By Nnamdi Odumody
On December 18, 1978, Chinese leader Deng Xiaoping decided to initiate reforms and economic policies aimed at opening up the economy. One of his experiments was the establishment of Special Economic Zones (SEZs). SEZs are clusters that would provide all the necessary support for industrialists to set up factories that would cushion China to become an industrialized nation.
Deng took advantage of a fishing village of about 300,000 inhabitants called Baoshan which was close to Hong Kong, in the Pearl River Delta, of Southern China. This community also known as Shenzhen would be the first Special Economic Zone, and is now home to 12 million inhabitants from all over the world, with a per capita income of $27,199, and a nominal output of $338billion. According to The Economist, of out of 4,000 SEZs across the world, Shenzhen Special Economic Zone is the most successful.
‘’The development of global manufacturing industry shows a certain pattern. It relocates from one region to the other every twenty years.’’ Prof Qu Jian, VP China Development Institute
Since the 1950s, the global manufacturing base has relocated three times.
The first round of global industrial relocation dated back to the 1950s when the U.S and Europe began to shift their traditional industries to Japan, as they had established their leading positions in global economy, and technology.
The second round took place in the 1970s when the third scientific and technological revolutions accelerated Japan’s industrial upgrade. As a result, Japan shifted its focus onto developing capital intensive industries such as chemicals, automobiles, electronics, aviation, and biotechnology. This redesign was as a result of the Kaizen Philosophy which laid the foundation for Japanese manufacturing to become globally competitive.
The 1990s marked the beginning of the third round of industrial transfer, to relocate labor intensive industries, and some low technology industries, to the coastal areas of mainland China, specifically Guangdong Province.
The following policies made Shenzhen Special Economic Zone to succeed.
- Policy On Imported Equipment for Foreign Funded Enterprises
- Duty Free On Personal Use Goods in the SEZ
- Land Tax Incentives.
- Policy of Credit Funds
- The Short and Medium Term Policy of International Commercial Loans
- Corporate Income Tax Incentives for Enterprises in the SEZ
- Coordinated Measures of Social Insurance in the SEZ
- Liberalization Policy on Commerce and Industry in the SEZ
- Reforms to allow establishment of Foreign Banks in the SEZ
- Reform of the Shenzhen Port to make it a global destination for import and export of goods
- Incentives for Processing Trade
- Policy on Imported Goods
Shenzhen’s industrial redesign saw it to move from products imitation (shanzhai), in its factories, to a new level of innovation capability, and in the process powered the emerged China. Consequently, it invests 4.3 percent per annum of its GDP in Research and Development and is now China’s Innovation and Technology capital, playing host to Huawei, Tencent, BYD, and Beijing Genomics Institute – the world’s biggest genome sequencing lab. Other homegrown technology brands include Ping An Insurance, I-Flytek, DJI, Oppo, and Oneplus.
The Nigerian Special Economic Zone company is an initiative of the Federal Ministry of Industry, Trade and Investment with vision to develop world-class Special Economic Zones, across Nigeria, to boost the competitiveness of Made In Nigeria products for regional and global exports. Components include Enyimba Economic City in Abia, Funtua Cotton Cluster (Katsina) and the Lekki-Epe Industrial Park in the Lekki Free Trade Zone.
Nigeria should copy and adapt Shenzhen SEZ to ensure we can deliver something competitive. The global capital is scarce, and investors will only flock to where there are incentives to attract them. This means our SEZs must be dynamic and innovative to attract the right capital.