64483 Institutional Best Practices for Special Africa Trade Policy Notes Economic Zones: An Note #25 Application to Tanzania Tom Farole and Josaphat Kweka * August, 2011 Special Economic Zones (SEZs) are increasingly failed to meet their potential. Although a policy tool of choice for governments seeking multiple factors contribute to the failure of an to attract foreign investment, promote export- SEZ program, in most cases, they can be traced oriented growth, and generate employment. back to the initial planning stages, and derive Recent estimates indicate that there currently from an ineffective regulatory and institutional are more than 2,300 SEZs established in 120 framework. countries. SEZs are spatially delimited areas, which offer a combination of high-quality In common with many other countries in Africa infrastructure, expedited customs and and elsewhere, Tanzania sees the development administrative procedures, and a range of fiscal of Special Economic Zones (SEZs) as a critical and non-fiscal incentives to overcome barriers element of a program to facilitate private that hinder investment in the wider economy.1 sector investment and transform the Well-designed SEZs have been successful as manufacturing sector to enhance instruments for export-led development, competitiveness and industrialization for job particularly in Asia and Latin America where creation. Indeed, SEZs traditionally have been many zone programs have been in place for used to address the very constraints facing several decades. However, despite high profile investors in Tanzania and as “quick-win� successes, many SEZs around the world have measures to exploit the potential for private sector driven job creation. It is therefore crucial 1 that the policy and institutional aspects of the The generic term SEZ is used here to encompass a SEZ regime are designed and implemented variety of regimes known variously as export processing zones, free zones, export free zones, effectively to ensure that it delivers on its investment promotion zones and foreign trade zones. 1 potential role as a facilitator of investment, much earlier. However, not only are few competitiveness, and job creation. governments experienced in planning and developing economic zones, given the large This note provides analysis concerning the investments required to support zones and institutional framework under which the zones their uncertain return, development of zones program is developed and administered in can be a risky proposition for governments. Tanzania. It examines various institutional and Private sector development (or public-private administrative structures for managing an SEZ partnerships) can not only provide critical program, focusing on the alternative expertise, but can reduce governments’ risk in approaches taken in different SEZ programs zone programs and ensure greater around the world and highlighting both good transparency. practices and those that have been less successful, and drawing lessons for Tanzania, With the growing participation of the private which will also be of relevance for other sector in zone programs around the world, the countries in Africa2. The note is structured multiple mandates of government in the around four key principles for designing an traditional approach to zones is increasingly effective institutional framework for SEZs: 1) problematic. Specifically, it creates a conflict of clarity in roles and responsibility; 2) autonomy interest, where the government is responsible and inclusivity; 3) authority and coordination; for regulating and promoting all the zones in a and 4) resources and capacity. The note country, including zones developed and concludes with a review of the existing operated by the private sector as well as those institutional gaps in Tanzania’s zones program developed and operated on behalf of the and measures to address them. government. Indeed, more often than not it is actually the same government agency Clarity of roles and responsibilities responsible for regulation and the development, so in effect they are regulating The operation of an SEZ includes the roles of themselves. Regardless of the transparency or zone owner, zone developer, zone manager or effectiveness of the regulator, a bias will be operator, and zone regulator. Up until the perceived by the private sector, which acts as a 1990s, when most zone programs remained significant barrier to attracting private sector fully in the hands of governments, it was usual developers, and becomes a point of contention for the same government body to carry out all in cases where disagreements arise. these roles simultaneously. This approach remains common in many zone programs This overlapping mandate currently exists in around the world, particularly in East Asia Tanzania, with the Export Processing Zones where most zone programs were established Authority (EPZA) acting as both the regulator of all zones and also the developer and operator 2 This note is based primarily on research conducted of the BWM SEZ.3 While the BWM SEZ is the as part of the following World Bank study, T. (2011), Special Economic Zones in Africa: Comparing 3 Performance and Learning from Global Experience, Tanzania’s zones program has suffered from lack of Washington DC: World Bank. an effective institutional framework. The program was launched in 2002 in the context of developing 2 only government-developed zone at the The free zone program in Ghana, under the moment, and is designed