China Inspires Kenya’s to adopt Special Economic Zones development model.

The Kenyan government through the immediate former director general of the Vision 2030 Delivery Secretariat, Mugo Kibati, recently announced that Kenya is adopting the model used by China and Singapore in developing their special economic zones. Kibati said the two countries used the zones to solve the twin issues of unemployment and industrialization.

Kenya will build Special Economic Zones in the cities of Kisumu, Mombasa and the historical town of Lamu in the coast region. The two cities and Lamu Town are expected to be converted into special manufacturing and services hubs that supply the foreign markets.

According to Kenya Vision 2030 blueprint, the special economic zones will include the establishment of agricultural parks, industrial parks, science and technology parks for the development and production of information technology software and hardware products.

Special Economic Zones are areas where market-driven capitalist policies are implemented to entice foreign businesses to invest in. The policies include investment in new infrastructure like office buildings and banks and preferential tax exemptions for foreign firms who want to invest in the country.

China is a global shining example of how effective Special Economic Zones can transform regions and spur economic development. Since 1979, after Deng Xiaoping’s economic reforms were implemented in China, Special Economic Zones were created to beckon foreign investors to do business in China.

Shenzhen became the model for China’s Special Economic Zones (SEZ) when it was transformed from 126-square-miles of a shanty fishing villages to a bustling business metropolis. Located a short bus ride from Hong Kong in southern China, Shenzhen is now one of China’s richest cities and the most successful Special Economic Zone in China. 

During his recent trip to China, President Uhuru Kenyatta visited the bustling Shenzhen province and was taken aback by its history and transformation. He encouraged Chinese investors to come to Kenya and promised to promote investment friendly policies in Kenya. He said the legislation and licensing regime governing the SMEs was being reviewed to make it a one-stop-shop to attract more investment.

Kenya can learn and emulate a lot from the Shenzhen experience which has inspired many other countries to success. Following the shenzhen example, Special Economic Zones have been established in several countries, including Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland, South Korea, Russia, Ukraine, United Arab Emirates, Cambodia and North Korea. Special economic zones (SEZs) are now touted as one of the most successful policies for economic development. The number of zones worldwide has grown into the thousands over the last few decades.

Special economic Zones (SEZs) fuelled China’s economic growth and they were governed by laws that were more market-oriented than national laws. For example, the Chinese government charged lower taxes in these zones in an effort to boost business and attract foreign investors. 

These zones were often set up in close proximity to national centers of research excellence to encourage technology transfer. Foreign investment created badly needed infrastructure in the form of facilities like factories and other production centers. Foreign investment also created opportunities for transfers of technology as well as increased exports. From 1981 to 1994, for example, exports rose 19 percent per year. 

The establishment of Special economic Zones in Kenya opens up a world of opportunities and possibilities for Kenya and the East African region. China’s experience has shown the world that with proper management of Special economic Zones, countries and regions can be transformed economically. 

Looking into the new era of China-Kenya relationship where China is committed to facilitate investment, technology and skills transfer to Kenya, the special Economic zones in Kenya are assured of a partner in China that is experienced, has learnt the lessons from its success and failures, and is ready to offer support and investment for the mutual benefit of both countries. 

Several Chinese manufacturers are already setting up local production plants in Kenya, shifting from the previous strategy in which they supplied the domestic consumer market with goods imported from China. This presents an opportunity for skills transfer and possibility of upgrading Kenya’s enterprises. Moreover, many Chinese entrepreneurs expressed their desire to invest in the country.

Therefore, attracting and utilizing the foreign investment through Special Economic Zones has become an urgent and timely strategy to take to the next level of development. China has been investing in Africa positively. With its 2nd largest GDP and the biggest Foreign Reserve, as well as abundant capitals, management experiences and advanced technologies accumulated over the past 30 years, China is capable of investing more in Africa and in Kenya. 

Up till the end of April, 2012, Chinese direct investment in Africa reached USD 15.3 billion, with more than 2,000 Chinese enterprises in 50 African countries. China’s Foreign Direct Investment (FDI) to Africa has assisted Africa to accelerate economic growth. Private enterprises has taken the place of Chinese state-run enterprises, and become the key player and source of Chinese investment in Africa.

Kenya stands to gain a lot from this new venture and the fact that there already exists willing investors from China is a bonus. We have a model to guide us, partners ready to share their experiences and walk with us and the urge to emulate the success of Shenzhen in Kenya.