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OCCASIONAL PAPER

Trade and Trade Policies inEastern and Southern Africa

With Enrique Gelbard, Richard Harmsen,Katrin Elborgh-Woytek, and Piroska Nagy

INTERNATIONAL MONETARY FUND

Washington DC

August, 2000

196

By a staff team led by Arvind Subramanian

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© 2000 International Monetary Fund

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Typesetting: Alicia Etchebarne-Bourdin

Library of Congress Cataloging-in-Publication Data

Trade and trade policies in eastern and southern Africa/prepared by a staffteam led by Arvind Subramanian; with Enrique Gelbard . . . [et al.].

p. cm. — (IMF occasional paper ; 196)

ISBN 1-55775-942-1

Includes bibliographical references.

1. Africa, Eastern—Commerce. 2. Africa, Southern—Commerce. 3.Africa, Eastern—Foreign economic relations. 4. Africa, Southern—Foreigneconomic relations. I. Subramanian, Arvind. II. Series. III. OccasionalPaper (International Monetary Fund); no. 196.

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Contents

List of Abbreviat ions

Preface

I

II

III

IV

V

VI

VII

Overv iew

Eastern and Southern Afr ica: Broad Characterist icsof the Region

Trade Liberal izat ion by E S A Countr ies D ur i ng the 1990s

Unilateral Liberalization in GoodsMultilateral Liberalization in GoodsLiberalization in Services

Regional Integration

Preferential Liberalization in GoodsTrade Developments

The External Environment and Trade Developments

External EnvironmentOpennessExport Performance

Macroeconomic Aspects of Trade Liberalization

Initial Macroeconomic ConditionsTrade Liberalization and Macroeconomic OutcomesFiscal Aspects of Trade Liberalization

Trade Policy Issues Ahead

The Unfinished Agenda of Unilateral LiberalizationRegional Preferential IntegrationPreferential Agreements with Industrial CountriesMultilateral LiberalizationRole of Complementary PoliciesRole of Major Trading Partners

References

Boxes

IIIVVI

3.1. Trade Liberalization in the Context of IMF-Supported Programs5.1. Trade Protection and Trade Outcomes in Africa6.1. South Africa: Dynamic Gains From Trade Liberalization

vi

vii

1

4

6

61213

17

1718

20

202021

24

242427

30

303033333435

56

102225

iii


CONTENTS

VII

6.2. Mozambique: Successful Trade Liberalization6.3. Zambia: Bold Liberalization but Low Growth6.4. Mauritius: Heterodox Opening6.5. Export Processing Zones7.1. The Impact of Changes in the Trade Environment on the

BLNS Countries

Tables

I

IIIII

IV

V

VI

VII

1.1. Selected African Countries' Membership in RegionalTrade Agreements

2.1. Eastern and Southern Africa: Basic Economic Indicators3.1. Eastern and Southern Africa: Overall Trade Restrictiveness

in the 1990s3.2. Eastern and Southern Africa: Measure of Trade Restrictiveness

in the 1990s: Nontariff Barrier (NTB) Regimes3.3. Eastern and Southern Africa: Tariff Regimes in the 1990s3.4. International Comparison of Trade Restrictiveness Rankings, 19983.5. Selected ESA Countries: Status of Tariff Exemptions,

December 19983.6. International Comparison of Tariff Collection Efficiency, 19963.7. Eastern and Southern Africa: Banking Sector Structure and

Liberalization, 19973.8. International Comparison of Liberalization of the Banking

Industry: Developing Country Members of the WTO3.9. Eastern and Southern Africa: Telecommunications Liberalization4.1. Eastern and Southern Africa: Intraregional and Extraregional

Trade with Selected Partners5.1. Eastern and Southern Africa: Openness Indicators, 1990 and 19995.2. Eastern and Southern Africa Countries: Growth in Export Volume6.1. Selected ESA Countries: Tariff Revenue6.2. Eastern and Southern Africa: Trade Tax Revenue as a Share

of Total Revenue7.1. Eastern and Southern Africa: Changes in the Trading Environment

FiguresIII

IV

VVI

VII

3.1. Eastern and Southern Africa: Changes in Tariff and NontariffBarriers, 1990-98

4.1. Eastern and Southern Africa: Destination of Exports, 1990and 1999

5.1. Eastern and Southern Africa: Imports and Exports, 1990 and 19996.1. Eastern and Southern Africa: Trade Liberalization and

Economic Performance6.2. Eastern and Southern Africa: Trade Liberalization, Fiscal

Performance, and External Balance7.1. Main Regional Trade Arrangements

AppendicesI

II

Overall Trade Restrictiveness Classification Scheme

Statistical TablesA1. Eastern and Southern Africa: Structure of Production (Constant Prices)A2. Eastern and Southern Africa: Countries with IMF Arrangements

During the 1990sA3. Sachs-Warner Classification of Trade Policy of ESA Countries

26262728

32

24

7

89

10

1313

14

1416

19212328

2931

11

1821

27

2734

37

39

39

4041

iv


Contents

A4. Eastern and Southern Africa: Current Account ExchangeRestrictions, 1990 and 1999 42

A5. Eastern and Southern Africa: Nontariff Barriers to Imports,December 1998 43

A6. Eastern and Southern Africa: Nontariff Barriers to Exports,December 1998 44

A7. Eastern and Southern Africa: Summary of Uruguay RoundCommitments in Agriculture and Industry 45

A8. Eastern and Southern Africa: Commitments Undertaken inTrade Services in the WTO 46

A9. SADC: Intraregional and Extraregional Trade 47A10. COMESA: Intraregional and Extraregional Trade 48A11. CBI: Intraregional and Extraregional Trade 49A12. Selected Eastern and Southern African Countries: Tariff

Preferences 50A13. Sub-Saharan Africa: Compound Annual Growth Rates for

U.S. Dollar Value of Exports 51A14. Sub-Saharan Africa: Structure of Exports, 1985-96 52A15. Selected Eastern and Southern African Countries: Concentration

of Exports 53A16. Selected Eastern and Southern African Countries: Intra-Industry

Trade Ratios, 1988 and 1996 53A17. Eastern and Southern Africa: Economic Conditions, 1990-92 54A18. Eastern and Southern Africa: Economic Conditions, 1993-99 55

The following symbols have been used throughout this paper:

. . . to indicate that data are not available;

— to indicate that the figure is zero or less than half the final digit shown, or that the itemdoes not exist;

between years or months (e.g., 1998-99 or January-June) to indicate the years ormonths covered, including the beginning and ending years or months;

/ between years (e.g., 1998/99) to indicate a fiscal (financial) year.

"Bil l ion" means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term "country," as used in this paper, does not in all cases refer to a territorial entity thatis a state as understood by international law and practice; the term also covers some territorialentities that are not states, but for which statistical data are maintained and provided interna-tionally on a separate and independent basis.

—

V


List of Abbreviations

BLNS Botswana, Lesotho, Namibia, and SwazilandCBI Cross-Border InitiativeCOMESA Common Market for Eastern and Southern AfricaDRC Democratic Republic of CongoEAC Commission for East African CooperationEPZ export processing zoneESA Eastern and Southern AfricaEU European UnionEU-SA FTA EU-South Africa free trade agreementFTA free trade agreementIOC Indian Ocean CommissionITU International Telecommunications UnionMERCOSUR Common Market of the SouthMFN most-favored nationNAFTA North American Free Trade AgreementNGO Nongovernment organizationNTB nontariff barrierODC Other duties and chargesRTA regional trade arrangementSACU Southern African Customs UnionSADC Southern African Development CommunitySSA sub-Saharan AfricaSITC Standard International Trade ClassificationTFP total factor productivityWAEMU West African Economic and Monetary UnionWTO World Trade Organization

vi


Preface

This occasional paper analyzes trade and trade policy developments in the coun-tries of eastern and southern Africa during the 1990s, covering regional and multilat-eral integration issues, and the interaction between trade policies and macroeconomicconditions. It also discusses the main challenges these countries face as they enter anew decade.

The authors are indebted to Anupam Basu for his guidance and support to carry outthis work. Jon Shields, Joseph Kakoza, Mwanza Nkusu, Gunnar Jonsson, BerteEsteve-Volart, Anne McGuirk, and John King provided valuable input to the paper.The paper has also benefited from comments by the Fiscal Affairs, Policy Develop-ment and Review, and Research Departments of the IMF. The research assistance ofJaouad Sebti, the editorial assistance of Thomas Walter and Jeremy Clift, and the sec-retarial support of Mariza Arantes are gratefully acknowledged.

The views expressed here are those of the authors and do not necessarily reflect theopinions of other members of the IMF staff or its Executive Directors.

vii


I Overview

Since the early 1990s, many countries in sub-Saharan Africa have made significant progress

in opening their economies to external competitionthrough trade and exchange liberalization, often inthe context of IMF and World Bank-supported pro-grams. African liberalization took place during a pe-riod of increasing globalization of trade and invest-ment, the conclusion of the Uruguay Round of tradenegotiations, and the creation or expansion of anumber of important regional trade arrangements inother parts of the world. These initiatives con-tributed to a revival of interest among African poli-cymakers in regional integration, resulting in the es-tablishment or renewal of regional organizations,such as the West African Economic and MonetaryUnion (WAEMU), the Cross-Border Initiative(CBI), the Southern African Development Commu-nity (SADC), the Common Market for Eastern andSouthern Africa (COMESA), the Commission forEast African Cooperation (EAC), and the IndianOcean Commission (IOC) (Table 1.1).

