EMBARGO: NOT FOR PUBLICATION
BEFORE 19:00 HRS GMT 10SEPTEMBER 1996
PRESS/TPRB/37
23August 1996
ZAMBIA 'SECONOMIC AND TRADE REFORMS
START TOSHOW BENEFITS
Since late1991, Zambia hasfundamentally changed itstrade andeconomic policy. Thetrade
regime hasbeenconsiderably liberalized andtherehasbeensubstantial decentralization andderegulation
inother spheres ofeconomic activity. AnewWTO Secretariat report onZambia 'strade policies and
practices notes thatthegovernment hasdecontrolled prices, privatized many statecompanies andlifted
exchange controls onitscurrency, thekwacha.
TheSecretariat report andonebythegovernment ofZambia willbethefocus oftwodays
ofdiscussion attheTrade Policy Review Body on9and10September 1996. TheSecretariat report
notes thatZambia 'sreforms arenowshowing some benefits. Inflation hasdropped fromover100per
centin1992 and1993 toaround 35percentin1995. Non-traditional exports, mainly from the
manufacturing sector, havedoubled inthepastfouryears andgrew byabout 35percentin1995.
Thereport alsonotes thatnewagricultural policies, financial reform andacontinued focus on
privatization andfiscal reform should helpZambia 'sexport andgrowth prospects.
Zambia isamong thetopfivenations intheworld interms ofcopper reserves, refining capacity
andproduction. Copper exports account forover70percentofZambia 'sforeign exchange earnings
while cobalt exports account forafurther 10percent.Thereport states thatnon-traditional exports,
includingengineeringandagriculturalproducts,processedfoodsandtextileshavegrownrapidlyrecently,
contributing some 17percentoftotalmerchandise export earnings in1995, compared witharound
8percentin1990.
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Market-orientedreformshaveresultedintheliquidationorprivatizationofalmostallstate-owned
companies. State trading activities havealsobeenconsiderably reduced. Thereport notes, however,
thatZambia 'sElectrical Supply Corporation, itstelecommunications sector andtheZambian National
OilCompany stillexercise monopoly rights intheirrespective fields. Plans arebeing examined to
privatize theZambia Consolidated Copper Mines. ACompetition andFairTrading Actpassed in1994
introduced acodeofconduct forallbusinesses andprohibits anti-competitive trade practices, such
astheformation ofcartels andcollusive tendering. The1993 Investment Act,which wasamended
in1995, provides general incentives toinvestors andoffers aconcession taxrateonearnings from
farming andnon-traditional exports. TheActalsoensures thatprivate investments areprotected from
nationalization orother compulsory acquisitions.
During theUruguay Round, Zambia bound allitstariff linesonagricultural products, 97per
centofwhich arebound ataceiling rateof125percent. More than180non-agricultural products
havebeenbound atratesranging from 30to60percent. Itssimple average m.f.n. tariff is13.6per
cent,withaverages foragriculture at18.2andformining andindustrial products at7.5and13.5per
cent, respectively. Thereport states thatZambia 'stariffs show noescalation from primary tosemi-
processed products butgoupto16percentforfinished goods. Escalation ismostpronounced insectors
suchaspaper products andtextiles. Zambia applies noexport taxes, levies orcharges andgrants no
direct subsidies toexports.
According tothereport, Zambia 'smarket access commitments under theGeneral Agreement
onTrade inServices (GATS) include services related tomining andexploitation, professional services
andtourism andtravel-related services. Many formerly state-run hotels, banks andtransport facilities
havebeenprivatized andZambia 'snational airline hasbeenliquidated. Zambia iscurrently revising
itsintellectual property legislation tobring itintoconformity withtheWTO Agreement.
Inregard toitsregional arrangements, Zambia participates intheCommon Market forEastern
andSouthern Africa (COMESA), which inDecember 1994, succeeded tothePreferential Trade Area
forEastern andSouthern African States (PTA). Imports fromCOMESA partners enter Zambia at40
percentofapplicable m.f.n. rate.Zambia isalsoasignatory oftheSouthern African Development
Community (SADC).
