African Industrial Free Trade Zones: Financial incentives, Institutions andPerformances.

By SEMEDO Gervasio1

Summary: This paper deals with special economic zones (SEZs). It begin with a particular attention to the literature devoted to the industrial free trade zones (IFTZs) or export processing zones (EPZs) in developing countries (DCs) whose principal vocation is to catalyse industrial exports of a country; the reasoned history of those processing zones and the critical updating of the major contributions are restored. Many African countries, under constraint of Structural Adjustment Programs (SAPs) and recommendations of various international institutions (the World Bank, International Monetary Fund, United Nations Conference on Trade and Development or UNCTAD, United Nations of Industrial Organization or UNIDO...) started, at the end of the Eighties, to promote such zones by traditional financial incentives. They created institutions devoted to offer various infrastructures being used for their industrial development. They hoped to attract Multinational Companies (MNCs) via foreign direct investment (FDI) and to raise their exports by the means of the established companies. Up to what point, can the creation of IFTZs contribute to the development of exports of manufactured goods of Developing countries specially the Less Developed ones in Africa and what are the determinants of their flows of export? The put incidental question is to know if the awaited hopes such financial initiatives, entrusted to the multiple disparate and differentiated institutions made possible the growth of African exports comparatively to experiences started into other countries of similar size. A bearing simple model with gravitation equation on Sub-African countries and other DCs over the period 1970-1999 with panel data comes to the support from the reasoning. We use mainly endogenous variables (GDP, population) with its economies, foreign demand and some determinant variables like the foreign direct investment summarizing factors of political and financial risk to explain their exports behaviour. The last part wonders about the methods of improvement of the public policies and also the institutions making it possible to promote exports while giving a total coherence to the African industrialization policies in the new context of New Economic Partnership for Economic Development in Africa (NEPAD) and the reiterated assertion of the African capacities of a regional and continental development.

IntroductionThe African countries seem now acquired with the idea that the raw materials constraints by the cyclic evolution of the terms of trade and by technological competition are not able any more to provide them their budget equilibrium and an acceptable level of their external payments.The globalisation imposes new grids of reading; the participation in the world economy requires a detailed attention to the relative costs of production, a consequent diversification of exports and a calculated link in the networks controlled by the MNCs. In the same way, the SAPs and the need of the economic and political governance raise with acuity the question of the effectiveness of their productive system and the urgency of redistributive policies to maintain, for example, regional and territorial balance. From this point of view, the Sub-

1 University François Rabelais de Tours, Groupe d’Etudes et de Recheches sur la coopération internationale et Européenne (GERCIE). E-mail: semedo@univ-tours.fr. .

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Saharan African countries (SSA), settled up a mosaic of SEZs such IFTZs or EPZs whose principal vocation would be the export of manufactured products.The multiplicity of such institutions of framing, not having always common and coordinated objectives and granting heterogeneous financial incentives, deserves to explore the effectiveness of it. Therefore, we would start with a consequent review of the literature on the SEZs created in the Developing Countries. A reasoned, critical and updated history of those zones is thus provided in the first section.In the second section, we will explore the incentive policies of the African zones while locating significant factors determining the performances to export of Less Developed countries (LDCs), including African countries, before and after the establishment of IFTZs. In this part, we grant a dominating place to endogenous factors specific to those economies; the model used takes as a starting point the standard gravitational model. The sample of our study include SSA countries (Cameroon, Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, Togo), Egypt, Morocco, Tunisia, Madagascar, Maurice, Iran, Indonesia, Malaysia, Sri-Lanka, Philippines, Brazil, Dominican Republic, Mexico, Trinidad and Tobago. Lastly, our objective will be to give a set of recommendations which can be used by national and regional public authorities in the new paradigm desired by the African politicians and theorists (NEPAD); these recommendations must answer to the objectives of revival of exports and balance of the payments equilibrium, while respecting the principle of efficiency in the public granting of subsidies in accordance with the concept of administrative viability of the taxes.I-Reasoned History of the SEZs in the LDCsThe political economy of the SEZs draws up a typology of its zones, which goal is to promote the establishment of national industrial firms and or foreign with IFTZs (1.1). Many developing countries hoped that with these IFTZs, it was possible in return of financial incentives to take benefits from outward looking policies. The experiences from the most began with industrial assembly plants; the links with MNCs came with subcontracting or direct investment while waiting success stories (1.2). But a question still: why relative success if we consider one country and full success with another? Comparative advantages offered for example by the creation of Export processing Zones (EPZs) are not sufficient to explain localisation of MNCs, primary vehicles for private sector-led growth (1.3). Some elements of competitiveness are needed to boost exports.1.1 Typology of Free Trade Zones and Theoretical Consequences of the creation of EPZs Various kinds of Free Trade zones (FTZs) including IFTZs were indexed (1.11), and for the EPZs, the traditional economic theory wondered about its consequences in terms of economic Welfare (1.12).1.11 Definitions and numerical importance of the FTZsThe FTZ is an enclave in a country or a territory devoting the free trade of services, factors of production and or products between established firms and firms operating in the remainder of the domestic economy, but also between these firms and the rest of the world. Also, certain activities are exempted of any tax and do not obey to the regulatory framework imposed to domestic firms. In a wide conception, Grubel(1982) provided this definition : “a geographically defined area within which certain types of economic activity take place without some of the government taxation and regulation that applies to them in the rest of the economy”. In this definition, rhetoricians include: the free ports, the zones of transhipment and fuelling, the storage sections, the zones of free commercial activity, the IFTZs, the warehousing and trade facilities entities, customs free zones or free economic zones, the free trade areas, the industrial and technological parks and finally the EPZS. Many of the terms used include the word free. For our analysis, we pay more attention to EPZs despite that Kusago and Tzannatos (1998) found that not less than 19 terms are used to describe very similar phenomena.

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There has been a rapid growth in the number of zones over the last three decades (Boyenge Singa, 2003)2. The LDCs were not away with this remarkable variation of dismantling of their tariff barriers and granting subsidies to firms in order to export. By the pressure or the suggestion, it is probable that the international institutions contributed to this institutional innovation conducting them to create often EPZs. It is clear that the multinational firms seized the opportunities to combine their competitive advantages and the factors of location favourable to their activities (comparative advantages and tax) while being established in the EPZs; the projecting example is the exploitation of the Multifibre Agreement (MFA) to circumvent the quotas of textile exports of products imposed by the countries of North (Jayanthakumaran, 2003)1.12 Collective Welfare, Economic Theory and EPZs In economic theory, the free zone approach is between the analysis of the subsidy and the analysis of the consequences of tariffs and non tariffs barriers. It is acted in fact of, while granting falls of tariffs and giving subsidies to a producer, to remove the distortions on the production costs and the optimal allowance of the resources. From this point of view, the domestic price of the small country which in is created the zone can approach the international price (law of one price). Previous works on FTZs assesses the implications of zones of fixed size in the presence of existing distorsions (tariffs, subsidies, quotas…) and the general conclusions on the Welfare effects of FTZs are mixed. For economists like Hamada (1974), the theory subjacent is a theory of the second best. He assumes that tariffs on final goods prevailing in the rest of the economy are removed when a FTZ is formed and shows that increased FDI in such a zone can reduces national income. Besides that, in dynamics in a model of the Hecksher-Olhin type, it is not certain that the domestic economy can continue to profit from comparative advantages. Thereafter, in his two sector model, the zone generates an inflow of foreign capital thereby attracting labour from domestic economy. When the protected sector is capital-intensive, the removal of labour from the domestic economy increases production of the protected sector through the Rybczinski effect, thereby reducing welfare. The condition to boost production and consumption is a situation where the protected sector and the free zone are labour-intensive. In an extensive work, Hamilton and Svensson (1982) conclude that capital inflows into the zone or into the tariffs zones (host economy with barriers to trade) reduce national income. Naturally the neo-classic analysis (Young and Miyagiwa, 1987) disputes this result to him; the EPZ is of course Welfare improving. In their framework, in a presence of a massive Harris-Todaro unemployment, the national income of the host country will increases as a result of the removing of tariffs on imported intermediate inputs and capital goods in the IFTZ. We still believe that empirical studies are necessary to give some highlights and policies recommendations. Nevertheless, and at first, the history of the LDCs since the middle of the Sixties can be mobilized to analyse their outward-looking policies.

1.2 Offshore assembly, International Trade within MNCs and Exports Led Growth in LDCsThe international Division of labour between developed countries and DCs goes on major transformations with the oil crisis of 1973. The International Division of the Product Process (IDPP) or the phenomena of the Sharing Production returns account of this transformation of the North-South relationships. The localisation of offshore assembly plants in the LDCs by MNCs or by subcontracting is the outstanding stage of this process (1.21) leaving us to think that no segment of production is negligible in terms of economic development. A precise legal context allows the localization of this activity of assembly in EPZs (1.22) in accordance with the industrialization policies followed in most LDCs (1.23).

2 300 in 2002 against 25 in 19750; and except China, more than 13 million individuals work in special economic zones.

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1.21 The IDPP and foreign assembly in the DCs.From the seventies, sectoral studies (textile, electronics, car, shoes, toys...) or followed complete monographs based on of a large sample of countries, analyzed the phenomena of production shared, orchestrated by the multinational firms. They agree with this fact: the MNCs have the possibility to cumulate into the final product their competitive advantage and the comparative advantages of various countries. Because of the increasing importance of the forms of vertical industrial integration and horizontal integration, caused by the international competition, and in a context of crisis of productivity, the multinational firms rationalize their production costs, including their organisational costs through captive markets and thus of hierarchical transactions. This is why, the countries abundantly provided in workforce interested the multinational firms for assembly plants, the transformation of semi-finished products, and this with favourable factors of location offered in the EPZs. Thus, the activity of offshore-assembly not needs always FDI and could be done with international subcontracting. Subcontracting is a form of quasi-integration, a tactic of control disengagement at lower cost, it proofs of a research by the firm of more flexible contractual relations not borrowing only the channel of the direct investment.

1.22 International legal context and free localisation of activities in the EPZ The activity of assembly requires a convention tally, since it associates multinational firms, States of the DCs, and governments of the developed countries. To this end, institutional conditions are met to organize the activity of assembly in LDCs and to attract footloose industries. First of all, the States of the developed countries hold account of the special interest groups by reinforcing the arguments of competitiveness of their domestic firms through effective commercial protection or while seeking to neutralize the activism of the working trade unions sensitive to the relocations3.They adopt inciting or defensive measures then to encourage or limit the division of the production implied by offshore assembly in the LDCs 4… Also States of the DCs grant five freedoms 5 necessary to the establishment of the firms mainly in the arranged EPZ. Lastly, the international organizations (UNCTAD,UNIDO) finance studies to encourage this activity.

1.23 LDCs’ Industrialization Choices and the behaviour of the Multinational Firms.In practice, multinational firms respected the orientations of industrialization of the DCs. In Latin America, put aside Mexico with its units of assembly called maquiladoras and strongly dependent on the American companies, the multinational firms work out finished products (automobile, electric household appliances in Argentina and in Brazil for example), within the framework of their related subsidiary companies. The reasons are for sale on the domestic markets, in accordance with the official preferences for the importation substitution. In Asia, this law of conformity is checked especially for territories or small insular countries, by the creation of workshops subsidiary companies. Those affiliates transforms partially or achieves the product process and export with value-added the product concerned, in phase thus with the local policies of export led growth. The case of South Korea, mixing the two strategies, is internationally marked by a strong presence of the multinational firms in the sector of the tradable goods.

