RESTRICTED
WORLD TRADE WT/TPR/S/17
12August 1996
ORGANIZATION(96-3171)
TRADE POLICY REVIEW
ZAMBIA
Report bytheSecretariat
Thisreport, prepared forthefirstTrade Policy Review ofZambia, hasbeendrawn up
bytheWTO Secretariat onitsownresponsibility. TheSecretariat has,asrequired by
theAgreement establishing theTrade Policy Review Mechanism (Annex 3oftheMarrakesh
Agreement Establishing theWorld Trade Organization), sought clarification from the
Government ofZambia onitstrade policies andpractices.
Document WT/TPR/G/17 contains thepolicy statement submitted bytheGovernment of
Zambia.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting oftheTrade
Policy Review Body onZambia.Zambia WT/TPR/S/17
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS ix
(1) TheEconomic Environment ix
(2) Zambia inWorld Trade ix
(3) Institutional andLegislative Framework x
(4) Features ofTrade Policies xi
(i) Trade policy instruments andtheir effects xi
(ii) Sectoral aspects oftrade policy xii
(iii) Trade policies andforeign trading partners xiii
I. THE ECONOMIC ENVIRONMENT 1
(1) Major Features oftheEconomy 1
(2) Evolution oftheEconomy 3
(i) Developments upto1992 3
(ii) Recent economic developments 4
(3) Composition andDirection ofTrade andForeign Investment 6
(i) Trade ingoods andservices 6
(ii) Foreign investment 9
(4) Outlook 10
Annex I.1 Foreign exchange régime 11
II. TRADE AND INVESTMENT REGIMES 12
(1) Institutional Framework 12
(2) Policy Formulation andImplementation 13
(3) Policy Objectives 15
(4) Laws andRegulations 15
________________________________________________________________________________________WT/TPR/S/17 Trade Policy Review
Page iv
Page
(5) Agreements 17
(i) Multilateral agreements 17
(ii) Regional agreements 18
(iii) Other agreements 21
III TRADE POLICIES AND PRACTICES BYMEASURE 22
(1) Overview 22
(2) Measures Directly Affecting Imports 22
(i) Registration anddocumentation 22
(ii) Customs procedures 23
(iii) Tariffs andother levies andcharges 24
(iv) Import prohibitions andlicensing 34
(v) Trade sanctions 35
(vi) Emergency actions 35
(vii) Rules oforigin 36
(viii) Local-content schemes 37
(ix) Standards andother technical requirements 37
(x) State trading 38
(xi) Government procurement 38
(xii) Measures implemented inexporting countries 39
(xiii) Other measures 39
(3) Measures Directly Affecting Exports 40
(i) Registration anddocumentation 40
(ii) Export taxes, charges andlevies 40
(iii) Export prohibitions, controls andlicensing 40
(iv) Export quotas andvoluntary restraints 40
(v) Export subsidies 40
(vi) Duty andtaxconcessions 40
(vii) Export finance, promotion andassistance 41
(viii) Free andindustrial zones 42
(ix) Other provisions 42
________________________________________________________________________________________Zambia WT/TPR/S/17
Page v
Page
(4) Measures Affecting Production andTrade 42
(i) Subsidies andother concessions 42
(ii) Assistance toadjustment, research anddevelopment 43
(iii) Competition policy 43
(iv) Protection ofintellectual property rights 45
IV TRADE POLICIES AND PRACTICES BYSECTOR 48
(1) Introduction 48
(2) Agriculture, fisheries andrelated activities 48
(i) Main features 48
(ii) Policy objectives andinstruments 50
(iii) Policy bytypeofproduct 52
(3) Mining andQuarrying 59
(i) Copper andcobalt 61
(ii) Other commodities 63
(4) Manufacturing 64
(5) Services 67
(i) Energy 68
(ii) Telecommunications 69
(iii) Transport 70
(iv) Financial services 71
(v) Tourism 72
REFERENCES 74
________________________________________________________________________________________WT/TPR/S/17 Trade Policy Review
Page vi
CHARTS
Page
I. THE ECONOMIC ENVIRONMENT
I.1 GDP byeconomic activity, 1990 and1995 2
I.2 Shares ofgovernment finance inGDP, 1980-95 4
I.3 Breakdown oftrade, bymain commodities, 1992-95 7