Thereport concludes thatZambia 'sadjustment efforts havestimulated rapid growth innon-
traditional exports andhavebegun tohelpZambia todiversify itseconomy away fromitsdependence
oncopper. Thereport notes thatZambia 'sefforts tocontinue theimplementation ofreforms could
wellbolster confidence andhelpattract foreign investment. Itwillalsobecritical, states thereport,
thatZambia 'snon-traditional exports, including textile andengineering, floricultural andfoodproducts
donotmeetnewprotectivebarriersandthatthemultilateraltradingsystemcontinuestosupportZambia's
efforts.
Notes toEditors:
TheWTO Secretariat 'sreport, together withareport prepared byZambia, willbediscussed
bytheWTO Trade Policy Review Body (TPRB) on9and10September 1996. TheWTO 'sTPRB
conducts acollective evaluation ofthefullrange oftradepolicies andpractices ofeachWTO member
atregular periodic intervals andmonitors significant trends anddevelopments which mayhaveanimpact
ontheglobal trading system.
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Tworeports, together withareport oftheTPRB 'sdiscussion andoftheChairman 'ssumming
up,willbepublished induecourse asthecomplete Trade Policy Review ofZambia andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Thereports cover development ofallaspects ofZambia 'strade policies, including domestic
lawsandregulations, theinstitutional framework, trade policies bymeasure andbysector. Since the
WTO cameintoforce, the"new areas" ofservices tradeandtrade-related aspects ofintellectual property
rights arealsocovered. Attached arethesummary observations fromtheSecretariat andgovernment
reports. Fullreports willbeavailable forjournalists from theWTO Secretariat onrequest.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992&1994), Chile (1991), Colombia (1990), Costa Rica(1995), Côted'Ivoire (1995),
Czech Republic (1996), Dominican Republic (1996), Egypt (1992), theEuropean Communities (1991,
1993 &1995), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991), Iceland
(1994), India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992 and1995), Kenya
(1993), Korea, Rep. of(1992), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993),
Morocco(1989&1996),NewZealand(1990),Nigeria(1991),Norway(1991&1996),Pakistan(1995),
Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992
&1996), Slovak Republic (1995), South Africa (1993), SriLanka (1995), Sweden (1990 &1994),
Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994), Turkey (1994), theUnited States
(1989, 1992 &1994), Uganda (1995), Uruguay (1992), Venezuela (1996) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
ZAMBIA
Report bytheSecretariat -Summary Observations
TheEconomic Environment
TheRepublic ofZambia hasimplemented afundamental change inpolicy direction. Since
late1991, ithasmoved decisively away from import substitution tooutward orientation asthebase
ofitsgrowth strategy. Thetraderégime hasbeenconsiderably liberalized andtariffs arenowthemain
instrument oftrade policy.
Trade reform hasbeenaccompanied bydecentralization andderegulation inother spheres of
economic activity: domestic prices havebeende-controlled andgovernment intervention inmarketing
steadilyreduced;parastatalreformandprivatizationaresignificantlydecreasinggovernmentinvolvement
inbusiness activity; exchange controls havebeenlifted andtheexchange rateofZambia 'scurrency,
thekwacha, isnowmarket-determined. Theprogramme ofstructural reform hasbeensupported by
amacroeconomic stabilization effort.
Thereforms followed alongperiod ofsteady economic decline since themid-1970s, marked
inparticular byafallinpercapita income ofsome 30percent, bringing Zambia among theleast-
developed countries, andaslowing ofgross domestic investment from over40tounder 15percent
ofGDP. These developments reflected notonlylower prices andoutput ofZambia 'spredominant
export, copper, butalsothegrowth-inhibiting effect ofpervasive Statecontrols overeconomic activity.
Zambia 'sreforms haveyettoshow theirfullbenefits, influenced bydroughts inthree ofthe
fouryearsthrough1995andbyfallingcopperoutput(exacerbatedbyefficiencyproblems).Thuspositive
growth wasrecorded onlyin1993. However, some favourable signsarestarting toshow. Inparticular,
inflation isdown significantly, from wellover100percentin1992 and1993 toaround 35percent
in1995, indicating amore stable macroeconomic environment. Inaddition, non-traditional exports,
mainly fromthemanufacturing sector, havedoubled inthepastfouryears, growing bysome 35per
centin1995. Manufacturing remains subject tohighproduction costs, including forinputs ofbasic
infrastructural services suchasfinance andtelecommunication. However, continued liberalization,
including recent cutsintariffs andreform offinancial markets, pursuit ofprivatization, planned
improvements inmining, andfiscal reforms suchastheintroduction ofvalue-added taxinplace of
theformer salestaxareexpected toimprove Zambia 'sexport andgrowth prospects.