3 The trade unions have often advanced the sensitive argument of wild imports.4 In the United States, for example, items 806.30 and 807.00 of the customs Code define the conditions of partial or final transformation -except metal borders- of products intended for the sectors of electronics and the armament, as of produce manufactured standardized. The first item concerns strategic products with high technology and with strong externalities and the American government largely subsidizes such products; the second applies to the products labour intensive which could create unemployment in the United States and consequently strongly taxed. Europe is not in remainder and in Germany, France and to the Netherlands; the legislator adapts the taxation to the traffic known as of outward processing or passive improvement traffic.5 Dismissal, repatriation of the profits and transfers of capital, imports and exports with weak or non-existent customs duties, exemption compared to the corporation tax and indirect taxes and free use of the infrastructures (roads, railroads, ports, airstrips, telecommunications, water…).

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1.3 Relativity of successes and place of the institutional factors framing the EPZThe clear option for openness, but also a set of the policies, including preliminary food safety, guaranties the success of the industrialization policies (1.31). The weight of the traditional determinants of FDI is not satisfactory, because successes did not appear everywhere in the LDCs (1.32).1.31 Twin Policies to the Export’s Promotion and Openness to International TradeFor the first countries concerned by EPZS and offshore assembly, especially those of the South-East Asia, the strategy of exporting goods and intermediate products led twenty years later to a quantitative and qualitative improvement of employment6. Also these dragons made a phenomenal breakthrough on the international markets of manufactured products and this process was the result of a strategic positioning on such markets. An attentive reading of the evolution of the world demand and of the modification of the economic environment offered to the domestic and foreign companies installed in those countries, a better allowance of their resources, and the conquest of foreign markets were needed to realise a strong and sustainable growth. This growth allowed an increase and an enlargement of the spectrum of comparative advantages7. In Mexico, where the preference for the promotion of export is not clear, maquiladoras industries dominated by the American multinational firms, did not give the awaited hopes, but the situation for the other countries of Latin America is still much more critical taking into consideration macroeconomic indicators like the growth of the national income, exports behaviour and the rate of unemployment. The success of the four tigers is not checked, as much during the same period, in countries like the Philippines and Morocco, beginning their industrial activity with the automobile assembly plant centred on sales into their domestic market. Consequently, for a small slightly industrialized country, the promotion of export via the activity of assembly is desirable to increase the export earnings around a diversified structure of products, and also to contain unemployment – Often, in those countries, financial constraints or social resistances even political do not make possible to reduce the inequalities with transfers’ mechanisms.Actually, successes of the newly industrialized countries are not always possible everywhere. It is appropriate for this purpose to point out the favourable prerequisites and the policies of accompaniment of the promotion of export in the countries of the South-East Asia. At the beginning of the Fifties, Hong-Kong, Taiwan, Singapore and South Korea are not industrialized and over-populated. As islands and peninsulas, they knew problems of distribution of the lands, and took bad choices with their preference for import –substitution. They realized during those periods slow growth rates and did not benefited from their home markets economics scale necessary to meet international competitiveness. In 1963, with massive injunction of Japanese and American public and private funds, they adopt a clear strategy to promote their exports. For these countries taking of the risks at the international level, food safety was effective after a redistribution planned of the lands to the peasants and the reasonable lending to them who’s desired to buy property rights (Adelman, 1984). Also these countries have as a whole practised wage braking by not tolerating any trade-union activity and to preserve the advantage temporary of a low cost of labour force, often female, with a great dexterity. This social dumping was reinforced by active policies of development of the financial and monetary markets like the practice of the structural undervaluation of their currency with the typical crawling peg favourable to the manifestation of the Balassa-Samuelson effect. The interest rates used, the rules of taxation applied, the financial 6 Labour Force more qualified with relative increase in the technicians and engineers and with the appearance of a class of qualified

contractors.7Progressive and calculated reorientation activities integrating of technology and know-how in the form of passage of simple stages of production into complex processes was remarkable. In a first time, these countries were producing and selling standardized products intensive in labour concerning the textile sector, toys… and thereafter they operated gradual sophistication of their products such as of the clock industry, apparels, electronics like semiconductors really demanded abroad.

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innovations behaviour and the inflation rate observed not over the world mean indicated good policies and the diminishing power of their informal markets. Lastly, these countries programmed the technology transfer subordinate to an objective the rising of their human capital and potential networks of marketing of their products. It is at this price that, they made a phenomenal breakthrough.The duplication of this experiment should not be taken everywhere. To tell the truth, the application of suitable measures - incentives with export, free entry for the imports, wage braking... - does not ensure immediately and inevitably qualified heads of enterprises, an improvement of labour force and links between the sector of export and the remainder of the economy. The linkage effects can be weak because the EPZS have limited cycles of life, or are enclaves in certain countries, where the institutional organization is missing. Moreover, the production in a EPZ is sometimes episodically curt according to risks and to the nature of subcontracting or according to the requirement of relocation felt by the multinational firms8

(Mouhoud, 1989). Apart from these negative aspects, and because of the existence of waves of new exporting countries, there are bases for an optimism of exports justifying theoretically that a DCs chose to offer to MNCs and other foreign firms tax breaks, relaxed legislation, investment in infrastructure, reduction of red tape or excessive bureaucracy, reduction of duties, absence of labour union activity, subsidised land…1.32 Traditional Determinants of Location in EPZsWhat conditions are needed then by MNCs and firms to establish in an EPZ? Without entering in details, the eclectic position of Dunning (1988) concerning the IDPP provides brief replies. The unified theory of the international trade based on the differences in conditions of supply9 and the conditions of demand such the importance of the domestic market, in conjunction with the structures of markets imperfections, give an adequate framework of interpretation of offshore assembly and subcontracting in the LDCs. This theory comprises three factors: ownership advantages, location advantages and internalisation advantages. Also, this paradigm is an answer to this following question: whether a business could be a success or not? The ownership advantages had to do with the competitive advantages of the owners (culture of innovation, control of intermediate products…). Location advantages depend from comparative advantages of the host country and emerge for four reasons: to get an important share of the national demand (market seeking), to get hold of scarce or cheap factors (labour, intermediate products…), to seek global efficiency, to benefit from strategic asset-seeking. Internalisation means basically the decision to produce: the firm has a choice to make or to buy some elements or whole parts of a product. With subcontracting, the MNC can avoid to do the entire chain. Ownership advantages might be relevant for EPZ, but more specifically location advantages are fundamental to analyse them. In fact cheap labour and transport costs, better infrastructures, externalities of a cluster, access to information, duty-free imports, flexibility of labour laws, quick permits to invest…could really attract business in an EPZ.In an optimistic view, an EPZ is supposed to offer a framework of promotion and diversification of exports for a LDC. In fact, an EPZ is not efficient immediately; the reason would be the weakness of the human capital. In this sense, the low cost of labour force can be a medium-term hurdle, if there are no private program and or public of training of the workers, and if there are no policies of redistribution of the incomes to activate the domestic demand. In Mexico and to Maurice, the preponderance and the abundance of female labour force were not the pretext of a wage braking without end; it rather profited from support and valorisation by education of young girls, and the current increase of the real wages in these countries is not a handicap. Thus, the companies operating in these EPZs of Mexico and Maurice forsook the intensive traditional products, and now they manufacture more complex 8 Return of segment in a developed country following a technological improvement.9 Costs of the labour, costs of transport, economies of scales, varieties and training.

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products in terms of technology and know-how. Actually, they make required products needed by countries of North or by the domestic economy while seeking to relocate their initial activities in the economies bordering like Colombia, the Dominican Republic (Sargent, Matthews, 2004) and Madagascar (Cling, Razafindrakoto, Roubeaud, 2005). In those contexts, time seems a variable of adjustment; any comparative advantage is temporary and requires to durably improving the reinforcement of the places of organization of the knowledge.Multiples variables (demographic, microeconomic, and macroeconomic...) condition the success of the EPZ, but it is advisable to add that it is not by imitation and without a clear presupposed lectures of International Division of Labour, that it is necessary for a country to create them.

2. Incentives, Particularly institutions, Econometric models and Performances of the African EPZsTraditional incentives were granted by the governments of the African countries, in the search of investors deprived in new activities, in a context of structural adjustment and privatization of public firms. The overall awaited compensation of these tax no-claims was not always reached in the majority of these countries in terms of attracting FDI (2.1). How can we explain the performances of African EPZS? To achieve this objective, we will use the gravitational model and the traditional economic theory; so we will develop a specific model where endogenous variables to the African economies are retained and we will supplement them by taking into account FDI in a given institutional context (2.2). This model in panel makes it possible to empirically test the relation between growth of African exports and other variables favourable to the creation of EPZs10 while carrying out comparisons with other geographical areas.2.1 Incentives and total performances of the African EPZThe African incentives are traditional (Table1); they inevitably do not concern signals in order to optimize resources in the long run. This point of view rests on protectionist practices and the links between the creation of EPZs in Africa and SAPs (2.11). The statistical performances mainly with the export and in terms of attraction of the FDI and in other fields like technology transfer and the input-output box relationships are not satisfactory as a whole; although there are branches of industry where African countries make a breakthrough on the world markets. It is appropriate however, to explain why countries using English tongue (Kenya, Ghana...), Madagascar and Mauritius achieves better goals traditionally reserved to the EPZs, particularly as regards IDE (2.12).

2.11 Policies of attracting MNCs in African EPZs: the role of protectionist past and SAPSBefore the creation of SEZs, the African countries as a whole, except Maurice, make the choice of import substitution turned to their domestic market. The public companies are the supports of such a policy where the private initiative and the markets are subjected to forms of regulation of the prices and or quantities, even with legally organized rationings. The direct investment is then of a low level except in traditional activities11 existing during the colonial time.On the macroeconomic side, the level of the domestic demand, the rate of inflation, the interest rate, the liquid assets ratio measuring the financial development (M2/GDP), the stability of the exchange rate, the degree of opening to the foreign trade, the share of the administrative expenditures in the GDP are as many determinant variables on the attraction of

10 Normally the EPZ must catalyse exports by attracting the FDI, while opening for the countries in voice of development of other markets

and while bringing additional incomes to the local population and the sub-contracting companies.11 Activities generally subjected to unforeseeable shocks (food shortages, fluctuations of the terms of trade…).

