BIS Review 71/2009  1  Evidence from South East Asia indicates that capital flows engendered a financial crisis in that region in 1997 and 1998. In light of this evidence, the results of the Foreign Private Investment and Investor Perception Survey are intended to assist the Government to effectively monitor private capital flows. Accurate and reliable data on private capital investment will be helpful in understanding recent developments in the Zambian economy. Better information on investor perceptions will assist Government in designing policies that will attract more investment into our economy. Further, the results of the survey should prove useful to the private sector and other stakeholders. On the whole, the importance of timely and reliable information on capital flows in the design of appropriate policy responses by Government and thus enhancing macroeconomic stability can hardly be overemphasised. Adequate and consistent information on capital flows will also greatly improve Balance of Payments Statistics for Zambia and serve as an early warning system for Government on potential international financial crises and other external shocks. Mr. Chairman, Zambia, like many other developing countries, has inadequate capacity to collect, analyse and disseminate data and information on foreign private capital investment. Compared with other countries in the African sub-continent, Zambia has serious gaps with respect to data on foreign private capital investment. For instance, while we are now at the second phase of the Survey, Uganda, Tanzania and Malawi are in the sixth, fourth and third phases, respectively.

Without their support, it would have been very difficult to complete this phase of the Survey. Distinguished Guests, As you are aware, the Zambian economy has recorded significant positive developments in the recent past, owing to the wide-ranging economic reforms the Government has been implementing since 1992. The reforms, which are aimed at stabilising the economy and supporting economic recovery for the purpose of reducing poverty among our people, have facilitated increased investment in various sectors of the economy, such as, agriculture, tourism, construction and manufacturing. As you may also be aware, the mining sector has attracted unprecedented amounts of investment in the recent past. Government’s economic reforms since the early 1990s have contributed immensely to the boosting both local and foreign investors’ confidence in the Zambian economy, which is an important pre-requisite for attracting capital flows. The survey findings that we are disseminating today indicate that Foreign Private Capital flows to Zambia in 2007 rose to US $ million from the US $ million recorded in 2001. The 2007 inflows were largely in form of foreign direct investment, borrowing from nonaffiliates (Loans and Trade Credits) and portfolio investment. We believe that the introduction of economic reforms led to a substantial increase in private capital flows, which regrettably, we have not been able to capture on a regular basis due to budgetary constraints. Mr. Chairman, History has taught us that high volatility in private capital flows, if not properly monitored and managed, can induce financial and macro-economic instability in the domestic economy.