From the period of 1949 to some years before 1979, when Mao Zedong was the Leader and the rise of Communism, China Exhibited little interest in international business transactions. During This period, China’s import-export trade was less than 10 Percent of her national income, because China neither allowed nor received foreign investments on her territory [30]. China Became more open to foreign investments only after the fall of the Gang of Four in 1976 [31]. The Chinese government actually embraced the free trade zones concept in the early 1980s when Deng Xiaoping promoted an economic “open-door policy” [10]. After the Third Plenum of the 11^th Congress in 1978, the Communist Party of China (CCP) and the Chinese government introduced some major political changes: they established four special economic zones in 1979, setting forth the as a national policy the development of the coastal region in the Sixth Five-Year Plan (1981-1985) [32].

In 1984, 14 coastal cities were opened; three deltas―the Lower Yangtze delta, the Xiamen-Zhangzhou-Quanzhou Triangle and the Pearl River Delt―were declared as Coastal Economic Development Zones, and Hainan was established as a special economic province [32]. China used Special Economic Zones to pioneer new economic policies, provide modern infrastructure and attract investment for export-oriented industries [33]. In 2008, a World Trade Organization policy review reported that as of 2006, china had 660 SEZs in addition to other development zones that were sanctioned by the central government and 1346 additional development zones sanctioned by local government [34]. The Peoples’ Republic of China (PRC) is the largest exporter in the world and the second largest importer. The only developing country on the list of the world’s top ten exporter’s aside Russia is China [29]. In December 2005, the PRC established its first FTZ located in a port―the Yangshan Free Trade Port Area [26]. This FTZ had all of the offices associated with a port including customs, taxes, maritime affairs, and border inspection. In July 2009, the State Council approved Pudong Airport Free Trade Zone, the fourth component SEZ. Most of the investment related with this FTZ comes from Pudong International Airport [29]. The service that it offers are the same as that of the SEZs in the SHFTZs and the success of the Pudong Airport Free Trade Zone is attributed to its superior air and land transport systems. Pudong Free Trade Zone went into strategic development alliance with the other three SEZs called the (“Three Ports, Three Areas”) four months after its establishment [29].

Despite its enormous trade volumes, the national government is encouraged to test new methods to promote international trade and foreign investments due to the slowing domestic economy. The NPC on August 30, 2013, promulgated the “Decision of the Standing Committee of the National People’s Congress sanctioning the State Council to Provisionally Adjust the Applicable Administrative Approval Items Set in Laws in China (Shanghai) Pilot Free Trade Zone”. The four aforementioned SEZs were stated in this legislation to be merged into one single FTZ and authority was given to the State Council to create administrative guidelines to set up and regulate the SHFTZ for three years. Pursuant to this document, the SHFTZ was established on October 1, 2013 [29]. The most advanced Shanghai Pilot Free Trade Zone (SPFTZ) in Shanghai was reinvigorated by the government of China in September 2013 and is seen as another key step by China towards its ambition of returning Shanghai back into a principal global trading and financial hub [35]. One purpose of setting up the free trade zone is to use it as a policy testing ground and spread it consecutively to other parts of the country when those policies and practices have fully-fledged [35].

Export promotion as a tool for economic growth is highly emphasized. It is acknowledged in theory that promoting volume and/or value of exports brings an increase in exports, increases foreign exchange and further improves a country’s economy. Success in manufactured exports has been measured to be synonymous with rapid economic development. In the last thirty years’ success in manufactured exports has been nearly synonymous with rapid economic development [36]. Export promotion in Ghana is seen as an important policy instrument for the country in achieving sustainable economic growth. In order to promote competiveness in Ghana exports, several policy instruments have been adopted. These include the Economic Recovery Program (ERP) initiated in 1983. The Free Zones policy instruments have become a very popular instrument after its introduction. Free zones have become important part of policy instruments in developing economies in their quest to attract foreign investment, promote non-traditional exports and to increase exports in total [37].

After 15 years of economic reforms prior to the inception of the Free Zones program in Ghana, Ghana’s business environment was said to be amongst the best in Africa for private sector development. This was after a benchmark study was commissioned by the Government of Ghana for the Gateway project to compare investment climate to those of Mauritius and Dubai (considered best practices); and Togo and Kenya (potential competitors). The study confirmed that Ghana compares favorably to Togo and Kenya and had advantages that make it attractive to Mauritius and Dubai. However, foreign investors in Asia, Europe and other parts of the world were largely not aware of the Ghana’s business potential both as a platform for production for the world markets and also as a gateway to the West African sub-region. The Free zones under the Gateway project was established to pull in a large number of investors who were export-oriented in order to facilitate export-led growth and trade in general. Ghana in a bid to kick-start the growth of the economy, adopted the free zones concepts over a decade ago. This was meant to attract investment and capital and to encourage competitive enterprises focus mainly to produce for export [37].

