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Can the Chinese formula work in Malawi?

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It may be a mystery to some understanding how China’s economy has grown during the last 30 years but Secretary to the Treasury, Ronald Mangani has a better knowledge now.

China’s rapid industrialisation has seen it become the world’s largest manufacturer and the Chinese were so open with their secret, taking the whole Africa to a city of Suzhou for a showcase of their industrialisation model.

With other countries sending cabinet ministers, Mangani took the mantle for Malawi at the tour of Sughou Industrial Park recently and he could not hide his admiration.

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The industrial park concept is a key tool of industrialisation that China used in its economic reforms and opening up.

The approach has seen creation and expansion of over 200 cities that have boosted industrial output, job and wealth creations.

It all started with former Communist Party of China (CPC) leader, Deng Xiaoping’s visit to Singapore in 1978 where he was exposed to the concept, just like how Mangani and the rest of Africa toured Suzhou Industrial Park.

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After several industrial parks or special economic zones were developed, in 1992 China and Singapore agreed on a joint venture of the Suzhou Industrial Park development that started in 1994.

Industrial park or special economic zone entails special legal system and favourable taxation intended to attract investments for creation of multifaceted industrial hub within an area.

However, this requires investments in supporting infrastructure to ensure smooth environment for business operations.

“Taxation was made very flexible to attract investors and encourage production for exports. Government,” said a Dr Young in a presentation.

He further emphasized on providing high standard social services such as hospitals and schools to attract more foreign skilled labour and investors to the area.

Suzhou Industrial Park is in Suzhou City, the commercial capital of Jiangsu Province which has the second largest provincial GDP in China (over US$1.13 trillion) after Guangdong’s US$1.17 trillion.

The Suzhou Industrial Park attracted over 5 600 Foreign Direct Investments, creating GDP worth US$31 billion with industrial output of US$68 billion.

The park has one stop service centres where, practically, investment processing takes three to five days and offering very competitive low tax rates, sometimes zero to encourage some exports while land is readily available.

While Malawi boasts a similar one stop service centre, perhaps land availability, competitive tax rates and investment processing need continued improvements.

For China, FDIs were not about corporate taxes during early stages of industrial diversification. The focus was on other benefits like exports, job creation and building production capacity.

That philosophy has helped China develop local production and have world class product brands and now it no longer has lowest tax rates.

“Foreign investments are mutually beneficial so we spared no effort to attract more businesses to expand our industrial base,” said Young.

Former Ambassador to Malawi, Lin Songtian, who heads the African Department in the Foreign Affairs Ministry told the African delegates that “we hope our experience will give you new thinking to develop your countries as well.”

He expressed worry, however, that most African countries have systems that thwart long term economic development programmes, lacking continuity of visions when governments change.

He advised that it should not be up to a sitting president or minister’s decisions but the laws and national development programmes which are not affected by changes of governments.

By the way, it should be noted that the delegates toured the industrial park after finishing a two-day conference in Beijing that followed up on progress countries made in coming up with strategic and commercial projects for funding.

The funding is from the US$60 billion package under the Forum on China Africa Cooperation (Focac) for industrialisation and agriculture modernisation unveiled in South Africa six months ago.

While the conference sought to clarify funding procedures and provide platform for African and Chinese business players to discuss possible joint ventures, the Suzhou tour was meant to expose delegates to effective industrialization model.

These events were meant to address Chinese Government’s concern that some countries were slow to table bankable projects and attract funding.

In this regard, Malawi was a mere spectator as over 30 countries have so far signed a total of 250 financing deals valued at US$50 billion.

But Mangani explained that other countries had their projects ready before the package was unveiled hence did not take time to have them funded.

But still, one could point at the touted Projects Compendium at Malawi Investments and Trade Centre which are being sold to investors around the world.

It is high time strategic project proposals were aligned to an existing national development plan. In that way, utiliSing such funding opportunities is easy and timely just like other countries are doing on Focas.

Mangani said some projects are at different stages in pursuit of this funding, citing the Kam’mwamba Power project, Chileka Airport, Fibre Optic Cable for e-government and some roads.

Apart from other strategic projects, several countries that signed financing agreements with China have industrial park projects which will host most of the investments.

Perhaps the proposed special economic zones being conceptualised should draw lessons from Suzhou and have them attract investments with funding from the Focac package may come after the current three year facility.

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