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Trade Compliance Center

ZAMBIA

TRADE POLICY REVIEW SUMMARIES - 1996

SUMMARY

23 August 1996

ZAMBIA'S ECONOMIC AND TRADE REFORMS

START TO SHOW BENEFITS

Since late 1991, Zambia has fundamentally changed its trade and economic policy. The trade regime has been considerably liberalized and there has been substantial decentralization and deregulation in other spheres of economic activity. A new WTO Secretariat report on Zambia's trade policies and practices notes that the government has decontrolled prices, privatized many state companies and lifted exchange controls on its currency, the kwacha.

The Secretariat report and one by the government of Zambia will be the focus of two days of discussion at the Trade Policy Review Body on 9 and 10 September 1996. The Secretariat report notes that Zambia's reforms are now showing some benefits. Inflation has dropped from over 100 per cent in 1992 and 1993 to around 35 per cent in 1995. Non-traditional exports, mainly from the manufacturing sector, have doubled in the past four years and grew by about 35 per cent in 1995. The report also notes that new agricultural policies, financial reform and a continued focus on privatization and fiscal reform should help Zambia's export and growth prospects.

Zambia is among the top five nations in the world in terms of copper reserves, refining capacity and production. Copper exports account for over 70 per cent of Zambia's foreign exchange earnings while cobalt exports account for a further 10 per cent. The report states that non-traditional exports, including engineering and agricultural products, processed foods and textiles have grown rapidly recently, contributing some 17 per cent of total merchandise export earnings in 1995, compared with around 8 per cent in 1990.

Market-oriented reforms have resulted in the liquidation or privatization of almost all state-owned companies. State trading activities have also been considerably reduced. The report notes, however, that Zambia's Electrical Supply Corporation, its telecommunications sector and the Zambian National Oil Company still exercise monopoly rights in their respective fields. Plans are being examined to privatize the Zambia Consolidated Copper Mines. A Competition and Fair Trading Act passed in 1994 introduced a code of conduct for all businesses and prohibits anti-competitive trade practices, such as the formation of cartels and collusive tendering. The 1993 Investment Act, which was amended in 1995, provides general incentives to investors and offers a concession tax rate on earnings from farming and non-traditional exports. The Act also ensures that private investments are protected from nationalization or other compulsory acquisitions.

During the Uruguay Round, Zambia bound all its tariff lines on agricultural products, 97 per cent of which are bound at a ceiling rate of 125 per cent. More than 180 non-agricultural products have been bound at rates ranging from 30 to 60 per cent. Its simple average m.f.n. tariff is 13.6 per cent, with averages for agriculture at 18.2 and for mining and industrial products at 7.5 and 13.5 per cent, respectively. The report states that Zambia's tariffs show no escalation from primary to semi-processed products but go up to 16 per cent for finished goods. Escalation is most pronounced in sectors such as paper products and textiles. Zambia applies no export taxes, levies or charges and grants no direct subsidies to exports.

According to the report, Zambia's market access commitments under the General Agreement on Trade in Services (GATS) include services related to mining and exploitation, professional services and tourism and travel-related services. Many formerly state-run hotels, banks and transport facilities have been privatized and Zambia's national airline has been liquidated. Zambia is currently revising its intellectual property legislation to bring it into conformity with the WTO Agreement.

In regard to its regional arrangements, Zambia participates in the Common Market for Eastern and Southern Africa (COMESA), which in December 1994, succeeded to the Preferential Trade Area for Eastern and Southern African States (PTA). Imports from COMESA partners enter Zambia at 40 per cent of applicable m.f.n. rate. Zambia is also a signatory of the Southern African Development Community (SADC).

The report concludes that Zambia's adjustment efforts have stimulated rapid growth in non-traditional exports and have begun to help Zambia to diversify its economy away from its dependence on copper. The report notes that Zambia's efforts to continue the implementation of reforms could well bolster confidence and help attract foreign investment. It will also be critical, states the report, that Zambia's non-traditional exports, including textile and engineering, floricultural and food products do not meet new protective barriers and that the multilateral trading system continues to support Zambia's efforts.