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the direct investments and the growth including exports (Asiedu, 2002; Trevino, Franklin-Mixon, 2004)12. On the microeconomic level various production costs and factors such as the management of the rate of exchange are advanced like explanatory factors. However, the development of the human capital is the principal argument of the rise of exports or the direct investment (World Bank, 2001).Bloom and Sachs (1998) thought that the isolationist situation of the majority of the SSA countries- landlocked countries- mainly explains the commercial and financial marginalisation of this continent. Indeed, the tropical areas on average have a GDP three times lower than those of other areas and the African countries are particularly concerned, for example Burkina Faso in spite of its remarkable efforts recognized by the international community. The latter are naturally handicapped in term of climate, of public health, powerful agriculture, demography, and various instruments for communication and expansion of urbanization. If the Dominican Republic is looked at, it is close to the United States from all the points of view: culturally and geographically. Also Panama profits from two oceans to cross of the Southern and Northern spheres American. Tunisia, Morocco with Tangier... is very close to the European continent. "But the geography does not explain all". Maurice, Hong Kong, Singapore, Madagascar, Malaysia... are not always near their own markets; it is then necessary to reconsider other sources of explanation of successes or failures of EPZs in Africa. The landlocked situation of African countries could have been counterbalanced by the more serious missing management of the existing infrastructures, even if the cost of the transport, airport and railway is to be taken into account in the analysis of the total costs of the goods exchanged by the African companies on the level of the domestic, regional and international circuits. Actually, the major part of the infrastructures in Africa is in bad condition, and they need additional investments or adequate maintenance. With these difficulties, prohibitive costs of the water of electricity and telecommunications are added. Thus, the often advanced costs of transport as determining of competitiveness are not sufficient to include/understand the difficulties of the companies established in the African EPZs, so that geography does not tell the whole story. Maurice is more distant than Senegal from the European market and the performances of the EPzs of these two countries are not comparable; it is the same for Madagascar compared to the African countries having benefited from the American market with the African Growth Opportunity Act (AGOA) for a line of precise product (textile-clothing). Also, the majority of the LDCs have levels of important commercial discrimination, but the heterogeneity of the African countries does not make it possible to draw good conclusions, except in which relates to the old British colonies, largely opened to the international trade (Gaulier, 2001). Discussions with the private, public and or multilateral organizations within the clubs of Paris and London, and with specialized organizations of the United Nations (UNCTAD, ONUDI...) started by resulting in a panoply of commercial reforms aiming softening the operation of the markets, privatising a range of activities and at setting up policies to attract FDI and outward looking policies. The subjacent idea defended by these partners is to convince African counties that, the other small countries of other continents, most inserted and in an early way into the world economy, have recorded exceptional growth rates, a blackening of their tables of input-output domestic trade, and they also achieve a successful programming of the technology transfer while improving their human capital compensating then their initial

12 It is comprehensible that the countries having a vast domestic market generating economies of scale are privileged from the point of view of the direct investment; the external market becomes a natural prolongation of the domestic market. A high rate of inflation makes dubious the costs and economic calculations of the economic agents and to prevent that the rise of the wages and inflation do not discourage exports, of compensation measurements of undervaluation structural of the currency are indicated…

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handicap of cheap and poor labour force. SAPs are one support to abandon the past protectionist policies everywhere in Africa.It may be then agreed that there was a certain delay in the starting of the cycle of the EPZ in Africa; the impulse would come more pressure of the donor’s countries and international community like IMF and the World Bank (table 2)13. Always with Table 2, it is possible to affirm first of all that the clear option with the opening to the international trade is not obvious for the most of these countries, and that the English –speaking countries, perhaps in comparison with the composition of the nature of their partly private debt, were more receptive in the unsettled conditions of the international division of labour. The late incentives granted by these countries, do not seem to give additional advantages to the African economies. Then, the assembly activity within the MNC or by subcontracting did not seem a precondition for these countries. Indeed in these countries, the markets concerned are local or regional and offshore assembly is shorted-circuit by the delivery of finished products to the host countries. Under these conditions, either the multinational firms are not always the providers of activity, or they are established to circumvent local barriers and to compete with domestic firms protected with the risk to ruin them. Since such markets are narrow, the scale of production is weak and the firms are not innovating. The paradox is that the branches of industry of the companies (table 2) correspond only partly to intensive activities in labour force, because they extend to trades as varied as the telecoms, oil, the services, the communication...In the light of the experiments of the countries of the South-East Asia, and closer countries still like Madagascar, Mauritius, Tunisia and Morocco, the openness should not be counterbalanced by practices maintaining importation substitution. But in the African case, the weight of the past remains alive, because the politicians and the bureaucrats do not seem persuaded with the idea, that in the long run, the relaxation of control on the companies would be advantageous for them; the effectiveness in the allowance of the resources is not included/understood as being the precondition of a better distribution. Thus, the African countries have evil to separate old choices safeguarding of the revenues at the origin of an immersizing growth.However, all was not negative in Africa. Rhee and Belot (1990) mentioned with relevance in a study relating to individual successes on international markets from given goods of 11 DCs and a country of transition, that in each examined case, a particular man, a company, or an organization played a major part as of the initial phase of starting of the activity while integrating in the corresponding production of the local inputs, while bringing know-how in terms of marketing, management and control of technology. Successful FDIs in a zone represent a demonstrative case for domestic firms and potential enterprises to learn and copy. In this case, foreign firms are catalysts for their initiate and they nurse non-traditional export-oriented production into maturity by giving techniques, marketing, know-how and access to international markets. In the absence of the domestic charismatic contractor, the schumpeterian one with the animal spirit helped by private and or public functional institution, the initiative returned to the subsidiary companies of the multinational countries. But we know, if the country risks (extent of the national debt, risks of risings violent one, unlimited strike, war...) are disproportionate, they never establish. So that, incentive policies are not sufficient, and they need to integrate politic factors and the domestic potential entrepreneurs who can wok with MNCs."To think more before acting” is relevant and Romer (1993) warns against such passive behaviours not anticipating all the consequences of a decision with its concept of idea gap.

13 Indeed, the creation dates of the EPZ are often synchronous at the periods of the policies of structural adjustment, translating the idea correctly that the African governments little anticipated the inadequacy of the policies of importation substitution compared to globalization.

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For producing for a market, it is necessary to raise the question of competition, the desired quantities and for which duration; commercial competences necessary to make international market, a prolongation of the domestic market and a place of economic scales. The creation of value in a modern economy implies a lighting on a multitude of constraints of management: inciting and evolutionary systems for the workers and the companies, the packing attracting of the products, marketing, the distribution, the quality control, the inventory of stocks, the systems of payment tested and reliable to adapted banking services, the installation of data-processing tools, communication, invoicing... From this point of view, the work of Brasseul (1993) deserves to be underlined and particularly when it insists: on the one hand, on the respective weights of the State and the markets in the proportioning of the economic policies, and on the other hand on the cultural and institutional causes of the fast development of certain countries in contrast with the relative delay of other countries.2.12 African performances and weakness of the FDIThe EPZ is supposed to create jobs and inter-industrial links. It would also contribute to the technology transfer and the rise of exports via the increase of FDI.The existence of EPZs since 1985 did not involve significant changes as regards FDI. Between 1980 and 1984, the annual growth rate of the FDI in the DCs increased by 1630%, while Africa counts only an increase of 496%. It results from it that the share of Africa in the total of flows of FDI in direction of the DCs dropped significantly (see table 4). It is 36% between 70-74; it passes to 10% between 80-84 then stagnates to 3% between 95-04.The graph 1 gives the evolution in volume of the FDI (million $), during this last decade, in the various countries of the sample retained in our empirical study. The share of the countries of Latin America has practically triplet and accounts for almost 80% of total volume. The FDI in Asia fell between 1998 and 2000 following the financial crisis of 1997, but it appears that the FDI return towards this area these last years. In addition, the case of the countries of SSA remains enigmatic, since the volume of the much reduced FDI before 1995, did not increase during the Asian crisis (backward flow of the FDI rather towards the Latin America) and is in stagnation.If the specific effects were to be higher for the countries which offer the conditions mentioned above (2.11), there is however another series of macroeconomic conditions and policies which intervene to discourage at the same time the surge of foreign capital and the mobilization of domestic investments. More precisely, according to the World Bank (2001), the constraints with the achievement of the principal objective reserved for the EPZ are in connection with the quantity and the quality of the infrastructures, including transport, adequate flows of governmental services (information customs and tax, administrative red tape..., the bad management of the zones...). In this way, the investors are not solely attracted by the natural endowments in factors and the tax advantages. They are sensitive to other varied economic constraints and institutional guaranteeing political and social stability in the host country and the African current situation does not seem to give a particular premium of location of the direct investment in this continent. From this point of view, the French-speaking African countries benefited less from the boom of the FDI comparatively to the English-speaking countries, North Africa and compared to the islands Maurice and Madagascar. If the majority of African countries did not benefit from the explosion of the direct investments in the DCs since the beginning of the eighties, it is advisable to locate the causes of them. For this reason, the following factors acting negatively on the growth and the efficient distribution of the resources were often indexed: the insufficiency of the public resources, bad economic and political governorship, and unequal ethnic policies of redistribution of the revenues, religious conflicts, corruption and the wide capital flights (Montalvo, Reynal-Queyrol, 2005).Asiedu (2002) showed that 60% of the variation of the rate of investment for the whole of the African countries over period 1988-1997 is explained primarily by the small degree of

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opening of the African economies, the quality of their infrastructures approximated by the number of telephones for 1000 inhabitants and the return on investment by country. If these explanatory traditional variables of the investment are valid for Africa, it does not remain about it less than with equal conditions (degree of opening, quality of the infrastructures, yield returns of the investments) with other DCs out of Africa, a country of SSA receives less direct investment. Two explanations can then be advanced: the non economic risks are higher in Africa (institutional problems) and or because the investors do not have opposite good information and ignore the African economic area.It remains comparatively with other spaces and by using the indices of Kaufman and al.. (2006)14that the public governorships in ASS in spite of the steps worsened between 1996 and 2005 (see graphs 2 to 5). The most of the African countries in the South of the Sahara are located in the South-Western quadrant indicating of institutional qualities in deliquescence. Compared to employment, table 3 makes it possible to form an opinion. First of all, the African English-speaking countries in the South of the Sahara were more active than their other African counterparts.With regard to the technology transfer, the economic theory (Johansson and Nilsson, 1997) suggests that it begins when: i) the contractual clauses integrate creations of joint-venture; ii) subcontracting becomes a substitute of the direct investment; iii) and finally, flexibility on the labour market does not mean any more the weakness of wages. In the African context, the firms established in the EPZs perceive the domestic firms like competitors, because of the markets concerned: local and regional. The technology transfer is weak, being limited to manual dexterity or basic know-how, except for Maurice, Tunisia and Morocco. This point of view is consolidated by the participation of the local capital in the creation of companies in the different special economic zones (see table 2, column origin of the investors) and by the existence of one female labour force discriminated in term of remuneration. Thus, with the current configurations where the joint-ventures are localisable only in the most advanced countries, a new regional and hierarchical division is outlined work. So Libyans invest in Burkina, in Niger; Ivory Coast citizens’ investors in Togo; Mauritius citizens in Madagascar... And, at the same time, the multinational firms organize for their own account their networks of production to circumvent the local or international trade barriers; the opportunity given by the AGOA testifies15this idea.In comparison with the weak transfer of technology, inexistence of subcontracting and financial relations narrow, the multinational firms in Africa have tendency rather, taking into account the customs devices into force in the EPZ to be supplied abroad, where the costs of the inputs are more favourable. And, thus the linkage effects awaited establishment of the multinational firms in the EPZ are almost non-existent. Also, the conclusion of Tekere(2000) considering disappointing the answer of the investors to the financial incentives granted by the African governments is admissible. Africa remains a marginal player in both FDI inflows and manufacturing in EPZs in the world context.2.2 Creation of EPZs: econometric estimates their effects on African exportsExplanatory models and estimates of the rise of exports of the DCs coming partially from EPZs exist and of, which it is necessary to draw from the consequences with the gravitational models (2.21). By taking as a starting point such models, we develop here a specific and comparative one in order to collect the inter-temporal influence of the policy of creation of EPZs, dependent to FDI and on other variables on African exports (2.22).2.21Some Lessons drawn from gravity models

14Three indicators of governorship are used here: the indicator of authority of the Law (Rule of Law), the indicator of effectiveness of the State (Government Effectiveness) and the indicator of control of the corruption (Control of Corruption).15 Togolese, Chinese and Korean capital joined to produce for export towards the North-American market.

