The Free Zones Concept In The Ghanaian Economy

The Ghana Free Zones Programme has come to represent an important tool for government in the economic development of the country.
The Free Zones Programme was conceived as an integrated programme to promote the processing and manufacturing of goods through the establishment of Export Processing Zones (EPZs), and encourage the development of commercial and service activities at seaport and airport areas.
The main aim of the programme, therefore, is to open Ghana up to potential investors who can utilise the Free Zones as focal points to produce goods and services for export to the sub-region and beyond.
The GFZB’s important and expected role within the context of the Gateway Project requires it to be the channel through which the export-led development policy is achieved.
In view of this, the GFZB has positioned itself to provide the needed infrastructure and efficient services to investors under the Free Zones Programme.
Within the 10 years of its implementation, the contribution of the Free Zones Programme to the economy of Ghana had been remarkable.
Presently, the GFZB has designated four areas as Export Processing Zones (EPZs). These are Tema, Ashanti, Sekondi and Shama.
The Tema EPZ has been developed with reasonably adequate infrastructure such as access road, drainage system, waste processing plant, water reservoir, telecommunication facilities and dedicated power supply.
The Tema EPZ takes care of the investor's problems of land acquisition.
The Tema EPZ also houses the President's Special Initiative on Textiles and Garment Village.
Part of the EPZ has recently been declared a Multipurpose Industrial Park to cater for investors whose operations fall outside the Free Zones scheme.
The GFZB has so far licensed 153 companies in various sectors of the economy including agro food-processing, fish processing, wood processing, metal fabrication, garments manufacturing, plastic products manufacturing and data processing.
Employment creation
These Free Zones Enterprises had employed over 34,000 people by the end of 2005. Of this figure, 98 per cent are Ghanaians while two per cent are expatriates.
The employment figure is expected to increase over the years as more companies get licensed.
The inflow of foreign firms into the free zones has also created managerial and technical opportunities for the local labour force to foster skills development.
The Free Zone Regulations make provision for the training of local staff and are equally expected to use one per cent of their total annual salary and wage bill for the training of local staff.
Indirect Employment
Free Zones Enterprises are also providing indirect employment to artisans. A large number of both skilled and unskilled labour such as masons, plumbers and welders have been employed for the construction of factories.
Considering the ripple effect of employment creation on the economy, the impact of the Free Zones Programme cannot be underestimated.
Foreign Exchange
With regard to foreign exchange earnings, Free Zone Enterprises are primarily engaged in exports and, therefore, generate foreign exchange earnings from the sale of goods and services.
Export receipts of registered Free Zone Enterprises have increased exponentially over the years. Exports receipts for the year 2005 alone amounted to US$ 510m.
Although Free Zone Enterprises can generally repatriate foreign exchange, substantial portions of their revenues are converted into local currency to pay for local costs such as wages and salaries, raw materials, rent, utilities, income tax for employees and transportation.
Backward linkages
Backward linkages of Free Zone Enterprises to the local economy is stimulating domestic industry through the use of local products and services.
At present, there is appreciable demand for packaging and construction materials, utilities as well as other inputs.
These linkages are expected to contribute to the development and growth of the non-traditional export sector by attracting manufacturing and light industries, thereby diversifying economic activities in the country.
Some Free Zone Enterprises engaged in agro processing have also adopted some farmers, and are introducing new farming methods to enable the farmers to increase their yield to feed the factories of the Free Zone Enterprises.
The cocoa processing sector has attracted multinational companies to locate in the country. These include Barry Callebaut and Cargill.
The presence of such companies will enable the government to achieve its aim of adding value to the cocoa beans which were hitherto exported in their raw form.
Made-in-Ghana goods
Free Zone Enterprises have introduced made-in-Ghana products onto the international market.
This has given Ghana some credibility in the production of goods such as canned tuna, fruits, cocoa products and, to some extent, garments and data processing.
Made-in-Ghana goods are, therefore, becoming gradually available in major supermarkets in Europe and USA, and Ghana is gaining recognition worldwide as a production base for good quality products.
Transfer of Technology/Skills
Generally, as Free Zone operations become more established, transfer of technologies and skills is expected to increase.
As most, production equipment in our industries is considered obsolete, the implementation of the Free Zone concept is to correct this obvious handicap through the transfer of modern technology and production techniques.
Investment Capital
The capital invested by Free Zone Enterprises as at the end of 2005 amounted to US$ 924m. These are mostly investments in the production of non-traditional exports.
Composite Benefits
Employment creation is perhaps the most singularly significant and immediate contribution that the Free Zones have made to the country's economy.
Increased foreign exchange earnings and export diversification are also significant in the resolution of the country's macroeconomic problems.
It should be noted also that Free Zone investments are incremental, and would not have taken place without the establishment of such a regime. Thus, the tax concessions and duty reliefs granted to their users do not represent a financial loss to the country.
The amount of foreign exchange retained by the economy will depend largely on the degree to which local supply relationships and subcontracting arrangements are established with free zone enterprises.
The promotion and facilitation of investments under the Free Zones Programme would be most beneficial to the nation if local entrepreneurs are able to ensure substantial participation in the activities of Free Zones Enterprises.

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