as a small-scale pilot authority of the autonomous Ghana Free Zones to demonstrate the potential of the zones Board (GFZB) is a good example of a program program in the country, the potential conflict of which makes a clear separation of these roles. interest exists. For example, it has already been GFZB is responsible for planning, regulation, suggested that lease rates offered in the and promotion of the free zones, as well as for government-run zone be below the market- packaging of sites for development (through rate for industrial facilities in Dar es Salaam. leases to private developers). From the outset of the program (1995) GFZB was restricted from The best practice approach to avoiding this involvement in zone development and conflict of interest is to separate the regulatory management. In contrast, in Lesotho, where role as much as practically possible from the the public developer of industrial parks also roles of owner, developer, and operator. This acts as the promoter, regulator, and allows the regulatory role to remain fully administrator of the licensing regime, provision independent from any individual zone. As part of land and factory shells and below-market of this process, it is important for SEZ policy to rates has been cited as a key factor outline clearly the specific responsibilities of undermining private sector provision, resulting the different actors – a summary of the main in an acute shortage of industrial facilities. In roles and responsibilities is provided in Table 1. Bangladesh, where the same authority is It is important to note the owner of an SEZ may responsible for zone development, or may not be the same as the developer. management, and regulation, the first privately Indeed, while it is most often the case that the developed zone languished for 8 years awaiting developer has at least some share (if not the approval for its operating license and has since majority) of the SEZ, it is not uncommon, even struggled to move forward on construction due in privately developed projects, for government to lack of guarantees from the government on to have an equity share4. This is why it is accessing energy supplies. important, even where the government is not a lead owner and operator of zones, that the Of course, leaving zone development to the regulatory activity of the zone authority is private sector does not mean the zone conducted at arm’s-length. authority has no role in the development process. Its role as a regulator is critical to export processing zones but it was four years before ensure that development processes are both it become operational when the EPZA was transparent and effective. It is critical that the established. A Special Economic Zones Act was legal framework establish an unambiguous set passed in 2006 but implementing regulations has of rules and procedures guiding the entire never been defined. Development of the zones process of site selection, investment, program was slow in the initial years in part as a result of the poorly defined institutional framework development, licensing, and operations of and the overlapping mandates for the EPZ and SEZ private development. The zone authority, in its programs. The EPZA has also been affected by a regulatory function should ensure that private lack of authority and resources. developers adhere to specific criteria in terms 4 Most often through their ownership of the land on of the locations in which they develop, the which the project is developed. nature of physical development, and 3 Table 1: Summary of roles and responsibilities in a typical SEZ program Primary responsibilities Government Conduct strategic planning Select site(s) and package land / establish land use guidelines Conduct initial feasibility studies Select and enter development agreement with developer Develop offsite infrastructure Training / workforce development and social services Regulation and administration of the SEZ program (see below) Regulator Designate SEZs: Designate public and private land as SEZs and public or private SEZ developers and/or operators. Facilitate government services: Facilitate licensing, registration and permits (environmental, building, work permits etc), regulate services within the SEZs such as utilities, provide for dispute resolution; the regulator may set fees commensurate with the cost of service delivery. Monitor compliance: Monitor compliance with the SEZ legal framework, including SEZ policies, standards and requirements, and enforce compliance through appropriate penalties independently from other public agencies. Developer Land use planning: Create a final land-use master plan, and prepare the land (grading, leveling, other pre-construction activity) Provision of infrastructure: internal road networks, drainage and sewerage, and infrastructure for provision of utilities. Operator (May be Facility leasing: Managing lease and rental agreements with individual same as developer investors and responsibility for main services of the zone (including maintenance, security, etc.) or under a Transacting utilities: Ensuring provision of on-site utilities (electricity, gas, contractual water, telecommunications) through own provision or via domestic providers. agreement with the Provision of other value-added services: May include a wide range of other owner/ developer) services including business and training centers, medical and childcare, transport, recruiting, etc. Marketing: Experienced private developers often have a