Zambia : Trade Policy Making

1. Fostering Equity and Accountability in the Trading System (FEATS) Zambia : Trade Policy Making Patrick Chengo, Project Assistant CUTS Africa Resource Centre, Lusaka 8 April 2009

2. Structure of Presentation • Economic background • Explanation of Zambian trade policy • Trade policy process • Key government institutions • Consultative mechanisms • Stakeholder views • MCTI, other government institutions, private sector, CSOs • Inclusive Trade Policy Making (ITPM) index

3. Brief Economic Outlook • 2007: population of 11.922 million and nominal GDP of 11.271 billion US$ • GDP per capita declined from US$ 461 in 1990 to US$ 310 in 2000, but increased to US$ 938 in 2006 • From 1991 to 2006, the incidence of poverty has declined in Zambia, reaching 64% in 2006 • During the same period, urban poverty increased from 15% to 33%. • In 2005, 64.3% of population lived below $1.25 US dollars per day, and 81.5% below $2.00 US dollars per day • Informal sector includes 81% of labor force in 2003 • Services make up the bulk of GDP, amounting to 51.3% in 2006 and have increased considerably since 1990

4. Trade Profile • Zambia’s balance of payments has been positive since 2005 • Copper is the main export at 58.3% of total exports • Cobalt, also important, makes up 16% • Most significant imports: machinery and transport equipment (39.9%), mineral fuels, lubricants and related materials (15%), chemicals (14.8%) and manufactured goods (14.2%) • Trade Shares in regional agreements • 2007, 13.7% and 23.2% of total exports to COMESA and SADC member countries respectively • 2007, 9.0% and 57.0% of total imports from COMESA and SADC member countries respectively • Trends in Zambian Trade performance • little progress in export product and market diversification efforts • Zambian integration in global economy has increased

5. Trading Partners • South Africa is the main import source (47.4% of total in 2007) • Major Export destinations: Switzerland(41.8%) South Africa (12%)

6. History of Trade Policy Making • Independence to the mid-1970s: state control characterized the economy, • Nationalization allowed for 80% state control of the economy through parastatals • Oil shocks of 1970s and the considerable drop in the price of cooper took a heavy toll on Zambia and its economic conditions declined • First Structural Adjustment Programme (SAP) in 1985, abandoned in 1987 • 1991, first multiparty elections held • period of liberalization: opening of trade, decentralization, and deregulation of the economy • IMF ranks Zambia as the most open trade regime in Sub-Saharan Southern African region • World Bank TTRI data shows increased openness of Zambian trade regime • TTRI rating for MFN applied tariffs increased over 2005-2007 to 2008 from 8.7 to 8.9 • Overall TTRI rating declined over 2005-2007 to 2008 from 8.8 to 8.5 • Consolidation of economic reforms in recent years has put an emphasis on poverty reduction

7. Current Vision and Goals of Trade Policy • Last comprehensive trade policy in Zambia was adopted in 1994 • Currently, trade policy is aimed at creating a competitive and productive economy driven by private sector initiatives, improving living standards for Zambians and alleviating poverty. • Committed to the multilateral trading system • Overall policy framework is provided by Vision 2030 • Within the context of Vision 2030 and the Fifth National Development Plan, a strategic plan has been developed by the Ministry of Commerce, Trade and Industry. • This strategic plan (2006-2010) aims to promote the growth and development of commercial and industrial sectors • Zambian participation in IF processes • Participation has helped to include trade policy into overall development strategies of the country • DTIS findings have been incorporated into 5th national development plan, Private Sector Development Programme, and the strategic plan of MCTI to implement findings of DTIS • Zambia currently preparing a 5 yr. Implementaion plan for the EIF

8. Trade Policy Making Process • National policy-making in Zambia is generally a preserve of the executive wing of the government through Cabinet decisions or pronouncements by the President: • Process: • Concerned ministry holds consultations with other relevant ministries and stakeholders (depending on the nature of the issue), and prepares the first draft of the policy/measure. • Circulated to all ministries (21 days to comment) • Revised draft is sent to the Ministry of Justice and Legal Affairs, which drafts a bill • Bill submitted for approval to the Legislation Committee of Cabinet, and subsequently to the full Cabinet • Published in the Government Gazette • Sent to the Parliament, which approves after three readings • Sent to the President for assent, after which the bill becomes an Act of Parliament. • Act usually comes into force as soon as it is published in the Gazette, unless a specific date is mentioned

9. Governmental Trade Policy Institutions • Ministry of Commerce, Trade and Industry (MCTI): • responsible for developing and implementing national policies for private sector development. • MCTI’s mission is “to facilitate and promote the growth, development and competitiveness of commercial, trade and industrial sectors in order to enhance socio-economic development”. • custodian of all trade policy issues in Zambia • Activities Include: • Providing inputs on regional and international trade policies and implementation • Providing factual information • Presenting and defending Zambia’s position in international negotiations • Participating in relevant meetings and conferences • Hosting foreign missions • Consulting national stakeholders • Inviting other stakeholders to submit sector reports

10. Governmental Trade Policy Institutions • Many government ministries and agencies deal with issues directly related to trade: • Policy guidance and decision making (e.g., Ministry of Finance and National Planning (MoFNP)) • Interpret trade related statutes, laws and render legal opinion (Ministry of Justice and Legal Affairs) • Provide input and feedback (e.g., Ministry of Agriculture and Cooperatives (MoCA), Ministry of Foreign Affairs (MoFA)) • Implement trade policy (e.g., Zambia Revenue Authority, Zambia Bureau of Standards (ZBS), Patents and Companies Registration Office (PACRO) Zambia Competition Commission (ZCC) etc.)