TRADE POLICY REVIEW BODY

ZAMBIA

Report by the Secretariat - Summary Observations

The Economic Environment

The Republic of Zambia has implemented a fundamental change in policy direction. Since late 1991, it has moved decisively away from import substitution to outward orientation as the base of its growth strategy. The trade régime has been considerably liberalized and tariffs are now the main instrument of trade policy.

Trade reform has been accompanied by decentralization and deregulation in other spheres of economic activity: domestic prices have been de-controlled and government intervention in marketing steadily reduced; parastatal reform and privatization are significantly decreasing government involvement in business activity; exchange controls have been lifted and the exchange rate of Zambia's currency, the kwacha, is now market-determined. The programme of structural reform has been supported by a macroeconomic stabilization effort.

The reforms followed a long period of steady economic decline since the mid-1970s, marked in particular by a fall in per capita income of some 30 per cent, bringing Zambia among the least-developed countries, and a slowing of gross domestic investment from over 40 to under 15 per cent of GDP. These developments reflected not only lower prices and output of Zambia's predominant export, copper, but also the growth-inhibiting effect of pervasive State controls over economic activity.

Zambia's reforms have yet to show their full benefits, influenced by droughts in three of the four years through 1995 and by falling copper output (exacerbated by efficiency problems). Thus positive growth was recorded only in 1993. However, some favourable signs are starting to show. In particular, inflation is down significantly, from well over 100 per cent in 1992 and 1993 to around 35 per cent in 1995, indicating a more stable macroeconomic environment. In addition, non-traditional exports, mainly from the manufacturing sector, have doubled in the past four years, growing by some 35 per cent in 1995. Manufacturing remains subject to high production costs, including for inputs of basic infrastructural services such as finance and telecommunication. However, continued liberalization, including recent cuts in tariffs and reform of financial markets, pursuit of privatization, planned improvements in mining, and fiscal reforms such as the introduction of value-added tax in place of the former sales tax are expected to improve Zambia's export and growth prospects.

Zambia is among the world's major copper producers. Mining and quarrying account for over 80 per cent of Zambia's merchandise exports; the sector produces about 6 per cent of GDP and provides employment for some 10 per cent of the formal work force. Agriculture accounts for over 20 per cent of GDP and about 17 per cent of employment. Manufacturing, with some 14 per cent of Zambia's exports of goods, is the source of almost a quarter of GDP and just over 11 per cent of employment. With over 60 per cent of the labour force, services are Zambia's largest employer, accounting for about half of GDP.

Zambia in World Trade

Zambia's vulnerability to external shocks is reflected in its external trade account, where the price of copper and the weather-related need for maize imports play an important role. A further significant factor in the current account is interest on Zambia's external debt, with such scheduled payments averaging over 25 per cent of merchandise exports in the past five years.

Copper accounts for over 70 per cent of Zambia's foreign exchange earnings from goods, and cobalt for a further 10 per cent. Zambia ranked as the world's second-largest producer of cobalt in 1992 and is among the top five nations in terms of reserves, refining capacity and production of copper. Non-traditional exports, including engineering and agricultural products, processed foods, and textiles, have grown rapidly; they contributed some 17 per cent of total merchandise export earnings in 1995 compared to around 8 per cent in 1990.

Major imports to Zambia include capital equipment for the mining sector, crude oil, fertilizer and maize. The share of maize in total imports reflects the intensity of droughts: maize accounted for nearly 20 per cent of total merchandise imports in 1992, 2 per cent in 1994 and 8.6 per cent in 1995. A recent increase in fertilizer imports partly reflects an increased emphasis by the private sector on agricultural products as non-traditional exports. Other imports, including consumer goods and intermediate inputs, have increased as a share of total imports - from 40 to around 60 per cent - since 1992, reflecting in part the considerable liberalization of the trade regime and the growth of exports of manufactures.