network of multinational clients across a range of industries to which they can market new SEZ opportunities. Note that the SEZ authority / regulator and other parts of government (such as an investment promotion agency) typically also carry out some marketing activities. Source: Adapted from FIAS “SEZ Practitioners Guide� environmental practices, among other things; operates as an agency, reporting through a line they should also ensure that developers are Ministry – specifically the Ministry of Industry, vetted in terms of their financial capacity and Trade, and Marketing (MITM). While this record of experience. approach does provide effective independence (EPZA is not a department within the ministry), Autonomy and inclusivity its links with a line ministry appear to make it What follows from the preceding discussion is more difficult for the agency to act with that two key principles of the institutional authority and to coordinate effectively across design of SEZ program administrator / regulator ministries, departments and agencies (MDAs). are: Autonomy (or independence) and inclusivity. In Tanzania, the EPZA currently 4 While placing the SEZ program under EPZA5 designated to take on this role; however, this may enhance integration of the two regimes agency should be overseen by a board or and bring about organizational efficiency, this committee that has inter-ministerial as well as still does not address the issue of whether EPZA private sector membership. Indeed, a wide would be more effective under the existing line variety of institutional arrangements have been Ministry (MITM) or rather through a central adopted, including government authorities or ministry (Prime Minister or Presidents office) corporations, departments within specific since the role of EPZA becomes much broader ministries, zone-specific management boards, than “export promotion� requiring more and (less often) investment promotion political will and resources beyond the scope of agencies. MITM. Where the regulatory agency operates as a unit Under the current institutional arrangement, fully within a single ministry, there is usually no EPZA’s governance structure allows for limited structure for private sector participation; inclusivity. EPZA’s board is dominated by moreover, cross-ministerial coordination government officials, which, together with the generally becomes more problematic. As a Attorney General and the Governor of the result, it is more common now (particularly with Central Bank, account for 9 of the 12 members programs that have developed since the mid – two other positions are set aside for the 1990s), to operate under a format of a private sector (through the Tanzania Private government authority or agency, with a Board Sector Foundation and the Tanzania National of Directors – usually chaired by the head of a Business Council) and one seat for the Trade specific ministry – including cross-ministerial Union Congress. While this provides at least and private sector membership. Some of these some potential for private sector consultation, government agencies, including Jordan, Costa it allows for little real voice and influence. Rica, Thailand, and the Dominican Republic, Moreover, there is no direct mechanism for have become corporate entities, primarily to participation by the private developers and enable them to operate without some of the investors involved in the zones program. civil service restrictions that can hinder their effectiveness (e.g. in terms of recruiting, hiring, Best practice is to establish the regulator as an and compensating staff, and managing autonomous agency (as it is in Tanzania) under budgets).6 a board of directors including both public and private sector members. Practically, however, establishing an autonomous agency may not be 6 In some larger countries, particularly those with feasible in the short term due to legacy significant local autonomy, zone programs and situations or other political economy factors. In regulation are sometimes devolved to the local level. this case, an existing agency could be This can have both benefits and drawbacks. The benefits are innovation in policy design and implementation, with the potential for a more 5 Note that, the Government decided to retain the entrepreneurial approach to investment promotion, name “Export Processing Zones Authority� for infrastructure development and service delivery. One convenience, even though the Authority will now drawback is that inconsistent policies and capacities handle the SEZ program. across regions can result in highly uneven programs that confuse investors. The same problem occurs 5 Although in some countries the national country to country, but an important principle is investment promotion agency is also given to balance the involvement of all parties that responsibility as the SEZ regulator, this is will need to participate in decision-making for generally not viewed as best practice. Rather, the zones development, with the equally investment promotion agencies should be free important need to ensure that the board is to focus on their role of promoting and efficient and governable. supporting investment on a national basis. While there is no specific “best practice� in this Given the specific regulatory functions of SEZs and the potential for more simplified set-up and regard, most boards tend to have relatively operational licensing procedures (by design), it small membership (less than 13). Private sector participation on