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Advances in Social Sciences Research Journal – Vol.7, No.7

Publication Date: July 25, 2020

DOI:10.14738/assrj.77.8778.

Mwansa, S., Shaikh, J. M., & Mubanga, P. (2020). Investing in the Lusaka South Multi Facility Economic Zone. Advances in Social

Sciences Research Journal, 7(7) 974-990.

Investing in the Lusaka South Multi Facility Economic Zone

Stephen Mwansa1,3, Junaid M. Shaikh2,3, Phillip Mubanga3,4

1. Office of the Vice President, Permanent Secretary Administration, Government of the Republic

of Zambia, Lusaka, Zambia.

2. Department of Accounting, School of Business, University Technology Brunei, Brunei.

3. Binary University of Management and Entrepreneurship, Puchong, Kuala Lumpur, Malaysia.

4. Directorate of Finance and Administration, Technical Education, Vocational and

Entrepreneurship Training Authority (TEVETA), Lusaka, Zambia.

ABSTRACT

A Multi Facility Economic Zone (MFEZ) can be described as a Special

Economic Zone which can be utilized for export and domestic

production purposes by industries operating in the designated

economic zone. The MFEZ is characterized by a mixture of several

enticing attributes ranging from facilities such as export processing

zones, Industrial parks, free trade zones and free ports, among others.

Ideally, it is hoped that an MFEZ will kindle economic development in

the selected location and consequently contribute to that country’s

gross domestic product. It is not uncommon to set up an independent

firm to oversee and run the entire administrative affairs of the economic

zone on behalf of the owners of the facility. This article is based on a

study that was undertaken to assess the performance of the Lusaka

South Multi Facility Economic Zone (LS-MFEZ) in Zambia from the time

it was established. The research was conducted over a period of

eighteen months. This article focuses on two of the objectives of the

study that assesses, the effectiveness of the economic zone management

firm in stimulating investment in the zone, and the suitability of the

economic zone infrastructure as a vehicle for attracting investment in

the zone. The research adopted a mixed methods approach using a

questionnaire, interviews, and focus group discussions. Interview

respondents were selected using snowball sampling. Since the study

adopted a mixed research approach with a concurrent triangulation

design, data were analysed through a thematic approach for the

qualitative component and using descriptive statistics from the

Statistical Package for Social Sciences (SPSS) for the quantitative part.

The findings show that the zone management firm appears to grapple

with some key administrative issues of managing the zone, in addition

to inadequate zone infrastructure.

Keywords: Industrial park, Multi Facility Economic Zone, Foreign

Investment, Export Processing Zone, Economic development, Special

Economic Zone.

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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 7, July-2020

1. INTRODUCTION

The rationale for conducting the study on which this article is based was to assess to the

performance of the Lusaka South – Multi-Facility Economic Zone from the time it was established.

This article focuses on two of the study objectives only. The first being assessment of the

effectiveness of the economic zone management in promoting investment in the zone, and the

second was assessment of the suitability of the economic zone infrastructure as a channel for

enticing investment into the zone. In Zambia, there are two types of special economic zones, in terms

of ownership. Some zones are owned by the government and others are privately owned. The

Lusaka South -Multi Facility Economic Zone (LS-MFEZ) is a facility owned by the government of the

Republic of Zambia, which is run and administered by the LS-MFEZ company. It was envisaged that

the Lusaka-South Multi Facility Economic Zone can make the following contributions to the

Republic of Zambia: contribution to employment; contribution to gross domestic product growth;

contribution to export revenue; contribution to tax revenue; value addition to local commodities;

and contribution to the country’s competitive advantage.

1.1 BACKGROUND

It was observed that most of the existing research on economic zones have adopted a case study

approach, usually focusing on a limited group of zones in a selected number of countries. This was

also the approach utilized for this research. Many of these studies have provided salient awareness

of what makes a zone dynamic and successful. It is worth noticing the bias, in the sense that most of

these studies focused on the most successful cases. The inclination to focus on successful cases only

raises serious questions about the validity of generalizing the factors attributable to the success of

a specific economic zone embedded in the specific economic, social, political, and legal contexts.

Replicating policy and incentive models involves significant risk, especially in countries with

questionable economic or political stability [1].