11. Policy Direction MoFNP MoFA Policy Formulation Ministry of Justice and Legal Affairs MCTI MoCA Policy Implementation Other line ministries & agencies ZRA PACRO ZBS ZCC

12. Civil Society Organisations (CSOs) • CSOs were not a part of the formal consultations until about 8 years ago • They are now involved in the processes of formulation, implementation and negotiations in trade policy • CSOs in Zambia that are working on trade issues can be divided into two broad categories: • local CSOs, for example, CSTNZ and CSPR, which lack adequate human and financial resources to follow all trade-related developments on a regular basis, most active with the WTO Ministerial Conference, etc., and often depend on technical and financial support of international NGOs • international CSOs like Oxfam and CUTS • An important development is the establishment of CSTNZ as a network of CSOs on trade issues. • The engagement of CSOs center around: awareness-raising and information sharing, research and analysis, lobbying and advocacy, and capacity building • Rural reach of CSOs must be strengthened, most CSOs are based in urban centres • Informal sector employees have no formal representation in CSOs, yet their interests are considered, like those of all disadvantaged groups of stakeholders, in CSO efforts to improve the trade policy process

13. Private Sector • Since 1991, many private sector organizations and businesses have started playing an increasingly active role, and the government seeks their inputs and views more frequently • Participation generally takes place through umbrella organizations • Important individual businesses in some sectors play a role • May be more active on one particular issue or sector than trade policy in its entirety • Example: stakeholders in the mining sector are organized in associations that often participate when their interests are being discussed • Note: umbrella organizations nor individual businesses are in a position to represent the interests of those employed in the informal sector • Private sector umbrella organizations participation has been inconsistent as they do not always have the required human and financial resources. • Conflicting interests exist: difficult to collect and collate the inputs and positions of all members and ensure a regular two-way feedback between their secretariats and members

14. Consultation Mechanisms • National Working Group on Trade Policy • main forum in Zambia that brings together state and non-state stakeholders • headed by the Director of Foreign Trade at MCTI • MCTI serves as its secretariat • consists of 13 members of the private sector, civil society and the government. • sub-committees and working groups for specific issues, providing recommendations on relevant topics, such as various trade agreements, negotiations and sectors • Agriculture Consultative Forum (ACF) • solicits inputs from stakeholders and communicates to the relevant authorities through ACF Advisory Notes • helps the government in understanding the concerns and views of farmers’ unions and the private sector on the full range of agricultural issues, including trade • well established and good reputation as the main consultative forum to bring together the state and non-state actors

15. Consultation Mechanisms (cont’d) • National Export Strategy Group • state and non-state actors • headed by a chairperson from the private sector • provides information on export-related issues and allows for stakeholders consultations on these issues • Steering Committee of Secretaries • consists of all Permanent Secretaries to ensure inter-ministerial coordination on all issues requiring coordination. • hardly any information is available on the functioning of this Committee and its effectiveness in ensuring inter-ministerial coordination on trade issues • literature indicates the need for greater coherence and coordination among various government ministries and agencies

16. Steering Committee of Secretaries all state actors for inter-ministerial coordination on all issues MCTI ACF State and non-state actors on all agriculture issues NWGT state and non state actors on all trade issues National Export Strategy Group State and non-stateactors on export issues Fora-specific Sub-Committees, e.g. on WTO, EPA, COMESA and SADC Issue specific Working Groups, e.g. services, IPRs, TF Trade Policy Making Map

17. Stakeholder Views – MCTI • MCTI has made significant progress in reforming trade policy • claims to have consulted with stakeholders with regard to all these, with high stakeholders’ participation in consultations. • MCTI has been utilizing the NWGT for these consultations and encourages sectoral inputs from other relevant ministries. • The above shows that the MCTI position as the main government ministry to deal with all trade issues is well established. It also has established mechanisms for stakeholders’ consultations. • Challenges: • number of trained technical staff is limited • The few professionals in the ministry, no matter how competent and dedicated, cannot be expected to handle all the issues thoroughly and ensure continuous stakeholders consultation. • Room for improvement in the information flow to all stakeholders, particularly non-state actors • For example, the revised Trade Policy 1994 is still not on the MCTI website