the board should include an is more effective to establish a specialized association of zone operators and/or companies regulator for the SEZ regime. to ensure direct voice to the private investors Autonomy must, of course, also come with involved in the zone program. Moreover, it is transparency. Indeed, the risk of corruption in critical to avoid having the private sector board the awarding of development and investment members be individuals that are hand-picked by licenses is not insignificant, and has been a the chairperson, but rather representatives of problem in many countries. Part of the solution private sector that can be selected or elected by to transparency is in the legal and regulatory their membership. Examples of board framework of the zone program. But the structures elsewhere include: Ghana where a 9- institutional arrangements also play a critical person board, chaired by Ministry of Trade and role. Here, the organization and function of the Industry has 4 members from private sector and board is critical. at least two members must be female; Kenya with a 15-member board, with Chairman In most cases, the SEZ regulator is governed appointed by President, and includes the Chief through a committee or board of directors. One Executive of the EPZ Authority and with 6 of of the most important characteristics of this remaining 13 members from the private sector; board is that it includes cross-ministerial and Dominican Republic which has a 9-member involvement and significant (ideally majority) board (Executive Director of the authority is a representation from the private sector. The non-voting tenth member) headed by Secretary composition of these members will vary from of State for Industry and Commerce and with 5 members from the private sector. where a country may operate more than one type of It is most common for the SEZ regulator, even zone regime. For example, in Nigeria, separate zone regulatory authorities have been established for the when operating as an autonomous agency, to oil and gas sector (OGFZA) and all other sectors report through a line Ministry, typically the (NEPZA). This has not only led to significant, high- Ministry of Trade & Industry / Commerce, as is level conflict between the agencies which had to be the case in Tanzania. Best practice, however, resolved through a ruling by the country’s attorney indicates that the regulator is most effective general, but it also has caused confusion for when its board reports into the highest possible investors, not least those oil & gas sector companies based inside NEPZA industrial zones and services level of government, which ideally means companies based inside OGFZA zones. through a central rather than a line ministry like 6 the Presidency, Prime Minister, or Ministry of stakeholders. Given the concerns over the Finance. In the cases of the Dominican Republic, existing institutions– that they are often Kenya, and Senegal, for example, the SEZ sources of inefficiency and poor service program reports directly into the President. provision – it is critical that the SEZ authority Similarly in Bangladesh, the program reports provide guidance and be capable of working into the Prime Minister. This reporting with the agencies to improve their performance relationship is critical to ensure that the standards of the services they deliver to the regulator has sufficient authority and regulatory authority. However, where existing autonomy, and is in a strong position to institutions are known to be sources of coordinate actions across ministries, corruption, it is necessary for the SEZ authority departments and agencies. to take over their regulatory functions. This is most common in the area of customs. There are, however, potential drawbacks to having the zone program linked directly to the Cross-agency coordination is also important for highest political offices in the country. In the marketing and promotion of the zones, as in absence of delegated decision-making, most countries the SEZ authority has primary important activities of the regulator can be responsibility for marketing and promotion and unnecessarily delayed. Central authority may (nearly always) investor after-care, while a end up micro-managing the program or separate national investment promotion demeaning its urgency given the range of other authority (IPA) performs these same roles for pressing issues of national interests. In the case the country overall. Both institutions typically of Ghana, all new zone licenses had to be operate as autonomous agencies, often with approved by the board of directors. However, both reporting in through the same Ministry. this board is appointed by the President and, following a change of Presidency in 2009, there In Tanzania, in the absence of an operational was a long delay before the new President one-stop-shop for investment facilitation, EPZA appointed and reconstituted the board. As a has struggled to show authority/coordination. result, companies which had applied to operate In several cases, EPZA was forced to intervene in the free zone faced a delay of six to nine actively to support the EPZ/SEZ investors obtain months to have their applications approved. the necessary facilitation from the Revenue Authority (TRA) for customs and taxation issues, Authority and coordination which would not be the case if the one-stop shop plan was effective. A typical example is the Key operational principles to ensure the SEZ failure by Customs officials to