This paper analyzes trade and trade policy devel-opments for a number of countries in the eastern andsouthern African region (referred to here as ESA)during the 1990s.1 It consists of three main parts: adescriptive one (Sections II-V), an analytical one(Section VI), and a normative one (Section VII).Section II provides a brief description of the region,while Sections III and IV elaborate on the domesticliberalization efforts of these countries: the formerfocuses on nonpreferential liberalization and the lat-ter focuses on preferential/regional liberalization.Section V deals with the external trade policy envi-ronment facing ESA countries and the changes inopenness and export performance witnessed in re-cent years. Drawing from the experience of individ-ual countries in the region, Section VI contains ananalysis of the macroeconomic aspects of trade re-

1Trhroughout this paper, the ESA region will comprise the fol-lowing 22 countries: Angola, Botswana, Burundi, Comoros, De-mocratic Republic of Congo, Eritrea, Ethiopia, Kenya, Lesotho,Madagascar, Malawi, Mauritius, Mozambique, Namibia,Rwanda, Seychelles, South Africa, Swaziland, Tanzania, Uganda,Zambia, and Zimbabwe.

forms, including the factors that have influencedtrade liberalization efforts and the impact of these re-forms on economic growth. Finally, Section VII ad-dresses the main trade policy issues that these coun-tries will face in the future and suggests possibleactions they and their trading partners could follow.

Why focus on eastern and southern Africa? The an-swer is twofold. First, countries in ESA appear to havea number of common characteristics—most notablyadministrative and legal institutions and language—stemming in part from a shared colonial history. Sec-ond, an increasing number of ESA countries are com-ing together—in various configurations and at varyingspeeds—to forge stronger trading links among them-selves. Thus, the region as a whole is becoming a nat-ural unit of analysis from a trade perspective.

The following conclusions emerge from the study.First, a number of countries in ESA made significantprogress toward opening up their economies duringthe 1990s. Between 1990 and 1998, low levels oftrade restrictiveness (covering both trade taxes andnontariff trade barriers) were established in 10 of the22 countries considered. The remaining countries,however, still maintain restrictive or moderately re-strictive trade regimes. Trade reforms aimed at, andbroadly achieved, a substantial reduction in nontariffbarriers, import tariffs, and export taxes, alongsidecomplementary liberalization measures in otherareas, including the relaxation of foreign exchangecontrols. As a result, many countries narrowed, butstill did not eliminate, the gap in terms of trade re-strictiveness between their regimes and those ofother regions of the world.

Second, in the area of services, notably in thebanking and telecommunications sectors, ESA coun-tries have more restrictive regimes than other coun-tries. Moreover, in the area of trade in goods and ser-vices, they have not really used the World TradeOrganization (WTO) to further their liberalization ef-forts or lock in their current reforms, thereby forgo-ing some of the benefits that arise from ensuringagainst future policy reversals.

Third, there was an improvement in the tradeperformance of ESA countries during the 1990s,owing in part to the trade liberalization measures

1


I OVERVIEW

Table 1.1. Selected African Countries' Membership in Regional Trade Agreements

SADC COMESA SACU CBI EAC IOC WAEMU

AngolaBeninBotswanaBurkina FasoBurundi

ComorosCongo, Dem. Rep. ofCote d'lvoireDjibouti

Egypt

EritreaEthiopiaGuinea BissauKenyaLesotho

MadagascarMalawiMaliMauritiusMozambique

NamibiaNigerRwandaSenegalSeychelles

South AfricaSudanSwazilandTanzaniaTogo

UgandaZambiaZimbabwe

/

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Notes: SADC = Southern African Development Community; COMESA = Common Market for Eastern and Southern Africa; SACU = Southern African

Customs Union; CBI = Cross-Border Initiative; EAC = Commission for East African Cooperation; IOC = Indian Ocean Commission; WAEMU = West

African Economic and Monetary Union.

adopted. Exports, in particular manufactured ex-ports, posted gains during the 1990s. This trendwas accompanied by only a modest increase in thediversity of exports. Thus, substantial progress isstill required to increase the range and sophistica-tion of products exported, as reflected in ESA's lowshare of intraindustry trade.

Fourth, links within the region are intensifying, asevidenced both by the magnitude of intraregionaltrade and the policy initiatives taken to reduce in-traregional trade barriers. Progress in implementingthese initiatives, however, remains mixed.

Fifth, adverse initial macroeconomic conditions inmany ESA countries did not appear to hamper theirtrade liberalization efforts. Trade liberalization was

associated with faster economic growth, especiallywhen accompanied by comprehensive macroeco-nomic reforms. Trade liberalization also led to a sig-nificant reduction in the reliance on trade taxes as asource of revenue without compromising overall fis-cal performance, owing to concomitant reforms tothe tax system.

Sixth, a number of policy issues will confrontESA countries in the years ahead, especially in lightof the likely changes in their trading environment:

• There is a considerable unfinished agenda ontrade liberalization, especially for the nine coun-tries that continue to maintain restrictive traderegimes.

2


• In proceeding with preferential integration, ESAcountries need to rationalize the multiplicity ofregional initiatives and pursue simultaneousmultilateral liberalization in order to maximizethe potential benefits of globalization and miti-gate the trade diversion effects of their regionalintegration schemes.

• In the future, ESA countries will need to reassesstheir role in the WTO, with a view to increasingthe benefits that they can derive from it. For in-stance, they could use the WTO as an anchor tolock in their liberalization of trade in goods andservices. ESA countries will also need to re-

spond to reductions in their trade-related rev-enues and in preferential access to industrialcountry markets. These are likely to arise as a re-sult of future regional and multilateral liberaliza-tion initiatives.

• Lastly, industrial countries could help facilitateESA countries' integration into the world econ-omy by either entering into reciprocal freetrade agreements with ESA countries or elimi-nating tariffs on ESA's export products. Indus-trial countries could also forgo the right to usesafeguards or antidumping actions against theseexports.

Overview

3


II Eastern and Southern Africa: BroadCharacteristics of the Region

The 22 eastern and southern African countriescovered in this study vary considerably in popu-

lation, size, and economic profile (Table 2.1). Popu-lation size varies from fewer than 80,000 people inSeychelles to about 62 million people in Ethiopia.The average per capita income of about US$1,100also masks large variations across countries. The

Seychelles is the richest country, with a per capitaGDP of about US$6,000 at 1990 prices, while theDemocratic Republic of Congo (DRC) stands as thepoorest country, with an income per capita of US$99(a ratio of 60 to 1). There is also a wide variation inincome inequality among countries. For example, theGini coefficient, which measures income inequality,

Table 2.1. Eastern and Southern Africa: Basic Economic Indicators

AngolaBotswanaBurundiComorosCongo, Dem. Rep. of

EritreaEthiopiaKenyaLesothoMadagascar

MalawiMauritiusMozambiqueNamibiaRwanda

SeychellesSouth AfricaSwazilandTanzaniaUganda

ZambiaZimbabwe

Population1

(Millions)

12.81.66.20.6

45.9

...61.730.0

2.215.0

11.01.2

17.31.87.1

0.143.2

...32.622.2

10.013.1

Area2

(000 sq. km.)

1,247567

262

2,267

1011,000

5692

582

942

784823

25

0.51,221

17884200

743387

GDP perCapita3

(US$)

8303,640

163438

99

...193342401233

2263,151

2491,810

342

5,9992,9431,091

189327

351805

GDP4

(US$ billion)

6.45.21.00.23.0

0.66.7

10.60.93.7

1.84.04.13.02.0

0.6131.0

1.28.65.8

3.15.7

Growth

1980-89

-1.17.30.70.0

-1.0

...-0.9

0.91.9

-2.1

-1.43.8

-0.7-2.4-1.4

1.8-0.2

2.0-0.6-0.3

-1.71.6

of GDP per Capita5

1990-94

-8.02.0

-1.5-0.4

-11.2

...0.3

-3.41.4

-3.1

-2.04.20.70.7

-12.1

3.1-2.5

0.6-0.2

1.8

-2.9-0.9

1995-99

3.52.7

-2.8-3.1-6.6

...4.80.32.10.0

5.23.76.0

-0.511.4

1.1-0.3

1.01.64.8

-0.5-0.1

GiniCoefficient6

...

...

...

...

...

...40455646

...

...

...

...29

...59

...3839

5057

1IMF: World Economic Outlook database, 2000.2World Bank data.31999 real per capita GDP (U.S. dollars at 1990 prices and 1990 exchange rates).41999 gross domestic product (in U.S. dollars at current prices).5Annual average real per capita GDP growth (in percent).6Gini index from Table 2.8 of World Bank, World Development Indicators, 1999.

4


Eastern and Southern Africa: Broad Characteristics of the Region

varies from 29 in Rwanda to 59 in South Africa, thelatter being among the highest in the world.

Many countries in the ESA region experiencedan improvement in economic performance in thesecond half of the 1990s, with 13 of 22 countriesexhibiting increases in per capita GDP. SouthAfrica dominates the economic landscape ofthe region, accounting for 62 percent of ESA'sGDP and 74 percent of its exports. It is also domi-nant in terms of the industrial base, the amount ofskilled manpower, the quality of its physical andfinancial infrastructure, and the maturity of domes-tic institutions and of the legal and regulatoryframeworks.

Agriculture accounts for a large (about 26 percent)albeit declining share of output in ESA countries (seeAppendix II, Table Al). ESA countries are more de-pendent than middle-income countries on agriculture,although the disparity between the two groups is lessif shares are computed on a weighted-average basis

because of the relatively small share of agriculture inSouth Africa.2 Angola is the only fuel-based economy.

There is a corresponding disparity in the industrialsector, as ESA countries generate less than 30 percentof output (35 percent on a weighted average basis) inthat sector, compared with 42 percent in middle-income countries. The Southern African CustomsUnion (SACU) countries (Botswana, Lesotho,Namibia, South Africa, and Swaziland), Zambia, andMauritius are the most manufacturing-intensiveeconomies in the region.

Services account for roughly the same share ofoutput in both ESA and middle-income countries.The island economies (Comoros, Madagascar, Mau-ritius, and Seychelles), Botswana, Kenya, Namibia,South Africa, Zambia, and Zimbabwe derive morethan 50 percent of their output from services.

