Trade and Industry

Monday, 02 February 2009

Trade and Industrialisation Policies: Experiences from Zambia

  • Year: 2009
  • Organisation: TIPS
  • Author(s): Dale Mudenda
  • Countries and Regions: Zambia

The Zambian economy has undergone profound reforms in the last two decades. It has transited to a market economy from the previously centrally planned economy. As part of the economy-wide reforms, the country's industrial and trade policies have also been re-oriented to suit the needs of the market-oriented economy. This paper therefore reviews the evolution of Zambia's industrial and trade policies from 1964, when the country gained independence, to 2009. This period is divided into two: the first period being before the reforms in 1991, and the second period being 1991 – 2009.

The paper observes that Zambia managed to rapidly industrialise immediately after independence through direct establishment of state-owned enterprises and promotion of import substitution strategy. However, the performance of these firms remained unsatisfactory, often operating at less than full capacity. The sector failed to create linkages with the rest of the economy and could not generate adequate employment for the country. The trade policy during this period discouraged export sales and encouraged production of domestic consumer goods through the use of high tariffs and quantitative and foreign exchange controls. Government used the anti-export bias policies to industrialise. By 1991, the performance of these strategies proved to be unsustainable. Government introduced the Structural Adjustment Programme and re-oriented its trade and industrial policies towards the market. Government's role has changed from that of an investor to creating a conducive (mainly macroeconomic stability and licensing reforms) and incentivised environment for private export oriented industrialisation strategy. The incentives have included fiscal incentives and infrastructural support. The reforms have resulted in an increased production and export of manufactured goods by more than 300% between 1991 and 2008.