Japan, which buys much of Zambia's copper, is the single largest market for Zambia's exports, followed closely by the European Union (EU). Textiles, which are among the more important of Zambia's non-traditional exports, find a market mainly in the EU and Switzerland. Zambia's agricultural exports, mainly floricultural, are marketed largely out of the region as many neighbouring countries produce similar items. Within the region, Zaire is the main importer of Zambia's products, followed by Zimbabwe. South Africa is Zambia's major supplier, with a share in Zambia's total imports of almost 30 per cent, followed in order by the EU, Zimbabwe, Japan and the United States.

Institutional and Legislative Framework

In August 1991, the Republic of Zambia became a multi-party democracy headed by an executive President, whose tenure may not run beyond two five-year terms. Legislative power is vested in Parliament, which consists of the President and the National Assembly. The President and most members of the Assembly are elected by universal adult suffrage. A Cabinet consisting of the President, the Vice-President and Ministers appointed by the President, formulates Government policy.

Zambia's laws comprise the Constitution, Acts of Parliament and Statutory Instruments, which are generally issued by members of the Cabinet. Bills, including those dealing with trade, are initiated by the competent Ministries and submitted for approval to the Cabinet before submission to Parliament. The 1995 Customs and Excise Act is the main legislation governing Zambia's foreign trade, including importation and exportation of goods, rules of origin, customs valuation, tariff concessions, excise taxes, and anti-dumping and countervailing duties. The 1994 Competition and Fair Trading Act introduced a code of conduct for all business entities and prohibits anti-competitive trade practices, such as the formation of cartels and collusive tendering. Under the 1993 Investment Act, as amended in 1995, general incentives are provided to investors, including a concessional tax rate on earnings from farming and non-traditional exports; private investments are protected from nationalization or any other compulsory acquisitions. All investment applications are processed by a one-stop Investment Centre, except for investment in mining and financial services, which are respectively under the authority of the Ministers of Mines and Finance.

In accord with the market-oriented reforms, almost all State-owned companies have either been liquidated, privatized, or earmarked for privatization, through the Zambia Privatization Agency. State trading and participation in productive activities have been considerably reduced. However, the Zambia Consolidated Copper Mines, for which privatization modalities are under study, the Zambia Electricity Supply Corporation, the Zambia Telecommunications and the Zambia National Oil Company hold monopolies or exercise rights in their respective field of activity.

Zambia grants at least m.f.n. treatment to all its trading partners. After independence, Zambia applied the GATT on a de facto basis until it became a Contracting Party in February 1982. Zambia is a founding member of the World Trade Organization (WTO). Like other WTO members, Zambia has bound all its tariff lines on agricultural products. About 97 per cent of such lines are bound at a ceiling rate of 125 per cent; bindings on remaining lines range from 45 to 60 per cent. Some 186 lines on non-agricultural products were also bound, at ceiling rates ranging from 30 to 60 per cent. Subject to limitations concerning the presence of foreign natural persons, Zambia bound market access under the General Agreement on Trade in Services (GATS) for some services, including those incidental to mining and exploration, and professional, tourism and travel-related services. Zambia is revising its trade-related legislation, including for intellectual property, to bring it into conformity with the WTO Agreements.

Zambia participates in the Common Market for Eastern and Southern Africa (COMESA), which in December 1994, succeeded to the Preferential Trade Area for Eastern and Southern African States (PTA). Imports from COMESA partners enter Zambia at 40 per cent of the applicable m.f.n. rate. Zambia is also a signatory to the Southern African Development Community (SADC).

Features of trade policy and trade policy instruments and their effects

Since late 1991, trade barriers have been substantially reduced in Zambia. Quantitative import restrictions have been eliminated and import controls are maintained only for health, security and associated reasons. Customs duties are now the main trade policy instrument.

