A new study conducted by Accra-based Think-Tank, African Center for Economic Transformation (ACET), has found that Ghana’s Export Processing Zones (EPZs) program is not well connected to other industrial policies or the broader development agenda of the government.
According to ACET, there is also no strategy to integrate the activities of the EPZs into the broader economy and increase the multiplier effects of zone activities.
“An even more serious observation is that the current compliance and reporting regime under the various EPZ incentives is not rigorous and reliable enough to religiously safeguard the interest of the state. The free zones scheme has been embroiled in many instances of abuse and revenue leakages that must be urgently tackled.”
ACET
ACET warned that though Ghana is not currently experiencing serious environmental problems within its EPZs because of the limited number of firms in operation and their relatively small sizes, risks exist if the number grows quickly and the current practices persist.
The study, which assessed the extent of sustainability of EPZs in Ghana to benchmark them against the most sustainable zones globally, found that technology adoption in the zone is minimal; it is mainly informed by market conditions and strength of firms. As such, ACET called on the Ghana Free Zones Authority (GFZA) to do more to promote technology adoption in the zone.
Need to develop a comprehensive policy
As part of its recommendations, ACET urged the Ministry of Trade and Industry to develop a comprehensive policy as soon as possible to lay a solid foundation for the strategic management of EPZs in Ghana and their positive effects on sustainability, linkages and national development.
ACET noted that enclave-based infrastructure has proven to be critical in the promotion of sustainability in EPZ activities and so the facility must integrate all aspects of sustainable manufacturing activities in its design.
“However, constructing integrated EPZs across the 16 regions of Ghana could prove costly for a government that can barely balance its budget. The private sector should be brought onboard. The private sector’s involvement could be a public-private partnership arrangement or purely privately owned but regulated by the government to guarantee the incentives under the scheme.
“Infrastructure development must not concentrate on the zone only. A conscious effort must be made to develop infrastructure that improves the general business environment (roads, ports, electricity, water, sewage disposal or treatment) to make non-EPZ firms competitive.”
ACET
ACET also urged the GFZA to employ deliberate, reactive and proactive strategies to connect the activities of the zone to the broader economy.
The Think-Tank further called for intensified efforts to nest climate-friendly investment activities and a carbon finance policy for the EPZ. This, it explained, could be done by influencing the carbon emission of firms with incentives, thus impressing on them to invest in products that will eventually help the country meet its climate change targets and Sustainable Development Goals.
It also recommended the employment of a new EPZ concept founded on technology-based best practices to eliminate the human element in the vetting and monitoring processes.
ACET also called for a review of the Ghana Free Zones Authority Act and the legislative instrument guiding the operation of the zone, along with a functional review of the administrative setup.
Export Processing Zones (EPZs)
The last 20 years have seen the proliferation of export processing zones (EPZs) globally. About 5,400 EPZs were in existence as of 2019, with about 1,400 of them less than five years old. Since their introduction in the 1920s, EPZs have changed significantly, offering various scales of domestic sales and incentives.
Many African countries including Ghana joined the bandwagon. However, after 25 years of EPZ existence in Ghana, policy experts have called for a review of the concept because although it offers generous terms to firms, it has stalled in fulfilling many of the objectives for which it was set up.
Additionally, the zones appear to neglect the fundamental dimensions of the sustainability standards required for effective EPZ development. The Ghana model could thus, benefit from reviews that offer prospects for sustainable development.
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