The State Council issued the “China (Shanghai) Pilot Free Trade Zone Overall Plan” (“SHFTZ Plan”) within three weeks after the NPC promulgated the document that gave authority to the State Council over the SHFTZ. The principal objectives of China (Shanghai) Pilot Free Trade Zone (SHFTZ) are:

1) To accelerate governmental change in accordance with a changing economic environment [29].

2) To research new methods of administrative regulation [29].

3) To promote trade and investment [29].

4) To serve as an experiment for national regulatory reform [29].

The SHFTZ Plan provides guidelines for the initial three years of the SHFTZ, it focuses on reforms concerning foreign investment, trade, financial services, merchandise classification, and currency exchange [29]. With the above main objectives, six areas of focus for the free trade zone were emphasized to bring forth the multi-layered mission of the SPFTZ. These are: financial services; shipping and logistics; commercial trade; professional services such as law and engineering; culture and entertainment; and social services including education and healthcare [35].

The Ghana free Zones was established to achieve the below objectives:

・ Attraction of Foreign Direct Investments [38] ;

・ Creation of employment opportunities [38] ;

・ Increasing foreign exchange earnings [38] ;

・ Provision of business opportunities for foreign and local investors to undertake joint-venture [38] ;

・ Enhancement of technical and managerial skills/expertise of Ghanaians; Promotion of the transfer of Technology and Diversification of Exports [38].

China’s path of development has closely resembled those of Taiwan, Singapore and South Korea in the sense that economic development has been accompanied and enhanced by the central authority being delegated, and promoting sufficient autonomy for domestic social groups and markets [39]. There has been a recognizable increase in the power of the local government to regulate the areas under their jurisdiction as a result of decentralization of economic power to lower administrative levels. While carrying on this process, market mechanisms have been transplanted into the economic arena [35]. The SHFTZ is made up of a complex structure of decentralized governance model of governmental organizations (Figure 1) that are categorized into two administrations for industry and commerce (“AICs”) and a variety of local offices [29].

The organizational structure of the Ghana Free Zones Authority is depicted in Figure 2. It has nine members of which the President appoints in consultation with the Council of State. The Minister of Trade and Industry chairs the board. The board’s main role is to facilitate, regulate and monitor activities in the free zones [41].

Enterprises established in these zone enjoy these incentives: 100% exemption from payment of direct and indirect duties and levies on all imports for production and exports from free zones, 100% exemption from payment of income tax on profits for 10 years and shall not exceed 8 percent thereafter, total exemption from payment of withholding taxes from dividends arising out of free zone investments, total exemption from payment of withholding taxes from dividends arising out of free zone investments, relief from double taxation for foreign investors and employees, no import licensing requirements, minimal customs formalities, 100% ownership of shares by any investor―foreign or national in a free zone enterprise is allowed, there are no conditions or restrictions on: repatriation of dividends or net profit; payments for foreign loan servicing; payments of fees and charges for technology transfer agreements; and remittance of proceeds from sale of any interest in a free zone investment, free zone investors have the permission of operating foreign currency accounts with banks in Ghana, annually in the local market up to 30% of sale of produced goods and services of the free zone enterprise are allowed, free zone investments are guaranteed against nationalization and expropriation, relief from various bureaucratic restrictions and other statutory requirements, investment approval not exceeding 28 working days, and accelerated on-site customs inspection [27].

The process of registering the obtaining legal license involves: Incorporate a company in Ghana with the Registrar General’s Department, obtain and complete Ghana Free Zone Board Application Form (US$100.00) and submit with Business Plan with Copy of incorporation documentation, evidence of possession/lease of land or intent to acquire such property, MOU with potential clients, Environmental Protection Agency(EPA) permit, evidence of funding and any other relevant document [38].

The space in the zone is limited; however, originally four (4) bonded zones were recently expanded. Now the zone covers 120 square kilometres and is currently composed of seven existing bonded zones, these are: Waigaoqiao Free Trade Zone and Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area; the first free trade zone in China, Pudong Airport Comprehensive Free Trade Zone; a deep-water port, key component of Shanghai Port, Lujiazui Finance and Trade Development Zone located west to Shanghai Pudong international Airport, Jinqiao Economic and Technological Development Zone a financial services hub and Zhangjiang High-tech Industrial Development Zone; an advanced manufacturing and manufacturer services area, high-tech manufacturing and medical services specialization area [36].

