**Table 15: Factor Intensity** **<u>per Sector (%).</u>**

|**Sector**|**Formal**<br>**workers**|**Informal**<br>**workers**|**Private**<br>**capital**|**Public**<br>**capital**|
|---|---|---|---|---|
|Agriculture: Food|0,07|24,48|75,45||
|Agriculture: Annual Crops||30,90|69,10||
|Industry: Food, non‐FZ|6,80|67,70|25,49||
|**Industry: Food, FZ**|**53,15**|**32,43**|**14,41**||
|Industry: Chemicals, non‐FZ|2,98|43,01|54,01||
|**Industry: Chemicals, FZ**|**11,99**|**7,59**|**80,41**||
|Other Industries, non‐FZ|16,11|71,69|12,19||
|**Other Industries, FZ**|**68,70**|**,18**|**31,12**||
|Services, merchandize|15,02|81,49|3,49||
|Services, non‐merchandize|70,32|||29,68|
|**_Total_**|_17,92_|_48,94_|_28,93_|_4,31_|

_Source_ : Agbodji (2009), data from MCS, Togo.

**The ICA data seems to suggest that the main reason for firms to join the Free Zone is the fiscal and administrative advantage.** ICA data in Figure 55 shows that firms in the Free Zone tend to first of all have concerns in fewer areas than non‐FZ firms. FZ and non‐FZ firms are more or less equally concerned about issues of access to finance and political instability, but non‐FZ firms are concerned about for example corruption, tax administration, custom and trade regulation, and business licensing while these are hardly mentioned as the main constraint by FZ firms. Given the higher growth of firms within the zone, this suggests that easier administrative procedures for running a business are binding constraints for many firms in Togo. Note however that the Togo ICA (2010) looks at the number of firms identifying a category as a main as well as a severe constraint and then compares the result between FZ and non‐FZ firms and conclude that complaints about business related constraints are not significantly different between the two groups. Given a number of differences when including both the main and severe constraint, the result should be taken with caution. Moreover, in the survey it was never specified if the FZ are responding having their particular investment climate in mind, or the general investment climate in Togo.

**Figure 55: Main Constraints to Business, FZ firms vs non‐FZ firms, Togo, 2009.**

<!-- Start of picture text --> 35%<br>FZs<br>30%<br>25% Non FZs<br>20%<br>15%<br>10%<br>5%<br>0%<br><!-- End of picture text --> _Source_ : ICA data, World Bank.

# **6.9 Market Failures**

**Undertaking profitable economic activities requires the availability of inputs specifically needed for such activities, but these inputs may not be available in a market despite a strong demand (current or potential).** These are tradable inputs, such as raw materials, equipment and other capital goods; and non‐tradable inputs, such as skilled workers, able entrepreneurs, infrastructure services and other services. In most of the cases, the provision of tradable inputs implies less of a problem for firms, as long as there is a good enough infrastructure (roads, ports, etc.) to make available these goods from far away when they are not locally produced. On the other hand, the provision of non‐tradable services represents more of a problem as it may take long time for a market for these services to clear ‐ if at all ‐ in response to a shortage of an input. In particular, markets may not even send signals for scarcity of certain production factors if there is no perceived demand for them, as the activities that

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