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国合前沿

What Are the Effects of China’s Overseas Special Economic Zones on Employment Generation:A Case Study of Zambia

Background

 

China, the world’s largest developing country, and Africa, the continent with the largest number of developing countries, have long formed a community with a shared future. Indeed, we share a common stake. China will work with Africa to achieve our shared goal of building a closer China-Africa community with a shared future and turn it into a pacesetter for building such a community for mankind. (Quoted from Chinese President Xi Jinping’s speech)

 

As BRICS gain more political and economic influence on global issues, they are trying to play a more active role in international development. Especially China, as a significant actor of BRICS, is expanding its sway in various ways including the Belt and Road Initiative, AIIB, CIDCA, numerous development policy banks and so on. The speech cited above indicated Chinese President Xi’s willingness and determination to invest in Africa. From 2000 to 2014, seven out of top ten recipients of Chinese aid are African countries. In 2018, Xi announced in the opening ceremony of Forum on China-Africa Cooperation that China will be providing aid worth 60 billion US dollars to support Africa’s development. 

Special Economic Zones (SEZs)

 

SEZs are demarcated geographical areas within a country’s territory, where different trade regulations are implemented. Generally speaking, these zones offer advantages to attract investors. The advantages could include advanced infrastructure, special customs regimes such as reduced duty, special regulatory regimes and a range of fiscal incentives . Though firstly introduced by places like Puerto Rico, Ireland’s Shannon Airport, and China’s Taiwan, China is the world’s foremost success story in conducting SEZs to develop its economy. China’s reform programs started in the late 1970s with the creation of SEZs in Shenzhen, Zhuhai, Xiamen and Shantou, after which China experienced rapid economic growth for three decades. Chinese officials recognized the positive role of SEZs in fostering economic development, employment and an investment-friendly environment. In 2006, the Chinese government indicated that it would establish and construct up to 50 overseas SEZs worldwide. During the Forum on China-Africa Cooperation held in November 2006, Beijing pledged that approximately 5 SEZs will be located in Africa. 

 

Though located in Africathe SEZs are mainly financed and constructed respectively by China’s development policy banks and Chinese infrastructure companies. China’s government provided support in material and network for the zone constructors. The winners of the tender competition could receive government financial support by special funds. In addition, China Development Bank (CDB) also provided funding support for the constructions.

 

Though SEZs are not perceived as typical international development programs from a western perspective, it is obviously one particular investment method how China is doing its international development assistance. The SEZs involve three actors: Chinese infrastructure companies, African governments and the Chinese government. The Chinese companies play the role of construction of the zones. African governments sometimes partner with the Chinese firms. The construction and maintenance of the SEZs are financially possible due to Chinese government aid and financial support. It is difficult to classify SEZs to a certain type of investment, because it qualifies criteria of multiple investments such as BRICS Bank, State enterprises and concessional loans.

 

The case of Chambishi ZCCZ ( Zambia-China Economic and Trade Cooperation Zone )

We will doing a case study of Chambishi mining area. In this section, we will first  introduce the basic information of the zone and then search for relevant data and information to evaluate the effects of the SEZ funded by China on employment generation in the zone located in Chambishi. However, it is worth noted that data should be viewed and interpreted with caution, because the Chinese government rarely releases its official documents and evaluation in international development programs. 

Chambishi is a mining area 420km north of landlocked Zambia’s capital, Lusaka, home to many mining complexes operated by Chinese companies. The Chambishi ZCCZ comprises 11.6 km² in Chambishi, including the Chambishi copper mine. The zone has almost completed the first phase, including the construction of over 14km main roads being tarred and linked up. According to a WB document, “a 330KV substation, 66KV and 10KV transmission lines, water supply with bore hole, rainwater drainage, sewage and drainage have been completed. Internet access is also available, and a multifunctional facility of 5000 square meters, with offices, meeting room, exhibition hall, internet and financial banking services is operational” The zone has already successfully attracted 14 investment projects and 8 of them are operational. The firms are from various sectors like agro-processing, pharmaceutical, beverages, new energy and logistics, etc. They committed approximately 20 million US dollars in investment. In 2012, the zone was seen by the Chinese government as the zone with “the best development, fastest progress, most standard management and most beautiful environment” among the 19 approved overseas SEZs.