I.4 Trade bypartner, 1990 and1995 8
I.5 Foreign direct investment byorigin, 1993 and1995 10
III. TRADE POLICIES AND PRACTICES BYMEASURE
III.1 M.f.n. tariff distribution bysector, 1996 27
III.2 Average tariff bydegree ofprocessing, 1996 28
IV. TRADE POLICIES AND PRACTICES BYSECTOR
IV.1 Major crops, 1981-94 49
IV.2 Average Zambian tariffs byISIC classification, 1996 53
IV.3 Planted areainselected crops, 1981-94 55
IV.4 Yield inselected crops, 1981-94 56
IV.5 Export performance ofselected groups ofagricultural products, 1987-95 58
IV.6 Production andsaleofcopper, 1986-95 62
IV.7 Contribution ofthemajor branches tomanufacturing output, 1990-95 65
IV.8 Labour costcomparison inthetextiles andclothing industry, 1993 66
IV.9 Contribution ofthemajor branches toservices, 1990-95 67
________________________________________________________________________________________Zambia WT/TPR/S/17
Page vii
TABLES
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Major features ofZambia 'seconomy 1
I.2 Recent economic performance, 1991-95 5
I.3 Foreign direct investment: certificates issued, 1993-95 9
II. TRADE AND INVESTMENT REGIMES
II.1 Trade related legislation inZambia 16
II.2 Status ofZambia 'sselected notification requirements totheWTO,
asatJune 199617
II.3 Main trade-related elements oftheCOMESA Treaty 19
III. TRADE POLICIES AND PRACTICES BYMEASURE
III.1 Border charges, 1991-94 26
III.2 Main features ofZambia 'sm.f.n. tariff, 1996 26
III.3 Excise taxes, 1996 30
III.4 Industrial property rights inZambia, 1993-95 47
IV. TRADE POLICIES AND PRACTICES BYSECTOR
IV.1 Agricultural Sector Investment Programme (ASIP) 51
IV.2 Licence feesandareacharges formining operations, July1996 59
IV.3 Selected gemstone sales January toSeptember 1994-95 62
IV.4 Zambian telecommunication indictors, 1991-95 69
IV.5 Hotel capacity, 1991-95 71
________________________________________________________________________________________WT/TPR/S/17 Trade Policy Review
Page viii
APPENDIX TABLES
Page
AIII.1 Tariff escalation andtariff ranges, 1996 79
AIII.2 Anindicative listofcompanies privatized inZambia, asof
28February 1996 81
AIII.3 Companies earmarked forprivatization inZambia, asof28February 1996 82
AIII.4 Other State-owned companies inZambia, asof28February 1996 84
AIV.1 Tariff rates forZambia, byISIC categories, 1996 85
________________________________________________________________________________________Zambia WT/TPR/S/17
Page ix
SUMMARY OBSERVATIONS
(1) TheEconomic Environment
1. TheRepublicofZambiahasimplemented
afundamental change inpolicy direction. Since
late1991, ithasmoved decisively away from
importsubstitutiontooutwardorientationasthe
baseofitsgrowth strategy. Thetrade régime
hasbeenconsiderably liberalized andtariffs are
nowthemain instrument oftrade policy.
2. Trade reform hasbeenaccompanied by
decentralization andderegulation inother
spheres ofeconomic activity: domestic prices
have been de-controlled and government
intervention inmarketing steadily reduced;
parastatal reform and privatization are
significantlydecreasinggovernmentinvolvement
inbusiness activity; exchange controls have
beenlifted andtheexchange rateofZambia 's
currency, thekwacha, isnow market-
determined. Theprogramme ofstructural
reform hasbeensupported byamacroeconomic
stabilization effort.
3. Thereforms followed alongperiod of
steady economic decline since themid-1970s,
marked inparticular byafallinpercapita
income ofsome 30percent, bringing Zambia
among theleast-developed countries, anda
slowing ofgross domestic investment fromover
40tounder 15percentofGDP. These
developmentsreflectednotonlylowerpricesand
output ofZambia 'spredominant export, copper,
butalsothegrowth-inhibiting effect ofpervasive
State controls overeconomic activity.
