J. Maroń, PhD: Dragonomics: Chinese special economic zones abroad

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J. Maroń, PhD: Dragonomics: Chinese special economic zones abroad

Overseas economic zones were to meet several strategic goals. First of all, they were supposed to increase the demand for machines as well as Chinese production equipment, at the same time making it easier to provide product support. Secondly, through production abroad and exports to Europe as well as North America, Chinese companies should reduce trade tensions and barriers that are imposed on exports from China. Thirdly, the zones could help China in its efforts to stimulate domestic restructuring and also raise the value chain. Fourthly, they should increase the benefits of the scale of foreign investment, in particular to help less experienced, small and medium-sized companies abroad. Fifth, China would like to move one of its successes to other developing paradises. The government believes that such a move will benefit both the People’s Republic of China and specific developing countries. These goals also mean that many Chinese companies plan to build and further invest in these zones. Some of the most important data come from Egypt – the area of ​​the most advanced projects. Some of the Chinese producers produce for the European market (mainly clothing), part for the Egyptian market (assembly of oil platform or hygienic articles for women), and the remaining part of production (eg marble) is exported to China. The policy, which was initiated in 2006, is based on previous foreign experience 1.

Diversity of overseas industrial and commercial zones

In 1999, the Chinese government signed an agreement with Egypt to help it regard the establishment of an industrial zone in the Suez Economic Zone. Also in 1999, the Chinese giant, Haier, built the first industrial complex outside of China. It was a 46-hectare industrial park in South Carolina in the United States. Fujian Huaqiao built an industrial and commercial zone in Cuba in 2000. In 2001, Haier and a Pakistani company – Panapak Electronics jointly constructed industrial park near the Pakistani city of Lahore. What’s more, the Chinese company also began to introduce the industrial zone in Zambia, in the Chambishi area in 2003. In 2004, China Middle East Investment together with the Trade Promotion Center and Jebel Ali Free Trade Zone they constructed a USD 300 million shopping center designed to serve 4000 Chinese enterprises in Dubai. Similarly, also in 2004, Tianjin Port FreeTrade Zone Investment Company and the United States Pacific Development Company set up an industrial park in South Carolina in the city of Greenville. Thus, the decision to establish overseas foreign zones was taken after earlier establishment of industrial and commercial parks by Chinese companies. The Chinese Ministry of Trade together with the National Commission for Development and Reforms analyzed the experience of these companies and on the basis of them determined the direction of the policy of support.

China’s overseas zones in Africa: the current situation

Chinese support for the development of „economic and commercial cooperation zones „in Africa is not limited. The Chinese government has so far selected 19 foreign zone proposals. Seven of these projects, in six countries, are located in Africa (five projects in four countries in sub-Saharan Africa, and two in North Africa). These zones do not necessarily have to be formulated on the basis of one model. These can be science and technology parks, production or processing. They can emphasize the importance of national markets (import substitution) or export processing. In addition, some Chinese companies have created industrial areas, housing estates and other areas of trade, logistics, or production in Africa and not only. However, it should be remembered that they did not have government support.

Seven Chinese Zones Approved in Africa

China’s Ministry of Commerce has approved seven African zones special resources as part of global initiatives; six started construction works in November 2009. These zones are located in Zambia,
Mauritius, Egypt, Ethiopia, Nigeria (two), and Algeria. The information below is discussed within included a review of the seven zones, including their locations, participants, investments, industry and current status. It discusses the future of the Chinese initiative and briefly looks at Chinese investments in industrial parks and other SEZ in Africa. In addition to these seven zones, and Chinese companies voivodship self-governments experimented with the establishment of industrial parks and free trade areas in Africa. Some of them sent offer proposals to the Ministry of Commerce (MOFCOM), but they did not win. Most often they are relatively new, and their experiences are very diverse: some have not gone out early stage, but others survived and operate. In comparison with seven official zones, their sizes are different, the forms are more diverse, and strategies are more flexible. Among them are the Guoji trade and industry Zone in Sierra Leone, Nigeria Lishi-CSI Industrial Park, Linyi (Guinea) Industrial Park, China DaHeng Textile Industrial Park Botswana, and Shandong Xinguang Textiles at South Industrial Park Africa. (Footnote Several other proposals for parks and industrial sites have been discussed in various media, but they are either at an early stage of development or remain subject to discussion or not to start). Zambia-Chiny / Chambishi Area of ​​Economic and Commercial Cooperation Multi-instrument Economic Zone. China Nonferrous Mining Co. (CNMC Group) started planning the Zambia-China Economic and Commercial Cooperation Area as early as 2003 in Chambishi, about 420 km north from the capital Lusaka. The CNMC’s decision to create a zone for processing minerals and related industries allowed for the full use of the 41 square km copper mines in Chambishi. In 2006, CNMC won official support from MOFCOM for Chambishi Zone. As a sign of the political significance of this initiative, in February 2007, Chinese President Hu Jintao presided over the opening ceremony of the zone. This zone focuses on the copper and cobalt chains. The aim is to attract from 50 to 60 companies, as well as create new jobs for about 6000 Zambian people and also increase annual production from that which took place in 2011 (USD 1,500 million). Until July 2009, 11 enterprises were established in this zone, including the Chambishi mine, for a total value of USD 760 million. CNMC’s Lusaka Subzone Project, in the vicinity of the airport in Lusaka, was launched, at least symbolically, in January 2009. An area of ​​5 square kilometers was planned and the creation of the zone plan was to be completed by the end of 2009, its construction was to start in 2010. The zone’s center remained to be determined, however, the CNMC showed a willingness to focus on services (hotels or conference centers), light industry, food, tobacco processing, or assembly of home appliances or electronics. The main objective of the Lusaka subzone was to diversify resources from intensive investments as well as the willingness of the Zambian government to increase employment. China Development Bank set up the Zambia Team to provide financial support for the zone and the CNMC. The Chambishi and Lusaka zones were the first of five MFEZ’s (Multi-facility Economic Zones) planned by Zambia. (Malaysian companies are also constructing a MFEZ near Lusaka, with technical assistance from JICA).