Zambia's tariff has also been considerably simplified. Over the past five years the maximum rate has been lowered from 100 to 25 per cent; tariff categories have been reduced from 12 to four, with rates of zero, 5, 15 and 25 per cent; and virtually all suspensions and exemptions have been eliminated. Almost all rates are ad valorem. Customs valuation is based on the Brussels Definition of Value but the authorities intend soon to move to a "transactions value" basis for these purposes.

Zambia's simple average m.f.n tariff is 13.6 per cent. The average rate is highest in agriculture, where it is 18.2 per cent; averages in mining and industry are 7.5 and 13.5 per cent, respectively. About two-thirds of all tariff lines bear rates of 15 or 25 per cent, while some 20 per cent of lines, mainly for raw materials and productive machinery, have zero rates. In aggregate, Zambia's tariff displays negative escalation from primary to semi-processed products but rates escalate to over 16 per cent for finished goods, with escalation most pronounced in sectors such as paper products and textiles.

The authorities hope to lower tariffs in 1997 and 1998, particularly on intermediate and consumer goods. However, border duties account for well over 50 per cent of government revenue, a factor that may slow further tariff reductions. An independent body, the Zambia Revenue Authority, was established in 1994, in order to improve revenue performance.

In addition to tariffs, imports are subject to an Import Declaration Fee, introduced in October 1995 for fiscal reasons, and levied at a rate of 5 per cent on commercial goods worth at least US$500. Excise duties ranging from 10 to 125 per cent apply to a limited number of goods, whether imported or locally produced, including sugar, beverages, petroleum products, tobacco, tyres and tubes. A value-added tax (VAT) of 20 per cent replaced a 23 per cent sales tax in July 1995 and is collected on both goods and services, locally supplied or imported.

Since the early 1970s, Zambia has applied an anti-dumping duty of 15 per cent on imports of windows and doors, and window and door frames of iron or steel, irrespective of the country of origin. Zambia, which intends to update its antidumping and countervail legislation, applies no other "emergency" measure. Nor does Zambia maintain any local content requirements; the last such measures were eliminated by the 1996 Budget.

Zambia applies no export taxes, levies or charges and grants no direct subsidies to exports. A drawback scheme is in place for exporters and is being reviewed with a view to reducing delays related to refunds. Non-traditional exporters are exempt from customs duty and VAT on imports of machinery and equipment, and are entitled to a concessional income tax rate of 15 per cent on their export earnings, compared to the standard rate of 35 per cent. The establishment of export-processing zones is under study. Except for prohibitions maintained for environmental reasons, restrictions on exports have been eliminated. However, exports of maize are banned from time to time depending on the domestic harvest, and scrap metal is subject to export limitations. All exporters have full foreign-exchange retention rights.

Zambia eliminated all its direct product and consumer subsidies in 1991. Price regulations and controls were abolished for almost all goods and services in 1992, including for staple foods, pharmaceuticals, and telecommunications; administered prices remain for petroleum products, electricity and transportation.

Sectoral aspects of trade policy

The signals for resource allocation in Zambia have changed significantly since 1991, away from State-control toward market orientation. By moving toward a more neutral incentive structure, the Government hopes that the private sector, in allocating resources according to comparative advantage, will diversify the economy away from its dependence on copper, and Zambia's attendant vulnerability to changes in copper output and prices. There are some indications of success. In the period since 1991, the decline in the value of copper exports, due to a reduction in output, has been more than fully compensated by an increase in non-traditional exports. This increase has been mainly in manufactures but agriculture has also responded to the reform effort, particularly in floriculture where there has been a recent seven-fold increase in exports.

