the

social atmosphere, 15.15% of the respondents were uncertain on what effect FEZ has on the social

atmosphere and 27.27% were disagreeing to the notion.

The above statistics are supported by Saeed Khan (2008) who postulated that though, SEZ policy adopted

by India to support economy in a big way, the conversion of fertile land into industrial land may

create food crises in near future. The use of the wasteland available in India (around 552692 sq.km.) for

SEZ development will ensure that the farmers are not displaced from their farmland, the developmentnot concentrated near cities and the fertile land will continue to be used for agricultural use.

4.3.12 The Legal and Regulatory Environment

The respondents were asked if the policies and regulations in the country are flexible enough to attract

FDI hence making FEZs successful in Zimbabwe. The results are presented below in figure 4.11.

Total 99 100.00


disagree 14 14.14 86.87

uncertain 15 15.15 72.73

agree 25 25.25 57.58


environment Freq. Percent Cum.

social

impact of FEZ on



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Figure 4.8: The Need for sound policies that encourage FEZ

Source: Raw data

Figure 4.11 shows that 10.34% of the respondents strongly agree that the laws and policies set in place

help come up with a successful FEZ supported by 15.52% who agreed on the same point. 3.45% are

uncertain, 18.97 % strongly disagree supported by 51.97% who disagree that the laws and policies are fit

enough to result in a successful FEZ.

A major preferential treatment is essential for the development of EPZ units by granting them the

Government policy concessions in the form of fiscal and non-fiscal incentives. There should have be

separate specific rules/regulations for different kind of zones in regard to Customs, Income Tax, Foreign

exchange, VISA/Landing permit etc.

4.3.13 Summation of the impact of all factors

0

.2

.4

.6

.8

1

D e n s

i t y

1 2 3 4 5policies

Density

kdensity policies

normal policies



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Table 4.10: Summation of all variables

Source: raw data

Ranjan (2006) carried out a study on whether FEZ are good for the host country, his findings show that

FEZs are an integral part of an economy especially an developing one.

The effectiveness of EPZs in developing countries has been debated for more than 2 decades now. Among

those supporting the use of FEZs, Haywood (2000). For example at one instance asserted that: Indeed, the

zone concept is so powerful, that more and more countries are recognizing a new paradigm of free zones.

While the old free zone was often described as a static, labour-intensive, exploitative enclave, the new

zone paradigm is a dynamic, investment-intensive, management-driven, enabling, and integrated

economic development tool.

4.4 Summary

This chapter presented and analysed the findings of the research from interviews in line with the research

questions and objectives. First an analysis of the response rates from interviews and questionnaires was

made. Data was then presented and analysed using Stata 13 data analytical software. The results from

questionnaire and interviews were presented in line with the research questions and objectives. An analysis

humandevel~t 99 2.030303 1.101525 1 5

revenue 99 1.666667 .9583148 1 5

education 99 2.313131 1.337424 1 5 culture 99 2.656566 1.415379 1 5

visibility 99 1.808081 .94412 1 5

skills 99 2.484848 1.172505 1 5

employment 99 1.626263 .8521983 1 4

capacity 99 3.141414 1.317156 1 5

fertilegro~s 99 2.717172 1.538886 1 5

averageper~d 99 1.969697 .908627 1 3

gender 99 1.373737 .4862572 1 2

policies 99 3.212121 1.372267 1 5

fdi 99 1.868687 1.174964 1 5 links 99 2.111111 1.300619 1 5

exports 99 1.69697 .461907 1 2

Variable Obs Mean Std. Dev. Min Max



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was made on each aspect. The next chapter will discuss the summary, conclusions and give

recommendations pertaining to this study. Suggestions for future research will also be outlined.



59 | P a g e

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

The preceding chapter dwelled much on data presentation and analysis. This chapter will give a summary

of the research and conclusions that the study has made on the feasibility of introducing FEZ in Zimbabwe.

Recommendations will be provided for the overall research paper.