2Middle-income countries are defined by the World Bank as thosewith a 1998 per capita GNP of between US$760 and US$9,360.

5


Ill Trade Liberalization by ESA CountriesDuring the 1990s

Unilateral Liberalization in GoodsIn the early 1990s, reflecting the inward-looking

development policies adopted in previous decades,the trade and exchange regimes of most countries ineastern and southern Africa were characterized bymultiple exchange rate systems, surrender require-ments for export proceeds, high tariff protection, re-strictive import licensing requirements, and other re-strictive nontariff barriers. The restrictiveness of thetrade regimes during the 1990s is depicted in Tables3.1 to 3.3, which classify the trade systems based ona scheme that captures both tariff and nontariff barri-ers.3 As shown in Table 3.1, at the beginning of thedecade, the average indicator of trade restrictivenessfor the region as a whole was 9.7 (on a scale from 0to 10, where 10 indicates the most restrictiveregime). Table 3.2 shows that 16 of the 22 ESAcountries had highly restrictive nontariff barriers inplace, while the remaining 6 had substantial restric-tions as well. Total trade taxes (including import tar-iffs, export levies, and other duties and charges) av-eraged 38 percent (Table 3.3), and tariff dispersionwas quite high.4 The transparency of the tariffregime was hampered by the large number of tariffbands and by frequent changes in the classificationof products. In this regard, SACU's tariff regime of-fered an extreme example: the product classificationwas changed on a weekly or even a daily basis,thereby contributing to the high degree of unpre-dictability of the regime. Furthermore, governmentsusually tried to reduce the anti-export bias of hightrade protection by granting discretionary exemp-tions on inputs and capital goods, thereby reducing

3The trade restrictiveness index is a modified version of theone used in Sharer and others (1998), and is based on a classifica-tion system for nontariff barriers and for import and export taxes(see Appendix I).

4For example, in the case of South Africa and its partners inSACU, the maximum tariff was 1,389 percent, there were morethan 13,000 tariff lines, and the effective protection ranged from—411 to 189 percent. While extreme, South Africa's case was notatypical, as Malawi, Mauritius, and Ethiopia also had highly dis-torted tariff structures.

the transparency of the trade regime and increasingopportunities for abuse and corruption.

Changes During the 1990sMany countries liberalized their trade regime dur-

ing the 1990s and introduced economic reform pro-grams to reduce the role of the state in the economyand enhance private sector growth. Policy measuresincluded price liberalization, deregulation, and priva-tization of state enterprises, often in the context ofIMF-supported programs5 (Box 3.1) and with thesupport of the CBI. These policy changes reflectedthe recognition that reliance on administrative con-trols had driven much economic activity outside for-mal channels, depressed exports, contributed to aninefficient structure of domestic production, andhampered long-run growth. In addition, the improve-ment in foreign relations in the southern African re-gion, following the demise of the apartheid regime inSouth Africa, strongly reduced the political motivesfor inward-looking economic policies. Although thenature, extent, and timing of trade liberalization inESA countries during the 1990s differed,6 manycountries made substantial progress in opening theireconomies during this period.

As a result of these efforts, ESA countries' traderegimes are converging toward those of the rest ofthe world.7 Nevertheless, the overall restrictivenessof trade regimes in eastern and southern Africa re-mains higher than that of all other groups of coun-tries in the world (Table 3.4), and not all the coun-

5Of the 22 countries in the ESA region, 14 had programs withthe IMF during the 1990s. The SACU countries (excludingLesotho), Angola, Eritrea, Mauritius, and the Seychelles did nothave programs with the Fund (see Appendix II, Table A2).

6While some countries—Zambia, for example—embarked on aliberalization program that encompassed both tariff and nontariffbarriers, some of the other reformers, such as Tanzania, gave pri-ority to the elimination of nontariff barriers and reduced tariffs ata later stage.

7Tentative evidence derived from developments in tariff collec-tion ratios and a categorization of countries on the basis of theSachs-Warner criterion suggest that the gap between ESA coun-tries and the rest of the world has narrowed considerably since thelate 1980s (Appendix II, Table A3).

6


Unilateral Liberalization in Goods

Table 3.1. Eastern and Southern Africa: Overall Trade Restrictiveness in the 1990s

Source: IMF staff estimates.1This index is based upon the classification scheme developed by Sharer and others (1998) but differs from it in two main respects. First, export tariffs

are explicitly taken into account. Second, wherever a country's trade taxes exceed 35 percent, it is accorded a 10 rating irrespective of its regime for non-tariff barriers (Appendix I). A rating of between 7 and 10 classifies a country as restrictive; 5 or 6 as "moderately restrictive"; 3 or 4 as "moderatelyopen"; and 1 or 2 as "open."

2A reversal is said to have occurred when trade taxes have increased or quantitative restrictions intensified during 1991-98.3Further trade liberalization measures were undertaken in 1999.

tries in the region have participated in the generaltrend toward opening their economies. One set ofcountries achieved relatively little or no liberaliza-tion (such as Angola, Burundi, Comoros, and Zim-babwe) and, hence, remained quite closed, while an-other achieved substantial liberalization, including,among others, Mozambique, Malawi, Uganda, thecountries in the SACU, and Zambia.

Trade reforms were characterized by the follow-ing elements:

• The reduction or elimination of nontariff barri-ers. This comprised the elimination of importand export quotas, bans, state trading, and othernontariff barriers. As of end-1998, five countriesin the region (the Democratic Republic ofCongo, Mozambique, Rwanda, Uganda, andZambia) had eliminated all nontariff barriers thatwere in place at the beginning of the decade—with the exception of restrictions related tohealth, environmental, and security reasons—

Countries with restrictive regimes in 1998AngolaBurundiComorosEthiopiaEritreaKenyaMauritiusSeychellesZimbabwe

Average

Countries with moderately restrictiveregimes in 1998

MadagascarRwandaTanzania3

Average

Countries with moderately open regimesin 1998

BotswanaCongo, Dem. Rep. ofLesothoMalawi3

NamibiaSouth AfricaSwaziland

Average

Countries with open regimes in 1998MozambiqueUgandaZambia

Average

Average for all ESA countries

InitialYear

199119911990199219901990199119911992

199119931990

1990199319901992199019901990

199119911991

Index1

101010101010101010

10.0

101010

10.0

109

107

101010

9.4

71010

9.0

9.7

Final Year(end of period)

199819981998199819981998199819981998

199819981998

1998199719981998199819981998

199819981998

Index1

1010108

1077

109

9.0

556

5.3

4444444

4.0

212

1.7

5.9

Change inIndex

000

-20

-3-3

0-1

-1.0

-5-5-4

-4.7

-6-5-6-3-6-6-6

-5.4

-5-9-8

-7.3

-3.8

Reversal2

YesYesYesNoNoNoNoYesYes

NoNoYes

NoNoNoYesNoNoNo

NoNoYes

7


Ill T

RA

DE

LIB

ER

AL

IZA

TIO

N B

Y E

SA

CO

UN

TR

IES

DU

RIN

G TH

E

1990s

Table 3.2. Eastern and Southern Africa: Measure of Trade Restrictiveness in the 1990s:Nontariff Barrier (NTB) Regimes

Initial FinalYear Categorization Year Restrictions Observations on Current Situation

Countries with pervasive NTB regimes atend-1998Angola 1991 Pervasive 1998 Pervasive All imports subject to foreign exchange restrictions; restrictive licensing of export

and imports.Burundi 1991 Pervasive 1998 Pervasive Imports subject to exchange restrictions and suspension of provision of foreign

exchange for luxury products. State trading in the coffee sector.Seychelles 1990 Pervasive 1998 Pervasive Commercial imports subject to quota. Import monopoly for a large number of

consumer goods.

Countries with substantial NTB restrictionsat end-1998Eritrea 1990 Pervasive 1998 Substantial Export and import bans for a few items. State trading in tobacco and matches.Ethiopia 1992 Pervasive 1998 Substantial State trading in petroleum and import licensing.Kenya 1990 Pervasive 1998 Substantial Restrictions on exports of tea, coffee, minerals, and agricultural products.Mauritius 1991 Substantial 1998 Substantial Government monopoly on oil and cement imports; state trading.Zimbabwe 1992 Pervasive 1998 Substantial Restrictions on exports of maize, wheat, and minerals.

Countries with few NTB restrictions atend-1998Botswana 1991 Pervasive 1998 Few Follows in general South Africa's import regime.Comoros 1990 Pervasive 1998 Few No restrictive licensing for imports. Government monopoly on oil imports.Lesotho 1992 Pervasive 1998 Few Follows in general South Africa's import regime.Namibia 1992 Pervasive 1998 Few Follows in general South Africa's import regime.Madagascar 1991 Substantial 1998 Few Government monopoly on oil imports; eliminated in 1999.Malawi 1992 Substantial 1998 Few Restrictive licensing requirement for fuel (including petroleum).Tanzania 1990 Pervasive 1998 Few Government monopoly on oil imports; eliminated in 1999.Swaziland 1992 Pervasive 1998 Few Follows in general South Africa's import regime.South Africa 1992 Pervasive 1998 Few Active antidumping policy.

Countries with no NTB restrictions atend-1998Congo, Dem. Rep. of 1993 Substantial 1997 None No NTBs, except for health and security reasons.Uganda 1991 Substantial 1998 None Import ban on cigarettes; removed in 1999.Mozambique 1993 Substantial 1998 None No NTBs, except for health and security reasons.Rwanda 1993 Pervasive 1998 None No NTBs, except for health, environmental, and security reasons.Zambia 1991 Pervasive 1998 None No NTBs, except for health, environmental, and security reasons.

Source: IMF staff estimates.

