Govt may ax EPZs

UNCLAS HARARE 002365 SIPDIS STATE FOR AF/S NSC FOR SENIOR AFRICA DIRECTOR JFRAZER USDOC FOR 2037 DIEMOND TREASURY FOR OREN WYCHE-SHAW PASS USTR FLORIZELLE LISER STATE PASS USAID FOR MARJORIE COPSON ¶E. O. 12958: N/A TAGS: EINV ETRD ECON EFIN PGOV ZI SUBJECT: Govt may ax EPZs ¶1. Summary: Yesterday's Herald suggests the GOZ may eliminate export processing zones (EPZs),taking to the next level its obliteration of a once-thriving and diversified economy. End summary. ¶2. The lead article in the State-run Herald's business section announces: "EPZs fail to deliver - RBZ [Reserve Bank of Zimbabwe]." In recent weeks, the GOZ has implied that firms in EPZs are sheltering foreign exchange from Reserve Bank controls. Although we have not heard anything definitive from GOZ sources, the Government appears to be laying the groundwork for de-certification of EPZs. ¶3. Comment: EPZ companies continue to do well, since they are not subject to the GOZ's mandatory exchange requirements and take full advantage of an industrious workforce at very low wages. It is one area of this plummeting economy that is even drawing new investment. Although GOZ statistics are sketchy, we believe most Zimbabwean exports to the U.S. now originate in EPZs. If EPZ companies must comply with present export regulations, most will no longer operate competitively. Sullivan