5.2 Summary of the study

The researcher sought to assess the feasibility of FEZ introduction as a strategy to improve the

Zimbabwean economic growth through the making available of FDI, exports demand as well as improving

the agricultural and manufacturing sectors. The motive of the study was derived from the challenges being

faced by the country in managing itself and serving its people.

The main objective was to assess the feasibility of introducing FEZ in Zimbabwe. The literature reviewedthat there are two classes of FEZs namely the regime type and the territorial type and also that the main

objectives of the traditional FEZ were to boost exports and attract FDI. The mostly faced challenges of

FEZs are requires much in terms of development, vulnerabilities to crime and money launderers and a

number of benefits enjoyed include reduced or no tariffs, increased liquidity, increased profitability and

growth in local corporates. An exploratory research design was employed to acquire new insights and

develop an understanding into how FEZ can be used as a strategy to revamp the economy. Judgemental

sampling was used to select the corporates that have been operational since the adoption of the multiple-

currency regime and both the management and the research and development were interviewed and given

questionnaires. In analysing and presenting data, both qualitative and quantitative techniques were used.

The findings show that FEZs are feasible in Zimbabwe at this moment in time and can help save it.

However lack of robust systems and more skilled workforce is being a challenge since most companies

are experiencing high overhead costs and at the same time suffering competition from the international

community. In this chapter the researcher is going to draw conclusions and recommendations of the study.

5.3 Conclusions

FEZs have become a key instrument of economic development policy in developing countries seeking to

gain advantages from the growing integration of the global economy. Yet, FEZs remain controversial and

often are associated with a race to the bottom because their net contribution to countries ’wellbeing is still

not clear (ILO, 2003; Cling, et al, 2005). Most critics point out that FEZs offer “sweat - shop” labour



60 | P a g e

conditions despite the significant tax and infrastructure incentives offered by developing countries seeking

to attract high - tech jobs (ILO, 2003).

Surprisingly, despite the interest in evaluating FEZs’ net contribution to countries’ wellbeing, the

scholarly literature has paid little attention to the environmental protection effects of EPZs

Based on the evidence gathered through the research study, in line with the objectives and research

questions the following conclusions can be made:

Feasibility of FEZ

The respondents showed that almost all organisations in Zimbabwe are willing to support the

establishment of FEZ hence the feasibility of introducing FEZ. The main challenges revealed by the

corporates as a limiting factor of the development of the FEZ in Zimbabwe is that the corporates do not

have skilled work force as well as robust systems that can meet the world standards and also the cost of

establishing the FEZs are very high (Ryal,1997). But however if successful, the cost of establishing the

zone can be recouped in a short space of time.

The benefits of FEZ

As characterised by their formation, FEZs were meant to boost exports, attract FDI, and create

employment amongst other benefits to the host country mostly developing countries. The respondents

agreed that this export tool has potential to increase liquidity, profitability and aid in economic growth.

Zimbabwe investment policies

The respondents agreed that the country has no policies that can foster foreign direct investment and

that stimulate exports. There is need for policy restructuring as well as making new policies that are

in line with investment and that encourage exports.

Challenges associated with FEZs

The major challenges expressed by respondents which are associated with FEZs include, vulnerabilities

from illicit dealings, environmental pollution and may deter the culture of the local.

The respondents showed that in order to reduce these dealings, there should be a well set customs

security task force that can do its job thoroughly. The respondents argued that in order to establish a long lasting relationship with the investors the

government should ensure consistency in their policies as well as implementing other policies that

attracts FDI.



61 | P a g e

As far as bankers and industrial l experts are concerned, the reluctance of the investors to invest in

Zimbabwe can be overcome by the government’s ability to disclose the policies in official and popular

sites so that everyone even in Mongolia can see what the policies look like.

