Statement On The Multi-facility Economic Zones Delivered By The Minister

STATEMENT ON THE MULTI-FACILITY ECONOMIC ZONES DELIVERED BY THE MINISTER OF COMMERCE, TRADE AND INDUSTRY, HON. FELIX MUTATI, MP TO THE NATIONAL ASSEMBLY ON WEDNESDAY, 18TH FEBRUARY 2009.

Madam Speaker I wish to inform the House and, indeed, the general public that the Government has been implementing a new business model called the multi-facility economic zones (MFEZs). This model has drawn considerable debate in this House. Madam Speaker, allow me, from the outset, to give a comprehensive statement to this august House to clarify this issue. Madam Speaker, the MFEZ falls under the auspices of the Triangle of Hope (ToH) Initiative, which was introduced to Zambia in 2005 by the Japanese Government through the Japan International Co-operation Agency (JICA). The ToH is aimed at creating a platform for Zambia to achieve economic development by attracting significant domestic and Foreign Direct Investment (FDI) through a strengthened policy and legislative environment. The ToH emphasises political will and integrity, private sector dynamism and integrity, civil service efficiency and integrity as key forces that will enable the economy to attain accelerated economic development. The ToH is being implemented through twelve taskforces appointed by the late President, namely the small and medium scale enterprises, MFEZs, the cotton cluster, streamlining government machinery, banking and finance, air cargo hub, health, education, mining, agriculture, Information and Communications technologies (ICT) and tourism. My ministry has the leading mandate for the implementation of the MFEZ taskforces’ recommendations. The implementation of MFEZs in Zambia is designed to make Zambia competitive through increased activity in the trade and manufacturing sectors which have numerous positive spillover effects on other sectors such as utilities, transport, agriculture and services. The MFEZ development responds to the vision articulated by the Ministry of Finance and National Planning in the 2009 Budget of a vibrant and diversified economy where hard work and the spirit of enterprise are rewarded. Madam Speaker, the MFEZ are special industrial zones for both export oriented and domestic oriented industries. These zones will have the well appointed infrastructure in

place in order to attract and facilitate establishment of world class enterprises in the zone (s). The MFEZs blend the best features of Free Trade Zones, Economic Processing Zones and Industrial Parks/Zones concept and create the administrative infrastructure, rules and regulations that benchmark among the best dynamic economies. The blending of physical infrastructure with an efficient and effective administrative infrastructure will create the ideal investment environment for attracting major world class investors. The legislation governing the MFEZs is mainstreamed in the Zambia Development Agency (ZDA) Act No. 11 of 2006 under section 18. In addition, the regulations and guidelines governing the declaration and establishment of MFEZs was put in place through Statutory Instrument No. 65 of 2007. Section 5 (p) of the ZDA Act No. 11 of 2006 mandates ZDA to administer, control and regulate MFEZs in Zambia. MFEZ incentives are non-discriminatory. Madam Speaker, my ministry has, to date, identified five areas earmarked for MFEZs namely Chambishi, Lusaka Sub Zone, Lusaka South, Lumwana and Ndola (Sub Saharan Gemstone Exchange) as an industrial park. The development of the Chambishi MFEZ is being under taken by the Chinese NonFerrous Metal Mining Co-operation Limited (CNMC). This is pursuant to action points within the framework of the China Africa Co-operation (FOCAC) where the Chinese President His Excellency Mr Hu Jintao committed to developing five trade and economic zones in Africa from 2007 to 2009. Zambia was selected as the first African country to benefit from this commitment. The Chambishi MFEZ has already housed ten enterprises and these enterprises have provided more than 3,500 local jobs which are expected to increase as more enterprises locate in the MFEZ. For example, the Chambishi Copper Smelter is expected to start operations this year and will employ an additional 1,500 locals. The smelter will also increase copper processing capacity by 150,000 tones annually. Further, the infrastructure construction is proceeding well and already, total investment in infrastructure development has reached US$100 million. A water pipeline and a ZESCO substation have already been put in place and vast expansion works are currently taking place. Those who have travelled to Chingola in recent times will have noticed land clearing in the MFEZ area. Madam Speaker, the Chambishi MFEZ will house heavy and light industries, among them copper smelting, agro processing, manufacture of copper cable, household appliances, bars, wires and motor parts.

By 2011, the MFEZ is poised to accommodate fifty to sixty zone enterprises with an output volume exceeding US$1.5 billion per annum of which more than US$600 million will be exported while employing more than 6,000 locals. Madam Speaker, the Lusaka Sub Zone, which is located adjacent to the Lusaka International Airport, whose construction and was launched on 14th January, 2009 by the Republican President His Excellency Mr Rupiah Bwezani Banda. This is an extension of the Chambishi MFEZ and will focus on light manufacturing activities and services such as the provision of conference facilities, hotel accommodation among others. The CNMC are currently developing a master plan and the actual construction work is expected to start before the end of this year. Madam Speaker, the Lusaka South MFEZ site is reachable through two inlets and exits, namely the Chifwema Road about 1.8 kilometres off Leopards Hill Road and Mosi-OTunya Road is being developed by the Malaysian experts from Kulim Technology Park Corporation in conjunction with the Japanese experts from JICA and a team of local experts. The construction of the Lusaka South MFEZ, a 2,100 hectare area will be in five phases. Phase 1 will require development of 414 hectares of land and will commence from the eastern side as it is closer to the already existing access roads which can easily be upgraded. In addition, the water source and storage is nearer to the eastern side of the Lusaka South MFEZ which would result in less piping in the first phase. The existing communication duct and a power sub-station are located in Woodlands and could, therefore, be easily extended to the eastern side of the Lusaka South MFEZ. Phase I is expected to employ up to 4,800 workers once completed. The Lusaka South MFEZ will house a variety of industries and facilities. Among them are high tech industries, research and development, commercial, residential, golf course, institutions and community facilities with total investment flows expected to exceed of $1.2 billion. The master plan of the Lusaka South is expected to be finalised by next month. Madam Speaker, the construction of access roads to the Lusaka South MFEZ is expected to begin in the second quarter of this year. It should be noted that the provision of infrastructure is the responsibility of the Government. The Government, in this year’s Budget, has provided K30 billion to support the development of infrastructure in the economic zones. The fourth site to be developed is the Lumwana MFEZ. This is a 1,300 hectare area which will focus on light and heavy industries. Some notable activities that the MFEZ will house include manufacture of explosives, agro-processing, horticulture, fisheries, hotel

