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1、What Are the Constraints to Inclusive Growth in Zambia?Elena Ianchovichina and Susanna Lundstrom This paper is a joint product of PRMPR, PRMED and AFTP1, and was prepared upon request from the Zambia country team to serve as an input into the Zambia CAS. We thank Ricardo Hausmann, Dani Rodrik, Lant
2、Pritchett, Jos Verbeek, Aditya Mattoo, and other participants in the Harvard workshop on Zambia for useful comments on this work, as well as participants at the seminar with donors and the seminar with the government and NGOs in Lusaka. We are grateful to Alan Gelb, Jonathan Kydd, Arne Bigsten, Lind
3、a van Gelder, and Louise Fox, for their written comments on this study, and to Ana Revenga, Louise Cord, Kapil Kapoor, John Panzer, Kenneth Simler, Emmanuel Skoufias, Francesco Caramazza, Verena Fritz, Brian Levy, Marie Sheppard , and Helen Mbao who shared with us valuable comments on this study. We
4、 would like to acknowledge the comments of participants in the workshop on Shared Growth and Job Creation, held at the University of Oxford, and in a seminar organized by the Poverty Group of PREM network at the World Bank. The findings, interpretations, and conclusions expressed in this paper are e
5、ntirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.May 27, 2008AbstractDespite positive, relatively broad-based and stable growth record in recent years and immense untapped potential in agriculture, mi
6、ning and services, Zambias poverty rates have not declined significantly and remain high. Income growth is limited by coordination failures such as poor access to domestic and international markets, inputs, extension services and information. High indirect costs most of which attributable to infrast
7、ructure service-related inputs into production including energy, transport, telecom, water, but also insurance, marketing and professional service undermine Zambias competitiveness, limit job creation and therefore serve as a major constraint to pro-poor growth. Continued real appreciation is anothe
8、r serious threat to the competitiveness of export-oriented and import-competing sectors and to job creation. For Zambia to stay competitive and sustain the growth momentum it will be critical to improve productivity including the productivity of its labor force, and to lower indirect production cost
9、s related to basic services. Carefully crafted monetary and fiscal policies will also be critical in responding to the real appreciation pressures. Improving the quality and access to secondary and tertiary education is essential if the poor are to benefit from future growth of the non-farm economy.
10、 Weak governance and in particular poor government effectiveness, are factors behind the market coordination failures and the identified government failures, and are as such major obstacles to inclusive growth in Zambia.1 Introduction and Recent DevelopmentsZambia is a country which despite its mine
11、ral wealth and fertile soil is one of the poorest countries in the world. In 2006 per capita income in Zambia was $365 (constant 2000 $). Its rank in the UN Human Development Index for 2007-08 is 165 out of 177 countries. Its per capita income is still much below the per capita income at independenc
12、e in 1964 (Figure 1) and the poverty rate is as high as 64 percent. At independence the countrys income level was 75 percent above the African average and four times that of East Asia (Bigsten and Tengstam, 2007). Today the per capita income is below that of the African average and a quarter of what
13、 it is in East Asia. After decades of declining standards of living, Zambias economy started growing and per capita incomes started rising in the late 1990s (Figure 1). The recent positive and stable growth record has been accompanied by productivity improvement (Figure 2), and presents a distinct b
14、reak with the past of high growth volatility. Can this high growth record be sustained and made more inclusive? This study tries to identify the key constraints to inclusive and sustained, rapid growth in Zambia. An emphasis on increasing the opportunities for the poor to contribute and benefit from
15、 the growth process is critical given the fact that the majority of Zambian people are poor and/or vulnerable.Figure 1: Zambias GDP per capita and annual growth, 1962-2006Source: World Bank (DDP data).Figure 2: Growth accounting decomposition for ZambiaSource: Authors calculations assuming CRTS (see
16、 specifics about the calculations in Appendix) using World Bank data and Barro and Lee (2000).Before we start the analysis it is important to understand what was behind the change in productivity and growth that occurred around 1998 and the country-specific context of economic development in Zambia.