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The effects of EPZs on exports are studied by using the traditional cross-sectional gravity model. This analysis aims at collecting: the potential demand of the principal countries customers of the DC starting from demographic or economic variables; potential of supply of the exporting LDCs; commercial, tariff and no tariff constraints between country partners; impact of the geographical and or economic distance between these countries; and finally, the effect of institutional arrangements on flows of bilateral or multilateral exchanges. Thus, the goal in these models of long-run equilibrium, generally, is to explain the trade between two countries or of a country with other regional blocks. For example, for Nilsson and Johansson (1997), the creation of EPZ was a catalyst of exports of a country like Malaysia: the subsidiary companies of multinational firms contributed not only to the rise of exports of this country, but also developed relations of joint-venture and subcontracting involving in their wave the domestic firms giving them the means to face foreign markets. The test used by these authors is of trans-logarithmic curve type to highlight parameters of responsiveness. The functional form of this model16 is as follows:

In the models of this type, it is held account of factors of supply specific to the exporting country or endogenous factors of growth. Indeed, if the levels of incomes or the demographic variables are initially low, the potential of export is likely to remain it in spite of the creation of EPZ. The country may find it beneficial to seek with better allocating its productive resources and developing its institutional capacity to attract the international investors. In other words, it is the attractiveness of a country which counts ultimately, because the multinational firms already know the international markets and can break the existing constraints on the foreign markets.2.22 The influence of the creation of EPZS on African exports: estimate of a modelOur model is close to that of Nilsson and Johansson (1997). The EPZ have as an intermediate objective to attract the foreign investors in by offering to the MNCs favourable financial conditions. In compensation, the authorities hope to achieve a principal goal, in fact a continuous increase and a diversification of exports of manufactured goods. Thus, it is clear in this model which exports (X) constitute the endogenous variable, and which the first explanatory argument of this variable is in connection with the FDIs. We suppose here that the economic risks are well reflected by the series of direct investment existing and that the impact of the nominal variables like the inflation and the rates of exchange is taken into account.Through preceding points, we can admit that their effects in terms of increase in exports are closely related to other variables like the growth rate of the gross domestic product (Y), the growth rate of the working population (L), and the average distance (DIS) between the wearing of loading of the products of the DC sheltering a zone and two ports of representative European disembarkation (Marseilles and Rotterdam). In our specification, the cost of transport is replaced by freight: a volume of important freight expresses a low cost of transport between two seaports and reduces DIS.Lastly, with an aim of collecting the inter-temporal influence of the policies of creation of EPZ, we introduce a dichotomy or institutional variable, or dummy variable (VM) which takes value 0 before the introduction of the EPZ and value 1 after the starting of the zone, and we distinguish two under-periods: before and after the installation.Our model of gravity is written in the following functional form:16 Exports of the country j having a frank zone or not towards the country or the group of country i (presumed developed) depend: of a parameter of scale α0; distance enters the country and the markets of destination of the tradable goods (D ij); factors of demand of the importing countries (Yi and Li); of capacity of export of the country j (Y j) and importance of the domestic market (L j) of the exporting country - any equal things of its level of human capital of a dummy variable whose value is equal to 1 as from the moment when the zone exists and zero as long as this zone is not created; and finally, of the term of error eij supposed normally distributed.

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WhereX is the growth rate of exports

Yd and Yf are the growth rates of the GDP of each DC and the average of the European Union of 15 members.

IDE : growth rate of the FDI.

FRET = growth rate of freight starting from the countries bound for Europe of 15 (EU15).

VFX is the annual volatility of the rate of exchange of the euro compared to the dollar.

INFd and INFf are respectively the rate of inflation of the domestic country and the average rate of inflation of the countries of the UE15.

IMPt-1 : growth rate of the imports, shifted one period.Ld and Lf are the growth rates of the working populations in the LDCs and the EU15.VM is a dummy variable which takes value 0 before the introduction of the zone and value 1 after. Often, EPZ borns after 1985 with SAP.To indicate time, we use the notation t and the exporting country is j. In panel and in linear form, the model with fixed effects becomes:

With where the kj are the effects specific to the country j. εt is a random variable of null average and constant variance (assumption of homoscedasticity).The table 5 in appendix presents the cross correlations: a manner of checking the absence of co- linearity between the principal exogenous variables of the model. For the whole sample of the countries and 21 coefficients of correlation only two coefficients are higher than 10%. The signs of the coefficients to be estimated make it possible to identify the direction of the effect of each one of our exogenous variables on the growth of exports. Which are the statistical and economic comments various modelling tested? Table 6 hereafter gives for the whole of the countries and the under-periods before and after the born of EPZ the values of coefficients of the various exogenous variables17.The coefficients do not indicate structural changes since the expected effects are checked. In fact the growth rate of the various exogenous variables: GDP of Europe of the 15, GDP of the DCs, FDIs, and imports of the DCs... and the volatility of the European currency with respect to the dollar influenced the growth of exports of the countries of our sample. The chart in scatter-plot assure us the positive direction of the effects of the growth of the IDE, the GDP of the countries or group of country partners on the growth of exports (see graph 6), attesting partially of the validity of the model on the whole of the period. However the distance measured by freight does not seem to influence the endogenous variable; the assumption of borders effects is not then checked.

Table 6 : Panel Estimate of whole sample countries1975 - 1985 1986 - 1999 1975 - 1999

Coef t Coef t Coef t

17 For the whole of the estimates, the coefficients of regression lie between 28% and 75%. The statistics of DW show us the absence of serial autocorrelation of the residues of our models.

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α0 (Constant) -0.031 (-0.880) 0.009 (0.210) 0.000 (0.004)α1 0.335** (1.914) -0.047 (-0.346) 0.217** (1.941)

α2 3.263* (3.457) 0.117 (0.264) 0.871* (2.036)

α3 ) 0.002** (1.909) 0.000 (0.288) 0.000 (1.006)

α4 0.018 (0.788) -0.008 (-1.243) -0.005 (-0.671)

α5 -7.733* (-2.098) -3.701 (-1.475) -3.553 (-1.341)

α6 0.000 (-0.052) 0.000 (-1.635) 0.000 (-0.992)

α7 0.338* (5.291) 0.699* (14.759) 0.525* (13.187)

α8 0.493 (0.600) -0.188 (-0.246) 0.009 (0.015)

α9 0.031 (1.183) 0.024 (0.661) 0.018 (1.006)

α10 -0.031 (-0.880) 0.009 (0.210) 0.000 (0.004)R² 28.45% 44.51% 31.86%DW 2.534 2.525 2.418(...) Are t-statistics. *, **, *** Significant coefficients at 1%, 5% and 10% level.

Can we now establish the specific effects according to the groups of country of our sample and appointed under-periods? The whole of the results is restored in table 7 in appendices.Firstly, for the countries of Asia and Iran the growth of exports is appreciably increased between 1986 and 1999 during to the boom of the FDIs. In spite of the Japanese crisis and taking into account the fact that Europe is not the principal market of destination of their exports, it is completely acceptable that this growth was drawn by processes of regional and domestic integration. The exception relates to Iran for which there is negative fixed effects, without any doubt related to institutional instability. Characteristics are detectable by country and under-periods. Indonesia more tardily starts its insertion within the international division of labour like Sri-Lanka; the Philippines and Malaysia begin this process early rather than the others.Secondly, for the countries of SSA, the impact of the foreign direct investments is negative on the whole of the period and each under-period. On the one hand Europe of the 15 disinvests in Africa and on the other hand, Africa disconnects itself from the European trade-circuits, in comparison with the coefficients α2and α3 obtained during the two time periods. In addition, if the variable dummy indicating the existence of EPZ is positive, it is not significant; the explanation can rise from the strategy even of the investors seeking more to penetrate the local and regional markets. The fixed effects are positive for Madagascar and Maurice for the second period translating the improvement of the public policies, the choice of a larger opening to the international trade. If the same effects are found in addition in Kenya and Togo, it is advisable to notice that these countries do not escape from institutional instability, and we can assert the brittleness of the results. For the other countries (Benin, Cameroon, Ivory Coast and Senegal), the performances are negative in a recurring way. Ghana makes the exception and this result come out with the success in SAP recognized by the international community, with the respect of the law, the effectiveness of the State and with the fight against the corruption.In third place for the Latin America, the growth of Europe of the 15 is not influential; the United States holds a dominating place in trade of these countries, in particular Mexico. If the effects of the FDI are not very significant, that is due partly to their preference for the import-substitution during the first period before SAP. The Dominican Republic and Brazil open more with the international trade and diversify their trade partners more and more, and thus improve the specific effects to the growth of their exports. In Mexico without any doubt, the

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restructuring of maquiladoras attenuates the specificity of exports. Finally for North Africa, the awaited coefficients are positive and are not always significant. However over the first period, the growth of the countries of Europe of the 15 and the volatility of the rate of exchange are the principal determinants of the growth of their exports. Concerning the specific effects Tunisia diversified as of the first period its structure of exports by not privileging the European destination, this is why probably over the second period, and the fixed effects do not penalize this country. The strong dependency of Morocco with the European FDI and the market of the EU have had for consequences negative effects in second period. Egypt, being adapted more and more to the international trade, improved its performances with export.

In filigree now, the institutional characteristics of the African EPZs clearly deserve to be identified for finally leading to recommendations of public policies, while supporting our reasoning on the experiments of other developing countries.3- Institutional environment of the African EPZ and the requirement of new public policies.The outstanding features of the African EPZs in comparison with the tools of the institutional analysis and the history fall under a context unsuitable to generate positive externalities favourable to the rise of the entrepreneurial activities, direct investment and exports (3.1). To take up the challenge of such bad performances, reforms of the public policies are needed (3.2) in a context, where Africa with programs of regional integration, affirms a will to better fit in the international circuits of globalization.3.1 Outstanding features of the African EPZs and mere contributions of the institutional analysisThe complete study of the African EPZ in the light of the experiments of the other DCs makes it possible to release from some useful lessons (3.11) supplemented by a setting in institutional prospect (3.12).3.12 Characteristics of the African EPZs

1. The African SEZs do not have all the statute of EPZ; they reflect the panoply of the configurations of existing free zones. In the same country, it is possible to find a multiplicity of organizations with different legal statute or that the texts are frequently modified. This ambiguity in the trade arrangements and tax is not made to facilitate the establishment of the multinational firms18.

2. The territorial duality increases the costs of the infrastructures and transport19. 3. The African countries start to create SEZs after a severe crisis of debt and without

food safety 20. Thus, the African zones were available to foreign investors well after the Asian, Latin-American zones and of the Middle East.

