|22 February 2002
ZAMBIA: World Bank tells government to privatise even more
The World Bank has drawn up a
tentative plan to rescue Zambia's troubled economy as the country's strategic
copper mining industry totters towards what analysts fear could be inexorable
The Bank's resident representative in Lusaka said Bank staff
had been discussing a plan with government officials to diversify the economy
as the copper industry shrinks on the back of falling international prices and
rising production costs. However, the Bank's support for the economic
transition would depend on the government's commitment to seeing through
far-reaching economic reforms that the reformist former government of Frederick
Chiluba initiated under a donor-backed structural adjustment programme a decade
"By and large, there are major problems in the industry. Copper
mining in the Copperbelt [Province] may soon cease as a result of the poor
market conditions and high cost of production," Clarke told journalists this
week at a pre-budget presentation workshop for business reporters in Lusaka.
"This is the time to start thinking diversification, diversification,
diversification," he said.
While it contributes only four percent to the
country's Gross Domestic Product (GDP), the copper industry is responsible for
around 70 percent of Zambia's foreign receipts and directly employs some 17,000
people. However, the industry's future prospects have looked uncertain since
late 2001, when Anglo-American Corporation put on hold the Konkola Deep Mining
Project, which sought to extend the life of the country's copper mines by an
estimated 40 years. Last month, the mining house resolved to cut back its
investments in the local copper industry on the back of a continued slide in
metal prices and a rise in operating costs. Other strategic mining houses in
the country have indicated that they, too, may cut down on or suspend their
Clarke said the World Bank saw partnership between the
public and private sectors as the best way to diversify the economy through the
development of agriculture, manufacturing, and tourism. "A public-private
partnership is necessary to successfully execute the diversification programmes
in short, medium and long term. A public-private task force, preferably headed
by the private sector, should be set up immediately to agree on the
transformation and diversification programme in the Copperbelt," he said.
However, the World Bank would expect the government to speedily
conclude the privatisation of remaining strategic state utilities and effect
belated economic policy reforms before helping it expand its economic base.
"Expected initial government of Zambia responses include the privatisation of
the energy, financial and telecommunications sectors within the next six to
nine months to improve governance and efficiency of infrastructure service
delivery required for economic growth and business development," Clarke said.
The privatisation of the state-run utilities was crucial if the country hoped
to reach the Highly Indebted Poor Countries (HIPC) initiative completion point,
which would introduce a final debt relief package. Clarke predicted that
Zambia's economic prospects would also be dampened by a severe HIV/AIDS crisis,
debilitating widespread poverty, and the prospect of cuts in lifeblood donor
aid over governance concerns this year. "If you think that the year 2001 was
difficult for Zambia, 2002 will be even worse," Clarke said.
donors led by the European Union (EU) have expressed grave concerns at the
conduct of general elections held last December, which were widely regarded as
rigged by the ruling Movement for Multiparty Democracy (MMD). President Levy
Mwanawasa has responded to the electoral concerns by accusing the EU of trying
to influence the polls in favour of the opposition. The resultant standoff has
raised fears that the EU could introduce punitive aid cuts against the
Clarke said the EU had not indicated to the World Bank
whether or not its electoral concerns would effect its support to the country,
but noted "the anecdotes are worrying" and urged the government to address the
donors concerns. "We have said to the president that we have to deal with these
problems as speedily as possible so that the lingering issues are resolved and
the business of development can start," Clarke said.
Western donors fund
around half of Zambia's national budget. Most bilateral donors cut balance of
payment support to the country in 1996 in protest against the manner in which
general elections, held in the previous year, were conducted.