Sixth Business Advisory Council: A Broken Record

UNCLAS LUSAKA 000384

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EIND EINV ELTN EMW ZA
SUBJECT: Sixth Business Advisory Council: A Broken Record


1. (SBU) The Zambia International Business Advisory Council (ZIBAC)
recently held meetings to discuss the global economic crisis and
Zambia's response. Government officials, private sector
representatives, and international donors discussed ways to increase
Zambia's competitiveness and promote economic growth. Topics
included the need to adjust electricity tariffs as a way to increase
private sector investment in the power sector, ways to bring down
international telecommunications gateway fee and expand access, the
need to reform labor laws, and the importance of currency
stabilization. While the discussions were open and frank, issues
raised at the last ZIBAC session in 2007 remain unresolved, and the
Government of Zambia (GRZ) shows no urgency toward implementing
pro-growth reforms recommended by private sector participants and
gathered experts.

2. (SBU) The 2007 ZIBAC session highlighted the need for certain
reforms in order to increase competitiveness and create
opportunities for economic growth, yet most proposals have yet to be
addressed by the GRZ. For example, a study found that Zambia had
the lowest electricity tariffs in the region and suggested the GRZ
move towards a more cost-reflective system to encourage investment
in the deficient power sector. Under pressure from manufacturers to
keep energy costs artificially low, the GRZ announced at this year's
ZIBAC that it is delaying promised cost-recovery tariffs to 2012
(Comment: safely after the 2011 elections) and is not committed to
an increase in 2009. Despite calls in 2007 for lower international
gateway fees, which almost two years later in March 2009 President
Banda said would be decreased, the Information and Communications
Technology Bill is still under consideration by Parliament. ZIBAC
attendees in 2009 were reassured, however, that the lower fees would
be implemented, apparently now by August 2009 (Comment: Embassy
deems it unlikely that something which has dragged on for two years
will now be implemented in two months). No gathering would be
complete without a call to diversify away from the mining sector,
although mining sector representatives nonetheless urged the GRZ not
to abandon the sector but rather to look towards non-copper mining
as a way to diversify the economy. Business representatives,
including those from the mining industry, repeated that inadequate
infrastructure, specifically the lack of a national railway network,
continues to be a significant barrier to business growth in Zambia.
The Ministry of Works and Supply welcomed the comments by suggesting
that the GRZ will gladly accept private investment in any
infrastructure project. Attendees also called for trade policy
reform, urging the GRZ to implement predictable and consistent
policy and to scrap import and export bans in favor of open markets.
Conspicuously absent from the discussions was the issue of
corruption, especially in light of recent reports of widespread,
no-bid government contracts and massive embezzlement at the Ministry
of Health, ZIBAC missed an opportunity to address the perpetuation
of this disturbing trend and its negative impact on the business
environment in Zambia.

3. (SBU) Comment: More than anything else, the sixth ZIBAC
highlights the failure to implement reforms that the business
community has suggested in previous years, as well as at the recent
Indaba and other fora(reftel). Calls for economic diversification,
infrastructure development, legal reforms, just a sample of the
topics discussed since at least the first ZIBAC in 2003, seem to be
forgotten at the conclusion of each conference. President Banda, in
addressing the gathering, once again stressed the importance of
attracting both foreign and domestic investment, yet his Government
(and his predecessor's)has not taken decisive action informed by the
advice and concerns of investors. Calling for investment in the
energy sector without raising rates and making the sector
profitable, focusing on the global economic recovery without heeding
calls for reform and diversification, suggesting tourism is an
avenue for growth without investing in the necessary infrastructure
to promote it have become the mantra of luxurious conferences like
ZIBAC. The GRZ's broken record policy statements in these
deliberative fora are losing impact without concrete actions and
decisions.
KOPLOVSKY