Progress in the following areas has been in place since the commencement of the SPFTZ in 2013. First of all, there has been a quick increase in newly registered enterprises. There were 12,547 new registered enterprises in the SPFTZ by 26 September 2014, consisting of 10,788 domestic investment enterprises and 1759 foreign investment enterprises. As seen in Figure 5, there was a steady increase, from 11.6% to 24.9% of the proportion of foreign investment enterprises [26]. Secondly, financial innovation in SHFTZ has made progress. As at the period of discussion, there were 484 free trade accounts operated by enterprises, and the RMB balance of these accounts was about 90 million. As can be seen in Figure 6 in the first quarter after the inception of the SHFTZ, not much growth or contribution to the Shanghai economy was observed, only 5.68%. SHFTZ was estimated to have contributed about 13.2% of Shanghai GDP, increasing to 15.2% and 22.9% in 2015 and 2016 respectively. These figures give a clear indication of the contribution of the SHFTZ to the acceleration of the economy of the area as in accordance with the maturity expectations [47].

Many financial institutions have business in the SHFTZ, including 23 foreign banks, 14 Chinese banks, three security companies and 11 insurance companies. Twenty-eight (28) enterprises had built so called “RMB money ponds” in the SHFTZ, having a balance of 16.9 billion. The RMB cross-border settlement in the SHFTZ is 111.5 billion. Seventy (70) of the enterprises are involved with RMB finance from abroad and are running on a balance of 16.06 billion [26].

Registered enterprises within the SHFTZ have continuously increased to a

total of 25,304 of which sixty-seven percent (67%) of them were registered after the SHFTZ was set up. Meanwhile, each enterprise’s registered capital has increased from 43.71 million to 63.36 million [48]. As informed by the local official of the SHFTZ, in 2015, the number of registered foreign-invested enterprises within the SHFTZ increased by one and a half times that in 2014. This as they noted, covers about half the total number in the whole city of Shanghai. Foreign-invested enterprises in the SHFTZ have increased from 5% (from the beginning) to 20% for the period under discussion. The average registered capital of foreign-invested enterprises is twice that of domestic-invested enterprises [48].

Table 1 shows the changes on income, tax, profits, and number of employees before and after the SHFTZ was set up in 2013. Apart from few figures like Investment

on Fixed Assets and Total Industrial Output Value, most others have indicated an increasing tendency. The Registered Capital from Domestic Enterprises, Foreign Investment Projects, and increase of the Newly Set-up Enterprises Registered Capital of FDI are very impressive merely because of the release market access. Table 2 shows a picture in parallel to the general one of China’s imports

and exports due to the fast increase rate of imports and exports within the SHFTZ. What is significant here is the volume of imports and exports via the SHFTZ, particularly with regards to the rapid increase after the SHFTZ was set up. This proves the SHFTZ concept’s attraction to investors [48].

Considering the above discussions, the SHFTZ was constituted as a form of pilot

program to increase investment from foreign investors. The benefits of foreign investment are relatively obvious―more capital, increased access to foreign markets, economic development, and availability of foreign products to domestic consumers notwithstanding, there are concerns to foreign investment. Firstly, there is a probability of it influencing domestic politics. China has historically resisted foreign influence strongly, so this SHFTZ has been a significant policy consideration. Secondly, there was a reduction in fund received by the central government due to the incentives introduced by the program. Shanghai, the financial centre of China was chosen strategically as the testing grounds for the economic reforms. This was to enable the program to balance the negative and positive sides of foreign investment promotion, to limit the risk that SHFTZ can bring while maximizing the potential gains. Shanghai hold offices for a number of foreign companies and is also noted for hosting conferences and events on trade promotion. So initially consolidation of the existing four Free Trade Zones was a good way of making use of existing infrastructure and also taking advantage of proximity to foreign companies. With a GDP contribution of 5.68%, 13.2%, 15.2% and 22.9% from the first quarter after the inception of the FTZ, at the end of 2014, 2015 and 2016 respectively, to the Shanghai economy it can be said finally that the SHFTZ idea has yielded its intended goals significantly.

There has been year on year increase in the number of companies registering for the free zone initiative. Even though the rate of export has increased over the years under discussion, it has not been that prominent. Taking the exports from the export processing zone as a proportion of the gross exports of Ghana, one can see an average of 15% to the gross exports of the country as can be seen in Figure 12. This is not good enough. Ghana would need to fully develop all the areas earmarked for development into Export Processing Zones. Lessons of the decentralized structure being used by China can be learnt to help grow this initiative. The setting up of the three Development Authorities by current government

can to a greater extent tow the China line of decentralized zone creation and governance. While business registration approval duration for SHFTZ has been reduced to less than a week, while import and export license takes 2 weeks, the approval duration for the Ghana free Zones take about 28 days.