4. The zones put aside Madagascar and Maurice did not begin their process of industrialization by offering the prospect for country receiving offshore plants specialized in assembly of products coming from North. Thus, in the majority of the cases, the countries did not seek to control a segment of production like, the final assembly and production of intermediate products which are mixed with local

18 The industrial park of East Dakar, for this reason, an example of badly definite statute on the temporal level with texts constantly altered. At the beginning, it is a EPZ; then, it passes to the mode of free port. Today, they are free companies of export. The failure of the industrial zone of Dakar and the poor echo of the free areas zones of this country are likely to stick durably to the image of this country. The new mode offers less interesting tax advantages.19 In Togo, for example, the zones of Kaza and Lome, by their duplication, arise problems on the level of the territorial unit and the fixed costs and maintenance which they generate; all equal things, of the least been worth tax are undergone by the State. The zone of Kaza was conceived with an aim of wanting at all costs to ensure a coordination with regional policies of decentralization and to give work in rural medium, where there exists neither of ports, nor of roads and the banks. The risk is to increase the production costs, storage, transport and even financial. It is about a geographical landlocked worsened by an authoritative choice without economic rationality.

20 It acts there, of last wave of frank zone, without clearly posted exporting vocation..

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products meeting international standards and able to benefit from the expertise of the foreign firms. The countries rather offered incentives suitable to work out produce finished, not answering sometimes to their comparative advantage. For proof, even of the traditional products of the primary sector of these countries are likely to emanate from the EPZs. Nevertheless and in a timid way, even surprising, the openings on the international markets were observed in certain fields: the fruits, the drinks, vegetables, the flowers... Again that, for the majority of these products, incorporating local raw materials, the market of destination is regional; an example is that of the gari of Ghana containing flour of manioc (Oduro, Ellis, Dziedzoave, Nimako-Yeboah, 2000).

5. The firms located in the African zones seek more to compete with the domestic firms and are not resolutely turned towards export, because the clear option for export is not selected in Africa. The governments continue to protect the national markets; the past of Africa persists and lives the public practice of effective protection21.

6. Certain African countries (Tunisia, Morocco, Kenya, Togo, Ivory Coast, Madagascar...) profited from the systems of preferential exchanges impelled by the AGOA, the Generalized Preferences System... Kenya doubled its exports of products of the textile sector and clothing between 1999 and 2004 to United States of America (EPZs Authority of Kenya, 2004, Report management) in the absence of quotas and customs duties. In compensation, more still than the low cost of labour force, the quality of the services and the infrastructures offered, the companies are attracted by the possibility of penetrating the European markets and North-Americans by circumventing the trade barriers. The establishment of the multinational firms can then be justified by a need to raise the tariff and non-tariff obstacles (Multifibre Agreements...). Thus, the Asian companies (Korean, Chinese and Indian) created subsidiary companies in Togo, because this country signatory of the agreements AGOA and SPG has an access privileged to the European Union and the American market (De Brie, 1996).

7. The English- speaking countries and or islanders (Kenya, Ghana, Maurice, Madagascar) or having posted much earlier their opening to the international trade (Tunisia, Morocco...) succeeded better than the French-speaking countries. Extreme cases are to be announced: total success (Maurice) and total failure (Dakar). Even an African classification exists (see De Brie, 1996). At the head: Mauritius, with mainly of the Asian investments, turned towards dynamic markets of Europe, of the Middle East and North-American. Hundred of thousands of employment created allowed full employment, and the reinforcement of the human capital contributed to the rise of the real wages in this country, with the investment in new activities with strong value added. The companies coming from Mauritius use now subcontracting and their activities are partially devoted to enterprises located in Madagascar and Kenya. Follow in the order: Tunisia, Morocco, Egypt, Madagascar, Kenya, Ivory Coast, Togo, and Ghana.

8. The drastic failure of Senegal (weakness of exports, of employment...) is not explained only by the cost of labour force and the taxation applied to the companies installed in the EPZ of Dakar, but also, because the costs of the intermediate factors are exorbitant: the tariffs of electricity are three times higher in this country compared to France. For the low one and the Medium average one, the tariffs applied are respectively 42% and 12% more expensive than in the other countries of West Africa

21 The rationality and the opportunism of the multinational firms lead them to be located into the free zones and to provide more domestic and regional markets, instead of putting their talent at the effort of sale on the international markets and at the re-entry of currencies.

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Monetary and Economic Union (WAMU), in spite of privatizations. The study of the comparative costs of water leads to the report of similar distortions and for sectors strongly unionized and with high financial debt before privatizations.

9. The devaluation of the franc of the African Financial Community- monies of WAMU- in 1994 lost of its effectiveness for those countries of the Zone, continuing to maintain fixed parity with the euro introduced in 1999 and whose volatility does not concern the African policies; so the instability of the rate of real effective exchange is not likely to give comparative advantages to Senegal, confronted with a strong unionisation and high urban wages. However, we already saw for example, for the countries of the South Asia and even recently compared to the Dominican Republic for example (Wilmore, 1995), the importance of the structural undervaluation of the currency in a system of the type crawling peg.

10. The World Bank (2001) insisted on the quality of the infrastructures as a determinant of successes and the failures. The infrastructures of transport are not the only bottleneck. The governments neglected basic maintenances; the investment of renewal and the costs of water, electricity and telecommunications are abnormally high in the majority of the countries.

11. Finally in these countries, the direct investments are explained initially by colonial, historical, cultural and geographical facts; the low cost of labour force is not always a relevant argument. Togo has costs identical to Maurice and Morocco and Malaysia have costs of higher labour force... It is thus, than in Kenya, the investors are English speaking and Asian; the Asian presence is included/understood because the Indians, the Pakistani who constitute a strong community there are present earlier during the two precedent centuries. Madagascar benefited from the community of insular culture like Asian and Mauritians and can now export with the AGOA.

These outstanding features must now be replaced in a precise institutional context and be reinterpreted with the tools for analysis given by North (Chabaud, Parthenay, Perrez, 2005). 3.12 The lighting of the institutional analysisBy definition, the institutional economy is interested in the articulation between the behaviours of the agents and nature of the institutions, and in the link between the evolution of the performances of a country and the political, social and administrative structures of accompaniment. The institutions are composed: i) of a political structure incorporating the political choices which are expressed, and which need an administration to put implement the ideology and modes of regulation; ii) of a structure of rights of ownership defining the formal incentives; iii) of a social structure in the beginning of the standards and conventions. From this theoretical point of view, the mechanisms of incentives, the compliance with the rules, political and social stability guarantee the rights of ownership and the confidence of the investors, and explain the differences in performances between countries. In a context of limited rationality of the agents, the institutions are necessary and are a means of reducing uncertainties. In this sense, Rodrik (2004, p 1) strongly argues that institutional quality holds the key to understand how some countries prospers and some do not. In this highlight: “Rich countries are those where investors feel secure about their property rights, the rule of law prevails, private incentives are aligned with social objectives, monetary and fiscal policies are grounded in solid macroeconomic institutions, idiosyncratic risks are appropriately mediated through social insurance, and citizens have recourse to civil liberties and political representations”. However, their existence does not exempt the agents to take erroneous decisions, because there are no measurable effects like ideological diagrams and beliefs prevailing in a given society. It results from this the possibilities to under use the resources particularly in LDCs because of the failure of the rights of ownership and the implemented incentives; the inefficiency can be the result noted starting from the behaviours of the representative agents. This is why, for a whole of institutions chosen by a country, it is

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necessary to raise the questions of their attractivity, their feasibility and their credibility22. The EPZ is the opportunity of the setting implementation of the liberal ideology. It supposes exclusive and transferable rights of ownership conferred on the companies and the organizations of management of the zone, granting incentives making it possible to activate factors and goods. In the same way the order must be guaranteed mainly to the industrial companies desiring to establish; the trade and financial undertakings of accompaniment must answer to the economic principle of efficiency23. Like corollary, since the production of the companies is intended for the world market, the companies and the organization of management must profit from various freedoms, of commercial and human competences, governmental services enabling them to reach this market.From this point of view, the zones were presented like an institutional innovation in the African DCs, facing in the nineties to the international debt problems. In the African case, we can first study questions related to the incentives granted to the companies. The multiplication of the statutes of the zones in the same country does not encourage the exporters, because the incentives are not specialized according to the international market. In the same way, the changes of legislation return confused the exercise of production and the trade of contractors having to form part of a national policy and can induce procedural conflicts between the contractors and the governmental authorities. If we take for example the case of Senegal, the statute of companies of exports is interested initially in companies already existing and eager to change statute. But comparatively with the other African countries having adopted this derogatory statute, the tax advantages are less interesting in Senegal, already handicapped compared to the costs of electricity and water24.On the political level, the creation of the African special zones is with the conjunction of the international pressure and the acknowledgement of failure of the planned and protectionist mechanisms of economic regulation. But the relaxation of the rights of ownership is not yet net in Africa. The standard model of the New Public Economy of the Eighties finds then a particular resonance, because it applies perfectly to the case of these small countries having weak institutions and constrained by public resources of a limited amount (Esfahani, 2000). The authorities of such countries are then tempted to more control the companies at the origin of the creation of wealth and or to maintain an inefficient and large public sector. The African experiments of privatization successful at a significant scale of activities per country are not indexed in the Nineties. Perhaps more than elsewhere, strong complicities between bureaucrats and African politicians prevented the transformation of the budgetary decisions into completely productive activities, thus they subsidizes the range of population espousing their own social and political preferences. Actually, the programmes of privatization until consisted in there transferring from the rights to politicians, chiefs of clans, persons in charge for the religious formations and bureaucrats reconverted as businessmen or using intermediaries to adapt economic activities. From this point of view, clannish, ethnic alliances were maintained with accounting techniques which make possible to buy shares in the companies without engaging the fortunes of the purchasers. Often new owners of companies domicile abroad their assets starting from the organization of the flight of capital sitting on the

22As we will confirm it, the African zones in the South of the Sahara were not as a whole to think, because the studies of their feasibility were hasty; their attractiveness and their credibility suffered from this erroneous behaviour of anticipation of the authorities under influence of various organizations and especially sensitive to the argument of the economic governance requiring the installation of policies of structural adjustment.23 In Senegal for example, trade companies compete with industrial companies by the means of the importation.24 Actually, the backers of the IMF encouraged countries to replace programmes of simple exemption by more complex programmes of refunding of customs duties with the free zones. It is a search for tax output by displacement of the direct taxation applied to the companies with an indirect taxation, but the mechanisms of covering became more opaque and longer. If it is true that the taxability resting on the companies is not important, because of the low number of industrial companies, that should not mean renunciation of the corporation income tax. It is possible to lower at the same time direct taxation and indirect taxation without harming the objective of tax output and the objective of simplification of the tax procedures.