recognize a regulator delivers effectively on its mandate shipment to/from zone investors, requiring are: authority and coordination. These additional proof before giving clearance. In this principles are intrinsically linked to the case, the authority of EPZA over these agencies organizational positioning and structure as is compromised, and hence EPZA becomes yet discussed in the previous section. But also another “stop� contrary to purpose for which it derive from the powers mandated to the was established. agency, the resources made available to it, and the degree to which the institutional structure facilitates constructive interaction across 7 Similarly while the EPZA and Tanzania Where an SEZ authority is forced to rely on the Investment Centre7 each has distinctive role authority of these same institutions, and mandate on the economy, the potential investment climate constraints tend to synergy from ideal collaboration between them perpetuate – indeed, in such cases, the SEZ has not been optimized. Instead, the general authority often becomes simply “one more view is that the two appear to be working in stop�. For example, institutional conflicts parallel, hence dissipating the policy traction. between key agencies in Nigeria undermined This is clearly important considering a case the effectiveness of the one-stop service, where an investor has option to invest through resulting in many investors finding it quicker to either program. go to individual agencies than through the one- stop service. In Tanzania, the problem to date More importantly, in the current institutional has not been conflict across institutions but set up, EPZA has to pass through the line rather lack of effective knowledge flow (e.g. Ministry in communicating with the central customs officers being unaware of the Government. Since the Ministry has many other existence of special procedures for EPZ-licensed Agencies under its administration (currently companies) and coordination across these about 17) with competing priorities, the risk of agencies. invisibility is likely, which may impact its ability to leverage (additional) resources or attention The first-best solution is to provide the it may require from the central authority. regulator with the power to make and enforce decisions on all of these issues. This essentially The SEZ law should give a legal mandate to the gives them authority over the normally- regulatory authority to empower it to carry out mandated agency or ministry, specifically the role both of monitor and enforcer of laws within the defined SEZs. Such authority is and standards, and as a “one-stop shop� normally granted either directly in the SEZ law facilitator of investment. This will necessarily or through the delegation of signature from involve a wide range of activities that cross over MDAs, as is the case under APIX in Senegal. various ministerial domains, including customs, Note also that, particularly with regard to land land use and zoning, taxation, business use planning, environmental, and licensing registration and licensing, immigration, and issues, it is also critical that the authority environmental, labor, and social compliance. granted to the SEZ regulator extend not just over national but also local authorities. In some One of the primary reasons for establishing programs where very large scale SEZs are SEZs is to bypass existing impediments to the established – for example in China, Jordan, and investment climate by providing services and the new program in Senegal – the SEZ regulator administrative processing that is more effective is conferred with the power of a governor of a and expeditious than is available through the municipality to which the Prime Minister or normal institutional channels in the country. President can delegate the full range of authorities required to enable the regulator to 7 provide a full “one-stop-shop� facility. TIC reports to the Prime Minister’s office, and has exemplary and successful one-stop-shop facility. 8 In most SEZ programs, delegation of authority type of cooperation, with ministries unwilling for business licensing, for issues relating to to give up any authority over their staff and taxation, and for monitoring of labor issues is their domain. This is another reason why not problematic. Customs, environmental placing the zones authority under a central compliance, and (perhaps most commonly) ministry is generally a more effective immigration issues, however, are where the institutional approach. majority of zone programs struggle to deliver effective authority to the regulator. This is due Regardless of the institutional arrangements, to both political as well as practical maintaining good relations with other considerations. government MDAs is critical to ensure that the SEZ authority can deliver effectively on their In any case, few SEZ authorities will have the mandate. Such relations must be cemented capacity to actually carry out their both at the political and the operational responsibilities independently, at least during (coordination) level. One example in which the early stages of their development. With the poor inter-agency relations has crippled the exception of large SEZ programs, building the development of the zones program is Nigeria. internal capacity to deliver across all the First, conflict between the ports authority regulatory and administrative functions (which controlled the Calabar port) and the required of an SEZ authority would be an export