Zambia isamong theworld 'smajor copper producers. Mining andquarrying account forover
80percentofZambia 'smerchandise exports; thesector produces about 6percentofGDPandprovides
employment forsome 10percentoftheformal work force. Agriculture accounts forover20per
centofGDPandabout 17percentofemployment. Manufacturing, withsome 14percentofZambia 's
exports ofgoods, isthesource ofalmost aquarter ofGDP andjustover11percentofemployment.
Withover60percentofthelabour force, services areZambia 'slargest employer, accounting forabout
halfofGDP.
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Zambia inWorld Trade
Zambia 'svulnerability toexternal shocks isreflected initsexternal trade account, where the
price ofcopper andtheweather-related needformaize imports playanimportant rôle. Afurther
significant factor inthecurrent account isinterest onZambia 'sexternal debt, withsuchscheduled
payments averaging over25percentofmerchandise exports inthepastfiveyears.
Copper accounts forover70percentofZambia 'sforeign exchange earnings fromgoods, and
cobalt forafurther 10percent. Zambia ranked astheworld 'ssecond-largest producer ofcobalt in
1992andisamong thetopfivenations interms ofreserves, refining capacity andproduction ofcopper.
Non-traditional exports, including engineering andagricultural products, processed foods, andtextiles,
havegrown rapidly; theycontributed some 17percentoftotalmerchandise export earnings in1995
compared toaround 8percentin1990.
Major imports toZambia include capital equipment forthemining sector, crude oil,fertilizer
andmaize. Theshare ofmaize intotalimports reflects theintensity ofdroughts: maize accounted
fornearly 20percentoftotalmerchandise imports in1992, 2percentin1994 and8.6percentin
1995. Arecent increase infertilizer imports partly reflects anincreased emphasis bytheprivate sector
onagricultural products asnon-traditional exports. Other imports, including consumer goods and
intermediate inputs, haveincreased asashare oftotalimports -from40toaround 60percent-since
1992, reflecting inparttheconsiderable liberalization ofthetrade régime andthegrowth ofexports
ofmanufactures.
Japan, which buysmuch ofZambia 'scopper, isthesingle largest market forZambia 'sexports,
followed closely bytheEuropean Union (EU). Textiles, which areamong themore important of
Zambia'snon-traditionalexports,findamarketmainlyintheEUandSwitzerland.Zambia'sagricultural
exports, mainly floricultural, aremarketed largely outoftheregion asmany neighbouring countries
produce similar items. Within theregion, Zaire isthemainimporter ofZambia 'sproducts, followed
byZimbabwe. South Africa isZambia 'smajor supplier, withashare inZambia 'stotalimports of
almost 30percent, followed inorder bytheEU,Zimbabwe, Japan andtheUnited States.
Institutional andLegislative Framework
InAugust1991,theRepublicofZambiabecameamulti-partydemocracyheadedbyanexecutive
President, whose tenure maynotrunbeyond twofive-year terms. Legislative power isvested in
Parliament,whichconsistsofthePresidentandtheNationalAssembly.ThePresidentandmostmembers
oftheAssembly areelected byuniversal adult suffrage. ACabinet consisting ofthePresident, the
Vice-President andMinisters appointed bythePresident, formulates Government policy.
Zambia 'slawscomprise theConstitution, ActsofParliament andStatutory Instruments, which
aregenerally issued bymembers oftheCabinet. Bills, including those dealing withtrade, areinitiated
bythecompetent Ministries andsubmitted forapproval totheCabinet before submission toParliament.