8


Un

ilate

ral L

ibe

raliz

atio

n in

Go

od

s

Table 3.3. Eastern and Southern Africa: Trade Tax Regimes in the 1990s

Average Average Final Year Average Average Change in Change in Change inInitial Import Export (end of Import Export Import Export TradeYear Tariff' Tariff2 Total3 period) Tariff1 Tariff2 Total3 Tariff1 Tariff1 Taxes1

Countries with trade taxes greaterthan 25 percent in 1998BurundiComorosEritreaRwandaSeychellesZimbabwe

Average

Countries with trade taxes between15 percent and 25 percent in 1998AngolaCongo, Dem. Rep. ofEthiopiaKenyaMadagascarMauritiusTanzania

Average

Countries with trade taxes lessthan 15 percent in 1998BotswanaLesothoMalawiMozambiqueNamibiaSouth AfricaSwazilandUgandaZambia

Average

Overall average

199119911993199319911992

1991199319921990199119911990

199019901993199319901990199019911991

3962

358530

50

24207944303425

36

454518194545451837

35

35

23

211800

7

8408

100

5

000

010

130

2

3

41674

595854

30

56

24307

86444046255

42

454518194545453337

37

38

199819981998199819981998

1998199719981998199819981998

199819981998199819981998199819981998

417160223832

44

24171719181920

19

151512101515159

14

13

15

2420500

5

0540000

1

000100100

0

1

7574460285

384

32

51

24235

21196

18I97

205

21

151512118

1515159

14

13

15

29

-13-47

2

-6

0-3

-62-25-12-15

-5

-17

-30-30

-6-9

-30-30-30

-9-23

-22

-21

23-1

-21-13

00

-2

-300

-8-10

0

-4

000

001

-130

-1

-2

348

-31-47

2

-5

0-7

-64-25-22-27

-5

-21

-30-30

-6

-30-30-29-24-23

-23

-23

Source: IMF staff estimates.1Statutory average tariff, including other duties and charges, unless indicated otherwise.2Export tax revenue in percent of total exports.3Based on the Lerner symmetry theorem, the total trade tax is defined as [(I +m)*( I +x)-1 ] * 100 where m and x are the import and export tariff rates, respectively. Although the export tax is based on col-

lections, there tends to be less divergence between statutory and collection rates on the export side than on the import side.4The estimate is based on import tax revenue in percent of total imports and an assumed tax collection efficiency ratio of 50 percent.5Trade-weighted average of import tariffs, including other duties and charges.6The statutory average rate (including other duties and charges) is estimated at 19 percent, based on a collection rate of 12.5 percent.7Estimate.8Export tax revenue is estimated on the basis of the statutory tariff on exports of raw cashews (14 percent).

9


Ill TRADE LIBERALIZATION BY ESA COUNTRIES DURING THE 1990s

Box 3.1. Trade Liberalization in the Context of IMF-Supported Programs

During the 1990s, trade was liberalized in severalESA countries, including the fastest reformers(Mozambique, Uganda, and Zambia), under IMF andWorld Bank-supported programs.1 In the case ofMozambique and Uganda, IMF programs were inplace during the entire period under review. In addi-tion, in several countries trade liberalization was pur-sued in the context of the Cross-Border Initiative

1Programs lasted an average of 6.4 years and were, in sixcases, nonconsecutive. With the exception of Lesotho (Stand-By, in addition to Structural Adjustment Facility (SAF)/En-hanced Structural Adjustment Facility (ESAF)), Zambia(Rights Accumulation Program, in addition to ESAF), andZimbabwe (Extended Fund Facility and Stand-By arrange-ments, in addition to ESAF), all ESA countries using IMF re-sources were supported by SAF/ESAF arrangements.

(CBI), established with the support of the IMF, theWorld Bank, the EU, and the African DevelopmentBank. Countries that changed from a restrictiveregime in the early 1990s to a moderately restrictiveregime in 1998 in the context of IMF-supported pro-grams included the Democratic Republic of Congo,Malawi, Rwanda, and Tanzania.

Although Lesotho implemented programs supportedby the IMF during the period 1990-97, as a member ofSACU the country did not pursue an independent tradepolicy. Despite IMF-supported programs, Burundi, Co-moros, Ethiopia, Kenya, Madagascar, and Zimbabweultimately achieved little or no liberalization in theirtrade regimes during the 1990s. The other countrieswith (relatively) restrictive regimes (Angola, Eritrea,Mauritius, and Seychelles) did not have IMF-supportedprograms during the 1990s.

Table 3.4. International Comparison of Trade RestrictivenessRankings, 19981

Source: IMF staff estimates.1Or latest year. In all indices, higher values denote greater restrictiveness.2lndex ranges from 1 to 10.3lndex ranges from 1 to 5.4lndex ranges from 1 to 3.5Fast-growing countries: Hong Kong, Korea, Singapore,Thailand, Indonesia, Philippines, and Malaysia.6Comprises Hungary, Poland, Czech Republic, Slovak Republic, Estonia, Latvia, and Lithuania.

while nine others had only limited restrictions(see Appendix II, Tables A5 and A6 for details ofthe nontariff regime as of end-1998). Thus, 14ESA countries had few or no nontariff barriers in1998 compared with the presence of substantialrestrictive nontariff barriers in all countries at thebeginning of the decade (Table 3.2). At the sametime, however, the use of antidumping and safe-guard measures as instruments of trade policyhas received greater emphasis in the ESA region.

Several countries have adopted legislation in thisarea, and South Africa has significantly steppedup antidumping investigations in recent years.

• A substantial reduction in maximum and averageimport tariffs. For the region as a whole, averagemost-favored nation (MFN) import tariffs camedown from 35 percent in the early 1990s to 15 per-cent in 1998, with significant decreases in Ethio-pia, Kenya, Seychelles, Zambia, and the SACU

Region

Eastern and Southern Africa

Asia, excluding fast-growing countries5

Fast-growing countries of Asia5

Eastern Europe (late transition)Eastern Europe (early transition) and

Baltic countries6

Former Soviet UnionMiddle East and North AfricaWestern HemisphereIndustrial countries

Overall Rating2

5.9

5.33.74.0

1.93.85.54.44.0

Tariff Rating3

3.5

2.71.62.3

1.41.63.12.11.2

NontariffBarrier Rating4

1.9

1.91.71.6

1.11.72.01.81.9

10


Unilateral Liberalization in Goods

Figure 3.1. Eastern and Southern Africa: Changes in Tariff andNontariff Barriers, 1990-981

Liberalization of nontariff barriers2

There is a positive correlation between reduction oftrade taxes and removal of nontariff barriers

Change in trade taxes (in percentage points)3

1Minus represents liberalization.2lndex of nontariff barrier liberalization varies between 0 (no liberalization) and -3 (maximum liberalization).3Includes import and export taxes.

(Table 3.3). Maximum tariffs in the reformingcountries, in many cases exceeding 100 percent atthe beginning of the decade, were reduced to25-40 percent by the end of 1998. Even some ofthe countries that achieved limited overall liberal-ization (such as Ethiopia and Kenya) broughtdown their maximum tariff rates considerably. Thetariff reductions in reforming countries werehighly correlated with reductions in nontariffbarriers (Figure 3.1).

•Reductions in effective rates of protection. Al-though data on effective protection rates are notavailable for ESA countries except South Africa,effective protection in most countries certainlydeclined during the 1990s, given that top rates,usually levied on consumer goods, came downfaster than lower rates, levied on intermediateand primary goods.8 Tariff structures, however,continue to exhibit the typical cascading prop-

8Specific revisions to tariff schedules may have prevented re-ductions in effective protection for important sectors of the econ-omy. In the case of South Africa, the top rate of effective protec-tion increased from 189 percent at the beginning of the decade to204 percent in 1998, despite the overall trade liberalizationachieved during this period.

erty, namely, rates are higher on consumer goodsthan on less processed goods.

• A simplification of the tariff regime. With someexceptions (Burundi, Tanzania, Uganda, andZambia), tariff regimes in the early 1990s werecharacterized by a large number of bands, rang-ing from over 10 to about 200 in the case of theSACU. In addition, many countries applied spe-cific rates, variable duties, other duties andcharges, and nontransparent valuation rules.Most of the reformers in the region simplifiedtheir systems by reducing the number of nonzerorates to less than six (Zambia, Uganda, andKenya have just three nonzero bands),9 therebylimiting opportunities for misclassification andfraud. Progress in improving transparency byeliminating specific rates and integrating otherduties and charges in the ad valorem tariff sys-tem has, however, been mixed.

• The reduction or elimination of export taxes. Atthe beginning of the decade, almost one-half of the

9With the notable exception of the SACU, which had applied72 tariff bands by end-1998.

11



countries in the region imposed export taxes, withcollection rates ranging from 1 percent of exportsin a number of countries to 21 percent in Eritrea.With the exception of Burundi and the DemocraticRepublic of Congo, these countries eliminated orreduced export taxes to less than 5 percent of ex-ports during the period under review.

• The liberalization of exchange restrictions. Withthe exception of Angola and Burundi, whichmaintained highly restrictive systems of ex-change controls, all the countries in the regionsubstantially liberalized their exchange regimesat a relatively early stage of their reform pro-grams. By the end of 1999, two-thirds of thecountries under review had removed restrictionson current international transactions and adoptedthe obligations under Article VIII of the IMF'sArticles of Agreement (Appendix II, Table A4).10

• Reductions in exemptions. While liberalizationprograms have in general been accompanied byreductions in discretionary exemptions and abroadening of the revenue base, the overallrecord of progress in this respect has beenmixed. Even as of end-1998, in addition to cer-tain standard (but questionable) exemptions,11

most countries continued to grant exemptionsunder special investment acts and on govern-ment imports (Table 3.5). Some countries havealso seen a reversal in this respect in recentyears, including Mauritius, Tanzania, and Zam-bia.12 Furthermore, generous exemptions weregranted in efforts to promote nontraditional ex-ports through the establishment of special taxand other incentives for exporters, includingthrough the creation of export processing zones(EPZs). The cost of these exemptions (and ofcomplicated tariff regimes in general) is illus-trated by a measure of the collection efficiencyratio. This compares the amount a countryought to collect theoretically (given its statu-

10Zambia and Mozambique have also moved closer to ArticleVIII status in 1999. However, capital account liberalization hasnot featured prominently in the reform agenda of most countriesin the region. Except for Mauritius, Uganda, and Zambia, severalcapital account controls are still in place in most countries.

