OECD Investment Policy Review of Zambia
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OECD Investment Policy Review of Zambia Advancing investment policy reform 2011 Preliminary draft The Ministry of Commerce, Trade and Industry of the Republic of Zambia partnered with the NEPAD-OECD Africa Investment Initiative in 2010 to undertake a comprehensive investment policy review, with the support of the Government of Finland, based on the OECD Policy Framework for Investment (PFI). The government of Zambia took the lead in this self-assessment. The report has benefited from inputs from the Secretariats of several OECD bodies, including the Investment Committee, the Committee on Fiscal Affairs, the Committee on Financial Markets, the Committee on Corporate Affairs, the Committee on Competition, and the OECD Working Group on Bribery in International Business Transactions. The views contained within do not necessarily represent those of NEPAD, the OECD or their member governments. 2 Table of Contents PREFACE ............................................................................................................................................... 5 GLOSSARY OF TERMS ....................................................................................................................... 6 EXECUTIVE SUMMARY .................................................................................................................... 8 1 Zambia‘s Ambitious Reform Agenda ............................................................................................ 11 2 Investment Policy .......................................................................................................................... 25 3 Investment Promotion and Facilitation .......................................................................................... 37 4 Trade Policy ................................................................................................................................... 47 5 Competition Policy ........................................................................................................................ 54 6 Tax Policy ...................................................................................................................................... 59 7 Corporate Governance ................................................................................................................... 68 8 Policies for Promoting Responsible Business Conduct ................................................................. 75 9 Human Resource Development ..................................................................................................... 86 10 Infrastructure Development ........................................................................................................... 93 11. Financial Sector Development ..................................................................................................... 114 12 Public Governance ....................................................................................................................... 118 ANNEX I ............................................................................................................................................ 125 BIBLIOGRAPHY ............................................................................................................................... 126 3 4 PREFACE The Honourable Mr. Felix Mutati, Minister of Commerce, Trade and Industry Zambia: Central, connected and committed Zambia is in many ways a manifestation at the national level of new investment frontiers in Southern Africa. A driver of regional integration through its membership in regional economic communities, such as COMESA and SADC, and linked to eight neighbours, Zambia is a central economic pillar in Southern Africa. It has enjoyed political stability for over twenty years and has now become a ‗Lower Middle- Income Country‘ as outlined in its Vision 2030. Zambia needs investment, foreign and domestic, to boost its upward trend even more. Having recognised this, the Government has introduced a series of private sector reforms to strengthen its policy framework for investment and to enable private business to grow. Notable advances have been made in investment policy, where regulations have been harmonised, and multi-facility economic zones and industrial parks with privileged business infrastructure have been established. We are also pushing the legal framework up to global standards and have strengthened the institutional landscape for private sector development with specialized agencies such as the Zambia Development Agency. We are making big strides in improving cross-border trading and we dispose of a mature corporate governance philosophy. In terms of infrastructure, Zambia‘s primary and secondary road networks are good and we have large power generation potential. We are very cognisant of the importance of private sector feedback – hence the Government has installed a series of consultative mechanisms which actively involve the business community. Also, our policies for responsible business conduct have led to an expansion of civil society; a trend we hope will spur further private-sector led growth. All of these steps have contributed to notable results in the World Bank‘s Doing Business rankings over recent years. In fact, Zambia has improved its global ranking to the best top ten of surveyed countries in the world, is third in COMESA on overall ease of doing business, starting a business and paying taxes, and sixth world-wide in access to credit. Zambia‘s future relies on stronger implementation of the comprehensive reform package aimed to diversify the economy, improve its infrastructure, and capitalise on its tourism and agriculture investment opportunities. Reform is not an end result, but a continuous process, a permanent challenge. It is in this vein that Zambia requested the OECD to support the Government in self- assessing its investment policy framework against global best practices. I believe that this candid evaluation allows us to take critical steps towards reaching our development objectives towards becoming a diversified economy driven by investment and a vibrant private sector. 5 GLOSSARY OF TERMS AGOA African Growth Opportunity Act APR Annual Percentage Rate ARIPO African Regional Industrial Property Organisation ASYCUDA Automated System for Customs Data BDS Business Development Services BEDIA Botswana Enterprise Development and Investment Agency CACP Customs Accredited Client Programme CEEC Citizens Economic Empowerment Commission CCPC Competition and Consumer Protection Commission COMESA Common Market for Eastern and Southern Africa CTI Commercial Trade and Industrial Policy CUTS Consumers Unity and Trust Society EAC East African Community EDF European Development Fund EIF Enhanced Integrated Framework EPAS Economic Partnership Agreement ESA Eastern and Southern Africa FSDP Financial Sector Development Plan HIPC Heavily Indebted Poor Country ICSID International Centre for the Settlement of Investment Disputes ILO International Labour Organisation IOM International Organisation for Migration IPPAS Investment Protection and Promotion Agreements IPU Intellectual Property Unit KOTRA Korea Trade-Investment Promotion Agency LDCs Least Developed Countries LOLR Lender of Last Resort MATEP Market Access and Trade Enabling Policies MCTI Ministry of Commerce Trade and Industry MFEZ Multi-Facility Economic Zone MIB Mauritius Investment Board MIDA Malaysia Industrial Development Authority MIGA Multilateral Investment Guarantee Agency MSMES Micro, Small and Medium Enterprises OECD Organisation for Economic Development and Co-operation PACRA Patent and Company Registration Agency PPP Public Private Partnership PSDRP Private Sector Development Reform Programme RBS Risk Based Supervisions RDA Rwanda Development Agency SADC Southern African Development Community SAG Sector Advisory Group SAIED Strategic Action Initiative for Economic Development STR Simplified Trade Regime TOH Triangle of Hope TRIPS Trade Related Aspect of Intellectual Property Right TWGT Technical Working Group on Trade TWGTF Technical Working Group on Trade Facilitation UNCITRAL United Nations Commission of International Trade Law UNCTAD United Nations Conference on Trade and Development WAIPA World Association of Investment Promotion Agency 6 WIPO World Intellectual Property Organisation WTO World Trade Organisation ZACC Zambia Chambers of Commerce and Industries ZBF Zambia Business Forum ZDA Zambia Development Agency ZEGA Zambia Exporter Grower Association ZIZABONA Zimbabwe, Zambia, Botswana and Namibia Interconnector 7 EXECUTIVE SUMMARY An impressive private sector reform agenda Zambia, today, is one of the dynamic growth poles of Southern Africa, thanks to important progress in recent years in strengthening the policy framework for investment. Breaking away from the centrally planned economy, Zambia began to liberalise its trade regime in the early nineties, and embarked on a privatization programme in 1992. A more ambitious reform agenda followed in 2004 under the Private Sector Development Reform Programme (PSDRP) to improve the investment climate and boost the private sector‘s contribution to economic growth. Moreover, the Government has articulated the country‘s long term development objectives in the Sixth National Development Plan (SNDP) and the National Long Term Vision 2030. Zambia boasted a real Gross Domestic Product (GDP) of 5.9% per annum between 2004 and 2010, exports expanded ten-fold and FDI increased eight-fold, reaching USD1.3 billion in