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The Impact of Globalisation on Trade and Industry in Zambia
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The Impact of Globalisation on Trade and Industry in Zambia PDF Print E-mail
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Introduction

The world is in a dynamic state of transition and transformation. The whole world is now moving toward an integrated global market, often referred to as the Global Village in which everyone is free to live, sell and buy. This process of transition and transformation is what is called Globalisation. At the heart of this process is the role of technological development, particularly in electronics and computers for its acceleration. In recent years, the creation of a global village has been seen as the engine of development for both the poor and already rich nations of the world. The concept of development could be perceived not only as a condition of life but also as a goal to be attained, and as the capacity to grow, change and develop.

It can also be understood in terms of satisfaction of basic needs, redress of inequalities, reduction in unemployment levels, reduction in poverty levels and so on. However, the initial enthusiasm with which globalisation has been promoted has not been justified by the concrete results on the ground in Zambia. The economy remains crisis laden, showing little or no signs of stability. The industrial sector has remained stagnant and closures are most frequent. Nevertheless, a limited benefit has been registered in terms of the development of information technology. The Zambian market has seen the development and launching of a number of Internet service providers, which is a positive development for a young economy like ours. Most of these have been able to provide e-mail services as well as Internet-based business to business and business to customer applications. This has facilitated business efficiency among local businesses as well as between those overseas.

Globalisation and the Zambian economy

Although it may be argued that globalisation creates room for free access to the world market, the truth seems to lie in the assertion that only developed countries benefit from the deal because they put in place protective measures or standards to discriminate the quality and quantity of developing countries' goods and services entering the world market. It may as well be argued that the benefits of globalisation will remain a mirage for Zambia in so far as the UNCTAD and WTO do not act to harmonise and level the playing field.

In Zambia, globalisation has left local industries in an unfair competition with the foreign sophisticated technology which has made them either close or restructure in one way or another and yet still registering stagnation. Furthermore, the unfair competition has resulted in the undermining of local production and growth in the incidence of dumping mainly for goods from South African and the developed world which are heavily subsidised in their countries of origin. The Zambian government has a Herculean task to offer attractive and meaningful tax exemptions to local industries in order for them to compete favourably with these "foreign dumping giants". This can be addressed through a fully integrated package of microeconomic reforms. The local industry is unable to compete favourably due to high production costs emanating from high fuel, electricity and transport costs. This is further compounded by the unavailability of most raw materials within the local market, thus paying much for importation of these through excise duty. Given this situation, the government needs to review and further rationalise the domestic tax structure. In addition to these measures, the government should facilitate the development of financial markets for the local manufacturing sector to access long term finance.

Liberalisation and globalisation in Zambia

In an attempt to be part of the global village, the Zambian government, under the MMD leadership, embarked on a programme in the early 1990s to alter the domestic economic environment to make it more attractive to investors, curb inflation and reduce budgetary deficit as well as redirect the real sectors of the economy to the path of growth. This was to be achieved in a framework which has at its centre the market mechanism and which seeks to roll back the frontiers of the state. This saw the introduction of the free market economy. As a result, Zambia became a source of raw materials and market for various manufactured items from neighbouring and developed countries.

The placing of parastatals into private hands through the privatisation programme has not always been a success story. Time and again these privatised industries have closed up citing high production costs and liquidity problems. The latest being the case of Amanita and Roan Antelope Mining Corporation (RAMCOZ). Though the open market operations and trading in government securities have been carried out, the inflation rate has not responded positively. Given this scenario, production costs have remained high, thereby increasing the end product costs and reducing the demand for the locally manufactured products. The Kwacha depreciated by over 10% against the US dollar just between November and December 2000 and this negatively impacted on the general level of prices. The monthly inflation rate for December 2000 was recorded at 2.6 %, representing a 0.6 % point increase on the November rate of 2.0 %.

Given a context in which investment in local production is made singularly unattractive by unstable exchange rates, high interest rates and sharply depreciating Kwacha, globalisation by open market structure in Zambia has encouraged a trading economy based on cheap imported goods impacting further on locally made goods. The flow of Foreign Direct Investment that was expected to follow globalisation has not materialised meaningfully. Capital flight remains a major problem.

With the real sectors stagnant or declining as a result of stiff market competition, unemployment rates have remained higher than before in the face of employee retrenchments as industries close up or restructure further. This has meant further declines in the living standards of the majority of the people as real incomes collapse and the cost of living rise. Hence, the nutritional and health standards of most households have fallen sharply. Massive unemployment has had its social consequences manifested particularly in growing crime and the dislocation of households.

Responding to the effects of globalisation

Undeniably, it is inevitable and beneficial that the entire world integrates itself into one big global economy. However, this can only be beneficial to small economies like ours if the rules of the game are harmonised and the playing field levelled. As long as the super economies of the world continue to deter entry of goods into their markets through tariff barriers, globalisation will remain an elusive concept in the development of young economies.

The formation of the COMESA region, let alone the implementation of the Free Trade Area looks like a possible remedy to the effects of globalisation. Member states will now be able boost production and promote one another's industry with the realisation that trade is more important than aid for long-term development. Nevertheless, COMESA has to face the challenges of the global economic order. Just as its Secretary General stated during the launch of the F.T.A, COMESA has to continue working toward a fully integrated and internationally competitive economy within which there is a complete flow of goods, services, capital and labour. In addition, problems relating to weak competition in the export sector and fragile markets need to be urgently addressed. High levels of concentration and market dominance by a few leading players also need attention. Only then will COMESA develop into a social, political and institutional atmosphere that promote trade, attract Foreign Direct Investment and reduce poverty.

Conclusion

The benefits of globalisation have not been felt to the fullest in Zambia except for the increase in the communication services. Too much emphasis has been on macro-economic sphere rather than on domestic production. The excessive openness of the market created a dumping ground for goods from South Africa, Zimbabwe and the developed world, killing the manufacturing industry. The inability by government to control the depreciation of the Kwacha has further worsened the position of the local industry whose production relies much on imported raw materials amidst the unstable exchange rates. This has gravely impacted on the manufacturing industry leaving it with no option but to further restructure, close up or scale down in production. Government is called upon to offer better tax exemption for the manufacturing industry to survive, as is the case with other countries. Furthermore, local products should be promoted and not be discriminated against in relation to foreign imported ones.

The call for the Ministry of Finance to recapitalise the Development Bank of Zambia would be more timely now than at any other moment. The local industry lacks stable financial markets from which to borrow on longer terms for their capital investments. Much more important, the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organisation (WTO) must ensure that the playing field is levelled in order that the concept of globalisation benefits all economies, big and small.
 

 

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