Economic Development Strategy Through Zambia Development Agency

By Clive Siachiyako

a. Zambia Development Agency’s role to Zambia’s economyThe free market economy model has radically changed the approach to development today. The competitiveness of foreign direct investment (FDI) and the pursuit of favourable business climates by investors have further steepened the approach. These trends make the pursuance and attainment of development sustainably more challenging. This entails that each country requires a strategic overseer of the development vision. To Zambia, the creation of Zamb

ia Development Agency (ZDA) fits well in this position of shaping the country’s development outline.Through ZDA government has committed itself to creating a business environment that benchmarks Zambia as the best among dynamic developing economies. ZDA is tasked to promote growth and investment in Zambia. It is an institution that is client focused and creates confidence in the public sector’s support for business. The Agency facilitates overall private sector growth. The ZDA promotes development by providing effective and comprehensive facilitation and aftercare services. It also promotes business development services and market information in order to attract investment and promote Zambian exports efficiently and in a competitive manner. The Agency supports Greenfield investments through joint ventures and partnerships between local and foreign investors, as well as ensuring speedy approval of all licenses by all government agencies. It also assists in obtaining land for economic projects and assists in obtaining work permits for expatriate staff.The Agency mainly promotes growth of the Micro and Small Enterprises (MSEs) sector, which cuts across all sectors of Zambia’s economy and provides one of the most prolific sources of employment. The MSE sector serves as a fibre of wealth creation for most Zambians and a breeding ground for industries. The emphasis on SMEs by the ZDA has been to shift Zambia's economic development direction, which has been geared towards the promotion of medium and large-scale enterprises mainly in the mining and manufacturing sectors. However, current wisdom shows that SME involvement in the economy has become essential. Thus, ZDA creates market linkages for SME players with trans-national corporations to enable them realise meaningful profit from their economic activities.Export earnings are another stimulant ZDA sees crucial in propelling Zambia’s economic development. The Agency thus markets Zambia’s exports abroad to increase earnings from the sector. It promotes export and competitive international trade from Zambia and assists Zambian businesses and entrepreneurs in accessing new markets and expanding existing ones for their products within the region and beyond. The Agency also assists entrepreneurs to source inputs at competitive rates.The promotion of exports involves research. The Agency thus research what different markets offer Zambian exporters. Based on market access offers, ZDA advises the Minister of Commerce, Trade and Industry on matters relating to International Trade and Development through export of goods and services. The Agency largely utilises market access offers received from trading partners under COMESA, SADC, the European Union and other Regional Trading Blocks as well as National Initiatives and from the World Trade Organisation. This is to ensure that Zambian businesses take advantage of the opportunities generated by those offers.To bolster the growth of domestic industries to enhance export earnings, ZDA promotes investments into the county. Indeed, Zambia has formulated an industrial policy vision that is meant to improve the country’s earnings from exports. The industrial policy embraces the promotion of investments into zoned areas for industrial parks. Accordingly, ZDA promotes both local (domestic direct investment –DDI) and foreign investments in different sectors of the economy. Specifically, the Agency establishes Multi-Facility Economic Zones (MFEZ) to bolster FDI and DDI. The MFEZ programme serves as a catalyst to Zambia’s industrial and economic development through facilitation of investment in Multi-Facility Economic Zones. The objective of the programme is to catalyse industrial and economic development in the manufacturing sector for the purpose of enhancing both domestic and export oriented business. The zones provide an environment that is competitive enough for a manufacturer to process within the borders of Zambia with relative ease. They are designed to make Zambia have a robust and viable manufacturing sector in the region through increased activity. The MFEZ initiative is crucial to Zambia, as it increases the country’s realisation of foreign exchange earnings. These earnings easily flow in when exports are value-rich; especially that Zambia is a member of various regional and international organisations such as World Trade Organisation, COMESA, SADC and various market access agreements. These provide ready markets for the export of value–added manufactured products. The MFEZ programme has several incentives that are meant to attract investors in the zones, such as exemption from tax on dividends for five years from first of declaration; corporate tax is at zero percent for the first five years from the first year profits are made, among many others.The ZDA mainly builds and enhances the country’s investment profile for increased investment inflow to be realised and promotes the country’s exports. It also promotes the growth of the MSE sector by providing incentives that can propel the growth of the sector sustainably. The Agency is simply the pioneer of Zambia’s development agenda.