The1995Customs andExcise Actisthemainlegislation governing Zambia 'sforeign trade, including
importation andexportation ofgoods, rules oforigin, customs valuation, tariff concessions, excise
taxes, andanti-dumping andcountervailing duties. The1994 Competition andFairTrading Act
introduced acodeofconduct forallbusiness entities andprohibits anti-competitive trade practices,
suchastheformation ofcartels andcollusive tendering. Under the1993Investment Act,asamended
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in1995, general incentives areprovided toinvestors, including aconcessional taxrateonearnings
from farming andnon-traditional exports; private investments areprotected from nationalization or
anyother compulsory acquisitions. Allinvestment applications areprocessed byaone-stop Investment
Centre,exceptforinvestmentinminingandfinancialservices,whicharerespectivelyundertheauthority
oftheMinisters ofMines andFinance.
Inaccord withthemarket-oriented reforms, almost allState-owned companies haveeither been
liquidated, privatized, orearmarked forprivatization, through theZambia Privatization Agency. State
trading andparticipation inproductive activities havebeenconsiderably reduced. However, theZambia
Consolidated Copper Mines, forwhich privatization modalities areunder study, theZambia Electricity
Supply Corporation, theZambia Telecommunications andtheZambia National OilCompany hold
monopolies orexercise rights intheirrespective fieldofactivity.
Zambia grants atleastm.f.n. treatment toallitstrading partners. After independence, Zambia
applied theGATT onadefactobasis untilitbecame aContracting Party inFebruary 1982. Zambia
isafounding member oftheWorld Trade Organization (WTO). Likeother WTO members, Zambia
hasbound allitstariff linesonagricultural products. About 97percentofsuchlinesarebound at
aceiling rateof125percent; bindings onremaining linesrange from45to60percent. Some 186
linesonnon-agricultural products were alsobound, atceiling ratesranging from 30to60percent.
Subject tolimitations concerning thepresence offoreign natural persons, Zambia bound market access
under theGeneral Agreement onTrade inServices (GATS) forsomeservices, including thoseincidental
tomining andexploration, andprofessional, tourism andtravel-related services. Zambia isrevising
itstrade-related legislation, including forintellectual property, tobring itintoconformity withtheWTO
Agreements.
Zambia participates intheCommon Market forEastern andSouthern Africa (COMESA), which
inDecember 1994, succeeded tothePreferential Trade AreaforEastern andSouthern African States
(PTA). Imports from COMESA partners enter Zambia at40percentoftheapplicable m.f.n. rate.
Zambia isalsoasignatory totheSouthern African Development Community (SADC).
Features oftrade policy andtrade policy instruments andtheir effects
Since late1991, tradebarriers havebeensubstantially reduced inZambia. Quantitative import
restrictions havebeeneliminated andimport controls aremaintained onlyforhealth, security and
associated reasons. Customs duties arenowthemain trade policy instrument.
Zambia 'stariff hasalsobeenconsiderably simplified. Over thepastfiveyears themaximum
ratehasbeenlowered from 100to25percent; tariff categories havebeenreduced from12tofour,
withratesofzero, 5,15and25percent; andvirtually allsuspensions andexemptions havebeen
eliminated. Almost allratesareadvalorem. Customs valuation isbased ontheBrussels Definition
ofValue buttheauthorities intend soontomove toa"transactions value" basis forthese purposes.
Zambia 'ssimple average m.f.n tariffis13.6percent. Theaverage rateishighest inagriculture,
where itis18.2percent; averages inmining andindustry are7.5and13.5percent, respectively.
About two-thirds ofalltariff linesbearratesof15or25percent, while some 20percentoflines,
mainly forrawmaterials andproductive machinery, havezerorates. Inaggregate, Zambia 'stariff
displays negative escalation fromprimary tosemi-processed products butratesescalate toover16per
centforfinished goods, withescalation mostpronounced insectors suchaspaper products andtextiles.
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Theauthoritieshopetolowertariffsin1997and1998,particularlyonintermediateandconsumer
goods. However, border duties account forwellover50percentofgovernment revenue, afactor
thatmayslowfurther tariff reductions. Anindependent body, theZambia Revenue Authority, was
established in1994, inorder toimprove revenue performance.
Inaddition totariffs, imports aresubject toanImport Declaration Fee,introduced inOctober
1995forfiscal reasons, andlevied atarateof5percentoncommercial goods worth atleastUS$500.
Excise duties ranging from10to125percentapply toalimited number ofgoods, whether imported
orlocally produced, including sugar, beverages, petroleum products, tobacco, tyresandtubes. Avalue-
added tax(VAT) of20percentreplaced a23percentsalestaxinJuly1995andiscollected onboth
goods andservices, locally supplied orimported.