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international debt of public and multilateral nature (Ndikumana and Boyce, 2003). How then in this African recent context to attract the foreign investors when the potential domestic investors organize the capital outflows? How the African production of the zones can be intended for the world market without a clear option for the strategy of promotion of exports? How to create the joint-ventures reaching the technology transfer and the spill-over effects of international subcontracting, whereas the political signals are not adequate? It seems obvious, with no institutional capacity, no sufficiently diversified human capital, and no consequent political forces, which Africa suffers that political instability is no neutral on its economic performances. Indeed, the orchestration of conflicts based on the various cultural and human identities, consubstantial in the majority of the African politicians poses problems with the adequate operation of the markets, because it led to civil wars, genocides, coups d’Etat 25

which can exceed the national borders with a procession of displacements of populations, human interventions... and with brakes compared to the process of regional and or continental integration (Semedo, 2004).Political instability and economic instability are reinforced mutually and give the image of Africa in social deliquescence, where rules of social and traditional life are constantly ridiculed. The alternative is in the multiplication of the crimes compared to the private property and temptation to create popular militia and private jurisdictions. Also, the guilty operations of the customs authorities, tax authorities and land managers and corruption of the civil servants, has some recurrence on the delays of production. The national and foreign private investors are sensitive in this established fact (the World Bank, 2001)26.Lastly, on the administrative level, it should be noted that the companies managing the African zones are seldom private; they are mixed or public. When they are mixed, the authorities constitute minorities of blocking within the boards of directors. Thus, the African countries try out special zones with dominant planned processes; they offer structures, financial incentives, identical to the foreign investors in a way not coordinated on the level of each country and between countries, thus giving the impression of an open war of tax incentives with degrees of variable success compared to the desired objectives. Creation as the management of the zones in the majority of the cases does not answer at the requests of the investors. At the creation, the financing of most of these zones was the occasion to thank for the awkward politicians (disputed or in the process of become) and to give work to bureaucrats obeying while garnering benefit related to the initial investments in infrastructures bearing on the international debt and or acquired by techniques of leverage buy out. Also, delays within the times relating to the specifications, the return on less been worth tax meet the corruption practises. Even apart from the phenomena of collusion, the African free zones conceived starting from centralized diagrams, managed by bureaucrats, appeared ambitious, involving over costs and less been worth tax. Compared to their current management, the investors meet administrative obstacles, because they do not have precise interlocutors, a single counter enabling them to regulate their administrative problems quickly, to obtain relevant information for their provisioning or to reach services27. It would have been besides interesting to deepen as for the African Central Banks: modes of appointment of the leaders, duration of their mandate, difficulties encountered by the latter with their environment and their notoriety (Diouf, 1998). Compartmental information exists tending to make believe their prevalent political character; the mandates are now subjected to the political alternations wanted by the topic of the good governance, and in spite of scarce notoriety cases, they still 25 78 between 1960 and 2003.26 The example of Senegal can be still mobilized: the operators before and after obtaining approvals must face various licences to start their activity. Moreover, after the neutralization of the beneficial effects of the devaluation (rise in the production costs...) as from years 98, Senegal arouses only one very weak interest on behalf of the investors and its growth is explained more by the agricultural added value.27 As we already announced, the organizations of management do not have functional autonomy because dependent on several decision-making centres politicized: their budget is subjected to discussion, with blocking in the execution, rationing of currencies or oversize costs.

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weakened by the electoral cycles. The administrative obstacles masked besides the commercial deficiencies which did not integrate the idea forces that export is a means of industrializing itself. From this point of view the organized policies of promotion of the products processed in these zones are almost non-existent, just like the communication compared to the objectives and the granted incentives; the countries specialize in products which do not have inevitably vocation to be exported and which are potential niches.

As the effective profits in SSA do not exceed the losses, and also as, the theory stays about the utility of the zones based on a theory of the second best, it is then comprehensible that we now propose as conclusions the setting of new public policies. In other words, we give recommendations of economic policies Pareto-improving within the meaning of a better allocation of the resources devoted to the zones.3.2 New public policies against bad performancesObviously, the future zones can profit from the experiments of those existing. The recommendations for the improvement of the public policies then relate to with the first chief the zones currently in activity. They are of two types: interns and external. In the second case, it is a question of reflecting on the regional, continental environment even international of the African zones and of giving background information on the deviating behaviours. But for the whole of the policies suggested, the resolution of political uncertainties in Africa will be determining.3.21 At national level and in the inside of Free zones. In the context of the new international division of labour, the training with manufacturing activities orders to consider even simple activities of assembly. The African countries often wanted to produce in their zones all the vertical chain of decomposable good and or traditional goods concerned with the primary sector of their economy; what is against conventional wisdom. The traditional incentives granted within the framework of the various SEZs have interest only, if the African countries remove the various trade arrangements of the free zones being able to cohabit in a country. Moreover, the territorial duality is not likely to attract investors. It is preferable to choose the EPZ clearly, instead of indirectly continuing recommendations suitable to reinforce the output of the indirect taxation and customs duties. The MNCs very quickly perceive the limits of such devices and come to settle to compete with the domestic firms on the markets local and regional markets28. The World Bank(2001) qualified this absence of option by the absence term of precise vision29. The protectionist African slogans were for example against the long-term interests of Senegal 30. Many politicians in Senegal were socialists and hoped in centralized mechanisms like the Lagos Plan and other policies with high degree of isolationism and supposed self-reliance. But this country gained more with openness and relaxed effective protection, for example after 1994 with the devaluation of the franc CFA. More openness seems to be really necessary everywhere in Africa.Food safety constitutes another important shutter of the policies of liberalization. The SSA countries are for the majority in the incapacity to face durable climatic shocks because: the

28 For insular countries or almost islands this choice was indisputable. In the same way, Sri- Lanka gave up the importation substitution for industrialization by the promotion of export, with the creation of the EPZ of Katunayaki. Senegal, having harbour and airport infrastructures in Dakar, did not consider it at Senegalese independence and, in 1976 no see the necessary specialization of the zone of Dakar in the activity of export.29 It is impossible to want to do everything: to export raw materials, to substitute imports, to again launch produced export, while maintaining policies centralized. Even, the free zones revealed fights between administrations, between ministries, leading to bad definitions of the priorities sullying operation and management with the African free zones: the political absence of consensus had bureaucratic and political implications, not without consequences on the least been worth tax and of the negative externalities (driving errors worsening the natural geographical landlockness...).30 It would have been even judicious for this country, which of tradition always devaluated frank CFA implicitly by subsidizing the exported products and by strongly taxing the imported products, to turn deliberately to a greater insertion to the international exchanges. Indeed, in theory, we know now that the costs of the labour force are only temporary comparative advantages. If time is a variable of adjustment for the whole of the production costs (wages, telephone calls, inputs...), it is judicious to compensate for the short-term advantages by compensation measurements of under devaluation of the national currency.

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incomes are distributed there in an unequal way; the governments did not envisage policies of storage of food; food practices often satisfied starting from the importation in the absence with policies of inversion of these behaviours31.The exploratory studies on the growth in Africa (Berthélemy, Söderling, 2002) insist on the levels of education, the public infrastructures and on the role of the institutions in Africa and openness. They show as well as ambitious investment plans of 1960 to 1975, then since 1996, allowed on obtaining or not negligible remarkable growth rates32. However brakes with the growth caused by internal and external conflicts, deliquescence of the institutions...appeared resulting in very low productivities. From this point of view, the role of the human capital is a major challenge for the African countries; the emergence of these countries is conditioned by a redistribution of the domestic and foreign resources towards education. The donors’ countries must support the sectored programs of education and find with the governments of these countries of the more effective tools for teaching and in particular professional areas. It is acted in fact of providing education for more children in a continent where the latter are discriminated in term of gender, and to insist at the beginning on an education of mass. It is advisable to adapt the financing of education gradually, without making exemption from payment, as unique procedure of operation. The joint action with the donors must be projected from the regional point of view. If very whole Africa is concerned with the problem of bad allowances of the tax and budgetary resources33, an in-depth reform is essential and requires a difficult political recasting in comparison with the instability currently noted in this continent. The African zones will be improved thanks to an overall vision, a consensus and a joint action with the financial backers, as for this public resource allocation. Management, in particular of the zones, often in the bottom of the public sector does not waiting the contractors ‘answers because the persons in charge continue categorical interests or undergo pressures delaying the good decisions. Why not consider then as in Asia, in Latin America, in Maurice, in the Middle East, a private management of the structures of management of the zones, in order to offer to the companies’ single interlocutors while reducing the costs of operation of the organization of management and the costs of transaction engaged by the contractors? In Bahrain for example (Tahir, 1999), the management of the frank zone of Djebel Ali is entrusted at a private organization (High Supervisory Committee one Free Zones)34. The States gain of credibility thus, of administrative viability of the tax by the means of a simplified covering which does not come to cover the output waited from the revenue duties required on the territory of the zones. The attempts of corruption are attenuated and by issuing a single choice of zone specialized in exports; the authorities protect better the domestic economies from the strategies of the multinational firms which come to be established to compete with in certain activities the domestic firms.3.22 At the regional level, continental and internationalThe experiments and projects of commercial, economic and monetary integration make legion in Africa35. At the commercial level, the adoption of a common external tariff with respect to third country and freedom of movement of the goods and factors between Member States of a union must have implication, like a harmonization going beyond the customs transactions, if

31 The countries of the South East Asia did not know episodes of famine and food shortage putting at evil their strategy industrialization; the reflexion in Africa on the fight against poverty relates to in first the question: how to nourish durably the African populations?32 Ghana, Maurice, Lesotho, Botswana, Uganda, South Africa, Mali, Ethiopia, Ivory Coast.33 The share of current public consumption (administrative expenditures) is disproportionate compared to the share of maintenance and capital expenditures of the public services.34 This board of management is remunerated according to the objectives of diversification of national exports and thus compared to a less dependence of these exports compared to oil. The simplification of the applications, the tax transparency, the direct access to information and administrative laws, the elimination of the multiple decision-making centres represents priceless financial profits for the companies which are addressed to a single counter.35 The Community of the States of West Africa,Economic and Monetary Union of the States of West Africa, Common Market of Eastern and Southern Africa, the Economic and Monetary Community of Central Africa...

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EPZS exist. The integration of the markets, essential for the attraction of the investors, should not exempt of a policy concerted between Member States. Indeed, it is possible to define a specialization of the zones in products and or segments according to the equipments in factors, degree of landlockness (presence of ports and or airports, roads...) and especially by holding account of the degree of development of the human capital. Nothing prohibits, for example, with the WAMU, to create on the level of a country, a whole of professional institutes developing a multiplicity of formations ensured by national and international trainers, all in their granting a certain financial autonomy with the assistance of the donors. It is then a question of communicating with the investors to show them the possibilities of each zone in terms of labour force qualifications. In the same way, at the regional level, a private single Counter is conceivable to simplify the procedures of establishment and management of the zones. The countries thus avoid devoting to a war tax incentive and would present thanks to a joint action, a clear vision of regional development.At the continental level, in agreement with the NEPAD, it is a question of communicating on the experiences gained on the level of each under area and of exchanging them. The creation of the Association of the African Free Zones in 2002 was certainly welcome. Objectives emerged from such a meeting: to encourage the development of the EPZ and the technological parks; to create platforms of international marketing; to canvass the investors, the researchers and the originators of projects; to reinforce the continental joint ventures and investments; to seek a greater stability of the continent; and finally, to explain more to the policies and the populations, interest of free exchanges. But the effective point of anchoring is to take as a starting point the pragmatism of Madagascar, Maurice and the English-speaking countries in Africa. It is not a question any more of denouncing liberalism, but of stating the objectives of the zones clearly, to defend the conditions of free exercise of the entrepreneurial activities in Africa: the Secretariat envisaged for this purpose by the NEPAD must be harnessed with this task but we hope that it will be of a great autonomy to function effectively.Finally on the international level, three tracks of reflexion deserve to be underlined. The first is the need for African countries for better training their officers’ projects to effectively reactivate the cultural, historical links and linguistics existing with old powers or new networks36. The second relates to the concerted organization of promotional policies of products abroad; the African embassies would not be any more simple places of turn-over high, corrupted civil servant regulating of the administrative and police questions. They would be the relay to explain the objectives of the EPZs, the granted incentives, the factors available. The third spring of the advantages gotten by the systems of preferential exchanges of the developed countries. It is to be deplored that the World Trade Organization does not favour always such devices and the markets of the developed countries remain mainly closed with the traditional African products. Africa needs a positive discriminating attitude on behalf of the authorities of the countries developed to leave the trap threshold of the static comparative advantage (Olofin, 2002). Indeed, even if the link between liberalization of the foreign trade and growth is often discussed in the short run, it is established now that a greater insertion with the international trade flows protects a small country from the vulnerability to the external shocks, and long-term constitutes a means of reduction of poverty (Gunter, Cohen, Lofgren, 2005; Winter, Mc Culloch, Mc Kay, 2004)37. 4. ConclusionsInsertion into the New Division of Labour is a real fact that African countries are impossible now to circumvent. They must take as a starting point the successful experiments. The EPZ were a level for a range of the countries having known experiments of remarkable growth. 36 See the case of Asian in Kenya, Maurice and Madagascar...37 The example of Madagascar contradicts pessimism related to exports.