accommodation among others. The developers of this MFEZ are finalising the master plan. The MFEZ is expected to be launched in the second quarter of this year. In order to support this development, the Government will construct a hospital in the Lumwana area and other support infrastructure. Already, Investrust Bank Plc has opened a branch in the area to provide financial services to the growing population of Lumwana. Madam Speaker, the fifth site is being developed in Ndola as an industrial park. It is called the Sub-Saharan Gemstone Exchange Industrial Park and will aim at creating a streamlined export procedure that will assist buyers, sellers and producers of rough and processed gemstones and jewelry to freely participate and conduct regular auctions and routine transactions and thereby making gemstone mining a sustainable venture to bring wealth to the nation as a whole. This is the first industrial park being developed by Zambian entrepreneurs. The industrial park is expected to house more than twenty companies of which five have already started operations employing about a 100 Zambians. Madam Speaker, may I take this opportunity to clarify that all investors, both local and foreign, have equal opportunities to invest in any of the MFEZs and industrial parks as the principal Act, the Zambia Development Agency Act No. 11 of 2005, does not discriminate between local and foreign investors. The criterion for setting up a company in an MFEZ is meeting the required threshold of investing not less than US$500,000 in line with Section 56 of the Zambia Development Agency Act No. 11 of 2006. In addition, the project to locate in an MFEZ has to, inter alia, demonstrate the following: (a) amount and quality of local employment creation; (b) extent of skills development and transfer of skills to local entrepreneurs and communities; (c) extent to which a project will lead to expansion of local production; (d) level of utilisation of local raw materials and intermediate goods; (e) introduction of science and technology; (f) production of new products; (g) extent to which a product will lead to the diversification of the economy; and (h) degree to which a project is export oriented.

Madam Speaker, allow me to comment on the issue of injury to local manufacturing companies. The Government will concentrate on attracting pioneer projects and export oriented companies that will strictly support the diversification agenda. Before concluding my statement, Madam Speaker, allow me to make specific reference to some of the issues that may be of particular interest to the majority of the people in this House as well as members of the general public. These issues involve a gazetted forest area, water supply and environmental issues. The area under consideration in the ministerial statement is, indeed, an aquifer for underground water for Lusaka and the source of the Chalimbana River. However, an environmental impact assessment will be undertaken to take into account these issues. Madam Speaker, initially, water supply for the MFEZ will be sourced from just outside the MFEZ area. This is the Lusaka Park. However, in the long term, there are plans to source water from the Kafue River by laying additional water pipes within the existing one. The current MFEZ, Forest No. 26, was degazetted by the late President in 2007 through Statutory Instrument No. 65 of 2007. Madam Speaker, as per requirements by the Environment Council of Zambia, a strategic environmental assessment will be included in the master plan where an environmental impact assessment will be conducted for each development phase of the Lusaka MFEZ (LS- MFEZ). In conclusion, I wish to inform this august House that Zambia is not the first country to implement the MFEZ concept as a business model for accelerating industrialisation and diversification of the economy by placing strong emphasis on export oriented production. For example, some of the countries that have developed with high Gross Domestic Products (GDP) rates of around 10 per cent in the last fifteen years have been implementing MFEZ as a business development model. These success stories are Malaysia, Singapore, China and India and are a clear testimony of what an economic zone can do to achieve transformation and accelerated growth. In 1964, Madam Speaker, Zambia had twice the per capita income of Malaysia. Today, Malaysia’s per capita income has increased to US$14,500 compared to Zambia’s US$1,044. In Africa, MFEZ is a business model which is being implemented successfully by Sudan, Egypt, Ethiopia and South Africa. As we move forward, we must not be demoralised or intimidated by the challenges we face. We must remain focused on what needs to be done to break the curse for the slow implementation of the diversification of our economy. Job creation is key to economic growth and the MFEZs will contribute significantly to this goal while reducing unemployment. It sets a platform for enhancing our competitiveness, diversification and

stimulating industrialisation. Once fully developed, the current MFEZs will create over 15,000 direct jobs and many more indirectly with investment flows in excess of $2.7 billion. The MFEZs will provide strong business linkages and set the momentum for business expansion opportunities as a basis for sustained economic growth. As we implement the MFEZs, our resolve and ingenuity will be challenged. We must remain fully committed to realise the 2030 Vision. The 2009 Budget is but a necessary step to achieve this vision. I will lay on the Table, Madam Speaker, the development plan of the MFEZs which will be made available to all hon. Members for their study. Madam Speaker, I thank you.