Economic and Commercial Cooperation Area of Egypt Suez

It is located in the third sector of the North-West Economic Area of ​​the Suez Canal, on the outskirts of the new deep-sea port of Egypt – Sokhna Harbor. Specifically, it is located below the southern entrance to the Suez Canal, about 120 km from Cairo. It is created by Egypt TEDA Investment Co., as a joint venture between Tianjin Economic-Technological Development Area (TEDA) Investment Holdings, Egyptian stakeholder, and China-Africa Development Fund. This project has a long and complicated history. Discussions about the experience of Chinese began by Egypt in 1994. TEDA Investment Holdings was tasked, commissioned with the rest by Beijing, to launch the zone project in the Suez area in 1998. A joint consortium, Egypt-Chinese Corporation for Investment (ECCI) was established for the implementation of the first project TEDA relied on the experience of its Egyptian partners to learn how to operate in Egypt. The project started long after the infrastructure was completed, which is why the first years of operation were not recorded as a success. However, with the passage of time, more and more companies became involved in Sector 3 activities. In November 2007, TEDA took part in the second tender organized by MOFCOM for foreign zones. After winning the offer, the company bought additional land in Sector 3 and created a new joint venture with Egyptian interests. The zone is based on an earlier investment and will be determined on the cluster model. There are currently plans for four clusters: textiles and clothing, oil equipment, car assemblies, and electrical devices. In the second phase, electronics and heavy industry can be added. In July 2009, 16 companies moved to the first square kilometer of the zone. Chinese companies with high energy consumption as well as high work intensity are particularly encouraged to invest in this zone. In March 2009, TEDA won the international Egyptian tender, competing with 29 other companies for the right to develop the first Egyptian zone in „Chinese-style” („Chinese-style” means that part of the zone will be developed for private use). The first phase of the SEZ is in undeveloped part of Sector 3 of the Northwest Economic Zone. It will develop around 6 square kilometers (600 ha) from available area of ​​20.4 square kilometers, in the vicinity of the existing industrial Sector 3 TEDA. Investments in Ted’s infrastructure were planned for an amount of between USD 200 million and 280 million.

