**Figures 3 and 4: Source of EPZ investment projects (2009)**<sup>**13**</sup>

<!-- Start of picture text --> 100% 100%<br>90% 26% 20% 90%<br>80% 32% 43% 42% 35% 80%<br>70% 52% 51% 57% 70%<br>69% 60%<br>60%<br>50%<br>50%<br>40%<br>40%30%20% 68% 74% 57% 48% 58% 65% 80% 49% 43% 31% 30%20%10%<br>10% 0%<br>0%<br>Foreign‐controlled Local‐controlled East Asia South Asia Europe Africa USA Other<br><!-- End of picture text --> Source: SEZ Investor Survey<sup>14</sup> Specifically, the non‐African zones have shown some evidence of the shift from foreign to local investment, as seen in the Malaysia and Mauritius cases. For example, in Vietnam local share of investment projects rose steadily from around 23% in 1995 to over 50% by 2008. Local investors have also played critical roles in the zones programs in Honduras and the Dominican Republic. In the case of the African zones, however, the same pattern does not appear to hold. For example, new programs like Tanzania have had high shares of local investment from the outset. This, in combination with the low levels of FDI attracted into the African zone programs to date, suggests that the relatively high share of local investment may reflect as much the failure to attract FDI as it does success in attracting local investors. A second explanation, particularly in programs like Senegal, is the existence of “single unit” licenses and the propensity of locally‐based firms to switch into the EPZ program. On a more positive note, it may reflect the relative perceived advantage of the EPZ operating environment even to local firms, and so perhaps indicates a pent‐up demand for investment opportunities by the domestic private sector. From the data we have available, we are unable to test which, if any, of these explanations holds true.

Focusing on the FDI only, Figure 4 illustrates the main sources of foreign investment into each of the zone programs, by region of investment origination. Several points stand out. First is the general dominance of East Asian investors, particularly in those programs focused on the garments and textiles sectors (with the exception of Dominican Republic and Honduras). Second, while the two Asian EPZ programs are mainly used as export platforms by regionally‐based (Asian) investors and the two Latin American zones (Dominican Republic and Honduras) play a similar role for US investors, the African zones have no such dominant investor source. European investors do play a relatively greater role in EPZ investment in the African zones, but they are by no means the dominant source. Indeed, the African

> 13 The data shown are percentages of firms not of investment value. The difference can be significant – for example, according to data from the Ministry of Planning and Investment, local investors accounted for more than half of all firms in the industrial zones in 2009, but only 26% of investment by value.

> 14 The share of local versus foreign ownership in Vietnam is based on data (2009) from the Ministry of Planning and Investment. This takes into account both firms in Export Processing Zones and Industrial Zones. By contrast the surveys were carried out only with firms in the Export Processing Zones, which are almost exclusively foreign‐controlled.

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