b. Experts, soothsayers and pundits have been falling over themselves to list the factors that combined to produce the worst economic downturn since the Great Depression. A partial consensus has emerged on some issues (excessive deregulation of the financial sector, current account imbalances) while debate continues to rage on others (such as the role played by central banks, China, and growing inequality).But it’s instructive to think for a moment about the factors that are generally, albeit implicitly, agreed not to have caused the crisis. Of course at one level, this might seem a trivial exercise: there is an infinite number. But consider the following selective list of non-culprits: rigid labour markets, out-of-control budget deficits, over-generous welfare states, powerful trade unions, too rapid growth of wages and excessive equality.Sound familiar? Right, these are the things that, for about a quarter century now, a seemingly invincible phalanx of international institutions, national governments of the right and increasingly also centre-left, media pundits – oh, and I almost forgot, investment-bank chief economists – has assured us are the causes of high unemployment and slow growth. They are the usual suspects.European economies have now suffered an unprecedented contraction of output. While forecasts are getting more optimistic a sluggish recovery is almost certainly the best that can be hoped for. Unemployment will in any case return to double-digits – way beyond the level when the Lisbon process was inaugurated in 2000 – and on past experience will be slow to fall. And the five sets of key explanatory factors, drummed into policymakers for years, the intellectual underpinning of one reform program after another, explain… nothing. The usual suspects are innocent.Instead the rise in unemployment is primarily due – in a nutshell – to failings in two main areas: first, a naïve reliance on market forces and excessive deregulation of the financial sector; and second, linked to that, the failure of macroeconomic policy to prevent bubbles and imbalances arising and then to arrest the downturn when they burst. Yet none of the major debates and policy initiatives on employment and unemployment of recent years – the OECD Jobs Strategy, the European Employment Strategy, the Lisbon process – had taken seriously issues of demand management and the need to stabilise economies in the face of speculation and asset booms and busts. This, in turn, reflected a cast-iron faith in the theories that claimed that monetary policy could and should only ever target inflation, discretionary fiscal policy had no role in stabilisation, and deregulated (financial) markets could never get prices wrong.The crisis has blown these theories away. Much of the policy agenda of the past decades has evidently been tangential at best and harmful at worst. Yet it is vital to make the implicit recognition of these facts explicit. For it is not at all clear that – beyond some limited re-regulation of the financial sector – the needed, more far-reaching changes in our economic and employment policies will materialise. There is a real risk that, in a situation of large fiscal deficits and high unemployment, the old, now discredited medicine will once again be prescribed, as happened after the recession of the early 1990s (which by the way also had primarily macroeconomic causes). This will be the locus for key political debates and struggles in Europe the coming month and years.Future columns will examine the different policy fields mentioned and the controversies surrounding them. Together they will set out the case for a different approach to maintaining sustainable growth and high employment, one that is more coordinated, more social and more European.