4. Zambia 'sreforms haveyettoshowtheir
fullbenefits, influenced bydroughts inthree of
thefouryears through 1995 andbyfalling
copper output (exacerbated byefficiency
problems). Thuspositive growth wasrecorded
onlyin1993. However, somefavourable signs
arestarting toshow. Inparticular, inflation
isdown significantly, fromwellover100per
centin1992 and1993 toaround 35percent
in1995, indicating amore stablemacroeconomic environment. Inaddition, non-
traditional exports, mainly from the
manufacturing sector, havedoubled inthepast
fouryears, growing bysome 35percentin
1995. Manufacturing remains subject tohigh
production costs, including forinputs ofbasic
infrastructural services such asfinance and
telecommunication. However, continued
liberalization,includingrecentcutsintariffsand
reform offinancial markets, pursuit of
privatization, planned improvements inmining,
andfiscal reforms suchastheintroduction of
value-added taxinplace oftheformer salestax
areexpected toimprove Zambia 'sexport and
growth prospects.
5. Zambia isamong theworld 'smajor
copper producers. Mining andquarrying
account forover 80percent ofZambia 's
merchandise exports; thesector produces about
6percentofGDPandprovides employment for
some 10percentoftheformal work force.
Agriculture accounts forover20percentof
GDP andabout 17percentofemployment.
Manufacturing, with some 14percent of
Zambia 'sexports ofgoods, isthesource of
almost aquarter ofGDP andjustover11per
centofemployment. Withover60percentof
thelabour force, services areZambia 'slargest
employer, accounting forabout halfofGDP.
(2) Zambia inWorld Trade
6. Zambia'svulnerabilitytoexternalshocks
isreflected initsexternal trade account, where
thepriceofcopper andtheweather-related need
formaize imports playanimportant rôle. A
further significant factor inthecurrent account
isinterest onZambia 'sexternal debt,withsuch
scheduled payments averaging over25percent
ofmerchandise exports inthepastfiveyears.
7. Copper accounts forover70percent
ofZambia 'sforeign exchange earnings from
goods, andcobalt forafurther 10percent.
Zambia ranked astheworld 'ssecond-largest
producer ofcobalt in1992andisamong thetop
fivenations interms ofreserves, refining
________________________________________________________________________________________WT/TPR/S/17 Trade Policy Review
Page x
capacity andproduction ofcopper. Non-
traditional exports, including engineering and
agricultural products, processed foods, and
textiles, havegrown rapidly; theycontributed
some 17percentoftotalmerchandise export
earnings in1995compared toaround 8percent
in1990.
8. MajorimportstoZambiaincludecapital
equipment forthemining sector, crude oil,
fertilizer andmaize. Theshare ofmaize intotal
imports reflects theintensity ofdroughts: maize
accounted fornearly 20percent oftotal
merchandiseimportsin1992,2percentin1994
and8.6percentin1995. Arecent increase in
fertilizer imports partly reflects anincreased
emphasis bytheprivate sector onagricultural
products asnon-traditional exports. Other
imports, including consumer goods and
intermediate inputs, haveincreased asashare
oftotalimports -from40toaround 60percent
-since1992, reflecting inparttheconsiderable
liberalizationofthetraderégimeandthegrowth
ofexports ofmanufactures.
9. Japan, which buysmuch ofZambia 's
copper,isthesinglelargestmarketforZambia's
exports,followedcloselybytheEuropeanUnion
(EU). Textiles, which areamong themore
important ofZambia 'snon-traditional exports,
findamarket mainly intheEUandSwitzerland.
Zambia 'sagricultural exports, mainly
floricultural, aremarketed largely outofthe
region asmany neighbouring countries produce
similar items. Within theregion, Zaire isthe
main importer ofZambia 'sproducts, followed
byZimbabwe. South Africa isZambia 'smajor
supplier, withashare inZambia 'stotalimports
ofalmost 30percent,followed inorder bythe
EU,Zimbabwe, Japan andtheUnited States.
(3) InstitutionalandLegislativeFramework
10. InAugust 1991, theRepublic ofZambia
became amulti-party democracy headed byan
executive President, whose tenure maynotrun
beyond twofive-year terms. Legislative power
isvested inParliament, which consists ofthe
President andtheNational Assembly. ThePresident andmostmembers oftheAssembly
areelected byuniversal adult suffrage. A
Cabinet consisting ofthePresident, theVice-
President andMinisters appointed bythe
President, formulates Government policy.
