Comfort zone for companies

To prevent pollution, which is a problem in Addis Ababa, cement, textile printing and chemical factories are being excluded.

Though much of China's investment in Africa has long focused on infrastructure, mining and agriculture, clean energy and all types of manufacturing are being viewed as hot targets for investment in Africa, a recent report of the China Chamber of International Commerce in Beijing said.

In Dukem, about 30 km south of Addis Ababa, investors from China have already set up a Chinese-managed zone called Eastern Industry Zone.

Its construction, with the backing of China's Ministry of Commerce and the Ethiopian government, began in 2009. Thirteen Chinese companies now operate in the zone, including Huajian Group, one of China's biggest shoe makers by production capacity, a vehicle assembly plant and a plastics factory. Goods sent to the zone from China are duty free.

Once construction is complete next year, the $805 million industrial zone will have more than 80 companies and create 36,000 local jobs, says Qian Guoqin, deputy managing director of the zone. About 12 Chinese companies, mainly from Zhejiang and Jiangsu provinces, are due to move into the zone by the end of this year.

Incentives to Chinese investors in the zone include low-cost use of land, four-year tax breaks and free power supply.

Qian says it is a sign of a big change in what China is investing in Africa, from energy development and building infrastructure to large-scale manufacturing.

Zhou Zhenbang, vice-secretary-general of the China Association of Development Zones, which represents 131 national-level economic development zones, says China has plenty of experience with special economic zones and agricultural reform, and Africa is doing well to emulate that.

It also gives Chinese companies the chance to make big inroads in Africa, he says, particularly given the opportunities that low labor costs and the abundance of natural resources offer manufacturers.

"These regions need money to develop. Their markets are big and growing, and the cost of doing business is low. Chinese investors have the money and are eager to find new markets there, and it could be a good mix and match."

The association and the Ethiopian embassy in China have set up a team to carry out follow-up business and has arranged a Chinese official and corporate delegation to visit Ethiopia this month.

But Zhou cautions that lack of skilled labor and managers and poor infrastructure are hurdles for Chinese businesses.

Company representatives would need to talk to various levels of government regarding land use, customs duties, tax rates, infrastructure system assessment, commercial regulations, electricity prices, currency exchange rates and incentive policies.

The Mano River Union, a grouping of Guinea, Liberia and Sierra Leone, is also looking to Chinese companies to set up special economic zones in the countries' coastal regions.

Patterned on the East African Common Market and the European Union, the agreement allows unrestricted movement of labor, capital, goods and services within the three countries.

Linda Koroma, deputy secretary-general, says that with China's help, building a number of special economic zones across Africa with access to the European and US markets would not only help African countries build a manufacturing base, but also reverse China's declining export share caused by the world economic malaise.

China has helped four African countries to set up five special economic zones to increase the proportion of manufacturing industry in their economies.

They are Ethiopia, Mauritius, Nigeria (two zones) and Zambia, which are encouraging steps in the direction of more efficient export and related investment, the China Association of Development Zones says.

"The fast economic growth achieved by China's special economic zones has been a major inspiration for many African countries," says Jarjar Kamara, Liberia's ambassador to China. "We want to create special economic zones in three of our coastal cities, and we have already sent a number of delegations to find out about special economic zones in Zhuhai, Shantou and Shenzhen.

"Liberia has been focusing on attracting more investment in its manufacturing sector. It has also outlined a major infrastructure program along with plans to further enhance industrial production capacity and create a conducive investment environment for Chinese companies."

"We will not succeed in establishing special economic zones if we cannot get rid of negative elements in our system," says Mamadi Diare, Guinea's ambassador to China.

"We also need to enrich our people's work ethic in terms of gaining investment from China and other parts of the world."