Since theearly 1970s, Zambia hasapplied ananti-dumping dutyof15percentonimports
ofwindows anddoors, andwindow anddoorframes ofironorsteel, irrespective ofthecountry of
origin. Zambia, which intends toupdate itsantidumping andcountervail legislation, applies noother
"emergency" measure. NordoesZambia maintain anylocal content requirements; thelastsuch
measures were eliminated bythe1996 Budget.
Zambia applies noexport taxes, levies orcharges andgrants nodirect subsidies toexports.
Adrawback scheme isinplace forexporters andisbeing reviewed withaviewtoreducing delays
related torefunds. Non-traditional exporters areexempt from customs dutyandVAT onimports
ofmachinery andequipment, andareentitled toaconcessional income taxrateof15percentontheir
export earnings, compared tothestandard rateof35percent.Theestablishment ofexport-processing
zones isunder study. Except forprohibitions maintained forenvironmental reasons, restrictions on
exports havebeeneliminated. However, exports ofmaize arebanned from timetotimedepending
onthedomestic harvest, andscrap metal issubject toexport limitations. Allexporters havefullforeign-
exchange retention rights.
Zambia eliminated allitsdirect product andconsumer subsidies in1991. Price regulations
andcontrols were abolished foralmost allgoods andservices in1992, including forstaple foods,
pharmaceuticals,andtelecommunications;administeredpricesremainforpetroleumproducts,electricity
andtransportation.
Sectoral aspects oftrade policy
Thesignals forresource allocation inZambia havechanged significantly since 1991, away
fromState-control toward market orientation. Bymoving toward amore neutral incentive structure,
theGovernmenthopesthattheprivatesector,inallocatingresourcesaccordingtocomparativeadvantage,
willdiversify theeconomy away fromitsdependence oncopper, andZambia 'sattendant vulnerability
tochanges incopper output andprices. There aresome indications ofsuccess. Intheperiod since
1991, thedecline inthevalue ofcopper exports, duetoareduction inoutput, hasbeenmore than
fully compensated byanincrease innon-traditional exports. Thisincrease hasbeen mainly in
manufactures butagriculture hasalsoresponded tothereform effort, particularly infloriculture where
there hasbeenarecent seven-fold increase inexports.
TheGovernment hasreoriented itsobjectives foragriculture away fromthenarrower aimof
foodsecurity, particularly fortheurban population, tothebroader goalofacontribution fromagriculture
tonational income andemployment. Inthiscontext, asectoral liberalization programme hasremoved
quantitative restrictions onimports, eliminated subsidies andmonopoly marketing boards, deregulated
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prices, andinitiated theprivatization ofallpublic enterprises inthesector. Government assistance
tothesector islimited toresearch, infrastructure, agricultural extension services andthemaintenance
ofastrategic foodreserve, mainly inmaize, thenational staple. Larger-scale projects, suchasthe
Emergency SeedDistribution Programme, which isaimed atdiversification toward drought-resistant
crops, arelargely financed byforeign donors. Tariffs arevirtually thesector 'sonlytrade policy
instrument buttheyremain relatively high: themaximum rateof25percentapplies tomore than
halfthelinesinthesector.
Theauthorities alsointend tosubstantially reduce therôleoftheState inmining, essentially
tothatofafacilitator andregulator. Thus, recent legislation eliminated themandatory participation
oftheGovernment inmining ventures, established thefreedom ofcommercial operations andguaranteed
thesecurity oftitletomining rights. Inaddition, in1994 monopoly marketing rights onmetals were
abolished, andin1995 anewroyalty scheme wasintroduced toencourage vertical diversification of
mineral products. Authority isnowreadily granted totheprivate sector forawiderange ofactivities,
including exploration andprospecting. However, thesector remains dominated bytheState-controlled
Zambia Consolidated Copper Mines (ZCCM). Productivity incopper production isrelatively low,
inpartresulting fromthedepth ofZCCM 'smines, depleting orereserves, lackofskilled labour and
management problems. Cost-cutting efforts areunderway andtheauthorities hopethatthistogether
withtheplannedprivatizationofZCCM, theprospectiveentryintoproductionofnewsites,andimproved
extraction methods willstabilize production atclose tocurrent levels.