11 Including exemptions on imports by nongovernmental orga-nizations and those financed by foreign donors, which usuallycover a large part of total imports.

12In Mauritius, the share of exempted imports in total importsincreased by about 10 percent during the 1990s. In Tanzania, thescope of exemptions has also increased in recent years, as evi-denced by the rise in the ratio of forgone revenue relating to ex-emptions to total import taxes assessed (including exemptions),from 24 percent in 1993 to 48 percent in 1997-98. In Mozam-bique and Zambia, the authorities have emphasized recently theuse of discretionary exemptions in an attempt to promote foreigninvestment.

tory tariffs) with what it actually collects. Table3.6 shows that collection efficiency is very lowin some ESA countries. Even in a well-devel-oped country such as South Africa, the collec-tion rate is barely 55 percent of the theoreticalpotential. Angola and Tanzania are extremelypoor in collecting taxes. These numbers con-trast with a country like Chile, whose high col-lection efficiency derives largely from its lowand uniform tariff rate.

Despite substantial progress made by several coun-tries, there have been a number of episodes of policyreversals, aggravating the credibility problem embed-ded in trade reforms.13 Table 3.1 shows that 8 out of22 ESA countries reversed, if only partially, the tradereforms during the 1990s. However, there were onlythree episodes of reversals (Malawi, Tanzania, andZambia) among countries that undertook significantreform, and none of them was permanent.14

Multilateral Liberalization in Goods

In contrast to the progress made by many ESAcountries in unilateral trade liberalization, they under-took very little, if any, incremental liberalization oftheir trade regimes under the Uruguay Round of mul-tilateral negotiations concluded in 1994. Nor did theymake substantial commitments to lock in the unilat-eral liberalization implemented during the 1990s by"binding" their tariffs in the WTO15 (see Appendix II,Table A7).

In relation to industrial goods, most countriesbound only a small number of tariffs, with the ex-ception of SACU countries and Rwanda. Tariffshave been bound at very high levels, well above theactually applied rates. Thus, countries have reservedfor themselves the right to reverse the trade liberal-ization, thereby forgoing the benefits from signalingthat the reforms are irreversible. In the case of theSACU, the wedge between bound and applied tariffsis lower than the average for the region but still pro-vides enough room for policy reversal for manyproducts. The argument that ESA countries may not

13See, for instance, Rodrik (1998).14Zambia introduced an across-the-board 5 percent import dec-

laration fee in 1995 for fiscal reasons, which was eliminated in1998. Also, an import ban on wheat flour, introduced in 1997,was lifted in the following year. The 10 percent export levy on to-bacco, tea, and sugar introduced by Malawi in 1995 for fiscal rea-sons was eliminated in 1998. In Tanzania, some of the tariff in-creases in 1992 were reversed during 1993/94.14See, for instance,Rodrik (1998).

15Binding represents a legal commitment by a country not toraise tariffs above a specified level. If a binding is breached by acountry it has to compensate partner countries or face retaliationby them.

12


Liberalization in Services

Table 3.5. Selected ESA Countries: Status of Tariff Exemptions, December 1998

Source: IMF, African Department.1Includes discretionary exemptions and waivers.

AngolaBurundiCongo, Dem. Rep. ofComorosEthiopia

KenyaLesothoMadagascarMalawiMauritius

MozambiqueNamibiaRwandaSeychellesSwaziland

TanzaniaUgandaZambiaZimbabwe

Government

YesYesYesYesYes

NoNoYesNoNo

NoYesYesYesNo

YesNoNoYes

PublicEnterprises

NoYesNoNoNo

NoNoNoNoNo

NoNoYesYesNo

YesNoNoNo

InvestmentConvention

or Code

YesYesYesYesNo

YesNoYesNoYes

YesYesYesYesNo

YesNoYesYes

NGOs

YesYesYesYesYes

YesYesYesYesYes

YesYesYesYesYes

YesNoYesYes

Foreign-FinancedProjects

YesYesYesYesYes

YesNoYesYesYes

NoYesYesYesNo

YesNoYesYes

Other1

YesYesYesYesYes

YesNoYesYesYes

YesYesYesYesNo

NoNoYesYes

have anticipated the liberalization that they wouldundertake independently of the Uruguay Round and,hence, did not bind their tariffs at reasonable levelsis difficult to sustain. This is because the wedge,even for early 1990s tariff levels, is very large (ex-cept for the SACU), provoking the question as to

Table 3.6. International Comparison ofTariff Collection Efficiency, I9961

(Percent)

Country

AngolaMalawiMauritiusSouth AfricaTanzaniaZimbabweNew ZealandChile

Collection Efficiency

36.047.256.154.738.153.184.076.0

Source: World Bank (1999).1Measured as the ratio of the duties collected on imports to

the import-weighted tariff.

why these countries did not bind tariffs at or close tothe then prevailing tariff levels. In relation to agri-cultural goods, all countries were required to bindtariffs and all other charges on imports. While ESAcountries have complied with this requirement, theyhave nevertheless bound their tariffs and charges atextremely high levels, often in excess of 100 per-cent, diluting the value of the commitments made totheir trading partners.


It is increasingly recognized that trade in servicesrepresents the next frontier of liberalization. Be-tween 1980 and 1998, the value of world trade inservices increased by 252 percent, as against 164percent for trade in goods. Furthermore, many ofthe technological advances witnessed in recentyears have been related to the services sectors—transportation, telecommunications, and financialservices are seen as crucial to improving competi-tiveness because they provide inputs to manufactur-ing and other export-oriented activities. In manytraded goods, services account for more than half ofinput costs.

13



Table 3.7. Eastern and Southern Africa: Banking Sector Structure andLiberalization, December 1997

Country

AngolaBotswanaCongo, Dem. Rep. ofComorosEritrea

EthiopiaKenyaLesothoMadagascarMalawi

MauritiusMozambiqueNamibiaSouth AfricaSwaziland


Average

Source: Gelbard and Leite (1999).1Herfindahl index of concentration.

ConcentrationIndex1

0.290.300.261.000.75

0.810.230.480.240.76

0.440.330.270.250.21

0.470.590.260.22

0.43

Presence of ForeignBanks

Number

25550

02031

35504

3233

3

in Five Largest Banks

Share of loansand deposits

27100100100

0

045

047

4

20100100

088

27805157

50

Table 3.8. International Comparison of Liberalization of the BankingIndustry: Developing Country Members of the WTO

AfricaOf which: Eastern and

Southern Africa

Asia

Europe

Latin America

All

W T OMembers1

41 (1.5)

18 (0.7)

25 (7.6)

7 (1.1)

32 (6.2)

105 (16.4)

MembersMaking

Commitments2

13 (80)

8 (88)

17 (95)

7 (100)

18 (97)

55 (95)

LiberalizationIndex

Simple average GDP-weighted

0.68

0.65

0.28

0.60

0.38

0.37

0.57

0.62

0.33

0.61

0.34

0.37

Source: Mattoo (1999).1Numbers in brackets represent the fraction of GDP of all WTO members.2Numbers in brackets represent the fraction of GDP of members in that regional grouping.

14



While liberalization of trade in goods depends on,and is measured as, openness to foreign competition,liberalization in services needs to take into accounttwo additional factors—the domestic market structureand the nature of regulation. The efficiency benefitsof liberalizing services sectors derive from the extentof competition, the extent of foreign direct invest-ment, which brings in improved technology and man-agerial know-how, and the effectiveness of regulation.The latter is important, particularly where markets areimperfectly competitive and where monopoly incum-bents' control of access to essential facilities can deterentry by competitors (see Mattoo and others, 2000).In these cases, regulation can promote competition,enabling the efficiency benefits to be realized.

Little information is available on the extent towhich the services sector is protected in ESA coun-tries and the ensuing efficiency losses. One crudemeasure of how much liberalization has been under-taken by ESA countries is the number of sectors inwhich they made commitments in the WTO (see Ap-pendix II, Table A8). South Africa and Lesotho werethe two countries that undertook the most commit-ments, as measured by the number of sectors cov-ered—9 and 10, respectively, out of a maximum of12 sectors. They were followed by Burundi, Kenya,Mauritius, and Rwanda, which committed to liberal-ization in 5 sectors. Most commitments were in thearea of tourism (16 countries), followed by businessservices (10 countries), financial services (8), andcommunications (7).

While the services sector comprises a wide rangeof activities, two sectors that are considered criticalin creating a favorable climate for investment andfacilitating growth are banking and telecommunica-tions. There is substantial participation of foreignbanks in ESA countries' banking systems (the shareof loans and deposits of foreign banks in the totalamount of loans and deposits of the five largestbanks averages 50 percent). In most countries, how-ever, the structure of the banking system is exces-sively concentrated, as measured by the Herfindahlindex of concentration16 (Table 3.7). Furthermore,there is a need to improve the institutional and regu-latory environment of most ESA countries, particu-larly with respect to judicial loan recovery, enforce-ment of financial contracts, property transfers, and

adoption of modern commercial legislation (Gel-bard and Leite, 1999).