18. Stakeholder Views– Other Relevant Government Bodies • Challenges: examples of uncoordinated action across relevant government agencies (ex. appreciation of the Zambian Kwacha in 2005) • Closer interaction would have allowed for a coordinated response • Less than optimal action because: • Ministries and agencies are focused on their own mandate, without looking at and responding to inter-linkages • Limited human and financial resources • Suggestions: • Vision 2030 should be consciously used to tailor other policies, ensuring coherence and preventing contradictions • Improve capacities to see and understand interlinkages • MCTI should take initiatives to share information and consider establishing institutional mechanisms for regular input and feedback

19. Stakeholder Views – Private Sector • successful in lobbying for certain issues • Lack of analytical capacity to critically evaluate trade policy • Conflicting Views, depending on: size, nature of economic activity, and benefits under existing policy framework. • large umbrella organizations cannot reconcile all the differences among various components of their constituencies • Lack of Interest : focus on international trade policy opposed to domestic trade policy, generally the representatives of the private sector participate in those meetings where the supply capacity issues are being addressed

20. Stakeholder Views - CSOs • Policies in the 1990s were designed with little knowledge and even less consultation with stakeholders: • outcry and criticism led to the initial opening up of the process of formulating development programmes, by engaging local non-state actors • Donors encouraged the government to undertake multi-stakeholder consultations. • sometimes provide financial and technical support to build the capacity of civil society • Cotonou Partnership Agreement (CPA) recognizes the role of non-state actors and provide for financial assistance for capacity building of CSOs • As a result of a good research base and policy analysis, the CSOs have built up a solid platform to lobby the government on issues that concern the general public, including trade-related issues. • CSTNZ is the nodal NGO for MCTI and other government departments • Participation: . • mechanisms and meetings organized by MCTI on trade issues • platform of round table meetings with relevant ministries • media campaigns that influence the public opinion and exert pressure on the government in favour of the CSO positions

21. Stakeholder Views - CSOs • trade professionals are generally in limited supply, only one economist at the University of Zambia had specialized in trade issues • no specialized think tank or research centre on trade issues • Ressources and capacities are an issue • exacerbated by a mushrooming of consultative meetings called by various sub-committees and working groups established by the MCTI under the NWGT • Recommendation: • Streamline sub-committees and working groups into fewer sector-specific organs

22. Additional Feedback • some stakeholders are currently not included in the consultation processes, for example, consumers and parliamentarians. • Lack of technical knowledge and capacity to take full advantage of participation opportunities • The influence of various non-state stakeholders is not the same across sectors • There is a preference of the government authorities to deal with large umbrella organizations of the private sector and CSOs instead of individual enterprises and organizations • Better coordination and harmonisation of policies should be a main objective while revising the national trade policy (especially in regards to trade and development) • Consultative mechanisms should not only include stakeholders in discussions of trade policy, but also push for stakeholder participation in decision-making processes

23. Good Trade Policy? • No one-size-fits-all policy • Economists generally agree that open trade policy is good for development • features of good policy include: • Coherence with national development policy • Supportive of and be supported by other government policies • Balance the interests of all key stakeholders • Conform with the commitments of the country under the WTO and other regional and bilateral agreements • Accompanied by an appropriate implementation plan

24. Process is Important • Determines whether the key features of good policy are attained which in turn determines the contents of policy. • May not result in best policy • but context and country specific • But widest possible buy-in and support from all key stakeholders • Support and ownership ensure policy’s relevance and proper implementation. • Outlining the key elements of the process also leads to the identification of the relevant stakeholders. • Important assumption: key stakeholders are an active part of the process with opportunities for equal participation and proportionate influence.

25. Analytical Tool – Linking Stakeholders with Essential Features of a Good Trade Policy through Trade Policy Making Process

26. Constructing ITPM • all the key stakeholders have been identified • they have equal opportunity to participate in the process • none of them is allowed to disproportionately influence the process nor the outcome in favor of its own interests. • Seven action variables, applied in two different groups • Variables 1-4 require action of primary government ministry in trade policy • Variables 5-7 require action of all other stakeholders • Three distinct indices are calculated for other relevant government agencies, private sector, and CSO categories of stakeholders respectively • maximum value of 1 (when the appropriate action has been taken by the concerned actor) • intermediate value of .5 (when some action has been taken by the actor concerned but such is not sufficient). • minimum value of zero (when the action has not been taken at all by the concerned actor) • Overall ITPM rating out of 13, index includes 4 distinct parts

27. Purpose: Zambia ITPM • Increase awareness of political economy aspects of trade policy making in Zambia • Assess the inclusiveness of the trade policy making process in terms of capacities, actions, and participation of key stakeholder groups • Illustrate where further efforts must be made to improve stakeholder capacity and participation in trade policy • Facilitate the development of a more inclusive trade policy making process to create local buy-in of that policy within Zambia • Only such buy-in can ensure successful implementation of trade policy and the subsequent realization of larger development goals of the country

28. Zambia ITPM Index: Parts I and II

29. Zambia ITPM: Parts III and IV