InZambia 'smanufacturing sector, reform hasledtoashake-out ofthemore inefficient firms.
Inparticular, theGovernment hasliquidated theZambia Industrial andMining Corporation, which
asaState-controlled holding company dominated thesector. Resources would nowseemtobestarting
tomove toward more efficient use; newinvestment appears tohavebeenattracted byprivatization
andsomeestablishedcompaniesareexpandingcapacity.Certainlymanufacturingexportshaveresponded
tothemore liberal environment, doubling overthepastfouryears. However, thesector remains one
ofrelatively lowproductivity, partly because ofweaknesses ininfrastructural services, including
occasional drought-induced energy shortages. Border protection forthesector isrelatively moderate;
therearenoquantitativeimportrestrictionsbuttariffsonsomefinalproducts,includingcertainprocessed
foods andtextiles range to25percent.
Since theinitiation ofreform many service-oriented State-owned service providers havebeen
privatized, including hotels, banks andtransport facilities. Inthelatter area, thenational airline has
beenliquidated. Except forlimitations intelecommunications, financial services andenergy, services
areopentoforeign investment. Inbanking, foreign-owned branches orsubsidiaries arefreetoenter
themarket provided theyincorporate locally andatleasthalftheirdirectors areestablished residents
inZambia. Monopolies orexclusive rights remain incertain areas, including telecommunications and
energy. Further planned reforms inthesector areexpected togivemomentum toothersectors, including
manufacturing, byreducing telecommunication, financial andtransport costs. Moreover, areas such
astourism, where deregulation andprivatization arewelladvanced, areexpected tostartshowing
improved growth.
Trade policies andforeign trading partners
Zambiahasundertakenprofoundchangeinitspolicyorientation.Supportedbyamacroeconomic
stabilization effort, ithasimplemented aseries ofboldstructural measures designed toreestablish
stable, sustainable growth. Trade liberalization isintegral, indeed central, toZambia 'sreform effort,
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thusindicating itsconfidence intheefficacy ofopen, competitive markets anditsadherence toWTO
principles
Zambia'sadjustmenteffortisbeginningtoshowsignsofsuccess.Inparticular,itsnon-traditional
exports havegrown rapidly, andarestarting toleadadiversification oftheeconomy away from its
dependence oncopper. Inthiscontext, continued steadfast policy implementation willhelptobolster
confidence andcould serve toattract theneeded foreign investment. Itwillalsobecritical thatZambia 's
non-traditional exports, including textile andengineering, floricultural andfoodproducts, notmeet
newprotective barriers andthatthemultilateral system supports Zambia 'sefforts withopenmarkets.
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TRADE POLICY REVIEW BODY
ZAMBIA
Report bytheGovernment -Summary Extracts
Overview
TheZambianeconomyhasalwaysbeendominatedbytheCopperminingindustry.Thecountry's
economic performance andpolicy making havebeenheavily influenced bycopper foritsincomes,
employment andexports.
Formany years theCopper industry hasaccounted forover90percentofforeign exchange
earnings andasubstantial proportion ofoutput. In1995 theindustry contributed 5.5percenttoreal
Gross Domestic Product (GDP), about 80percenttototalexport earnings andemployed anaverage
ofabout 59,8000 workers. Thisis11.9percentoftotalwage employment.
Duringthepastdecadetheproductionofcopperhasdeclinedsteadily.In1965,Zambiaproduced
about 680,000 metric tonsofcopper. Thisroseto700,000 tonsin1977. By1991 theproduction
hadfallen toabout 380,000 tonsanditwas307,181 tonsin1995. Thisislessthan50percentof
the1969 production.
Thisdeclineincopperproduction,compoundedbyfallingcopperpricessince1974,thedepletion
oforereserves andtheincreasing costofproduction haveadversely affected theperformance andgrowth
prospects oftheZambian economy. Thishasledtosignificant dropinGDP andliving standards.
Since 1989 forinstance, realGDP growth rateshavebeennegative except for1993 when it
shotupto9.2% gross. Output growth wasboosted bymainly thesignificant increase inagricultural
production brought about, largely bythefavourable weather conditions during the1992/93 season.
