New industrial policy hamstrung by global regs

The much awaited Industrial Development Policy, together with the National Trade Policy will be launched today (Thursday). These two policies will transform the way we look at industrialization - the most powerful engine of structural change and modernization.

An industrial policy is an official strategic effort to encourage the development and growth of the manufacturing sector. The IDP was approved by Cabinet last year, following the expiry of the previous one in 2010. Its purpose is to create a vibrant, self-sustaining and competitive economy through promotion of viable industrial and commercial sectors as well as domestic and international trade.

The manufacturing sector hashad little effect on poverty reduction in the past two decades. Its contributionto GDP fell sharply after 1991, from 23% in 1980 to 10% in 2008.

But no matter how concrete the policy, it will face severe limitations that could hinder it from flying high. Some very effective industrial policy instruments applied by developed and emerging economies, in order to be where they are today, are now either banned or regulated.

The rules of the World Trade Organization, of which Zimbabwe is a member, prohibit the use of quotas and local content requirement.We are emerging from a decade of economic meltdown, when real GDP growth fell by an average of -5.9% between 2004 and 2008. Manufacturing is estimated to have declined by 73.3% in 2008, and is battling numerous challenges, which are making most locally produced products uncompetitive.

The industrial policy might also find it tricky to use tariff barriers. As a result ofeconomic partnership agreements with the EU, Zimbabwe is under increasing pressure to abandon the use of tariffs for protection. This will result in goods walking-for-free from Europe to Zimbabwe.

This will effectively mean that the industrial policy may not be able to use tariffs to protect the local manufacturing sector. As Europe’s economy is projected to contract by 4% this year because of the Eurozone debt crisis, it remains to be seen how the EPA negotiations will proceed.- [email protected]

Post published in: Opinions & Analysis
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