The Government has reoriented its objectives for agriculture away from the narrower aim of food security, particularly for the urban population, to the broader goal of a contribution from agriculture to national income and employment. In this context, a sectoral liberalization programme has removed quantitative restrictions on imports, eliminated subsidies and monopoly marketing boards, deregulated prices, and initiated the privatization of all public enterprises in the sector. Government assistance to the sector is limited to research, infrastructure, agricultural extension services and the maintenance of a strategic food reserve, mainly in maize, the national staple. Larger-scale projects, such as the Emergency Seed Distribution Programme, which is aimed at diversification toward drought-resistant crops, are largely financed by foreign donors. Tariffs are virtually the sector's only trade policy instrument but they remain relatively high: the maximum rate of 25 per cent applies to more than half the lines in the sector.

The authorities also intend to substantially reduce the role of the State in mining, essentially to that of a facilitator and regulator. Thus, recent legislation eliminated the mandatory participation of the Government in mining ventures, established the freedom of commercial operations and guaranteed the security of title to mining rights. In addition, in 1994 monopoly marketing rights on metals were abolished, and in 1995 a new royalty scheme was introduced to encourage vertical diversification of mineral products. Authority is now readily granted to the private sector for a wide range of activities, including exploration and prospecting. However, the sector remains dominated by the State-controlled Zambia Consolidated Copper Mines (ZCCM). Productivity in copper production is relatively low, in part resulting from the depth of ZCCM's mines, depleting ore reserves, lack of skilled labour and management problems. Cost-cutting efforts are underway and the authorities hope that this together with the planned privatization of ZCCM, the prospective entry into production of new sites, and improved extraction methods will stabilize production at close to current levels.

In Zambia's manufacturing sector, reform has led to a shake-out of the more inefficient firms. In particular, the Government has liquidated the Zambia Industrial and Mining Corporation, which as a State-controlled holding company dominated the sector. Resources would now seem to be starting to move toward more efficient use; new investment appears to have been attracted by privatization and some established companies are expanding capacity. Certainly manufacturing exports have responded to the more liberal environment, doubling over the past four years. However, the sector remains one of relatively low productivity, partly because of weaknesses in infrastructural services, including occasional drought-induced energy shortages. Border protection for the sector is relatively moderate; there are no quantitative import restrictions but tariffs on some final products, including certain processed foods and textiles range to 25 per cent.

Since the initiation of reform many service-oriented State-owned service providers have been privatized, including hotels, banks and transport facilities. In the latter area, the national airline has been liquidated. Except for limitations in telecommunications, financial services and energy, services are open to foreign investment. In banking, foreign-owned branches or subsidiaries are free to enter the market provided they incorporate locally and at least half their directors are established residents in Zambia. Monopolies or exclusive rights remain in certain areas, including telecommunications and energy. Further planned reforms in the sector are expected to give momentum to other sectors, including manufacturing, by reducing telecommunication, financial and transport costs. Moreover, areas such as tourism, where deregulation and privatization are well advanced, are expected to start showing improved growth.

Trade policies and foreign trading partners

Zambia has undertaken profound change in its policy orientation. Supported by a macroeconomic stabilization effort, it has implemented a series of bold structural measures designed to reestablish stable, sustainable growth. Trade liberalization is integral, indeed central, to Zambia's reform effort, thus indicating its confidence in the efficacy of open, competitive markets and its adherence to WTO principles Zambia's adjustment effort is beginning to show signs of success. In particular, its non-traditional exports have grown rapidly, and are starting to lead a diversification of the economy away from its dependence on copper. In this context, continued steadfast policy implementation will help to bolster confidence and could serve to attract the needed foreign investment. It will also be critical that Zambia's non-traditional exports, including textile and engineering, floricultural and food products, not meet new protective barriers and that the multilateral system supports Zambia's efforts with open markets.

TRADE POLICY REVIEW BODY

ZAMBIA

Report by the Government - Summary Extracts

Overview

The Zambian economy has always been dominated by the Copper mining industry. The country's economic performance and policy making have been heavily influenced by copper for its incomes, employment and exports.