5.4 Recommendations

As noticed in other cases from different countries, FEZs can be unsuccessful or can fail to meet the set

objectives. In order for FEZs to positively impact the Zimbabwean economy and create employment as

well as boosting exports and attracting FDI, the following are recommendations hinged on the aids;

verdicts and comments from participants throughout the whole research process should be done.

Following the strides taken by the government to reduce public expenditure, policies revisiting amongst

other areas as directed by the IMF to access funding from the international organisation, here are some of

the additional recommendations that can as well assist both in a successful FEZ introduction and economic

growth as a whole.

The government should revisit their policies to ensure that there are investor friendly and if

possible design new policies that can attract foreign potential investors and there should be

consistency in their policies

There should be also political stability and improved national relationships with other countries

mainly the western countries who are leading in terms of markets.

Road networks should be up to standard amongst other infrastructural development that can be

done to attract investors from as far as Japan.

There should be effective land reform programs to ensure that there is enough available space for

the zone and also for activities like commercial farming and in turn revamping the manufacturing

sector which rely mostly on agricultural products.

There should also be fair tight laws pertaining to illicit dealings in the customs and the spear

headers of the FEZ introduction should have a huge percentage of young blood individuals who

are still working hard to be recognised. This will encourage new and fresh ideas through logical

thinking.

Heavy promotional strategies of the FEZ should be done and the processing of necessary

documents to operate in zone should be minimised by all means to avoid boredom and monotony.



62 | P a g e

The government should avoid giving a name to the zone that will portray wrong image about the

zone, the name should be enticing as well as giving hope to the firms operating in it and curiosity

to the potential investors. A suggested name by the researcher is “Giant Awakening Zone(GAZ)

or Zim Asset Zone( ZAZ)”

5.5 Suggestions for future research

This research conducted in this study has led to some useful results and conclusions regarding the

feasibility of introducing FEZ in Zimbabwe. However, it has also uncovered many areas that need

additional study which may include how FEZs can be promoted in a developing economy like Zimbabwe

and reasons behind failure of other FEZs.



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REFERRENCES

Aggarwal Aradhna (2005), ‘Performance of Export Processing Zones: A Comparative Analysis of

India, Sri lanka and Bangladesh, Working Paper No. 155, Indian Council for Research on International

Economic Relations, New Delhi.

Confederation of Zimbabwe Industries website www.czi.co.zw accessed on 22 July 2015

Confederation of Zimbabwe Industries, manufacturing survey, 2012

Cronbach, L. J (1951), Coefficient alpha and the internal structure of tests, Psychometrika, vol.16, no.3,

pp.297- 334.

Curimjee, A. 1990. “Linkages in Mauritius” in R. L. Bolin (ed.) Linking the Export Processing Zone to

Local industry. The Flagstaff Institute

Durham, K. B., 2003. “Absorptive Capacity and the Effects of Foreign Dir ect Investment and

Equity Foreign Portfolio Investment on Economic Growth,” European Economic Review 48, 285-

306. Foreign Investment , IFC and MIGA, Washington, DC.

Haywood, Robert (2000) Free trade zones in the modern world, Flagstaff, Arizona, World Export

Processing Zone Authority, The Flagstaff Institute, www.wepza.org/article5

IMF (International Monetary Fund). 2001. International Financial Statistics: Mauritius.

Washington: International Monetary Fund.

Kane, M (2001), Current concerns in validity theory, Journal of Educational Measurement , vol.38,

pp.319-342.

Khan Saeed, (2008) ‘India’s SEZ: Economic Performance, Social / Environmental Impacts’,

retrieved electronic copy of Journal Social Sciences.

Madani ,Dorsati (1999) “a review of the role and impact of export processing zone”, Policy research

working paper, No 2238, Washington DC, World Bank

Mireri C., (2000) ‘The Impact Of Export Processing Zone Development On Employment Creation In

Kenya’. Singapore Journal OfTropical Geography, Vol.21 No.2, Pp 149

http://www.czi.co.zw/






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Mlambo, A.S, Pangeti, E.S, Phimister,I(2000) Zimbabwe, A history of manufacturing 1890-1992, UZ

publications

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Noorbakhsh, F., Paloni, A., and Yousef, A. (2001), “Human Capital and FDI to Developing

Countries: New Empirical evidence”, World Development, 29 (9): 1593-1610.