c. The world is suffering from the most severe economic breakdown in decades and the international political community, under the umbrella of the G20 and the UN, is working feverishly to mitigate the hardest consequences of the downturn. But the political management of the crisis must not only focus on the tackling of economic issues and the reform of the regulatory framework for financial markets. Political leaders must also address some of the fundamental political and democratic problems that helped the crisis to materialise in the first place. If a new post-crisis economic system is to become more sustainable and responsive political control of the economy needs to be permanently restored.The British MP and former Cabinet Minister Clare Short once said: ‘People have accused me of being in favour of Globalisation. This is equivalent to accusing me of being in favour of the sun rising in the morning.’ Short, who enjoys a reputation as a principled politician, expressed what was the widespread believe of the mainstream Western political class in the 1990s and early 2000s: economic Globalisation – driven by financial markets – was regarded as an inexorable law of nature. Attempting to shape the process was hence a hopeless undertaking.This view has always been tricky. In fact it led to a democratic problem: if politicians – as a matter of faith – surrender the political scope of action over a process that has such a major effect on the societies whose interests they were elected to represent, what democratic mechanisms are left for people to influence the way Globalisation impacts on their lives? And if it is not elected politicians who set the rules of the game is it democratically legitimate that markets by and large determine their own boundaries?In the wake of the financial crisis it became apparent that surrendering the scope of action to shape Globalisation did not only produce a democratic problem but was also a serious political mistake. As a result of the market being unable to heal itself and prevent a systemic crisis, governments were forced back into the driving seat. And there was no choice but to assume responsibility since no other institution is equipped with the necessary means to stabilise the economy.But far from realising their political mistake politicians were ill prepared for this seemingly impossible scenario and reacted more than they guided. Caught on the wrong foot about the extent of the predicament of the financial sector and the beginning global recession, national governments had to prepare emergency landings for financial institutions and enacted stimulus packages to strengthen economic demand using dizzying amounts of taxpayers’ money. The irony therefore is that it was the ordinary citizen, who used to have little say over how the global economic system was governed, that in effect had to provide the means to prevent a disaster and was left with serious risks and liabilities.Against this backdrop, it is crucial for political leaders to realise that what is needed now is not just basic repairs of a broken system. Above all politicians must comprehend that giving up the scope of action to shape economic Globalisation was a big mistake and part of the reason why the crisis could happen in the first place. Politics must not surrender democratic control over the global economy again but insist on setting the rules of the game in the future. This would also help to make Globalisation more democratic, accountable and responsive to citizen concerns taking into account their new role as risk-bearers of last resort. If political leaders, however, simply move back to pre-crisis business as usual there is a good chance that the next crisis is just around the corner.

d. To understand how economies work and how we can manage them and prosper, we must pay attention to the thought patterns that animate people’s ideas and feelings, their animal spirits. We will never really understand important economic events unless we confront the fact that their causes are largely mental in nature.It is unfortunate that most economists and business writers apparently do not seem to appreciate this and thus often fall back on the most tortured and artificial interpretations of economic events. They assume that variations in individual feelings, impressions, and passions do not matter in the aggregate and that economic events are driven by inscrutable technical factors or erratic government action. In fact, as we shall discover in this book, the origins of these events are quite familiar and are found in our own everyday thinking.We started work on this book in the spring of 2003. In the intervening years the world economy has moved in directions that can be understood only in terms of animal spirits. It has taken a rollercoaster ride. First there was the ascent. And then, about a year ago, the fall began. But oddly, unlike a trip at a normal amusement park, it was not until the economy began to fall that the passengers realised that they had embarked on a wild ride. And, abetted by this obliviousness, the management of this amusement park paid no heed to setting limits on how high the passengers should go. Nor did it provide for safety equipment to limit the speed, or the extent, of the subsequent fall.What had people been thinking? Why did they not notice until real events – the collapse of banks, the loss of jobs, mortgage foreclosures – were already upon us? There is a simple answer. The public, the government, and most economists had been reassured by an economic theory that said that we were sage. It was all OK. Nothing dangerous could happen. But that theory was deficient. It had ignored the importance of ideas in the conduct of the economy. It had ignored the role of animal spirits. And it had also ignored the fact that people could be unaware of having boarded a rollercoaster.Traditional economics teaches the benefits of free markets. This belief has taken hold not just in the bastions of capitalism, such as the United States and Great Britain, but throughout the world, even in countries with more established socialist traditions, such as China, India, and Russia. According to traditional economics, free market capitalism will be essentially perfect and stable. There is little, if any, need for government interference. On the contrary, the only risk of major depression today, or in the future, comes from government intervention.