Comfort zone for companies

Several African countries are embarking on a new drive to attract investment from China, using a method that China itself has used so effectively to achieve economic success over the past 30 years.

From the late 1970s, the Chinese government, with an eye on economic development, selected certain coastal cities as special economic zones and adopted policies and administrative powers aimed at promoting their development. Those policies allowed the cities to adopt economic management specifically designed to promote business with foreign investors.

Now African countries are taking a leaf out of China's textbook, setting up special economic zones, particularly in sectors such as manufacturing and clean energy.

There are already five Chinese special economic zones in the continent, in Ethiopia, Mauritius, Nigeria (where there are two) and Zambia, and more are about to join them.

Seyoum Mesfin, Ethiopia's ambassador to China, says: "Taking into account the experience of China, and adapting it to the realities of Ethiopia, our government is planning to designate five special economic zones and border economic cooperation zones in which various types of industrial zones and parks can be developed."

These five zones are in five regions, Mesfin says, and the central and eastern special economic zones will be given priority to develop over the next two years.

The central zone is close to Addis Ababa and the eastern zone is expected to be a manufacturing base and a regional logistics center, because a railway line being built between Addis Ababa and the port of Djibouti will run through it.

Construction on the 700-kilometer line began last year and is expected to be completed in 2016. Part of the $1.2 billion cost of the line is being underwritten by a long-term loan from China.

The government is offering tax breaks to encourage companies from China, India, Turkey and the Middle East to invest in sectors that could create jobs and develop industries that the country is giving priority to.

"We are keen to see more Chinese investment in sectors like green energy and manufacturing," Mesfin says. "Chinese companies doing these businesses will be offered reasonable corporate income tax rates."

The two zones cover a total of 320 square kilometers, he says, and the dimensions of the others will be decided once the first two have been set up.