For many years the Copper industry has accounted for over 90 per cent of foreign exchange earnings and a substantial proportion of output. In 1995 the industry contributed 5.5 per cent to real Gross Domestic Product (GDP), about 80 per cent to total export earnings and employed an average of about 59,8000 workers. This is 11.9 per cent of total wage employment.

During the past decade the production of copper has declined steadily. In 1965, Zambia produced about 680,000 metric tons of copper. This rose to 700,000 tons in 1977. By 1991 the production had fallen to about 380,000 tons and it was 307,181 tons in 1995. This is less than 50 per cent of the 1969 production.

This decline in copper production, compounded by falling copper prices since 1974, the depletion of ore reserves and the increasing cost of production have adversely affected the performance and growth prospects of the Zambian economy. This has led to significant drop in GDP and living standards.

Since 1989 for instance, real GDP growth rates have been negative except for 1993 when it shot up to 9.2% gross. Output growth was boosted by mainly the significant increase in agricultural production brought about, largely by the favourable weather conditions during the 1992/93 season.

Zambia, has had adjustment problems before. Between 1983 and 1987, she operated under structural adjustment programme. The aim was similar to the current adjustment measures. The programmes were, as today supported by the International Monetary Fund. Unfortunately, due to inconsistence in implementation, the programmes failed to accomplish their objectives. They were abandoned in 1987.

Since 1992 the new Government has made progressive efforts to try and improve the economy. Macroeconomic and other reform measures have been put in place for that purpose. These have included freeing interest and exchange rates; fighting inflation through prudent fiscal management; trade liberalisation; public sector reform; privatisation of state companies etc.

The main objectives of Government's economic policies are:

1. Restoration of the Zambian economy.

2. Acceleration of the manufacturing and agricultural sectors.

3. Improving and expanding economic infrastructure for FDI, tourism and others.

4. Improving and expanding social infrastructure to improve living standards.

Achievement of these objectives however, has met with obstacles such as drought which has hit the country the past three consecutive years.

Performance of some sectors of the economy has also been affected negatively by both internal and external factors. Internally, the liberalisation of interest rates in the presence of high inflation led to a rapid increase in nominal interest rates particularly in the period 1992 and 1993. For instance, by August, 1993, the average lending rates of banks had gone up to 139 per cent, from 85 per cent in January, 1993. High, interest rates have discouraged borrowing by the business sector, hence prolonging opportunities of investment and output growth.

Stabilisation measures, have also caused the exchange rates to appreciate and cause problems for Zambia's exporters including the copper industry. Economic liberalisation has also caused problems for the domestic industries debilitating many while resulting into several closures of others.

International factors causing major problems for the economy includes the substantial decline in metal prices on the world market since 1990.

Inspite of all the odds against the economy, reform measures have produced some good results.

The macro economy is now more stable than it was before new Government took over four years ago. Inflation is low, interest rates have declined, staple food prices have been stable, the balance of payments situation is viable, and Zambia's external financial relationships have been normalized. The successes reflect improved economic polices, enhanced financial management, and the Zambian population's willingness to make the sacrifices needed to restore the economic growth prospects.

The economy has moved towards a situation of external and internal financial balance. This has begun to lead to a recovery in average per capita real incomes.

Over the period 1991-1994 as a whole, real GDP increased by 3.2 per cent and real per capita GDP declined by about 7 per cent. These achievements have to be seen against the background of almost two decades of economic decline.

Numerous changes signal the economic turnaround. Construction activity is increasing; local cement sales are rising; energy use (petroleum and electricity) is expanding; tourism is growing; new businesses are being formed; investment, funded from both local and foreign sources is rising; small non-traditional exports have until recently been increasing; Zambian asset-holders are repatriating foreign exchange; basic consumer and investment goods are no longer in short supply; the physical infrastructure is being repaired; and the private transport sector has expanded markedly because of encouraging policies by Government.