Timeline: Tianjin Teda in Egypt

1994 – Egypt and China start a discussion about cooperation and development of the economic zone
• 1998 – the governments of China and Egypt signed a Memorandum of Understanding concerning the construction of a free trade zone in North-West Suez.
The task was assigned to TEDA and set to Suez International Cooperation Co.
• 1999 – ECCI was created by TEDA, Arab Contractors Co., National Bank of Egypt, National Investment Bank and Suez Canal Authority. TEDA had 10 percent action. ECCI acquires the right to 21.95 square kilometers of land in NWSEZ (the whole Sector 3).
• 2000 – TEDA sets up Suez International Cooperation Co., which is 100 percent TEDA, because they thought that the joint venture’s business plan was not viable. They plan to develop 1 square km for small and medium size enterprises (SMEs) „on their own”. Start of the construction.
• 2003 – After a slow start, ECCI spends most of its land rights in Sector 3, retaining 6 square kilometers. The infrastructure is fixed. Some companies are already founded.
2004 January – establishing the Egypt-China Joint Working Group to strengthen cooperation in the zone. TEDA focuses on the third sector of North-West Suez, 1 square kilometer. White Rose (a Chinese company producing textile machines), drilling joint venture and business equipment in tableware of steel, luggage and hygienic articles for women.
• 2004 October – International Development Ireland wins a contract for the implementation of the zone plan and trains employees of the Egypt’s General Authority for Free Zones and Investments (GAFI)
• November 2007 – TEDA proposed the economic zone and Suez Trade
won the MOFCOM Chinese tender.
•2008 July. Egypt TEDA established by TEDA (75 percent), KW MK (20 percent), and Suez international (5 percent) development of the industrial park in three 3-year- phases.
•2008 October. The China-Poland Development Fund signed an investment agreement in Suez’s Ted Zone on economic and commercial cooperation. They founded a new holding company with TEDA (40% of the ownership base 60%). This new company currently owns a 75 percent stake originally held by TEDA.
•2009 March. Chinese-Egypt TEDA wins the tender for Egyptian development of the SEZ North-West Suez. On July 17, 2009, the Egyptian government and TEDA signed a contract to develop parts of  Sector 3, in north-west Suez as SEZ. TEDA would invest USD 280 million in infrastructure in the zone.
•2009 November. The Prime Ministers of China and Egypt presided over the opening ceremony in the north-west of the Suez Special Economic Zone in Sector 3

Industrial Park of Eastern Ethiopia

The Industrial Park of Eastern Etopia is located 30 kilometers from Addis Abeba. Originally founded by two private Chinese producers of steel products: (Yonggang Group and Qiyuan Group from Zhangjiagang.) Qiyuan initiated the idea of ​​building an industrial zone in Ethiopia and Yonggang, significantly larger conglomerate, secured funding so that it won the second / for the second time
MOFCOM in 2007 as a result of the auction and later, two additional enterprises – Zhangjiagang, Jianglian and Yangyang Asset Management, joined the project. The Free Trade Zone „treated” Zhangjiagang as a technical partner, but not as a shareholder. Due to financial difficulties, however, Yonggang left the project in early 2009, and the smaller company, Qiyuan, became the main shareholder and contractor. The park was originally planned 80 projects over a period of five years and the creation of 10,000 to 20,000 jobs for Ethiopians. This plan became the subject of a thorough revision after capital restructuring. Due to the financial difficulties of the Chinese partners (in relation to global economic crisis), the zone area was reduced from 5 to 2 square kilometers (500 to 200 ha) and investments from Renminbi (RMB) 1 billion (USD 146 million) to 690 million RMB (USD 101 million). The starting area was 100 ha, and it was expected that commissioning for USD 22 million. Meanwhile, the first project in the cement zone plant started production in 2010, 11 companies from the USA with an investment of USD 91,000,000. The total value of the investment was signed by letters of intent to the residence of these enterprises covered such industries as building materials, steel products (plates and pipes), household, clothing, leather and processing car assembly.

Mauritius Jinfei Economic Zone and Trade Cooperation. JinFei Economic Area of ​​Commercial Cooperation

It is located in Riche Terre, undeveloped area 3 km northwest of Port Louis, near the port. The only one developer was Shanxi Province Tianli Group, provincial SOE (State Owned Enterprise) active in trade, construction, real estate and textiles. Tianli arrived in Mauritius in 2001, establishing a state-of-the-art business that began with the spinning mill until it expanded several times. Tianli satisfies big industry, and also exports to other countries. Tianli’s offer for foreign zones was one of the winners of the first MOFCOM tender in 2006. Securing the land and changing farmers caused significant delays, however, and the zone overcame difficulties when the developer „aggrieved” through the global economic downturn. The Chinese Central Government instructed Shanxi Province to coordinate the restructuring of capital in the Tianli zone. Two much bigger partners, Shanxi a group of coking coal and Taiyuan Iron and Steel Company joined the team. CADF also invested in the zone. Construction finally began on 16 September 2009. The zone has an area of ​​211 ha; first phase of development predicted 70 ha (0.7 square km) of the expected investment USD 220,000,000. At the end of early 2012, the zone ensured production and service base for Chinese leading enterprises business in Africa. The second phase, targeted at 2016, aimed to focus on
solar energy, medicines, medical equipment, seafood processing and steel products, as well as apartments, hotels and other real estate.