17、 The improved macroeconomic environment during the 1990s is often mentioned as a major factor behind the improvement in the business environment and has most probably had, with some time lag, a significant impact on growth. For example, inflation was over 180 percent in the early 1990s but has now r
18、eturned to single digits (Figure 3) and the government budget deficit halved as a share of GDP between 2003 and 2006.Figure 3: Inflation 1986 to 2006 (percent)Source: WDI and IMF (2007)Another important factor that is often assumed to have influenced the latest positive economic developments was the
19、 sharp increase in the price of copper. This has certainly helped growth in Zambia but it is also important to notice that the increase in production started before the sharp increase in the international price of copper in 2005 (Figure 4). Figure 4: Copper production and copper prices Source: Data
20、from Bank of Zambia Rapid growth between 1996 and 2006 was accompanied by rising domestic migration in response to the structural changes in the economy (Figure 5). There were strong rural-to-rural and urban-to-urban labor movements and much less pronounced increases in rural-to-urban migration. The
21、 later reflects perhaps the fact that Zambia already had a high level of urbanization (35 percent) given its development stage, and the excess of urban labor resulting from the privatization of mines. It is important to notice that urban to rural migration was also on the rise between 1996 and 2004.
22、 However, in all reported years since 1996 data suggest positive and rising net rural-to-urban migration. In the period 2004-06 migration flows seem to have stabilized with the exception of rural-urban flows. Figure 5: Internal migration flows, 1996-2006Source: CSO (forthcoming)Is the recent growth
23、episode a one time event related to a rebound from the improvement in the macroeconomic environment, the increase in copper prices, and the structural change accompanying reforms in the early to mid-1990s, or has Zambia embarked on a new, sustainable growth path? There are indications that recent gr
24、owth is not only a sign of these external events, but an outcome of more fundamental changes in the economy that have led to new sources of growth. Zambia has managed to broaden its export base. In the period 1980-2004 the country nearly doubled the number of products exported (Figure 6) and halved
25、its Herfindahl index The Herfindahl index measures the degree of export diversification. The higher the Herfindahl index, the lower the degree of diversification. breaking away from the group of least diversified economies in Sub-Saharan Africa (Figure 7). While in 1980 the five largest Zambian expo
26、rts accounted for 96 percent of its exports, in 2004 they made up about 80 percent of exports (Figure 6). Although the economy has grown rapidly and trade has expanded in absolute terms, it is declining in relative terms (see Figure 36). Figure 6: Degree of export diversification, Zambia Source: Wor
27、ld Bank, Export diversification data, PRMED.Figure 7: Non-oil Herfindahl Index for countries in SSA, 2004Source: World Bank, Export diversification data, PRMED.Zambia has diversified by capitalizing on its advantage in land-intensive primary goods (Figure 8). Mining products still dominate merchandi
28、se exports, but while in the three decades after independence Zambia relied exclusively on exports of ores and metals, in the last 17 years agricultural exports, including non-traditional farm exports, started playing a much more prominent role. The total gross value of agricultural output has risen
29、 by over 50 percent between mid-90s and 2001-2004. Cotton and tobacco has contributed to export-led growth. Cassava, sweet potatoes, cotton and groundnuts production have increased. Zambias share of food and other farm products in total exports increased from 4 percent in 1980s to 20 percent in the
30、early 2000s. Even small scale farmers have diversified by 2002/03 one out of five grew cotton, 45 percent derived income from animal products and 17 percent from horticulture.Figure 8: Composition of exports in ZambiaSource: World Bank, Export diversification data, PRMEDThe decline in the export sha
31、re of mining hides important trends in the mining sector which has diversified away from copper into other base metals and precious stones. In 1995 other base metals were fifth on the list of Zambias top 5 exports, and they accounted for less than 2 percent of total exports. By 2002 other base metal
32、s have moved to the second spot and represented 15 percent of Zambias merchandise exports. Precious stones, which were not on the top 5 list in 1998, represented nearly 4 percent of total exports.In addition to mining, in the last ten years, growth was driven by strong expansions in services and con
33、struction, and to a lesser degree in manufacturing. The change in average growth rates from the period 1991-98 to 1998-06, was 4.4 percent in total of which 1.8 percentage point came from mining, 1.1 from services and 1.4 from construction, but only as little as 0.4 from manufacturing (Figure 9). Gr