processing zones authority effectively inefficient and expensive proposition. This undermined the potential of integrating the problem can be addressed through the Calabar Free Zone and its adjacent port, which principle of coordination with other MDAs. severely affected the competitiveness of the Under this approach, the SEZ authority would free zone. Second, conflict with the customs provide overall guidance with existing MDAs and tax authorities meant that the Tinapa retaining responsibility for executing the Business Free Zone and resort, designed as an regulatory functions, but have dedicated staff alternative to Dubai and London for shopping from each of the relevant agencies based at the and tourism, saw its duty-free allowance SEZ authority’s “one stop shop�, at least on a reduced from the planned US$5,000 to only day-to-day basis under the SEZ authority. US$330 per person (after US$400m in investment had already been sunk into the To make such arrangements effective, there is project). Finally, several years after legislation normally a need for a memorandum of was changed to allow free zone companies to understanding (MOU) across agencies on the sell to the local market, customs authorities, deployment of staff and a clear delineation of who opposed this, continue to block local authority. Such a program was put in place in market sales. Lesotho a year after the initial launch of their “one-stop� center, when management found The Nigeria case proves that board they were unable to deliver effectively on their representation alone is not sufficient to mandate due to lack of any day-to-day overcome such cross-agency conflict (both the management control over the staff from across Nigerian Ports Authority and Customs sit on the various agencies. In most countries, there are NEPZA board). However, high-level authority at significant political economy constraints to this the top of the board, combined with inter- 9 ministerial committees and the establishment authority. Zone authorities, like Tanzania’s, of MOUs and service level agreements across whose budgets are allocated from a ministry or agencies can certainly contribute to improved the exchequer, face serious problems of coordination. predictability (budgets are normally only fixed year-to-year) and can be held hostage to While a separation of these agencies is advised, political issues. During its early years, EPZA has this separation is often the source of an operated with a skeletal staff. As a result, EPZA operational disconnect between the agencies, was not able to provide the expected resulting in poor coordination of activities. For institutional support to facilitate EPZ investors example, in most cases it appears that the or to promote the EPZ program adequately. For national investment promotion agency does example, it was unable to support the provide some high level promotional support to establishment of a “one stop shop�, which has the SEZ authority (usually marketing the SEZs as had significant implications on the experiences one investment option within the country), of the first wave of EPZ investors in Tanzania. there is generally little coordination in terms of marketing planning and execution, and no Best practice is to link the budget in some way formal process for hand-off or cross-support of to the revenues earned through the zones investor aftercare between the agencies. program. This does not mean expecting the Examples of good practice usually incorporate zones authority to be self-sufficient through formal institutional links, which then form the fees raised for licensing and other services. basis for joint activities. In Ghana, for example, While these can be an important revenue the Chief Executive of the Ghana Investment source they are typically not enough to cover Promotion Centre (GIPC8) and the CEO of the the full budget of an authority. And the Export Promotion Council are both non-voting expectations of self-sufficiency can lead to members of the free zone authority’s (GFZB) excessive administrative charges, which deter board. Moreover, GFZB and GIPC are core investors (e.g. in Ghana, investors complain stakeholders (along with the ports, airports, that they are required to pay the zone authority and customs authorities) in the “Ghana US$50 for a permit each and every time they Gateway� project, a key pillar in the country’s import a consignment). Instead, best practice strategy to promote export-oriented (as followed, for example, in China) is to set up investment. some formula for establishing the annual budget, including giving the authority a specific Resources and capacity share of taxes generated in the zone. This has Finally, an additional institutional principle to the added benefit of giving the zone authority ensure effective functioning of the zone an incentive not to compete on tax holidays. regulator is ensuring availability of the appropriate resources and capacity in the Beyond this, best practice is to ensure that the agency is able to operate independently of any rigid rules of the civil service. Again, being set 8 It is important to note that in Ghana, GIPC’s formal up as a corporatized agency is one way to free mandate excludes investments in the free zone areas the SEZ authority from civil service restrictions (as well as in the oil and gas sector). around hiring, firing, and salaries, that can act 10 as a barrier to effective operations (in terms of customer services, an important activity of the organizational