Zambia, hashadadjustment problems before. Between 1983 and1987, sheoperated under
structural adjustment programme. Theaimwassimilar tothecurrent adjustment measures. The
programmes were, astoday supported bytheInternational Monetary Fund. Unfortunately, dueto
inconsistence inimplementation, theprogrammes failed toaccomplish theirobjectives. They were
abandoned in1987.
Since 1992thenewGovernment hasmade progressive efforts totryandimprove theeconomy.
Macroeconomic andotherreform measures havebeenputinplaceforthatpurpose. These haveincluded
freeing interest andexchange rates; fighting inflation through prudent fiscal management; trade
liberalisation; public sector reform; privatisation ofstatecompanies etc.
Themain objectives ofGovernment 'seconomic policies are:
1. Restoration oftheZambian economy.
2. Acceleration ofthemanufacturing andagricultural sectors.
3. Improving andexpanding economic infrastructure forFDI, tourism andothers.
4. Improving andexpanding social infrastructure toimprove living standards.
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Achievement ofthese objectives however, hasmetwithobstacles suchasdrought which has
hitthecountry thepastthree consecutive years.
Performance ofsome sectors oftheeconomy hasalsobeenaffected negatively bybothinternal
andexternal factors. Internally, theliberalisation ofinterest ratesinthepresence ofhighinflation
ledtoarapid increase innominal interest ratesparticularly intheperiod 1992and1993. Forinstance,
byAugust, 1993, theaverage lending ratesofbanks hadgoneupto139percent, from 85percent
inJanuary, 1993. High, interest rates havediscouraged borrowing bythebusiness sector, hence
prolonging opportunities ofinvestment andoutput growth.
Stabilisation measures, havealsocaused theexchange ratestoappreciate andcause problems
forZambia 'sexporters including thecopper industry. Economic liberalisation hasalsocaused problems
forthedomestic industries debilitating many while resulting intoseveral closures ofothers.
International factors causing major problems fortheeconomy includes thesubstantial decline
inmetal prices ontheworld market since 1990.
Inspite ofalltheoddsagainst theeconomy, reform measures haveproduced some goodresults.
Themacro economy isnowmore stable thanitwasbefore newGovernment tookoverfour
years ago.Inflation islow,interest rateshavedeclined, staple foodprices havebeenstable, thebalance
ofpayments situation isviable, andZambia 'sexternal financial relationships havebeennormalized.
Thesuccesses reflect improved economic polices, enhanced financial management, andtheZambian
population 'swillingness tomake thesacrifices needed torestore theeconomic growth prospects.
Theeconomy hasmoved towards asituation ofexternal andinternal financial balance. This
hasbegun toleadtoarecovery inaverage percapita realincomes.
Over theperiod 1991-1994 asawhole, realGDP increased by3.2percentandrealpercapita
GDP declined byabout 7percent. These achievements havetobeseenagainst thebackground of
almost twodecades ofeconomic decline.
Numerous changes signal theeconomic turnaround. Construction activity isincreasing; local
cement salesarerising; energy use(petroleum andelectricity) isexpanding; tourism isgrowing; new
businesses arebeing formed; investment, funded frombothlocalandforeign sources isrising; small
non-traditionalexportshaveuntilrecentlybeenincreasing;Zambianasset-holdersarerepatriatingforeign
exchange; basicconsumer andinvestment goods arenolonger inshortsupply; thephysical infrastructure
isbeingrepaired;andtheprivatetransportsectorhasexpandedmarkedlybecauseofencouragingpolicies
byGovernment.
Government created Zambia Revenue Authorities aresult ofwhich hasimproved revenue
collection. Thishasledtoanimprovement inbudgetary deficits. Export Board ofZambia isinplace
topromote andimprove export performance. Theinvestment Centre wasalsocreated toimprove
investment. Zambia Privatisation Agency isinplace topromote sales ofstatecompanies. Onthe
financial side,aLusaka Stock Exchange wascreated twoyears agotodevelop thefinancial markets
andpromote equity investment. These institutional support mechanisms forexport andinvestment
effectively usedshould improve theeconomy. Alldirect controls ontradehavebeenremoved, except
forashortlistofitems controlled forenvironmental, health orsecurity reasons. Levels anddispersion
ofimport duties havealsobeenreduced.
