caleb m fundanga : the bank of zambia and the insurance industry speech by dr caleb m fundanga, governor of the bank of zambia, at the end of year cocktail party for the zambia state insurance corporation limited clients, lusaka, 1 december 2004. * * * the master of ceremony the registrar - pensions and insurance authority the board chairman - zambia state insurance corporation the board chairman - zambia state insurance pension trust fund madam managing director - ms muyenga distinguished invited guests ladies and gentlemen good evening! i wish to thank the managing director of zambia state insurance corporation limited - ms muyenga, for inviting me and my wife to be the guest of honour at this end of year cocktail party. despite the fact that the bank of zambia is not directly associated with the insurance industry, this function gives me a rare opportunity to say something about the relationship between the bank of zambia and the insurance industry. in the past few years, the bank of zambia has taken keen interest in the operations and performance of the insurance companies and pension funds. this is because insurance companies and pension funds have a direct impact on macro - economic variables, since most of them are leading players in the government securities market. whenever the government wishes to raise funds, it is these institutions together with commercial banks that provide them. ladies and gentlemen, many of you will agree with me that the recent downward trend and stabilisation in the macro - economic variables, such as interest, inflation, and exchange rates, has induced high levels of investor confidence in our economy. as many of us are aware, a stable macroeconomic environment is one of the critical ingredients for achieving sustainable economic growth and, ultimately, poverty reduction, in our country. in this regard, allow me to reiterate what i have been saying at other fora that the insurance industry plays a critical role in the economic growth and development of any country. here in zambia, the insurance industry, with gross annual premiums of approximately k273 billion for life and non - life business, and about k550 billion for pensions, controls colossal sums of money which could be used for investment locally ; and if properly regulated could contribute to developing a strong financial sector in zambia. however, the problem has been that the insurance industry has been under - regulated for many years. in this respect, it is high time that regulations are put in place to harmonise the operations of this important industry. i have several times been told that the insurance act of 1997 is inadequate in many areas

in an international market. banks and other service sectors, in particular, have outperformed other countries in this respect. this is probably due to the modernisation of the economy through the 1980s and 1990s, which resulted in more efficient markets. a third characteristic has been an ample supply of labour, which has boosted output growth. over the past two years, an increase in labour force participation and high inward labour migration has provided room for continued high growth. in both 2006 and 2007, the number of employed increased by over 3 per cent. the number employed increased by 93 000 persons between 2006 and 2007, the highest increase over the past few decades. the sharp growth in employment has partly been reflected in a decline in unemployment and an increase in the labour supply. this is due to inflows of foreign labour and increased labour participation among the existing population. labour force participation in the age group 15 - 74 has never been higher. in 2007, growth in the labour force was almost as strong as employment growth. the increase in the labour supply has been particularly sharp in the youngest and oldest age groups. one particular feature of this upturn has been high inward labour migration, accounting for almost half of the growth in the labour force in recent years. most work permits have been given to nationals from poland, germany and lithuania. most foreign workers from the new eu countries probably intend to remain in norway for some time. although unemployment has fallen sharply, wage - earners ’ share of value added has declined since the early 1990s, but has picked up lately. solid productivity growth and high prices for export goods and goods supplied to the petroleum sector have boosted corporate earnings and reduced the wage share over the past few years. the ample supply of labour has probably also had a dampening effect on wage growth. increased globalisation may have provided greater opportunities for norwegian enterprises to relocate production to other countries if labour costs become too high. this probably places some restraint on wage demands among workers in sectors where enterprises have such opportunities. but wage - earners have also fared well. we have seen solid growth in employment, and low prices for imported goods have resulted in a subdued rise in consumer prices and a substantial increase in wage - earners ’ real wages. there are now signs that productivity growth is edging down at the same time as wage growth is high. strong growth in real income has contributed to the long period of high housing investment and rising house prices. house price inflation peaked amid the housing market euphoria of about