Fostering Equity and Accountability in the Trading System (FEATS)

Patrick Chengo, Project Assistant CUTS Africa Resource Centre, Lusaka

8 April 2009

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

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

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

Country Share in Total

ExportsSwitzerlan

d41.8%

South Africa

12.0%

Thailand 5.9%DRC 5.3%

Egypt 5.0%

Country Share in Total

ImportsSouth Africa 47.4%

United Arab Emirates

6.3%

China 6.0%

India 4.1%

UK 4.0%

• South Africa is the main import source (47.4% of total in 2007)

• Major Export destinations: Switzerland(41.8%) South Africa (12%)

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

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

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

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

• 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.)

MoFNP

MCTI

MoFA

MoCA

Ministry of Justice and Legal Affairs

ZRA PACRO ZBS ZCCOther line

ministries & agencies

Policy

Direction

Policy

Formulation

Policy

Implementation

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

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

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

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

Steering Committee of Secretaries

all state actors for inter-ministerial coordination on all

issues

ACF

State and non-state actors on all agriculture

issues

MCTI

NWGT

state and non state actors on all trade issues

National Export

Strategy Group State and non-state actors on export issues

Fora-specific Sub-Committees, e.g. on

WTO, EPA, COMESA and SADC

Issue specific Working Groups, e.g. services, IPRs, TF

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

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

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

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

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

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

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

• 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.

Features of a Good Trade Policy Key Elements of Good Trade Policy Making Process

Relevant Stakeholders

Based on national development policy

Clear guidance/directions from national development policy makers

National development policy makers (e.g., Ministry for Planning and Development, President’s Office, parliament, etc)

Linked with other governmental policies

Inputs and feedback from other government ministries/departments

Other relevant government ministries/departments (e.g., those dealing with agriculture, employment and labour, finance, competition and consumer protection, education and health, etc.)

Linked with international commitments (to implement the commitments as well as to guide the positions regarding future possible commitments)

Inputs and feedback from relevant ministries and negotiators

Relevant ministries (e.g., Ministry of Foreign Affairs, etc.) and negotiators (e.g., dealing with the WTO agreements and negotiations)

Balancing the interests of all key stakeholders

Inputs and feedback from key non-state stakeholders

Key non-state actors (e.g., representatives of the private sector, farmers, consumers, and the civil society)

Clear implementation plan with adequate resources

Commitment of required resources Relevant government ministries (e.g., Ministry of Finance) and donors (multilateral and bilateral)

• 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

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

Action Variable Action by Action Value

A. Identification of all key stakeholders

MCTI Some identified = 0.5

B. Creating awareness about the need for trade policy

MCTI Yes = 1.0

C. Establishment and functioning of formal consultative mechanisms

MCTI Several established but sub-optimal functioning = 0.5

D. Regular information flow to the stakeholders including on the content of trade policy

MCTI Ad hoc and/or irregular = 0.5

Part I Score MCTI 2.5/4.0

E. Regular participation in the process and feedback to the relevant authorities

Other relevant government ministries/agencies

Some = 0.5

F. Faithful representation of and regular feedback to the represented constituencies

Other relevant government ministries/agencies

Some = 0.5

G. Acquiring relevant knowledge and expertise

Other relevant government ministries/agencies

Some knowledge and expertise = 0.5

Part II Score Other relevant government ministries/agencies

1.5/3.0

Action Variable Action by Action Value

H. Regular participation in the process and feedback to the relevant authorities

Private sector and business umbrella organizations

Yes = 1

I. Faithful representation of and regular feedback to the represented constituencies

Private sector and business umbrella organizations

Yes = 1

J. Acquiring relevant knowledge and expertise

Private sector and business umbrella organizations

Some knowledge and expertise = 0.5

Part III Score Private sector and business umbrella organizations

2.5/3.0

K. Regular participation in the process and feedback to the relevant authorities

Civil society organizations Yes = 1

L. Faithful representation of and regular feedback to the represented constituencies

Civil society organizations Occasional representation and/or irregular feedback = 0.5

M. Acquiring relevant knowledge and expertise

Civil society organizations Some knowledge and expertise = 0.5

Part IV Score Civil society organizations 2.0/3.0

ITPM Index Score All stakeholders 8.5/13.0