OECD. 1996. Trade, Employment and Labour Standards - a Study of Core Workers’ Rights and

international Trade. Paris.

Offshore Outlook. 1995. Volume 3, issue 29, March

Processing Zones and Free Trade Zones, Flagstaff Institute

Raftapoulos, B and Mlambo, A.S (2009) Becoming Zimbabwe: A history from the pre-colonial period to

2008, Weaver Press

Raheem Abdul A. (2001), ‘Impact of Special Economic Zones on Human Development and Poverty

Reduction: An Indian Experience’, International Journal of Multidisciplinary Research, Vol. 1, Issue

7, November, pp117-188.

Rajan, R (2006): ‘Sustaining Competitiveness in the New Global Economy: Introduction and Overview’

in R Rajan (ed), Sustaining Competitiveness in the New Global Economy: A Case Study of Singapore,

Edward Elgar, Cheltenham, 2006

Ranjan Ram Krishna (2006), ‘Special Economic Zones: Are They Good for the Country”? CCS Working

Paper No. 156, Summer Research Internship Programme, Centre for Civil Society.

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Sampat Preeti, (2010) ‘Special Economic Zones in India: Reconfiguring Displacement in a

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Sehweinberger, A. G, (2003). ‘Special Economic Zones (SEZ) In Developing And / Or Transition

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Tekere, M (2000) Export Development and Export led growth strategies: Export processing zones and the

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UNDP (United Nations Development Program), Zimbabwe manufacturing industry, Economic recovery

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UNIDO. 1988. Export Processing Zones in Transition: the Case of the Republic of Korea,PPD 84. Vienna.

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University of Mauritius, June 26, 1997.

Wei, S.J. (2000). How Taxing is Corruption on International Investors. Review of Economics

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APPENDICES

APPENDIX A: COVER LETTER

Midlands State University

Department of Banking and Finance

P. Bag 9055

Gweru

To whom it may concern

RE: Research on an assessment of the feasibility of introducing free economic zones in Zimbabwe

I am a student at the above mentioned institution and carrying out a research on assessing the f easibil i ty

of i ntr oducing f ree economic zones in Zimbabwe . This is in partial fulfilment of the Bachelor of

Commerce Honours Degree in Banking and Finance which I am currently undertaking. I kindly ask you

to assist by completing the questionnaire attached to this letter. The information provided as well as your

personal views will be treated with confidentiality and used for the purposes of this study only.

Your contribution to this research is greatly appreciated.

Yours faithfully

……………………………………………………..

Luckmore Hanyire (R114962F



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APPENDIX B: QUESTIONAIRRE

There are 15 questions in this survey

Section A: Demographics

In this section you are asked some biographical questions. The following information is important for

analysing the information gathered from this questionnaire. Please choose information that represents you

the most.

1. My gender

Please choose only one of the following: MALE FEMALE OTHER

2. My age group

Please choose all that apply: 1960-70 1970-80 1990-95

3. Highest qualification achieved

Please choose all that apply: High school Diploma Degree and above

4. Average years in practice before current employment/running my business:

1-10 10-20 20-More

Section B: Macro economic issues

Please choose all that apply:

In answering the questions below you are kindly asked to use the scale provided where possible

1 2 3 4 5

Strongly Agree Agree Uncertain Disagree Strongly

Disagree

1. After the introduction of the multicurrency regime, have you ever exported any of your products



68 | P a g e

2. There is fertile ground for FEZs to be fully implemented in the economy.

3. Companies have the capacity to operate in the FEZ and meet both local and foreign demand

4.