11. Zambia'slawscomprisethe
Constitution, ActsofParliament andStatutory
Instruments, which aregenerally issued by
members oftheCabinet. Bills, including those
dealing with trade, areinitiated bythe
competentMinistriesandsubmittedforapproval
totheCabinet before submission toParliament.
The1995 Customs andExcise Actisthemain
legislation governing Zambia 'sforeign trade,
including importation andexportation ofgoods,
rules oforigin, customs valuation, tariff
concessions,excisetaxes,andanti-dumpingand
countervailing duties. The1994 Competition
andFairTrading Actintroduced acode of
conduct forallbusiness entities andprohibits
anti-competitive trade practices, such asthe
formation ofcartels andcollusive tendering.
Under the1993Investment Act,asamended in
1995, general incentives areprovided to
investors, including aconcessional taxrateon
earnings from farming andnon-traditional
exports; private investments areprotected from
nationalization orany other compulsory
acquisitions. Allinvestment applications are
processed byaone-stop Investment Centre,
except forinvestment inmining andfinancial
services, which arerespectively under the
authority oftheMinisters ofMines andFinance.
12. Inaccord with themarket-oriented
reforms,almostallState-ownedcompanieshave
either beenliquidated, privatized, orearmarked
for privatization, through the Zambia
Privatization Agency. State trading and
participation inproductive activities havebeen
considerably reduced. However, theZambia
Consolidated Copper Mines, forwhich
privatization modalities areunder study, the
Zambia Electricity Supply Corporation, the
Zambia Telecommunications andtheZambia
National OilCompany hold monopolies or
exercise rights intheir respective field of
activity.
________________________________________________________________________________________Zambia WT/TPR/S/17
Page xi
13. Zambia grants atleastm.f.n. treatment
toallitstrading partners. Afterindependence,
Zambia applied theGATT onadefacto basis
untilitbecame aContracting Party inFebruary
1982. Zambia isafounding member ofthe
World Trade Organization (WTO). Likeother
WTO members, Zambia hasbound allitstariff
linesonagricultural products. About 97per
centofsuchlinesarebound ataceiling rate
of125percent; bindings onremaining lines
range from45to60percent. Some 186lines
onnon-agricultural products werealsobound,
atceiling ratesranging from30to60percent.
Subject tolimitations concerning thepresence
offoreign natural persons, Zambia bound
market access under theGeneral Agreement on
Trade inServices (GATS) forsome services,
including those incidental tomining and
exploration, andprofessional, tourism and
travel-related services. Zambia isrevising its
trade-related legislation, including for
intellectual property, tobring itintoconformity
withtheWTO Agreements.
14. Zambia participates intheCommon
Market forEastern and Southern Africa
(COMESA),whichinDecember1994,succeeded
tothePreferential Trade AreaforEastern and
Southern African States (PTA). Imports from
COMESA partners enterZambia at40percent
oftheapplicable m.f.n. rate. Zambia isalso
asignatorytotheSouthernAfricanDevelopment
Community (SADC).
(4) Features ofTrade Policy
(i) Trade policy instruments andtheir
effects
15. Since late1991, trade barriers have
been substantially reduced inZambia.
Quantitative import restrictions have been
eliminated andimport controls aremaintained
onlyforhealth, security andassociated reasons.
Customs duties arenowthemain trade policy
instrument.
16. Zambia 'stariff has also been
considerablysimplified.Overthepastfiveyearsthemaximum ratehasbeenlowered from100
to25percent; tariff categories have been
reduced from12tofour, withrates ofzero, 5,
15and 25percent; and virtually all
suspensions and exemptions have been
eliminated. Almost allrates areadvalorem.
Customs valuation isbased ontheBrussels
Definition ofValue buttheauthorities intend
soontomovetoa"transactions value" basisfor
these purposes.