The basic concept of special economic zones embraces several specific attributes such as being in a

geographically demarcated location which may be physically secured; has a single administration;

offers incentives for investors physically present in the zone; has a separate customs area offering

duty-free benefits and streamlined procedures [2]. The economic zone normally operates under

more liberal economic laws than those generally prevailing in the country. It was argued that in

general terms, special economic zones offer two categories of economic benefits. The first type of

benefits includes items such as employment creation, export growth, government revenues and

foreign currency earnings. The second group covers benefits such as skills upgrading, technology

transfer and innovation, economic diversification, and productivity enhancement of local firms [2].

These two types of benefits fall within the reasonable expectations and are some of the reasons

behind the establishment of the Lusaka South – Multi Facility Economic Zone in Lusaka, the capital

city of Zambia.

The Lusaka South – Multi Facility Zone (a special economic zone) was established with the view of

replicating some of the benefits that have been realized in some countries where special economic

zones have been implemented successfully. Empirical research indicates that there is a continuum

of economic zones, ranging from facilities such as free trade zones, industrial parks, export

processing zones, economic and technology development zones, high-tech zones, science and

innovation parks, free ports, enterprise zones among others [2]. In a similar study, special economic

zones were classified into four categories. Free Trade Zones: These are also referred to as free zones

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URL: http://dx.doi.org/10.14738/assrj.77.8778 976

Mwansa, S., Shaikh, J. M., & Mubanga, P. (2020). Investing in the Lusaka South Multi Facility Economic Zone. Advances in Social Sciences Research Journal,

7(7) 974-990.

Communication Partner On Uptake Of Voluntary Medical Male Circumcision Among Married Men In Kenya: An Evaluation Study Of Information Source

Attributes or commercial . Advances in Social Sciences Research Journal, 7(7) 825-842. free zones, being the oldest and most common. These are situated at or near most

ports of entry, and typically offer trade-related activities such as warehousing, storage, distribution,

sales, re-export, and exhibition, among others. Export Processing Zones first appeared in late 1950s

and early 1960s to promote industrialization in developing countries. These are normally fenced- in industrial estates of significant size which lie outside the host country’s customs territory, and

they offer industrial facilities and other incentives such as duty-free incentives and simplified

administrative procedures for manufacturing and related activities [3].

Traditionally, only foreign capital financed manufacturing for export activity was allowed in the

export processing zones, but over the years many have somewhat relaxed the foreign capital and

exports limitations. Free enterprise zones are also referred to as single factory export processing

zone schemes, and are a variation of the free trade zones and export processing zones, whereby

individual enterprises are provided with incentives and other benefits without having to locate into

a demarcated area. In some countries, free enterprises may exist with export processing zones and

free trade zones within the same locality. Freeports are the largest type of special economic zones.

They can include entire economic regions and populations and can contain or overlap political and

administrative units including both rural and urban areas. Typically, they incorporate large

transport facilities such as seaports, inland ports, and airports. Freeports also accommodate all

types of economic activities, including tourism and retail trade, and allow for on-site residence.

Freeports also provide a broader range of incentives and benefits [3].

1.2 Problem Statement

The study on which this article is premised had four research questions. However, this article

focuses on two research questions only which have several variables that were dealt with in greater

detail. The first question looks at the effectiveness of the zone management in promoting

investment in the multi facility economic zone. The other question probed the suitability of the

economic zone infrastructure as a conduit of attracting investment in the zone. The identified

problem relates to the reluctance to invest in the economic zone by prospective investors and those

that had initially expressed interest to invest in the zone. It was reported that the Lusaka South

Multi-Facility Economic Zone had five companies who had declared interest to set up businesses in

the economic zone but later rescinded their decisions due to various reasons [4]. In order to

understand the problem and the underlying factors, it was inevitable to conduct a study to probe

the reluctance to invest in the zone and why some of the companies that had set up were struggling

or why others had ceased operations. The investigation was extended to those that had pledged to

invest in the zone but have hesitated or procrastinated.

1.3 Theoretical Framework

The study on the Lusaka South – Multi Facility Economic Zone is based on the theory that a special

economic zone is a geographical area within a country, where trade and business regulations or

laws are different from those applicable to other locations in the rest of the country. The rationale

behind economic zones is to override hurdles that stifle investment in the ordinary economy. The

barriers range from restrictive policies, inadequate infrastructure, poor governance, and challenges

relating to access to land. This theoretical framework is backed by empirical evidence obtained

from the literature review of studies conducted by several researchers [1], [2], [3], [5], [6], [7], [8],

[9], [10] among others. Furthermore, research has indicated that special economic zones tend to

give export investors certain distinct advantages in comparison to the domestic investment