Zimbabwe is well positioned to link with the international community

5. There is a positive correlation between FEZs and economic growth

6. FEZs can attract FDI as well as boosting exports.

7. The regulatory environment affect the establishment of FEZs

8. Zimbabwe has policies that encourage FEZs operations

9. Employment can be created by establishing FEZs

Section C: Organisation Based

10. Your organisation can easily meet the demand of its products from both FEZs market and local market

at the same time

11. There is greater visibility to targeted markets for firms operating in zone than outside

12. Your organisation has highly skilled staff and robust systems that can match with the export standards

13. Your organisation’s revenues will increase when operating in FEZ

14. Existence of FEZs will not affect the cultural part of the Zimbabwean people as well as not exposing

Zimbabwe to new crime

32

1 32 4

4321

321

54

5

5

4

4321

54321

5

1

5

5432

4 5321

54321

5432

5432

5432

5432

5432



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15. FEZs have an impact on human development and poverty reduction

YOUR CONTRIBUTION IS GREATLY APPRECIATED

THANK YOU

5432



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APPENDIX C: INTERVIEW GUIDE

1. Are you exporting your finished products ? If yes, what are the benefits? If no, what are the

reasons?

2. What are the challenges you think might likely be associated with FEZs and what are the solutions

to overcome them?

3. Do you think FEZ establishment in Zimbabwe might help in addressing the national challenges

including unemployment? Would you say investors currently are keen to invest in Zimbabwe? If

yes justify and if no what might be the cause of that?

4. Does Zimbabwe really have the capacity to establish a FEZ? How do you see this changing in the

future?

5. Are regulators and the government being supportive to exporting firms in any way and do you

think the regulators behaviour on exporting firms will change in the future?

6. FEZs were once introduced in Zimbabwe but failed to sail through what do you think can be done

to promote FEZs hence insuring their success in Zimbabwe?

7. How can government regulations be used as enablers for the implementation of FEZs

8. How can the concept of FEZs be applied to third world countries like Zimbabwe to revamp the

economy?

………………………………………………..

L.J. Hanyire

October, 2015



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APPENDIX D: MEAN AND VARIANCE OF THE DURATION

LR test of model vs. saturated: chi2(0) = 0.00, Prob > chi2 = .

var(averageperiod) .8172635 .1161608 .618554 1.079808

mean(averageperiod) 1.969697 .0908581 21.68 0.000 1.791618 2.147775

Coef. Std. Err. z P>|z| [95% Conf. Interval]

OIM

Log likelihood = -130.48613

Estimation method = ml

Structural equation model Number of obs = 99

Iteration 1: log likelihood = -130.48613

Iteration 0: log likelihood = -130.48613

Fitting target model:

Observed: averageperiod

Exogenous variables



72 | P a g e

APPENDIX D: RELIABILITY TEST RESULTS

Test scale .1837168 0.7304

humandevel~t 84 + 0.4380 0.3207 .1866814 0.7179

revenue 84 + 0.4014 0.3085 .1925011 0.7202

education 84 + 0.5189 0.3670 .1742612 0.7129

culture 84 + 0.5234 0.3656 .173122 0.7133

visibility 84 + 0.3643 0.2666 .1946186 0.7231

skills 84 + 0.4449 0.3164 .1848762 0.7182

employment 84 + 0.5331 0.4650 .1874408 0.7116

capacity 99 + 0.5063 0.3358 .1792354 0.7193

fertilegro~s 99 + 0.5504 0.3460 .1729376 0.7213

averageper~d 99 + 0.1874 0.0376 .2075521 0.7396

gender 99 + 0.3332 0.2699 .2036423 0.7265

policies 84 + 0.5546 0.4068 .1700859 0.7077

fdi 84 + 0.5636 0.4478 .1738202 0.7041

links 99 + 0.6638 0.5322 .1583175 0.6883

exports 99 + 0.4689 0.4047 .1968147 0.7180

Item Obs Sign correlation correlation covariance alpha

item-test item-rest interitem

average



APPENDIX E: FACTOR ANALYSIS

humandevel~t 0.4009 0.1643 -0.1373 0.3564 -0.3348 0.0538 -0.1388 -0.0077 0.0706 0.0167 0.5268