17. Zambia 'ssimple average m.f.n tariffis
13.6percent. Theaverage rateishighest in
agriculture, where itis18.2percent; averages
inmining andindustry are7.5and13.5per
cent,respectively. About two-thirds ofalltariff
linesbearratesof15or25percent,while some
20percentoflines, mainly forrawmaterials
andproductive machinery, havezerorates. In
aggregate, Zambia 'stariff displays negative
escalation from primary tosemi-processed
products butratesescalate toover16percent
forfinished goods, with escalation most
pronounced insectors suchaspaper products
andtextiles.
18. Theauthorities hopetolower tariffs in
1997and1998,particularlyonintermediateand
consumer goods. However, border duties
account forwellover50percentofgovernment
revenue, afactor thatmayslowfurther tariff
reductions. Anindependent body, theZambia
Revenue Authority, wasestablished in1994, in
order toimprove revenue performance.
19. Inadditiontotariffs,importsaresubject
toanImport Declaration Fee,introduced in
October 1995 forfiscal reasons, andlevied at
arateof5percentoncommercial goods worth
atleastUS$500. Excise duties ranging from
10to125percentapply toalimited number
ofgoods, whether imported orlocally produced,
includingsugar,beverages,petroleumproducts,
tobacco, tyres andtubes. Avalue-added tax
(VAT) of20percentreplaced a23percent
sales taxinJuly1995 andiscollected onboth
goods and services, locally supplied or
imported.
________________________________________________________________________________________WT/TPR/S/17 Trade Policy Review
Page xii
20. Since theearly 1970s, Zambia has
applied ananti-dumping dutyof15percenton
imports ofwindows anddoors, andwindow and
doorframes ofironorsteel, irrespective ofthe
country oforigin. Zambia, which intends to
update itsantidumping and countervail
legislation, applies noother "emergency"
measure. NordoesZambia maintain anylocal
content requirements; thelastsuchmeasures
wereeliminated bythe1996 Budget.
21. Zambia applies noexport taxes, levies
orcharges andgrants nodirect subsidies to
exports. Adrawback scheme isinplace for
exporters andisbeing reviewed withaviewto
reducing delays related torefunds. Non-
traditional exporters areexempt fromcustoms
dutyandVATonimports ofmachinery and
equipment, andareentitled toaconcessional
income taxrateof15percentontheirexport
earnings, compared tothestandard rateof
35percent. Theestablishment ofexport-
processing zones isunder study. Except for
prohibitions maintained forenvironmental
reasons, restrictions onexports have been
eliminated. However, exports ofmaize are
banned from timetotimedepending onthe
domestic harvest, andscrap metal issubject to
export limitations. Allexporters have full
foreign-exchange retention rights.
22. Zambia eliminated allitsdirect product
andconsumer subsidies in1991. Price
regulations andcontrols were abolished for
almost allgoods andservices in1992, including
forstaple foods, pharmaceuticals, and
telecommunications;administeredpricesremain
forpetroleum products, electricity and
transportation.
(ii) Sectoral aspects oftrade policy
23. Thesignals forresource allocation in
Zambia havechanged significantly since 1991,
away from State-control toward market
orientation. Bymoving toward amore neutral
incentive structure, theGovernment hopes that
theprivate sector, inallocating resources
according tocomparative advantage, willdiversify theeconomy awayfromitsdependence
oncopper,andZambia'sattendantvulnerability
tochanges incopper output andprices. There
aresome indications ofsuccess. Intheperiod
since 1991, thedecline inthevalue ofcopper
exports, duetoareduction inoutput, hasbeen
more thanfullycompensated byanincrease in
non-traditional exports. Thisincrease hasbeen
mainly inmanufactures butagriculture hasalso
responded tothereform effort, particularly in
floriculture where therehasbeenarecent seven-
foldincrease inexports.
24. TheGovernment hasreoriented its
objectives foragriculture away from the
narrower aimoffoodsecurity, particularly for
theurban population, tothebroader goalofa
contributionfromagriculturetonationalincome
andemployment. Inthiscontext, asectoral
liberalization programme has removed
quantitative restrictions onimports, eliminated
subsidies andmonopoly marketing boards,
deregulated prices, and initiated the
privatization ofallpublic enterprises inthe
sector. Government assistance tothesector is
limited toresearch, infrastructure, agricultural
extension services andthemaintenance ofa
strategic foodreserve, mainly inmaize, the
national staple. Larger-scale projects, suchas
theEmergency SeedDistribution Programme,
which isaimed atdiversification toward
drought-resistant crops, arelargely financed by
foreign donors. Tariffs arevirtually thesector 's
onlytrade policy instrument buttheyremain
relatively high: themaximum rateof25per
centapplies tomore thanhalfthelinesinthe
sector.