34、owth within services was mainly driven by growth in community and social services, real estate and business services, and wholesale and retail sales (Mattoo and Payton, 2007). These sectors are more often an “employer of last resort” unlike service sectors such as tourism, transport and communicatio
35、n, and finance and insurance, which tend to reflect broader economic dynamism. Understanding the constraints to growth in these latter service sectors and the manufacturing sector is an important step toward understanding how to sustain growth in Zambia in the long run.Figure 9: Changes in real grow
36、th rates (%) Source: World Bank (2007b)Robust increases in foreign direct investment inflows accompanied the boom in the mining sector. In 2005 FDI inflows increased by 166 percent, compared to just 2 percent in 2004. Investment pledges increased the most in manufacturing and mining, It has been est
37、imated that US$1.4 billion were injected in the mining sector in the last 3 years. and decreased in agriculture, tourism and transport. Credit to the private sector increased significantly for almost all sectors indicating increased domestic private sector activity (Figure 10). The sectors with the
38、strongest growth in private loans and advances were agriculture, wholesale and retail trade, manufacturing and other sectors. Loans to other sectors included personal loans (usually used for investment in a sector rather than consumption), loans to mining suppliers, law firms, audit firms, NGOs and
39、development organizations, private hospitals, cleaning services, book publishers, and others. Figure 10: Loans and advances to the private sectorSource: Bank of ZambiaDespite robust and increasingly broad-based growth in recent years, aggregate poverty rates in Zambia have declined only slightly and
40、 remain high. According to the household survey in 2006, 64 percent of the people in Zambia are still poor (Figure 11). Poverty rates remain highest in rural areas (80 percent) where two-thirds of Zambias population resides. This implies that the vast majority of the poor (72 percent) live in rural
41、areas. Other measures of well-being paint a disturbing picture including increasing child malnutrition over the 1990s, high prevalence of HIV/AIDS, and the lowest life expectancy in the world in 2007.Figure 11: Poverty rates in rural and urban areas, 1991-2006Source: Republic of Zambia (2006a), CSO,
42、 WDI, and Bank staff estimatesLooking separately at trends in rural and urban poverty rates, one sees a sharp decline in urban poverty between 2004 and 2006, and a slight increase in rural poverty during the same period (Figure 11). Understanding why urban poverty levels seem to have responded to th
43、e new economic opportunities but not rural poverty is crucial for understanding the constraints to shared growth.Figure 12: Incidence of poverty by stratumSource: CSO (forthcoming)Note: Small, Medium and Large in the rural area refer to the scale of the farm, and Low, Medium and High costs in the ur
44、ban area refer to the cost of the residential area.Figure 13: Percentage distribution of households that perceived a change in welfare during the recent year (2005-2006)Source: CSO (forthcoming)Note: Small, Medium and Large in the rural area refer to the scale of the farm, and Low, Medium and High c
45、osts in the urban area refer to the cost of the residential area.Poverty rates are highest among small and medium-sized farmers and non-farm rural residents (Figure 12). When asked directly how they perceive their welfare change during the preceding year, households involved in large-scale farming w
46、ere most likely to have felt an improvement, followed by urban households in high cost residential areas (Figure 13). The larger the size of the farm, or the higher the cost level in urban areas, the stronger was the perceived improvement in the households living standards. Finally, across all categ
47、ories, the share of households reporting improved welfare was larger than the share of those reporting deterioration. Growth in Zambia must accelerate in order to reduce poverty in a sizable way. Quantitative analysis by Bigsten and Shimeles (2007), who analyze the trade-off between growth and redis
48、tribution for poverty reduction in several African countries in the period 1981-2001, find that annual per capita growth in Zambia would need to be 4 percent in order to halve poverty between 2001 and 2015, assuming a constant Gini. Although many assumptions underlie this conclusion it indicates tha
49、t growth needs to accelerate in Zambia even beyond the 3 percent average annual per capita growth recorded in the strong growth period 2001-2006. This paper investigates the nature of the growth process in Zambia and the binding constraints to shared growth, i.e. inclusive growth in which the poor contribute and benefit f
