A wide number of factors contribute to the performance of economic zones programs, including structural determinants like market size and access and broad national competitiveness (see Farole, 2011). But one of the main factors contributing to unsuccessful zones may be the failure to create an _investment climate_ inside the zones that is substantially improved on what is available outside. Anecdotal information suggests that too often, African zones are plagued with the same problems – unstable electricity, lack of water, heavy bureaucracy, inefficient and corrupt customs – that hinder investment in the wider economy. However, to date there have been no comparative studies of the investment climate performance in economic zones, in Africa or elsewhere.

This paper has two objectives: first, to assess the outcomes of African economic zones in a systematic manner; second to assess the performance of African zones in meeting the investment climate requirements of their investors. The hypothesis is that the latter has important impacts on the former. The paper is based on original survey research carried out in 6 African countries (and four comparator countries outside the region). Throughout the remainder of the paper we will refer to the zones programs as being “export processing zones” (EPZs), even though several of the programs are technically considered free zone programs – the reason for this is that the focus of the research was on export‐oriented manufacturing activities and thus in line with the traditional EPZ model.

We find that performance across the African zones is mixed, with Ghana and Lesotho (and in some cases Kenya) performing relatively well on some measures. On the whole, however, African programs are underperforming relative to the Asian and Latin American programs included in the study. Moreover, the African zones programs are not yet having any discernable structural impacts on their economies. The results raise questions regarding the competitiveness of African zones programs and the potential of zones which aim to compete for labor intensive assembly employment under a traditional export platform (EPZ) model. In analyzing investment climate performance, we find that, across the criteria that matter most to investors, economic zones in Africa offer an improved business environment relative to what would be available outside the zones. However, in most cases the scale of improvements is limited. In contrast, the zones in the non‐African countries in the survey appear to be able to make much more dramatic improvements on the national investment climate. The survey results highlight the critical importance of addressing the basic day‐to‐day challenges that investors face inside the zones.

The remainder of the paper is structured in seven sections. Section 2 provides a very brief introduction to economic zones in Africa. In section 3 we outline a basic framework for assessing performance of economic zones programs. This is followed in section 4 by a discussion the relationship between the investment climate and FDI, and its specific implications in the economic zone context. Section 5 gives a brief description of the data and methodology used in the analysis. In section 6 we present a detailed assessment of zone performance, covering investment, exports, employment, and structural economic change. Section 7 presents the findings from the survey on the investment climate. Finally, in section 8 we summarize the findings and discuss briefly the implications for African economic zones programs.

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