Namibian Export Processing Zones (EPZ) : success or myth?

Karaerua, Gerson Uaeta (2008-12)

Thesis (MBA (Business Management))--Stellenbosch University, 2008.

Thesis

ENGLISH ABSTRACT: In the quest to attract foreign investments which is seen as one way of alleviating poverty by creating employment opportunities and earning foreign currency many countries have implemented the EPZ regime. Though the concept remains the same throughout the world, it has adopted different names depending on the country. In Mexico the EPZ's are called the "Maquiladoras" and in Bulgaria EPZ's are called Free Trade Zones. No matter the differences in names the concept is principally the same: EPZ is an enclave which operates outside the normal economic framework of the country. At independence Namibia faced a high unemployment rate and poverty. In 1995 the Namibian government passed the EPZ Act in order to pave the way for the development of EPZ industrial parks. The need for passing the EPZ Act was necessitated by the acute unemployment rate which the country faced at the time, which had the potential to threaten the political stability the country enjoyed. Thus, amongst other policy instruments, the EPZ Act was passed with the principle objective of attracting the much needed foreign investments which would result in creation of the needed employment opportunities. The government set a very ambitious target for the EPZ regime; it was expected that by 1999 the EPZ regime would have created about 25 000 job opportunities. Thus, the anticipated number of job opportunities was quite frequently used as a justification for the massive investments provided for the development of infrastructures in the EPZ industrial parks and hefty subsidies which were extended to some EPZ companies. It is important to note that unlike other countries who adopted the location-based EPZ model, Namibia has adopted a flexible EPZ model implying that a company which acquires the EPZ status is free to locate or set-up its facility anywhere in the country. In 2003 a Malaysian textile company called Ramatex closed its operations in South Africa and relocated to Namibia. In terms of employment creation the EPZ reached its peak in 2004 when about 10 057 persons / individuals were actively employed in the EPZ companies. Ramatex accounted for about 80% of the total of 10 057 EPZ jobs. Since 2004 the number of jobs in the Namibian EPZ regime started to decline at an alarming rate; at the end of 2007 there were only 5 248 people employed by the EPZ companies. Many times Ramatex threatened to close its operations, citing decline in the demand of its products and low productivity, but after some closed-door negotiations the government initially managed to convince it to continue its operation. Regrettably the success of the Namibian government to convince Ramatex to continue with its operation in Namibia was short-lived, when in the first quarter of 2008; the inevitable closure of Ramatex became a reality. The closure of Ramatex has resulted in the retrenchment of about 3 000 people. The overall performance of the Namibian EPZ regime leaves a lot to be desired. The Namibian EPZ regime so far failed to attract enough investments to create the anticipated job opportunities and to increase the export of manufactured goods. On a positive note, EPZ regime compelled the authority to invest in infrastructures which it might otherwise not have invested in.

AFRIKAANSE OPSOMMING: In die soeke na 'n wyse om buitelandse beleggings te trek as een van die maniere om armoede te verlig deur die skepping van werksgeleenthede en die verkryging van buitelandse valuta, het baie lande die EPZ-regime geimplementeer. Hoewel die konsep dwarsdeur die wereld dieselfde bly, het dit verskillende name in verskillende lande. In Meksiko word dit die UMaquiladoras' genoem en in Bulgarye is dit Vryehandelsones. Ongeag wat dit genoem word , bly die konsep in wese dieselfde: EPZ is 'n enklave wat buite die normale ekonomiese raamwerk van die land opereer. Toe Namibia onafhanklik geword het, het die land gebuk gegaan onder 'n hoe werkloosheidskoers en armoede. In 1995 het die Namibiese regering die Wet op EPZ uitgevaardig om ruimte te skep vir die ontwikkeling van EPZ-nywerheidsparke. Die akute werkloosheidskoers van die land op daardie tydstip het dit noodsaaklik gemaak dat hierdie wet uitgevaardig word, aangesien die werkloosheid potensieel die politieke stabiliteit in die land kon bedreig. As deel van ander politieke instrumente is die Wet op EPZ dus uitgevaardig, met as hoofdoelwit die 10k van broodnodige buitelandse beleggings wat sou lei tot die skepping van die ewe nodige werksgeleenthede. Die regering het 'n baie ambisieuse doelwit vir die EPZregime gestel; dit sou na verwagting teen 1999 nagenoeg 25 000 werksgeleenthede skep. Die verwagte getal werksgeleenthede is dus dikwels gebruik as regverdiging vir die massiewe beleggings wat voorsien is vir die ontwikkeling van die infrastrukture in die EPZ nywerheidsparke asook die groot subsidies toegestaan aan sommige EPZ-maatskappye. Dit is belangrik om daarop te let dat, anders as ander lande waar die EPZ-model plekgebonde was, Namibia 'n buigsame EPZ-model aanvaar het. Dit het geimpliseer dat 'n maatskappy wat EPZ-status verwerf het, sy fasiliteit enige plek in die land kon vestig. 'n Maleisiese tekstielmaatskappy met die naam Ramatex het in 2003 sy bedryf in Suid Afrika toegemaak en na Namibie verhuis. Sover dit die skepping van werksgeleenthede aangaan, het die EPZ in Namibie in 2004 sy hoogtepunt bereik, toe ongeveer 10 057 persone / individue aktief in diens van die EPZ-maatskappye was. Ramatex het ongeveer 80% van die totale 10057 EPZ-werksgeleenthede voorsien. Sedert 2004 het die getal werksgeleenthede in die Namibiese EPZ-regime teen 'n ontstellende koers afgeneem, sodat daar teen die einde van 2007 net 5248 mense in diens van die EPZ-maatskappye was. Ramatex het by verskeie geleenthede gedreig om sy bedrywighede te sluit weens die afname in die vraag na sy produkte en lae produktiwiteit, maar na onderhandelinge agter geslote deure het die regering aanvanklik daarin geslaag om Ramatex te oortuig om voort te gaan. Hierdie sukses van die Namibiese regering was ongelukkig van korte duur, aangesien die onafwendbare sluiting van Ramatex in die eerste kwartaal van 2008 werklikheid geword het. Die gevolg was die afdanking van ongeveer 3 000 mense. Die oorkoepelende prestasie van die Namibiese EPZ-regime is ver van bevredigend. Hierdie regime het tot nou toe nie daarin geslaag om genoeg beleggings te lok om die verwagte werksgeleenthede te skep en die uitvoer van vervaardigde produkte te verhoog nie. Aan die positiewe kant het die EPZ-regime die owerheid gedwing om te bele in infrastrukture waarin hulle andersins nie sou bele het nie.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/6431
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