Table 3.8 contains data on liberalization commit-ments relating to the banking sector undertaken byall developing country members of the WTO. Ofthe 18 WTO members in the ESA region, only eightcountries—Angola, Kenya, Lesotho, Malawi, Mau-ritius, Mozambique, South Africa, and Zim-babwe—undertook any commitment, a lower sharethan in any region outside Africa (column 2).Columns 3-4 describe the nature of liberalizationcommitments undertaken by these countries, mea-sured by an index computed by Mattoo (1999). Thehigher the value of the index, the less the liberaliza-tion undertaken in the WTO.17 The value of theindex for ESA is substantially higher than the aver-age for all countries. The eight countries in theESA that did undertake commitments in the finan-cial services sector bound them at a more restric-tive level than all groupings outside Africa. OnlyAfrican countries outside ESA were more restric-tive than ESA countries.

Table 3.9 describes both the unilateral and multi-lateral liberalization efforts of ESA countries in thetelecommunications sector. The left-hand panel ofthe table shows the WTO commitments undertakenby ESA countries in the telecommunications sec-tor—only 5 of the 20 countries shown in the tablehave undertaken any commitments, and even thesecountries have essentially codified the existing pol-icy framework with little new or incremental liber-alization. The actual openness of the sector is sum-marized in the right-hand panel of the table. Of the20 ESA countries shown, 16 countries have a mo-nopoly supplier of telecommunications services inthe three main market segments (local, local longdistance, and international). These monopoly sup-pliers tend to be publicly owned, with foreign par-ticipation in only 3 countries—South Africa,Uganda, and Madagascar—and majority foreignownership in only 1 country. It is now recognizedthat sound regulation ensuring a competitive mar-ket structure is an essential complement to foreignownership in fostering an efficient sector. On thisscore too, ESA countries are lagging behind. Of the20 ESA countries, very few have a statutorily inde-pendent regulator.

16Computed as Hi, = Z j=1 , . . .5(Sj/2j=1, . . . 5Sj)2, where Sj is thesum of deposits and loans for bank j. As defined, the index equalsone in the case of a monopoly and 0 in the case of equal shares.An index value higher than 0.3 is normally associated with an im-perfect market structure.

17The liberalization index corresponds to the bound rather thanthe applied level of access, and, therefore, does not necessarilycorrelate with how liberal actual conditions are.

15


Ill T

RA

DE

LIB

ER

AL

IZA

TIO

N B

Y E

SA

CO

UN

TR

IES

DU

RIN

G T

HE

I 9

90

s

Table 3.9. Eastern and Southern Africa:Telecommunications Liberalization

Commitments in the WTO Features of Sector

Commitments on Adherence Degree of marketCommitments inward foreign to pro- liberalization

o n c r o s s - investment competitive International Foreignborder supply No. of regulatory Local long long ownership Domestic

Full Limited Full Suppliers principles Local distance distance (percent) ownership Comments

Kenya Yes No 1 Yes Monopoly Monopoly Monopoly 30 PublicMauritius Yes No 1 Yes Monopoly Monopoly Monopoly 0 PublicSouth Africa Yes No 1 Yes Monopoly Monopoly Monopoly 0 PublicUganda Yes No 2 Yes Duopoly Duopoly Duopoly 0-90 Public/privateZimbabwe Yes No Monopoly Monopoly Monopoly 0 Public 50 percent foreign

ownership allowedAngola Monopoly Monopoly Monopoly 0 PublicBotswana Monopoly Monopoly Monopoly 0 PublicBurundi Monopoly Monopoly Monopoly 0 PublicCongo, Dem. Rep. of Partial Partial Partial

competition competition competition 0 Public

Eritrea Monopoly Monopoly Monopoly 0 Public 45 percent foreignownership allowed

Ethiopia Monopoly Monopoly Monopoly 0 PublicLesotho Monopoly Monopoly Monopoly 0 PublicMadagascar Partial Partial Partial 66 Public

competition competition competition

Malawi Monopoly Monopoly Monopoly 0 PublicMozambique Monopoly Monopoly Monopoly 0 Public 50 percent foreign

ownership allowedNamibia Monopoly Monopoly Monopoly 0 Public 49 percent foreign

ownership allowedRwanda Monopoly Monopoly Monopoly 1 PublicSwaziland Monopoly Monopoly Monopoly 0 PublicTanzania Partial Partial Partial 0 Public 65 percent foreign

competition competition competition ownership allowed

Zambia Monopoly Monopoly Monopoly 0 Public

Sources: Schedules submitted to the WTO; and ITU (1999).

16


IV Regional Integration

Preferential Liberalization in Goods

During the 1990s, in addition to the Cross-Bor-der Initiative, countries in eastern and southernAfrica embarked on a number of bilateral and re-gional trade arrangements (RTAs). These arrange-ments include COMESA, SADC, SACU, EAC, andthe IOC. There is also the free trade agreement be-tween the European Union (EU) and South Africa,that presages significant preferential liberalizationon the north-south axis; the recent accord betweenACP countries (African, Caribbean, and Pacific)and the EU, that extends for a considerable periodthe concessions of the Lome conventions; and theAfrican Growth and Opportunity Act that providesfor duty-free treatment of Sub-Saharan African ex-ports to the United States.

The member states of COMESA (consisting of18 ESA countries plus Djibouti, Egypt, and Sudan)have been implementing phased preferential reduc-tions in import tariffs in recent years with the ob-jective of achieving a free trade area by October2000. The aim is to establish a customs union by2004, in which there will be a common external tar-iff structure with a small number of tariff bands. Sofar, progress on intraregional tariff liberalizationhas been mixed. As of March 1, 1999, only Egyptand Madagascar met the targeted 90 percent mar-gin. Eight countries (Comoros, Eritrea, Kenya,Mauritius, Sudan, Tanzania,18 Uganda, and Zim-babwe) had agreed to an 80 percent preferentialmargin, and Malawi to a 70 percent margin. In ad-dition, three countries (Burundi, Rwanda, andZambia) had offered a 60 percent margin. Sevencountries (Angola, Democratic Republic of Congo,Djibouti, Ethiopia, Namibia, Swaziland, and Sey-chelles) had not made any preferential tariff reduc-tions, although Namibia and Swaziland were givenderogations because of their membership in SACU,and Djibouti did not levy discriminatory importtaxes. Both the EAC and the IOC support the effort

of their members to abide by the trade liberaliza-tion goals of COMESA.

Over half of the countries in COMESA also par-ticipate in the CBI, which encourages a "fast track"to trade liberalization. The CBI originally sought toestablish free trade among participating countriesand a harmonized external tariff by October 1998.External tariffs were to have no more than threenonzero rates, a maximum rate of 20-25 percent (in-cluding all import taxes), a difference between thelowest and the highest rate of no more than 20 per-centage points, and a weighted-average rate of lessthan 15 percent. Although none of the CBI countriesmet the target for eliminating intraregional tariffs, 10of the 14 countries implemented preference marginsof 60-80 percent by end-1998. Outcomes on exter-nal tariff reductions have also fallen short of the tar-gets; Zambia and Uganda are the only two countriesthat have met the agreed targets. However, most CBIcountries achieved significant progress in eliminat-ing nontariff barriers, reducing the monopoly poweron trade of state marketing boards or state enter-prises, liberalizing foreign exchange regimes anddomestic financial markets, harmonizing road transitcharges, and introducing a single goods customs de-claration form. In some cases, there was also signifi-cant progress in simplifying investment procedures,particularly through the establishment of a one-stopinvestment approval authority. Since May 2000, theCBI changed its name to Regional Integration Facil-itation Forum (RIFF), refocusing its activities on in-vestment facilitation while at the same time broad-ening its agenda to include other issues related toregional macroeconomic developments and cooper-ation among the RTAs.

Although the SADC free trade protocol wassigned in 1996 and has been ratified by most coun-tries,19 details have not been agreed on how nontar-iff barriers and intraregional tariffs will be phasedout within the eight-year period, expected to begin

18Tanzania will withdraw from COMESA effective September2000.

19Angola, the Democratic Republic of Congo, and the Sey-chelles are the only three countries that are not signatories of theprotocol, though Angola and Seychelles have signaled their inten-tion to accede to it in the near future.

17


IV REGIONAL INTEGRATION

in September 2000, for the establishment of a freetrade area. Three classes of products have been de-fined according to the speed of liberalization: im-mediate, gradual, and sensitive products. For goodsin the latter category (including textiles and auto-motive products), tariffs will only come down at theend of the eight-year period. The more developedmember countries (South Africa and its SACU part-ners) will reduce their tariffs on imports faster thanother SADC countries, and tariffs on imports ofnon-SACU countries from BLNS (Botswana,Lesotho, Namibia, and Swaziland) countries willfall faster than tariffs on imports from South Africa.There is no plan for a concerted reduction in exter-nal tariffs, which are widely different across SADCcountries. However, product-specific rules of origindetermining the domestic content requirements for alarge number of products are being considered, in-cluding a 100 percent domestic content requirementfor (primarily agricultural) inputs that are producedwithin SADC.

Members of these RTAs are also trying to fostereconomic integration by other mechanisms in addi-tion to tariff reductions. The SADC, for instance, isdeveloping policies and stimulating joint projectsand standards across areas such as transport, powergeneration, water, human resource development, andfinance and investment. COMESA has streamlinedcustoms procedures, promoted cross-border vehiclelicensing and insurance, and is working to facilitatecross-border payments and settlements. However,there is considerable overlap in the membership ofthese arrangements, giving rise to a number of prob-lems discussed in Section VII below.

Figure 4.1. Eastern and Southern Africa:Destination of Exports, 1990 and 1999

Trade Developments

Owing primarily to its size but also to its more ad-vanced level of industrial development, South Africaaccounts for more than 70 percent of the imports ofother countries in the ESA region. This leads to alarge trade surplus with the region of about US$4 bil-lion. The BLNS countries, Malawi, Mozambique,Zambia, and Zimbabwe exhibit a high degree of re-liance on South Africa for their total imports, rangingfrom 35 percent to 60 percent, and only Zimbabwesells more than 20 percent of its exports to SouthAfrica.