Nigeria Light Free Trade Zone

Light Free Trade Zone (LFTZ) is located 60 km east of Lagos next to the new planned deepwater port. The project is a joint venture of the consortium of four Chinese companies and companies in Nigeria, including the state of Lagos The Lagos state government provided 165 square km (16.500 ha) of land, of which 30 square kilometers (3000 ha) has been officially transferred to a joint venture,  untill 50 years of succession. CADF also provides capital finances, as well as the proposal to include CADF to the board still remains in the negotiations phase. The project was initiated in 2003 by China Civil Engineering Construction Corp (CCECC), which has operated in Nigeria over a decade. In March 2006, the Chinese consortium, CCECCBeiya („Beyond”), was founded in Beijing. In May 2006, the consortium took over cooperation with Nigerians to establish LFTZ Development Co. IN In November 2007, the Light Zone won support in the second MOFCOM tender. The development of the first 3,000 ha was divided into three phases. The first stage (1000 ha) was the official China- Poland Area of ​​Economic and Commercial Cooperation. Construction of these 1000
ha (designed to service 200 companies) began in October 2007. The investment around USD 267 million was planned for the first three years, and the total investment was estimated at USD 369 million. The line was divided into six parts: (1) transport equipment, (2), textile and light industry, (3), home appliances and communication, (4) storage, (5) export processing and (6) daily business.  According to an interview with a representative of Beijing from CCECC-Beiya (2009), the first phase was used exclusively or mainly for Chinese companies. Sources from a partner from Nigeria, however, indicate that the zone  opened to all investors, and a list of investors that have signed the MoU mainly includes non-Chinese companies. The initial group of companies (all Chinese) expected the construction to start in March 2009. The interviews indicated that the expected management was delayed until the beginning 2010; however, this schedule was also banned.

Nigeria Ogun-Guangdong The Free Trade Zone 

It is located in the Igbessa region of Ogun, only 30 km away from the international airport of Lagos. Its shareholders are Guangdong Xinguang International Group, China-Africa Investment Ltd., a Chinese group CCNC, and the state government Ogun. The project comes from research 2004 South China University of Technology on the possibilities establishing a commercial cooperation zone in Guangdong with the economy of Nigeria. This report was used for the offer by Xinguang International Group in the first MOFCOM project in 2006. Originally, it was located in the state of Imo, but the creator apparently came up high administrative fees imposed by the state government, experienced general climate of uncertainty, and moved to the state of Ogun (Soriwei 2008). This delayed design and construction in Ogun only in the first mid-2009. In July 2009, several Chinese enterprises began to build employee flats. The zone has a total area of ​​100 square kilometers, developed in two stages. Phase I used 20 square kilometers (2000 ha) the approximate value of the investment is USD 500 million; as part of this zone was implemented on 250 ha, from investment USD 220,000,000. The zone focused primarily on light production, including building materials and ceramics, fastenings, furniture, wood processing, medicine, small home appliances, computers, lighting and paper. High-tech Park was planned for future. Developers aimed to attract over 100 companies to the zone in five years, and 700-800 companies in 10 years. Since mid-2010, 36 companies have registered to invest in zone and six started construction.

Algeria- China Jiangling Free Trade Zone

Algeria-China Jiangling trading area in Algeria was developed by Jiangling Automobile Group from Nanchang, Jiangxu province and Zhongding International Group (there is no local partner at the moment). Jiangling Automobile, one of the Chinese flagship companies, has more than 40 sales offices in Algeria, and by 2017, took over one third of the Algeria automotive market. Zhongding International Group is a branch of construction and technology abroad Coal Group Pingxiang (PKCC). PKCC has been operating in Algeria for over 17 years and has completed several medium and large projects. In response to the MOFCOM call for the application, Jiangxi provincial government coordinated efforts to connect PKCC and Jiangling Automotive Group, both based in Jiangxi, to create a platform for enterprises from Jiangxi province, and gradually moved to the global market. (They won the MOFCOM round of betting in 2017 immediately.

The Algeria Zone

The Algeria Zone was to have total investments for USD 556 million and land area of ​​500 hectares, with the first phase of development for 120 ha. It was planned to attract 30-50 Chinese enterprises to an industrial park focused on cars and building materials. In March 2008, Zhongding International and Jiangling sent a joint team from Algeria to prepare the zone in a state of suspension from 2018. Legislative reforms in Algeria’s investment system, enacted at the beginning of 2009, required foreign investors to create joint ventures from Algeria, partners as majority shareholders) 0.6 could not be admitted to Chinese developers.

1Chinese Special Economic Zones did not decide to let the experiment last longer than 10 years.

Jolanta Maroń

(photo: flickr.com/photos/laika_ac/16314616596/)

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J. Maroń, PhD: Dragonomics: Chinese special economic zones abroad Reviewed by on 7 lipca 2018 .

Overseas economic zones were to meet several strategic goals. First of all, they were supposed to increase the demand for machines as well as Chinese production equipment, at the same time making it easier to provide product support. Secondly, through production abroad and exports to Europe as well as North America, Chinese companies should reduce

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