25. The authorities also intend to
substantially reduce therôleoftheState in
mining, essentially tothatofafacilitator and
regulator. Thus, recent legislation eliminated
themandatory participation oftheGovernment
inmining ventures, established thefreedom of
commercial operations andguaranteed the
security oftitletomining rights. Inaddition,
in1994 monopoly marketing rights onmetals
were abolished, andin1995 anewroyalty
scheme wasintroduced toencourage vertical
________________________________________________________________________________________Zambia WT/TPR/S/17
Page xiii
diversification ofmineral products. Authority
isnowreadily granted totheprivate sector for
awiderange ofactivities, including exploration
andprospecting. However, thesector remains
dominated bytheState-controlled Zambia
ConsolidatedCopperMines(ZCCM).
Productivity incopper production isrelatively
low,inpartresulting fromthedepth ofZCCM 's
mines, depleting orereserves, lackofskilled
labourandmanagementproblems.Cost-cutting
efforts areunderway andtheauthorities hope
thatthistogether withtheplanned privatization
ofZCCM, theprospective entryintoproduction
ofnewsites, andimproved extraction methods
willstabilize production atclose tocurrent
levels.
26. InZambia 'smanufacturing sector,
reform hasledtoashake-out ofthemore
inefficient firms. Inparticular, theGovernment
hasliquidatedtheZambiaIndustrialandMining
Corporation,whichasaState-controlledholding
company dominated thesector. Resources
would nowseemtobestarting tomove toward
more efficient use;newinvestment appears to
havebeenattracted byprivatization andsome
established companies areexpanding capacity.
Certainlymanufacturingexportshaveresponded
tothemore liberal environment, doubling over
thepastfour years. However, thesector
remainsoneofrelativelylowproductivity,partly
because ofweaknesses ininfrastructural
services, including occasional drought-induced
energy shortages. Border protection forthe
sector isrelatively moderate; there areno
quantitative import restrictions buttariffs on
somefinalproducts,includingcertainprocessed
foods andtextiles range to25percent.
27. Since theinitiation ofreform many
service-oriented State-owned service providers
havebeenprivatized, including hotels, banks
andtransport facilities. Inthelatter area, the
national airline hasbeenliquidated. Except for
limitations intelecommunications, financial
servicesandenergy,servicesareopentoforeign
investment.Inbanking,foreign-ownedbranches
orsubsidiaries arefreetoenter themarket
provided theyincorporate locally andatleasthalftheirdirectors areestablished residents in
Zambia. Monopolies orexclusive rights remain
incertain areas, including telecommunications
andenergy. Further planned reforms inthe
sector areexpected togivemomentum toother
sectors, including manufacturing, byreducing
telecommunication, financial andtransport
costs. Moreover, areas suchastourism, where
deregulation and privatization are well
advanced, areexpected tostart showing
improved growth.
(iii) Trade policies andforeign trading
partners
28. Zambiahasundertakenprofoundchange
initspolicy orientation. Supported bya
macroeconomic stabilization effort, ithas
implemented aseries ofbold structural
measures designed toreestablish stable,
sustainable growth. Trade liberalization is
integral, indeed central, toZambia 'sreform
effort, thusindicating itsconfidence inthe
efficacy ofopen, competitive markets andits
adherence toWTO principles
29. Zambia 'sadjustment effort isbeginning
toshowsignsofsuccess. Inparticular, itsnon-
traditional exports havegrown rapidly, andare
starting toleadadiversification oftheeconomy
away fromitsdependence oncopper. Inthis
context,continuedsteadfastpolicy
implementation willhelptobolster confidence
andcould serve toattract theneeded foreign
investment. Itwillalsobecritical thatZambia 's
non-traditional exports, including textile and
engineering,floriculturalandfoodproducts,not
meet newprotective barriers andthatthe
multilateral system supports Zambia 'sefforts
withopenmarkets.
________________________________________________________________________________________