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Theengine ofeconomic growth isprivate sector. Toachieve that, Government isinthe
advanced stage ofprivatising allstatecompanies including theZambia Consolidated Copper Mines
which produces Copper.
Trade Policy andPractices -General Trade Policy Objectives
In1991/1992 thenewGovernment ofMovement forMulti Party Democracy (MMD) embarked
ontheneweconomicrecoveryprogrammedrivenbyStructuralAdjustmentProgramme(SAP)supported
byIMF.Undertheseneweconomicmeasures,TradePolicyaimsatcreatingacompetitiveandproductive
economy driven byprivate sector initiative which willfoster living standards forZambians. Specific
objectives include thefollowing:
1. Complete trade liberalisation.
2. Trade promotion anddiversification through exports ofnon-traditional goods.
3. Creating conducive domestic environment forinvestment, growth andimproved living
standards.
Government emphasis initstradepolicy istoencourage export diversification inorder tomove
awayfromCopper dependence. Inthisregard sectors otherthanmining arebeing encouraged toexport.
Thefloricultural andhorticultural sectors arecurrently doing quite well.
Intheprocess ofimproving theeconomy, private sector emphasis remains key. TheZambia
PrivatizationAgencycontinuestosellstatecompaniestoprivateindividualsandcompanies.Government
isnolonger supporting statecompanies through subsidies aswasthecasepreviously. Monopolies
inpublic sector aregoneasdemonstrated intheliquidation ofthenational airline andmarketing boards.
International macroeconomic situation affecting Zambia 'sexternal sector
Thetwinprocesses ofliberalisation andglobalisation arepresenting adequate opportunities
forinternational trade. Government intentions aretoparticipate fullyintotheinternational tradesystem
byunlocking allbureaucratic impediments andother obstacles ofentry.
Demand forcopper, Zambia 'smainstay oftheeconomy, according tocurrent forecasts and
projections byUNCTAD, "point toanoverall increase intherhythm ofconsumption growth inthe
coming years". Thisbright picture isbased onassumption thatdeveloping countries ofAsiaandothers
keepthemomentum ofeconomic growth, andifthelarger Eastern Europe countries achieve asuccess
transition andtheireconomies succeed inrecovering fromthepresent slump. Fordeveloped countries,
itishoped thattheydonotundergo amajor recession intheyears totheendofthecentury.
Thecurrent trend intheinternational market istocreate prospects fordebtrelief andeven
cancellation fordeveloping countries particularly LDCs. Zambia, having donesowellsofarinterms
ofimplementation ofstructural adjustment programme should takeadvantage ofinternational donors
fordebtcancellation
Problems inExternal Markets
Toappreciate theproblems faced byZambia intheExternal market, itisnecessary totake
intoaccount thecountry 'sgeographical location andthepattern ofhertrade. Zambia isalandlocked
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country. Asaresult ofthispredicament, itincurs highfreight costs which result intouncompetitive
pricing ofherexports.
Furthermore, theworld copper prices aresubject tomajor price fluctuations. Thismakes the
economy vulnerable tomajor external shocks duetoitsdependence oncopper which contributes about
94percentofforeign exchange earnings overthe1990-1994 period.
RegulationsandstandardsarealsomajorobstaclesfacedbyZambianexporters.Thisisespecially
sointheexport ofagriculture products. These aresubjected tostringent rules andregulations.
Zambia benefits fromtheGeneralised Systems ofPreferences Schemes offered byDeveloped
countries. However, notallexports qualify forpreferential treatment under these schemes.
Zambia isamember ofSADC towhich allSouthern African Customs Union (SACU) member
states arealsomembers. South Africa, which isamember ofbothSACU andSADC, isZambia 's
major supplier intheregion. Itsupplies about 40percentofZambia 'stotalimports requirements,
while Zambia supplies onlyabout 1.5percentofSouth Africa 'stotalimports.
South Africa andtheother SACU members maintain highprotective tariffratesandnontariff
barriers aswellassubsidising theirexporters. Thiscreates unfair competition toZambia products in
theregional market. Theimprovement ofmarket access toZambian products intheregion will
contribute significantly toimproving Zambia 'strade balance.
END