Trade links among ESA countries have intensifiedin recent years: the share of intraregional exports intotal exports increased from 4 percent in 1990 to 9percent in 1999 (Figure 4.1). This increase in in-traregional trade reflects predominantly the intensifi-cation of links with South Africa following the

demise of the apartheid regime, as there was a smalldecline in intraregional trade among ESA countriesexcluding the SACU countries (see Table 4.1). Theshare of imports from industrial countries has de-clined for all countries except SACU and Madagas-car, as South Africa has displaced some of theirproducts, and there has been an increase in SouthAfrican exports to the EU.

Within ESA, regional links are most intensewithin SADC followed by the CBI and COMESA(Appendix II, Tables A9-A11). In 1999, about 10percent of total SADC trade was intraregional, com-pared with 6 percent for COMESA. These links havealso intensified over time in SADC, as the share ofintraregional imports in total imports grew fromabout 5 percent in 1990 to 12 percent in 1999. Bycontrast, intra-COMESA trade has remained virtu-ally unchanged during this period.

18


Trade Developments

Table 4.1. Eastern and Southern Africa: Intraregional and Extraregional Trade with SelectedPartners

1990

Imports

1994 1999 1990

Exports

1994 1999

(Millions of U.S. dollars)

ESA tradeIntraregional1

By SACU from/to rest of ESA regionBy rest of ESA region from/to SACUBetween rest of ESA region

ExtraregionalRest of AfricaEUUnited StatesJapanRest of world

Total

ESA tradeIntraregional

By SACU from/to rest of ESA regionBy rest of ESA region from/to SACUBetween rest of ESA region


Total

Memorandum itemsIntraregionalExtraregionalTotal

2,25579982

1,19443,020

73519,0024,6983,20315,38245,275

5.00.22.22.6

95.01.6

42.010.47.1

34.0100

1.222.423.6

4,066573

2,2901,203

46,486333

19,2376,5513,75716,60950,552

8.01.14.52.4

92.00.738.113.07.4

32.9100

2.023.425.4

5,963596

3,7441,623

65,779423

28,0037,4123,669

26,27271,741

1,640405174

1,06238,0641,247

11,3244,8042,25918,43139,704

(Percent of total)

8.30.85.22.3

91.70.639.010.35.1

36.6100

4.11.00.42.7

95.93.1

28.512.15.7

46.4100

(Percent of GDP)

2.831.434.3

0.9

19.820.7

3,8822,257454

1,17138,010

47010,6484,4921,787

20,61341,892

9.35.41.12.8

90.71.1

25.410.74.3

49.2100

2.019.121.1

5,6143,561557

1,49656,925

64019,1647,0122,793

27,31662,539

9.05.70.92.4

91.01.0

30.611.24.5

43.7100

2.727.229.9

Source: IMF, Direction of Trade Statistics.1Import and export data differ mainly because partner country data are used directly or indirectly in estimating missing figures. Imports are measured

c.i.f.; exports are measured f.o.b.

19


V The External Environment and TradeDevelopments

External Environment

ESA countries faced changes in their external en-vironment in the 1990s, caused by the increasingtrend toward globalization and worldwide trade lib-eralization, most notably as a result of the conclu-sion of the Uruguay Round. These changes had fourimplications for ESA countries' trading opportuni-ties. Two of these relate to the preferential marketaccess enjoyed by ESA countries and the other twoto nonpreferential access.

• First, the effect of the tariff reductions imple-mented in the Uruguay Round was to reduce themargin of preferences enjoyed by ESA countriesin industrial countries' markets.20 The magnitudeof the losses for ESA countries has been esti-mated, however, to be relatively small, varyingbetween 0.1 percent and 0.5 percent of their ex-ports (Appendix II, Table A12).21

• Second, perhaps a more important source of dis-ruption for ESA countries is the reduction inpreferential access on items such as beef, sugar,and textiles, which these countries enjoy in theform of guaranteed quotas, particularly in theEU market. In the case of beef and sugar, thereare reduced rents accruing to ESA countries' ex-porters. In the case of textiles, the loss could beeven more severe if ESA countries fail to adaptto the competitive conditions that would arisefrom the elimination of quotas on textiles andclothing products. For example, Mauritius,

20ESA countries that are net importers of foodstuffs could alsobe affected by the increase in prices brought about by the reduc-tion in subsidization of agricultural products. This increase is,however, expected to be small.

21These preferences stem from various arrangements betweenindustrial countries and ESA countries, such as the GeneralizedSystem of Preferences between the European Union, Japan, andthe United States, on the one hand, and developing countries, onthe other. There are also the Lome Convention, involving the EUand several low-income countries, including ESA countries, andothers, such as the Multi-Fiber Arrangement, under which severalESA countries have special quotas for the export of textiles andclothing products.

which has sizable exports of these products,could well face severe competition from lowercost suppliers in Asia, threatening its currentmarket niche.

* Third, tariff reductions by industrial countries ontropical commodities will benefit ESA countries,but the effect is expected to be small as thesecommodities were already subject to very lowtariffs prior to the Uruguay Round (Harrold,1995).

• Lastly, as a result of the tariff cuts under theUruguay Round, the tariff escalation faced byESA countries has been reduced to some extent,although it will endure for a number of impor-tant products (wood, textiles and clothing, fish,and leather).22 Tariff escalation has the effect ofencouraging exports of raw materials from ESAcountries rather than products higher up thevalue-added chain, thereby militating against di-versification and industrialization in those coun-tries (Harrold, 1995).

Openness

During the 1990s, there was an appreciable increasein the openness of ESA countries as measured by theratios of exports and imports of goods and services toGDP (Figure 5.1). Between 1990 and 1999, the aver-age trade-GDP ratio increased by 9 percentage points,although wide variations existed between countries inthe region, and eight countries actually experienced adecline in their trade-to-GDP ratios (Table 5.1). Thesedevelopments reflected the extent of trade liberaliza-tion in the region and resulted in higher merchandisetrade, rather than trade in services. On average, theshare of trade in nonfactor services in GDP remainedbroadly unchanged at about 30 percent.

A statistical analysis of the determinants of theopenness of ESA countries reveals that trade liberal-

22Tariff escalation is a phenomenon whereby tariffs increasewith the stage of processing.

20


Export Performance

Figure 5.1. Eastern and Southern Africa:Imports and Exports, 1990 and 1999(Percent of GDP)

ization was one of the factors behind the observedincrease in openness during the 1990s (Box 5.1). Onaverage, a 1 percent reduction in trade taxes led to anincrease in the trade-to-GDP ratio of about 0.9 per-centage points, and the corresponding coefficientswere statistically significant.

Merchandise Merchandise Imports of goods Exports of goodsimports exports and services and services

Export Performance

Export performance of ESA countries lagged be-hind that of the rest of the world, particularly otherdeveloping countries. The average annual growthin export volume for ESA countries was 5.4 per-cent, compared with 6.4 percent for the world as awhole. However, there was a substantial pick-up inexports in the second half of the 1990s, with exportgrowth of 6.4 percent, compared with 4.5 percentbetween 1990 and 1994. Within ESA, a few coun-tries—Ethiopia, Lesotho, Madagascar, Mozam-bique, Seychelles, and Uganda—registered impres-

Table 5.1. Eastern and Southern Africa: Openness Indicators, 1990 and 1999(Percent of GDP)

Exports of Goodsand Services

1990

39538148

2624172663

95267024

772063623

30

30

28

1999

784852213

2628253064

135356925

8614133046

35

35

30

Imports of Goodsand Services

1990

2353283712

31120273171

3468147223

8833173723

42

43

27

1999

5648154929

34101344060

4064216823

10230324041

46

47

32

Total Trade

1990

62106365120

571444457134

431202014147

16552237246

72

73

55

1999

13395207142

591295969124

531182613648

18844447087

81

82

61

AngolaBotswanaBurundiComorosEthiopia


MozambiqueNamibiaRwandaSeychellesSouth Africa

SwazilandTanzaniaUgandaZambiaZimbabwe

ESA1

ESA (excl. South Africa)1

Sub-Saharan Africa1

Source: IMF staff estimates.1All averages are unweighted and exclude the DRC and Eritrea.

21


V THE EXTERNAL ENVIRONMENT AND TRADE DEVELOPMENTS

Box 5.1.Trade Protection and Trade Outcomes in Africa

Is trade in Africa determined exclusively by exoge-nous factors, such as geography, or does trade policyplay an important role? To examine this question, andconsistent with the approach in Rodrik (1999), a set ofregressions was run on a sample of 37 sub-SaharanAfrican countries for the period 1984-98. To provide asuitably large data set for the analysis, the sample wassplit into two time periods, 1984-91 and 1992-98. Thedependent variable was the ratio of exports and importsto GDP or the ratio of exports to GDP (the trade out-come variable), and the independent variables includedthe log of initial per capita income (logincome) andpopulation (logpop), a measure of the proportion of acountry's land area in the tropics (tropics), trade taxes(tradetax), import taxes (importax), and export taxes(exportax). The tax variables were measured in terms ofcollections: for example, import taxes were measured ascustoms duty collections divided by the value of im-ports. Timedum is a dummy variable aimed at capturing

any structural shifts across the two time periods. The re-sults are presented in the table below.

The regressions show that trade and export outcomesare determined by income levels, geographical vari-ables, and trade policy. The fit of the regressions, partic-ularly for this type of cross-section analysis, is quitegood. The coefficients on the size variables (income andpopulation) are usually significant at the 5 percent leveland are correctly signed. They were also quite robust toalternative specifications. More important, the tradepolicy variables also turned out to be significant, robust,and correctly signed. The results suggest that a 1 per-centage point reduction in trade taxes leads to a trade in-crease of between 0.7 and 1.1 percentage points. Inter-estingly, and consistent with Lerner's theoreticalproposition that import taxes are equivalent to exporttaxes in terms of their relative price and resource alloca-tion effects, the coefficients on the two tax terms turnout to be broadly similar.