design, labor flexibility, regulator is the compilation and dissemination performance-based management, and in being of statistics related to the free zone program. A able to attract the best talent). Finally, it is detailed compilation of statistics – for the argued in many cases that independence of the program overall and each individual zone – is authority enables it to procure goods and published annually. Critically, these results services more efficiently, independent of often- provide input to a regular policy dialogue with heavy civil service regulations. the government and the private sector regarding the strategic development of the Zone authorities need to develop capacity to zones program. deliver effectively on their regulatory function. Among the critical skills required is technical Conclusions and options for Tanzania capacity to properly develop a masterplan Tanzania’s zones program is still in its early days framework for zone to development and to of development. To date, its success has been properly interrogate zone masterplans limited, although significant progress has been developed by private investors. The capacity to made over the past two years. As Tanzania challenge business plans and feasibility studies plans to integrate the existing overlapping SEZ of zone developers and potential investors is a and EPZ regimes, it has a significant skill that is lacking in many zone regulators opportunity to address the existing institutional around the world. This need not be fully weaknesses that restrict the effectiveness of absorbed by the regulatory authority, however. the program. On one hand, Tanzania is not far One approach is to establish a review from some of the features of good practice committee, including relevant experts (e.g. around the world. It has established the academics and consultants) who can provide regulator as an independent authority with a the necessary technical expertise, to board of directors having interest cutting across supplement in-house capacity. MDAs. It also links the SEZ authority and the IPA through their respective board structures. Finally, one of the most critical and Finally, it has plans (although not yet underappreciated roles of zone authorities is implemented) for a one-stop service that is co- monitoring and evaluating (M&E) the located with the regulator and which comes performance of zones across a wide range of under its day-to-day authority. On the other outcome indicators. The role of M&E links back hand, there are a number of shortcomings to to the overall strategy and objectives of the SEZ the existing institutional structure that can be program, and should be a fundamental part of improved to support the program going the government’s ongoing decision-making forward. These are outlined in Table 2, with regarding investment in the program. The SEZ “good practice� options for how to address authority should ensure there are mechanisms them. to collect the necessary data to monitor progress against these measures on an ongoing basis. In the Dominican Republic, for example, in addition to departments responsible for evaluation, investment promotion, and 11 Table 2: Institutional gaps in Tanzania’s SEZ program and options to address them Issue Summary Options to consider 1. EPZA role as EPZA’s role as independent regulator Delineate regulator role: regulator, of private zone developer is developer, and compromised by its role in developing Concession operations of BWM SEZ to private operator sector and operating BWM SEZ Adjust lease rents to market level 2. Board Current EPZA board dominated by Expand private sector representation to 50% inclusivity MDAs with limited private sector (Without expanding the current size) of board participation members Include representation from both investors and developers 3. Board authority EPZA not in strong position of Uplift institutional position of EPZA: and authority to enable it to coordinate coordination effectively (with a strong mandate) Place EPZA under a central ministry (e.g. across MDAs Presidency, Prime Minister, or Finance) Ideally, EPZA and TIC sit under same ministry Put in place service agreements and MOUs with key line MDAs 4. Budgetary Lack of sufficient, predictable and Enhance Autonomy of EPZA: autonomy independent budget to enable EPZA to plan and carry out its activities Establish multi-year budget with formula linked to revenue streams set for “ongoing running costs� until when the program is well established) Allow EPZA to solicit funds directly to supplement budgetary allocations. 5. Capacity Lack of operational framework for Establish an operational M&E framework: development measuring and monitoring (staff and and M & E program) performance. Solicit quick win measure by requesting framework support from established experts or programs (rather than re-inventing the wheel). Avail a training opportunity to the recently recruited manager to strengthen in-house capacity to carry out regular M&E functions. *About the Authors Tom Farole is a Senior Economist in the World Bank’s International Trade Department. Josaphat Kweka is a Senior Economist in the World Bank’s Africa Region. This work is funded by the Multi-Donor Trust Fund for Trade and Development supported by the governments of the United Kingdom, Finland, Sweden and Norway. The views expressed in this paper reflect solely those of the authors and not necessarily the views of the funders, the World Bank Group or its Executive Directors. 12 13