After briefly presenting the basic information and overview of the MFFZ, the rest of the section will be focused on its impacts on human development especially on employment. It is very interesting that all the actors involved in the zone provide highly divergent data of employment generation. It was forecast by both Chinese and Zambian governments that up to 60,000 jobs will be occupied by both local residents and Chinese. The number is apparently exaggerated and the basis upon which it is calculated is not clear. However, on the official website of Zambia’s ministry of commerce trade and industry, they claimed that the number of investors registered to operate within the zone had reached 41 companies with accumulated investment commitments of US$ 1.6 billion and created a total of 8146 number of job vacancies, which is ironically and unfortunately far less than expected 60,000 job vacancies. Nevertheless, on the side of China, CCTV, the official mouthpiece of Chinese government estimates that more than one hundred million US dollars have been invested in the zone, enabling the residents to have an accumulative income of more than four billion US dollars and contributing more than twelve thousand jobs in the zone.  However, we also find a different data from Zambia-China Economic and trade cooperation zone official website. Their website estimated that this project has an investment of more than 900 million US dollars and generate about 7000 local employment opportunities. We also got a World Bank senior economist indicating that his estimation of jobs generated by the zone is about 8418. To summarize, it is really hard to find a convincing and reliable data because all the actors have different data and do not share how they get and calculate the number. Based on collected data, we can conclude that the Zambian SEZs ZCCZ financed by China’s government has an overall positive contribution to employment generation. The number of jobs created ranges from 6000 to 12000.

 

 

Critical analysis and recommendations

 

Few researches have been conducted to evaluate SEZs’ impacts. Based on existing researches, most researchers hold a negative attitude to SEZs in Africa considering serious political, economic and social challenges behind them. Some think that Africa’s SEZs have definitely failed to reproduce the performance of successful zones in China due to inadequate infrastructure, corruption, investor ignorance and linguistic barriers, and low human capital. One of the challenges is labor standards, the Chinese zone developers were always criticized by local community for low salaries and bad conditions. My recommendation for this is to allow the African workers to organize their labor union and could thus negotiate with their employers more effectively.

 

Another challenge identified during my research is that there is little technology and knowledge transfer during China-Africa development programs. A number of China’s delivered projects in Africa failed to achieve their anticipated outcomes due to advanced technology of China’s aid and the lack of technology and management transfers. For example, China constructed a very modern and advanced theatre for Ghana as a development project. But due to poor management and technology in Ghana Ghana seems unable to sustain it. The air conditioning systems in the theatre had not worked for years. The Ghanaian thought the reason is that Chinese products are not very good. In fact,  it is the lack of technology and management transfer that caused this problem. My recommendation is that Chinese experts should be encouraged to be involved in the operation and maintenance of development projects. Relevant trainings could equally be provided to African officials and workers.

 

Another recommendation for Chinese government is to release its official data in development projects. During my research, I found it extremely difficult to find available data in international development projects conducted by China. Documents from website of Exim Bank and NDB are always inaccessible and most of the documents are only available for insiders and internal staff. Some documents are open to public but they are written in very complicated words that nobody could understand. The significance of information release is that these data are important for the analysis of official aid and other official flows and for other donors to coordinate their own developmental assistance. In addition, scholars and researchers also need the resources to evaluate and provide suggestions. Besides, if China wants to be regarded as a responsible donor it has to accept lending norms relating to regular and systematic release of information concerning aid flows.

Conclusion

Importance of effects of Chinese aid to Africa cannot be ignored, given China is playing an increasingly important role in Africa. Constant exchanges and interactions between two continents are growing rapidly in the background of President Xi’s ambition to promote the Belt and Road Initiative and his belief in shared future of China and Africa. In this paper, we introduced special economic zones (SEZ), a typical East Asian development model. We study the case of Zambia’s ZCCZ, a special economic zone invested by China, by evaluating its effects on Africa’s human development especially on employment generation. We have found that China, Zambia and WB do not reach a consensus about how many jobs are created exactly, but the creation of ZCCZ does contribute to job creations. We also at the end of the paper try to provide some suggestions and recommendation for future investment from China including decent labor conditions, more technology transfer and regular release of data. For future researchers who want to study on SEZs, I think they can do more field work like an anthropologist and see what is really going on in the zones.

Written by Mr. Zhang Qinong

Edited by Professor North Yu

(This paper  represents the views and opinions of the writer only)