revenue 0.4421 0.6268 -0.0996 0.0413 0.2073 -0.0179 -0.1242 -0.0342 0.1482 -0.0068 0.3181

education 0.4325 0.1976 -0.1460 -0.0636 -0.3458 -0.0421 0.1085 -0.0629 0.0430 -0.0811 0.6030

culture 0.4274 -0.1093 0.5074 0.0478 0.1779 -0.1458 0.0149 0.1016 0.0718 -0.0437 0.4752

visibility 0.3119 0.5041 0.2337 0.2216 -0.1757 0.0565 0.1714 -0.0040 -0.0655 0.0661 0.4728

skills 0.4154 -0.1013 -0.1630 0.6449 0.1471 0.0068 0.0425 0.0586 -0.0877 0.0060 0.3400

employment 0.5619 0.2347 -0.0554 -0.0639 0.1082 0.1939 -0.0847 0.0024 -0.1637 -0.0576 0.5354

capacity 0.4165 -0.6390 -0.1808 -0.1609 -0.1626 0.1847 0.1377 -0.0451 0.0340 0.0040 0.2769

fertilegro~s 0.4085 -0.1674 -0.3797 0.1515 0.1822 -0.2137 0.3064 0.0010 0.0345 -0.0022 0.4641

averageper~d 0.1231 0.2134 0.4241 -0.1514 0.1437 0.2424 0.2498 -0.0666 0.0627 0.0186 0.5860

gender 0.2920 0.0923 -0.4586 -0.3179 0.1452 0.2564 -0.0109 0.1487 0.0363 0.0169 0.4843

policies 0.4721 -0.3565 0.4312 0.0525 -0.1745 0.0695 -0.0663 0.1491 0.0377 0.0037 0.3981

fdi 0.5675 0.0589 -0.1454 -0.4164 -0.0803 -0.2493 -0.0681 0.0405 -0.0161 0.0622 0.4010

links 0.6301 0.0033 0.2268 -0.3234 0.0276 -0.1322 -0.0183 -0.0765 -0.1084 0.0014 0.4108

exports 0.4868 -0.4412 0.0401 0.1576 0.1906 0.0720 -0.1949 -0.1734 0.0387 0.0275 0.4301

Variable Factor1 Factor2 Factor3 Factor4 Factor5 Factor6 Factor7 Factor8 Factor9 Factor10 Uniqueness

Factor loadings (pattern matrix) and unique variances

LR test: independent vs. saturated: chi2(105) = 402.97 Prob>chi2 = 0.0000

Factor15 -0.30869 . -0.0434 1.0000 Factor14 -0.26210 0.04659 -0.0368 1.0434

Factor13 -0.24878 0.01332 -0.0349 1.0802

Factor12 -0.18956 0.05921 -0.0266 1.1151

Factor11 -0.14988 0.03969 -0.0211 1.1418

Factor10 0.02184 0.17172 0.0031 1.1628

Factor9 0.09524 0.07339 0.0134 1.1597

Factor8 0.10733 0.01209 0.0151 1.1464

Factor7 0.30775 0.20042 0.0432 1.1313

Factor6 0.36102 0.05327 0.0507 1.0881

Factor5 0.54582 0.18480 0.0767 1.0373

Factor4 1.08255 0.53673 0.1521 0.9607

Factor3 1.21891 0.13636 0.1712 0.8086

Factor2 1.60600 0.38709 0.2256 0.6374

Factor1 2.93097 1.32497 0.4117 0.4117

Factor Eigenvalue Difference Proportion Cumulative

Rotation: (unrotated) Number of params = 105

Method: principal factors Retained factors = 10

Factor analysis/correlation Number of obs = 84

A Feasibility Study of Introducing Free Economic Zones in Zimbabwe

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