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But Africa never gains with this good event. In its case, the experiences of EPZS started with SAP and there multiplicity institutions without clear objectives frame the activity of the firms located in such zones. Contrary to the other countries, SSA still marked by planned processes and institutions in deliquescence after the creation of EPZs. Never doubts that performances to export are still bad and Africa is living with static comparative advantages. Our model inspired of the gravitational version explains the African failures partly. The search for relevant causes of institutional nature tends to accredit the idea that political and administrative facts... not easily identifiable on the quantitative level, in spite of various and traditional incentives influence the growth and the development. The benefits which must rise normally from the existence of EPZ are slowed down by defective institutions and under-optimal public policies. We propose some ideas to resolve them and new policies national, regional and continental based in accordance with these strands : i) starting with offshore assembly and relationships like joint-venture; ii) occupying the ground vacated by other DCs as they lose their competitiveness in labour-intensive manufactures due to higher wages; iii) associating with the newcomers on the scene of FDI (India, China); iv) arguing more strongly in front of WTO to obtain more favourable treatments and special agreements like GSP and AGOA; v) and finally upgrading in human capital in order to meet the challenge imposed by MNCs producing advanced products in country with diversified and abundant skills.

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AppendicesTable 1: Financial incentives granted in some African special ZonesCountry Legal status and tax and budgetary incentivesBenin Prescription n°400 (2003). Creating the EPZs. Ordinary customs advantages. 60% of Current assets resulting

from diary indirect taxes on vehicles are assigned to the maintain infrastructure of the zone. Fiscal advantages: exemption to income tax up to 14 years according to the landlockness and sites chosen by companies and thereafter the rate is fixed at 20%; the maximum level taxes on wages and dividends are at 4% during 5ans; exemptions of the Value added tax if a company give a promise to include progressively local inputs in the productive process of the goods. The sale on the local market is authorized. Freedoms of dismissal with priority to recruit nationals.

Cameroun Prescription n°90/01 in 1990 of creation of the National office of the EPZ placed under the supervision of the Ministry for the Industrial Development and Commercial Advantages. Total exemption with the import and the export. Tax advantages: total exemption for the income tax during 10 years; the rate applied the eleventh year is 15%. Exemption with perpetuity for the other taxes especially for the internal inputs. Right to open accounts in currencies within the local banking structure and total exemption of control on the capital mobility. Not subjection of the companies to the code of the wages defined by the fair national labour standards act and freedoms of dismissal.

Ghana Decree of authorization of creation of ones private structure of management of EPZ in July 1995 after parliamentary debate. Exemption of taxes to the import and export. Free income tax during 10 years and after it is 8%. The accounts abroad, repatriations of profits are authorized and the freedom of dismissal is guaranteed. 25 to 30% of the industrial production of the EPZ can be intended for the local market.

Togo Law n°89-14 of September 89: creation of the Company of Administration of the ZF under the supervision of the Ministries: Trade of Industry, Transport and Finances. Even standard of exemptions that in Cameroon with preferential rates on electricity, water, the telephone... the tax on the wages is 2%. Freedom of transfer of the capital and dismissal.

Senegal Three different statutes were successively voted: Law n°74-06 April 1974 instituting the EPZ of Dakar; Law 91-30 April 91extending the principle of the EPZ to the whole of the territory (free port); and the Law of February 2004 defining the statutes of the free company of exports with a potential to export at 80% level of their production. Five freedoms which can exist in a free Zone are accorded for 25 years renewable duration except for the income tax whose rate is fixed at 15%.

Source : ILO (2003) and Panafrican Free Trade Zone Association (2003)

Table 3 : Contribution to employment of female labour force in 2003Countries Employment % of female labour force Countries Employment % of female labour forceBenin 700 60 Maurice 83609 56Burkina Faso 1500 68 Nigeria 4700 60Cameroon 8000 80 Togo 7213 70Côte d'Ivoire 22000 78 Tunisia 239800 ndaGhana 9500 65 Senegal 940 58Kenya 27148 60 Iran nda ndaMadagascar 35000 84 (1995) ; 78 (2003) Pakistan 410540 81.5Maroc 71315 nda Sri Lanka 451033 77.72Source : ILO Data Base (2003). Nda : non available.

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Table 2 : Principal information on a sample of Special Economic Zones

Countries and zones date creation into brackets

Type of special zones and number into brackets

Institutions of framing (public, mixed or private control)

Exports starting from the EPZ in % of total exports in 2003

Direct investments in US dollars in 2003

Nnumber of companies in 2003

Origin of the investors

Branches of industry and markets Year of SPA launching

Benin (03) EPZ (3) The Chamber of Commerce (mixed) nda 120.895.364 nda

Benin, France, Nigeria

Textiles, services, activities with labour force; local and regional markets.

89

Burkina Faso(99) Free Trade Zone (1) Office of foreign trade (public) nda Nda nda Burkina, Libye,

FranceActivities with labour force ; local and regional markets.

86

Cameroon(90) EPZ for factories turn-key and free port (2)

National office of the EPZ-Ministry of industry (public) 32% 195.613.221 44

Cameroon, France, Spain, Italy, Lebanon.

Food, drinks, industries of wood, tourism, services; local, regional and European markets.

88

Ivory Coast(86) EPZ (1) Promotion centre of the private investments (mixed) and Ministry of Finances

30% 328.856.462 60

Ivory Coast, France, Lebanon

Services, textiles, clothes, wood, drinks, food, shoes; local, regional, European and US markets.

81

Ghana (95) EPZ (4) Ghana Free Trade Board Zones (Private)

80% 447.000.000 117

Malaysia, USA, Lebanon, South Africa, China, England, Australia, France, Italy, Germany

Oil, mines, drinks, textiles, clothes, food. 84

Kenya (90) EPZ (6) including 4 technological EPZ and industrial park

Export Processing Zones Authority (private) Export Processing 80% 1.655.369.654 69

USA, England, Hong Kong, China, India, Sri-Lanka, Pakistan

Clothing, textile, services, agricultural processing industries, pharmacy, electrical equipment and tools, electronic products; local, Regional (Uganda, Tanzania, Burundi), USA, Europe and Japan.

80

Madagascar (90) Free companies and EPZ (1)

Ministry for Industry and the Chamber of Commerce (mixed) 40% nda 180

USA, France, Maurice, Hong Kong (China), Southeast Asia

Food, services, timber, watches, textiles and clothes; regional (Indian Ocean), USA, European and African markets.

89

Malawi (90) EPZ (1) Investment Promotion Agency (private) 60% 302.625.280 50 USA, South

AfricaTextiles, clothes; USA and South Africa. 80

Mali (92) ZLE(1) Promotion Centre of investments (public) nda 2.962.256 17 Germany,

France, DenmarkAgriculture, mines, tourism, metals, wood, leathers, textiles; local and regional

82

Morocco (77) EPZ (2) Ministry of Finances61% 395.000.000 63

France, Switzerland, USA, England

Textiles, clothing, leathers, shoes, agricultural processing industries and services; Europe, the USA

80

Maurice (75) The whole Island is a special free trade zones

Export Processing Zones Authority (private)

77% 53.734.731 513 Maurice, France, England, South Africa, India, Malaysia, Hong

Textiles, clothes, apparels and sophisticated tools, biomedical materials, electronic products, watches…; Asia, Europe, Africa, North and South America

nda

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Kong (China)Nigeria (90) FTZ and free ports Ministry of mining

and Industries (public)nda 312.000.000 72 USA, England,

Europe, NigeriaAgricultural processing industries, oil, gas, mines and communication; local and regional

83

Togo (89) EPZ (2), free port (1) Authority of the Free Zones, Mixed investment Company

30% 60.185.082 45 France, Lebanon, Ethiopia, Italy, South South Korea Spain, USA, Hong Kong (Clouded), Ivory Coast

Synthetic shoes, final assembly of computers, hair, industrial adhesive, cosmetics, cassette radio, horticulture, vegetable oil; USA, Europe, local and regional markets.

81

Tunisia (76) EPZ (2) Agency for the promotion of direct investments (public)

60% 626.858.352 2503 Tunisia, USA, France, Germany, Italy, Belgium, Netherlands, Russia, Libya, Japan, Sweden

Electronics industries and mechanics, textiles, clothes, leathers, shoes, tourism, services, pencils

78

Senegal (74) Free port, free companies and EPZ(1)

EPZ of Dakar, mixed Company with significant part of the Senegalese government (53%), Ministries of Finances and Industry

30% 108.789.619 52 Senegal, Lebanon, France (13)

Local and regional markets (WAMU)

80

Iran (90) EPZ (4) Export Processing Zone Authority (private)

nda nda 2035 France, Germany, Iran, Emirates, Turkey

Electronics, chemistry, oil-chemistry industries.