Government created Zambia Revenue Authorities a result of which has improved revenue collection. This has led to an improvement in budgetary deficits. Export Board of Zambia is in place to promote and improve export performance. The investment Centre was also created to improve investment. Zambia Privatisation Agency is in place to promote sales of state companies. On the financial side, a Lusaka Stock Exchange was created two years ago to develop the financial markets and promote equity investment. These institutional support mechanisms for export and investment effectively used should improve the economy. All direct controls on trade have been removed, except for a short list of items controlled for environmental, health or security reasons. Levels and dispersion of import duties have also been reduced.

The engine of economic growth is private sector. To achieve that, Government is in the advanced stage of privatising all state companies including the Zambia Consolidated Copper Mines which produces Copper.

Trade Policy and Practices - General Trade Policy Objectives

In 1991/1992 the new Government of Movement for Multi Party Democracy (MMD) embarked on the new economic recovery programme driven by Structural Adjustment Programme (SAP) supported by IMF. Under these new economic measures, Trade Policy aims at creating a competitive and productive economy driven by private sector initiative which will foster living standards for Zambians. Specific objectives include the following:

1. Complete trade liberalisation.

2. Trade promotion and diversification through exports of non-traditional goods.

3. Creating conducive domestic environment for investment, growth and improved living standards.

Government emphasis in its trade policy is to encourage export diversification in order to move away from Copper dependence. In this regard sectors other than mining are being encouraged to export. The floricultural and horticultural sectors are currently doing quite well.

In the process of improving the economy, private sector emphasis remains key. The Zambia Privatization Agency continues to sell state companies to private individuals and companies. Government is no longer supporting state companies through subsidies as was the case previously. Monopolies in public sector are gone as demonstrated in the liquidation of the national airline and marketing boards.

International macroeconomic situation affecting Zambia's external sector

The twin processes of liberalisation and globalisation are presenting adequate opportunities for international trade. Government intentions are to participate fully into the international trade system by unlocking all bureaucratic impediments and other obstacles of entry.

Demand for copper, Zambia's mainstay of the economy, according to current forecasts and projections by UNCTAD, "point to an overall increase in the rhythm of consumption growth in the coming years". This bright picture is based on assumption that developing countries of Asia and others keep the momentum of economic growth, and if the larger Eastern Europe countries achieve a success transition and their economies succeed in recovering from the present slump. For developed countries, it is hoped that they do not undergo a major recession in the years to the end of the century.

The current trend in the international market is to create prospects for debt relief and even cancellation for developing countries particularly LDCs. Zambia, having done so well so far in terms of implementation of structural adjustment programme should take advantage of international donors for debt cancellation

Problems in External Markets

To appreciate the problems faced by Zambia in the External market, it is necessary to take into account the country's geographical location and the pattern of her trade. Zambia is a landlocked country. As a result of this predicament, it incurs high freight costs which result into uncompetitive pricing of her exports.

Furthermore, the world copper prices are subject to major price fluctuations. This makes the economy vulnerable to major external shocks due to its dependence on copper which contributes about 94 per cent of foreign exchange earnings over the 1990-1994 period.

Regulations and standards are also major obstacles faced by Zambian exporters. This is especially so in the export of agriculture products. These are subjected to stringent rules and regulations.

Zambia benefits from the Generalised Systems of Preferences Schemes offered by Developed countries. However, not all exports qualify for preferential treatment under these schemes.

Zambia is a member of SADC to which all Southern African Customs Union (SACU) member states are also members. South Africa, which is a member of both SACU and SADC, is Zambia's major supplier in the region. It supplies about 40 per cent of Zambia's total imports requirements, while Zambia supplies only about 1.5 per cent of South Africa's total imports.

South Africa and the other SACU members maintain high protective tariff rates and non tariff barriers as well as subsidising their exporters. This creates unfair competition to Zambia products in the regional market. The improvement of market access to Zambian products in the region will contribute significantly to improving Zambia's trade balance.


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