Zambia invites Indian firms to set up tax-free zone

March 21st, 2008 - 12:02 pm ICT by admin  

By Devirupa Mitra
New Delhi, March 21 (IANS) After giving China a tax free zone, the southern African nation of Zambia wants to create a similar exclusive economic zone for Indian companies to bring “value-addition” to its mining industry. “We have had a long partnership in India, with investments in several areas. But what has been lacking was visibility. This zone will help in improving India’s profile (in Zambia),” visiting Zambian Minister for Commerce, Trade and Industry Felix Mutati told IANS.

He said that the offer was specifically drawn up to mark his visit to India for the fourth India-Africa business conclave. “I have not yet told my president of my decision. But we need to make quick decisions nowadays,” he said, tongue-in-cheek.

The landlocked African nation, whose economy has been traditionally dominated by copper mining, has already approved two multi-facility economic zones being developed by the Malaysians and the Chinese.

“If the Malaysians can do it, why not India, which is a bigger country,” he asked.

Malaysia was the first to ink a deal for a multi-facility economic zone (MFEZ) last year, followed by China, which is currently negotiating an agreement with the Zambians.

The minister said that the Chinese planned to invest nearly $900 million to develop the tax-free zone.

“We want the Indian zone to be at least $900 million. If it’s smaller, then it will not have the visibility,” he said, adding that 30 sq km land had already been identified in the central province of Kabwe, about 150 km from capital Lusaka, for the special economic zone.

The Zambian minister said that he would like Indian firms to focus on supply of equipment and processing of raw products.

“While we have a lot of mining activity, we have to export all the raw materials for processing outside as there is no proper processing plant,” he said.

Pointing out that Zambia was surrounded by eight nations, who were also mineral-rich, Mutati said: “Our neighbours like Congo, Angola and Mozambique also have active mining industries, which could also be catered by this proposed economic zone.”

He said that he was already in talks with the Tata Group, which had shown interest in setting up a plant in the proposed zone, while another Indian industrial group will be visiting Zambia next week to survey the site.

Mutati said that once Indian firms invested in the tax-free zone, they would act as “marketing tools” to attract more Indian investment in other parts of the economy.

Currently, India has a share of 50 percent of Zambia’s mining industry, while the Chinese have 15 percent - courtesy Vedanta Resources’ majority stake in the country’s largest copper mines, Konkola, at a cost of $1.2 billion.

The total Indian investment in Zambia is estimated to be $2 billion, with capital flowing in other sectors like banking, health and education too.

While he does not foresee India losing its strong position in the Zambian mining industry, Mutati was clear that China’s “whole new way of doing business” in the continent had to be matched by the Indians.

“The Chinese start to work behind the scenes, but they come and make a decision there and then. After that, they start to work backward, asking for data on the projects,” he said.

He cited the example of the Chinese MFEZ in his country to illustrate his point. “They have already constructed 30-40 percent of the buildings, but it is only now that they are negotiating an agreement,” said Mutati.

Similarly, he said, the Chinese had announced an investment of $1 billion in the mining sector, but were yet to see the land. “Chinese do and assess, while Indians assess and do,” said Mutati.

He was also appreciative of the Chinese strategy to combine their acquisition of licences for resources with development of infrastructure.

“In a neighbouring country, the Chinese have offered to build 3,000 km of road in a swap for a mining concession of 20 years,” he said.

“Indian firms need to be more aggressive, otherwise they are losing out,” warned Mutati.

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