None

Pakistan (74) Technological parks and EPZ (22)

Mixed agency 50% 81.000.000.000 403 The USA, Europe, China, Japan, Korea, Saudi Arabia

Textiles, electronics, sophisticated tools, clothes…

None

Sri Lanka (77) EPZ and industrial parks (12)

Private agency 33% 64.000.000.000 402 The USA, Europe, South Asia I, United Kingdom, Japan

Textile, leathers, clothes, sophisticated tools, tea, drinks, agro-industries, tourism, services

None

Source : ILO Data base (2003) and personal data base nda= non indicated elsewhere

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Table 4 : Annual average of the FDI flows to the DCs in million $ (1970-2004)Flow of the IDE 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04DCs 2058 5967 8896 15222 25347 153805 176597East Asia and Pacific 404 1054 2346 5588 26352 60342 56620

Europe and Middle Asia 58 65 87 341 4469 70384 107984

South Asia 50 71 163 350 863 3693 5992Africa 741 803 866 1337 1847 5170 6001Shares of SSA (%) 36 13 10 9 4 3 3

Table 5: Cross-correlation matrix of the exogenous variables (by group of country) North Africa a FRET FX IDE INF GDP GDP 15Variable of EPZ -0.032574 0.022126 0.130446 -0.069173 -0.328621 0.087289Growth of freight% 1.000000 0.090908 -0.004591 0.026215 0.199670 -0.070228Exchange rate 1.000000 -0.069808 -0.010350 0.162881 -0.108436Growth of IDE % 1.000000 -0.088292 0.002874 -0.172268Inflation rate 1.000000 0.039166 0.025589Growth of the GDP % 1.000000 0.079066growth of the GDP UE15 % 1.000000Latin America b FRET FX IDE INF GDP GDP15Variable of EPZ  0.072551  0.152869 -0.013474 -0.032951 -0.431109 -0.097742Growth of freight%  1.000000 -0.043693  0.016865 -0.071766 -0.180482  0.116231Exchange rate  1.000000  0.041870  0.217211 -0.163824 -0.096137Growth of IDE %  1.000000  0.072601  0.138450  0.091135Inflation rate  1.000000  0.064598  0.155677Growth of the GDP %  1.000000  0.078970growth of the GDP UE15 %  1.000000Asia and The Middle East c FRET FX IDE INF GDP GDP15Variable of EPZ -0.013069  0.080458  0.057360 -0.010881  0.232373 -0.137135Growth of freight%  1.000000  0.020310  0.015050 -0.013658 -0.024769  0.035598Exchange rate  1.000000 -0.098880  0.484496 -0.215389  0.077052Growth of IDE %  1.000000 -0.087678  0.020137  0.077289Inflation rate  1.000000 -0.162501  0.092259Growth of the GDP %  1.000000 -0.129994growth of the GDP UE15 %  1.000000SSA FRET FX IDE INF GDP GDP15Variable of EPZ  0.000376  0.073837  0.082728 -0.025267 -0.187456  0.087689Growth of freight%  1.000000  0.003702  0.007163 -0.011850 -0.080430  0.127126Exchange rate  1.000000 -0.031303  0.011703  0.011070  0.010533Growth of IDE %  1.000000  0.217238  0.044305  0.086383Inflation rate  1.000000  0.071656  3.81E-05Growth of the GDP %  1.000000  0.072221growth of the GDP UE15 %  1.000000All countries FRET FX IDE INF GDP GDP15Variable of EPZ  0.003737  0.068798  0.083003 -0.018385 -0.148922  0.024379Growth of freight%  1.000000 -0.009087 -0.080807 -0.008204 -0.067040  0.078982Exchange rate  1.000000 -0.004807  0.021374 -0.058093 -0.032563Growth of IDE %  1.000000  0.130634  0.032186 -0.003978Inflation rate  1.000000  0.037276  0.011163Growth of the GDP %  1.000000  0.042256growth of the GDP UE15 %  1.000000a Égypt, Morocco and Tunisia.b Brazill, Mexico, Trinidad and Tobago.c Indonesia, Pakistan, Philippines, Malaysia, Sri Lanka and Iran. d Benin, Cameroon, Ivory Coast, Ghana, Kenya, Madagascar, Mauritius, Nigeria, Senegal and Togo.

Table 7 Fixed effects by country and regionsPanel A : Asia and Middle East 1975 - 1985 1986 - 1999 1975 -1999

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Coefficient Estimate t-Student Estimate t-Student Estimate t-Studentα0 -0.203 (-0.951) 0.157 (1.499) 0.074 (0.799)α1 0.885** (2.055) -0.521** (-1.929) 0.274 (1.074)α2 5.267* (2.582) 0.147 (0.187) 1.249 (1.397)α3 -0.005 (-0.923) 0.016* (3.145) -0.001 (-0.163)α4 0.005 (0.114) 1.349 (0.941) -0.002 (-0.042)α5 -8.580 (-0.966) -9.959** (-1.978) -5.599 (-0.990)α6 0.000 (0.033) 0.002 (1.401) 0.001 (0.596)α7 0.099 (0.592) 0.772* (7.975) 0.487* (5.139)α8 -5.048 (-0.706) -0.946 (-0.246) -1.408 (-0.438)α9 0.267 (1.284) -0.136** (-1.926) -0.051 (-0.741)Indonesia -0.031 0.011 0.023Iran 0.182 -0.148 -0.083Malaysia 0.015 0.004 0.030Pakistan -0.051 0.037 0.009Philippines 0.007 0.048 0.033Sri Lanka -0.131 0.019 -0.021R² et DW 41,45% 2.590 62,05% 2.600 0.318 2.710Panel B : SSAα0 -0.097 (-0.989) -0.102 (-0.778) -0.027 (-0.515)α1 0.120 (0.372) 0.039 (0.149) 0.198 (1.025)α2 4.369* (2.803) 0.880 (1.131) 1.829* (2.608)α3 -0.002 (-0.428) 0.000 (-0.492) 0.000 (-0.495)α4 0.030 (0.854) -0.013 (-0.534) 0.013 (0.655)α5 -8.352 (-1.277) -1.578 (-0.090) -3.389 (-0.775)α6 -0.002 (-1.182) 0.001 (1.103) -0.001 (-0.980)α7 0.407* (4.123) 0.635* (7.418) 0.487* (8.005)α8 2.961 (1.032) 0.808 (0.165) 0.869 (0.586)α9 0.064 (0.842) 0.077 (1.089) 0.012 (0.366)Benin - -0.027 -0.049Cameroon 0.057 -0.011 0.003Ivory Coste 0.035 -0.003 0.008Ghana 0.080 -0.009 0.018Kenya -0.092 -0.010 -0.017Madagascar -0.016 0.014 -0.005Mauritius 0.057 0.047 0.032Nigeria 0.025 -0.048 0.004Senegal -0.016 0.007 -0.009Togo -0.110 0.028 -0.018R² et DW 37,74% 2,34 41,26% 2,60 32,30% 2,28Panel C : Amérique Latineα0 0.219 (0.880) 0.045 (0.391) 0.075 (0.698)α1 0.391 (0.693) -0.417 (-0.760) 0.083 (0.274)α2 -4.017 (-1.197) -2.329 (-1.552) -1.875*** (-1.593)α3 -0.001 (-0.239) 0.006 (0.426) 0.001 (0.295)α4 -0.266 (-0.339) -0.013 (-1.361) -0.007 (-0.785)α5 -5.764 (-0.385) -69.275*** (-1.747) -3.297 (-0.426)α6 0.001 (0.495) 0.000 (-1.249) 0.000 (-1.196)α7 0.392** (1.983) 0.694* (5.350) 0.625* (6.257)α8 -8.421 (-0.666) 17.685 (1.134) -2.457 (-0.425)α9 -0.030 (-0.225) - - 0.037 (0.516)Brazil -0.039 -0.026 0.017Dominican Republic 0.004 -0.007 0.038Mexico 0.037 0.054 -0.013Trinidad and Tobago -0.007 -0.022 -0.044R² 37,70% 55,49% 42,72%DW 2,49 2,37 2,33Panel D : North Africaα0 0.236 (0.574) -0.055 (-0.437) 0.039 (0.426)α1 0.107 (0.276) -0.030 (-0.082) 0.293 (1.191)α2 5.305* (3.125) -0.169 (-0.191) 0.903 (1.155)α3 -0.100 (-0.552) 2.484 (0.891) -0.130*** (-1.955)α4 -1.991** (-2.517) -1.253 (-0.755) -0.869 (-1.491)α5 0.002 (0.984) 0.000 (0.408) 0.000 (0.202)α6 -0.001 (-0.140) 0.007 (1.566) 0.006 (1.386)α7 0.115 (0.535) 0.699* (4.333) 0.487* (3.854)α8 -1.785 (-0.086) 5.672 (0.498) 3.683 (0.474)α9 -0.261 (-0.464) - - -0.049 (-1.069)Egypt -0.148 0.029 -0.012Morocco 0.148 -0.048 0.011Tunisia 0.074 0.020 0.002 R² et DW 79,63% 2,36 48,93% 2,54 46,27% 2,34*, ** and * are 1%, 5% and 10% significant level.

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Graph. 1: FDI (million US dollar) by region

Source : World Bank (2005)

Graph. 2 :Role of Law and Government Effectiveness  Graph. 3 Role of Law and Government Effectiveness 

-1,50 -1,25 -1,00 -0,75 -0,50 -0,25 0,00 0,25 0,50 0,75 1,00-1,40

-1,20

-1,00

-0,80

-0,60

-0,40

-0,20

0,00

0,20

0,40

0,60

0,80

TOGO

NIGERIA

CAMEROON

MADAGASCAR

IRAN

KENYA

BURKINA FASO

D. REPUBLIC

PAKISTAN

INDONESIA

SENEGALBRAZIL

MEXICO

GHANA

PHILIPPINES

BENIN

TUNISIA

MOROCCO

EGYPTSRI LANKA

TRINIDAD AND TOBAGO

MAURITIUS

MALAYSIA

Role of Law 1996

Gov

ernm

ent E

ffect

iven

ess

1996

-1,50 -1,25 -1,00 -0,75 -0,50 -0,25 0,00 0,25 0,50 0,75 1,00-1,50

-1,25

-1,00

-0,75

-0,50

-0,25

0,00

0,25

0,50

0,75

1,00

1,25

NIGERIA

TOGO

CAMEROON

KENYA

INDONESIAPAKISTAN

IRAN

DOMINICAN REPUBLIC

BENINBURKINA FASO

PHILIPPINES

MEXICO

BRAZIL SENEGAL

GHANAMADAGASCAR

MOROCCO

TRINIDAD AND TOBAGO

SRI LANKAEGYPT

TUNISIA

MALAYSIA

MAURITIUS

Role of Law 2005

Gov

ernm

ent E

ffect

ivne

ss 2

005

Graph. 4 :Role of Law and Corruption  Graph. 5 :Role of Law and Corruption 

-1,50 -1,25 -1,00 -0,75 -0,50 -0,25 0,00 0,25 0,50 0,75 1,00-1,50

-1,30

-1,10

-0,90

-0,70

-0,50

-0,30

-0,10

0,10

0,30

0,50

TOGO

NIGERIA

CAMEROON

MADAGASCAR

IRAN

KENYA

BURKINA FASOD. REPUBLIC

PAKISTAN

INDONESIA

SENEGAL

BRAZIL

MEXICO

GHANAPHILIPPINES

TUNISIA

MOROCCO

EGYPT

SRI LANKA

TRINIDAD AND TOBAGO

MAURITIUSMALAYSIA

Rule of Law 1996

Con

trol o

f Cor

rupt

ion

1996

-1,50 -1,25 -1,00 -0,75 -0,50 -0,25 0,00 0,25 0,50 0,75 1,00-1,25

-1,00

-0,75

-0,50

-0,25

0,00

0,25

0,50

NIGERIA

TOGO

CAMEROON

KENYA

INDONESIA

PAKISTAN

IRAN

DOMINICAN REPUBLIC

BENIN

BURKINA FASO

PHILIPPINES

MEXICO

BRAZILSENEGAL

GHANA

MADAGASCAR

MOROCCO

TRINIDAD AND TOBAGO

SRI LANKA

EGYPT

TUNISIA

MALAYSIAMAURITIUS

Rule of Law 2005

Con

trole

of C

orru

ptio

n 20

05

Source: D. Kaufmann, A. Kraay et M. Mastruzzi (2006).

29

Graph. 6 : Exports growth, GDP and FDI

Scatter plot of indicate positive relationship of FDI Growth and Growth of GDP again growth of Exportation.

30