LogincomeLogpopTropicsTradetaxImportaxExportaxTimedumNR2

(X+M)/GDP

7.94**-6 .89**

-67.06 ***

-0.71 ***-0.44***

Yes48

0.81

X/GDP

7.47***-2.63 *

-14.06**-0 .88***

Yes48

0.54

X/GDP

9.66***-1.40-8.12

- 0 . 4 1 * *-0 .25***

Yes41

0.46

Note: ***, **, and * denote significance at the 10 percent, 5 percent, and 1 percent levels, respectively.X: value of exports.M: value of imports.

sive export performance, comparable to that ofother fast growing developing countries (Table5.2). For ESA countries (as for sub-Saharan Africain general), the growth of exports of manufactureswas relatively strong, with the share in total exportsincreasing from 28 percent in 1985 to about 37 per-cent in 1996.23 Particularly striking was the perfor-mance of Madagascar, Uganda, and the SACUcountries (Appendix II, Table A13). The share oftraditional exports—encompassing agricultural ma-

terials, fuels, ores, and metals—all decreased rela-tive to the late 1980s. Within manufacturing, thesector exhibiting the most dynamic growth wasclothing (Appendix II, Table A14). However, theexport performance of countries in the ESA regionhas been negatively affected by anticompetitivearrangements in the transportation and insurancesectors, as reflected in the relatively high level offreight costs that exceed the level of tariff barriersby a wide margin.24

23This result is based on Yeats (1998) and covers eight ESAcountries for which reliable data are available at a disaggregatedlevel. The countries are Kenya, Madagascar, Malawi, Mauritius,South Africa, Uganda, Zambia, and Zimbabwe. The non-ESAsub-Saharan African countries covered are Benin, Burkina Faso,Cameroon, Gabon, Cote d'Ivoire, and Senegal.

24According to Amjadi and Yeats (1995), net payments onfreight and insurance by sub-Saharan African countries were in1990-91 equivalent to about 15 percent of exports of goods andservices, more than twice as high as in other developing coun-tries. In landlocked countries such as Malawi and Uganda, theratio was well above 50 percent.

22


Table 5.2. Eastern and Southern Africa:Growth in Export Volume

Country

AngolaBotswanaBurundiComorosCongo, Democratic

Republic of


MauritiusMozambiqueNamibiaRwandaSeychelles

South AfricaSwazilandTanzaniaUgandaZambia

Zimbabwe

All countries

All countries, exc.South Africa

Sub-Saharan Africa

Average Annual Rate of Growth

1990-94

2.54.1

-2.51.0

-14.7

5.67.3

28.04.17.2

1.010.00.7

-8.516.4

3.66.45.8

15.4-0.8

2.5

4.5

4.6

3.4

1995-99

7.33.6

10.32.0

3.6

10.83.13.89.95.9

2.39.52.18.7

26.6

4.93.90.0

16.0-1.1

0.9

6.4

6.5

5.5

1990-99

4.93.93.91.5

-5.6

8.25.2

15.97.06.6

1.79.71.40.1

21.5

4.25.12.9

15.7-1.0

0.9

5.4

5.5

4.3

Export Performance

increase in the number of items exported, amongwhich Zambia stands out as a strong performer(Appendix II, Table A15). On related measures ofdiversification—the single- and three-product con-centration ratios25—ESA countries' performancewas positive, with the concentration ratios fallingin six of the eight countries. The performance ofESA countries contrasts sharply with that of sixother sub-Saharan African countries investigated,which showed a marked decrease in the level of di-versification measured on all three counts (thenumber of products exported and the one- andthree-product concentration ratios).

One of the key aspects of globalization has beenthe recent trend toward increased specialization atthe level of the firm, the plant, and product lines—as reflected in increasing intra-industry trade. Thisspecialization has also led to the phenomenon ofglobal production sharing, whereby different com-ponents of a good are produced in various geo-graphical locations. With the exception of SouthAfrica, however, most African countries have in-significant levels of intra-industry trade, reflectingtheir low level of industrialization and the limiteddegree of regional vertical integration (AppendixII, Table A16). Even South Africa ranks only in themiddle of emerging market countries—Brazil, Tai-wan, Province of China, and Korea have intra-in-dustry trade ratios that are nearly twice as large.Similarly, apart from South Africa, there has beenno discernible dynamism in trade in parts and com-ponents in the other ESA countries.

Source: Country authorities and IMF staff estimates.

This aggregate manufacturing export perfor-mance was accompanied by a small increase in thediversity of products exported by ESA countries.Four of the eight ESA countries studied showed an

25The single-product and three-product concentration ratiosmeasure the share of total exports accounted for by the largestand the three largest export items, respectively.

23


VI Macroeconomic Aspects of TradeLiberalization

This section deals with two questions: whether ini-tial macroeconomic conditions influenced the

extent of trade liberalization during the 1990s, andwhether trade liberalization was associated in identifi-able ways with the macroeconomic performance ofESA countries.26 The description below does not pur-port to assign causality: there is the customary diffi-culty of isolating the impact of macroeconomic condi-tions on trade liberalization from other factors, andvice versa. The analysis aims at highlighting the styl-ized aspects of the relation between macroeconomicconditions and trade liberalization, drawing upon theexperience of individual countries.

Countries are classified into two groups accordingto the level of trade liberalization achieved at the endof 1998.27 Countries that by 1998 had lowered theirindex of trade restrictiveness to 4 or less are classi-fied as part of the "substantial liberalization" group(i.e., the bottom two categories in Table 3.1, also re-ferred to as fast reformers), while the remainingcountries are placed in the "moderate-or-no-liberal-ization" (i.e., the top two categories in Table 3.1,also referred to as slow reformers) group.

Initial Macroeconomic Conditions

Initial macroeconomic conditions do not appear tohave played a decisive role in ESA governments' de-cisions to liberalize trade (Zimbabwe is one countrywhere macroeconomic factors may have played a rolein slowing, even reversing, liberalization). Countriesin the moderate-or-no-liberalization group did notdisplay consistently larger macroeconomic imbal-

26The following variables are analyzed: GDP growth, GDP percapita growth, growth in export volume, inflation performance,the fiscal balances, the current account balance (the latter two ex-cluding grants and expressed as a share of GDP), and indicatorsof trade revenue dependency. The Democratic Republic of Congoand Eritrea are excluded from the analysis because their macro-economic data are either unavailable or highly distorted by the re-cent wars in these countries.

27In virtually all cases, those countries that had open traderegimes in 1998 were also the ones that undertook the most liber-alization since the beginning of the decade.

ances in the early 1990s. At the same time, a numberof ambitious reformers—Uganda, Zambia, Mozam-bique—faced severe macroeconomic imbalances inthe early 1990s, with inflation rates varying between36 and 135 percent and very high fiscal and currentaccount deficits. Far from constraining reform, theseimbalances may even have provided a spur to the re-form process.

The substantial liberalization group had larger ini-tial current account deficits than the slow liberalizers,but managed to improve their external position overthe 1990s. The average current account deficit de-clined by about 4 percentage points for the former setof countries, but deteriorated by a further 2 percent-age points for the latter. This may have resulted inpart from better exchange rate management. Coun-tries that liberalized, on average, saw their real effec-tive exchange rate depreciate by about 6 percent (cu-mulatively) during the period 1990-98, while that ofthe slow reformers appreciated by about 11 percent.The six countries—Angola, Congo, Eritrea, Kenya,Rwanda, and Tanzania—that experienced the mostadverse movements in the exchange rate were in thegroup of slow liberalizers. Thus, to some extent, a de-preciating exchange rate in liberalizing countries mayhave averted or mitigated short-term pressures ontheir external position.

Trade Liberalization andMacroeconomic Outcomes

Even though not every country in the "substan-tial liberalization" group had a superior economicperformance during the 1993-99 period, the fig-ures show that these countries have, on average,fared much better than the countries in the "moder-ate-or-no-liberalization" group. This is particularlythe case for GDP growth, investment ratios, andfiscal and inflation performance (Appendix II,Table A18). In the case of South Africa, there is ev-idence that trade liberalization contributed to thedynamic efficiency of the economy, as reflected infaster growth of total factor productivity (Box 6.1).

24


Trade Liberalization and Macroeconomic Outcomes

Box 6.1. South Africa: Dynamic Gains From Trade Liberalization

South Africa undertook significant trade liberaliza-tion in the 1990s and has experienced a large increasein the openness of its economy. The impetus for liber-alization started gaining momentum in the late 1980s,reflected in a consultative process under the auspicesof the tripartite National Economic Forum involvinggovernment, labor, and organized business. As a result,South Africa adopted a two-pronged approach to tradeliberalization, consisting of multilateral trade liberal-ization in the context of the Uruguay Round of tradenegotiations and unilateral trade liberalization. Neitherfiscal nor macroeconomic considerations influencedtrade reform in South Africa. Trade taxes accounted fora very small share of total revenue—and in any eventmuch of the revenue derived from trade was trans-ferred to SACU partners. Furthermore, inflationsteadily declined during the 1990s while the externalposition—although subject to episodic shocks—wasgenerally sound.

Virtually all quantitative restrictions have now beeneliminated, including those operating through agricul-tural marketing boards. The tariff regime has been ratio-nalized, with the number of lines reduced from over13,000 in 1993 to about 7,900 in 1998 and the numberof tariff bands reduced from well over 100 to 72. Thesedata mask the progress made in reducing the actualcomplexity of the tariff regime, as the number of linescarrying formula duties (that acted like variable importlevies) was reduced from 1,900 in 1993 to 28 in 1997and the number of lines facing specific tariffs was re-duced from 500 to 227. The standard deviation of tariffsdeclined from 43 to about 15, while the range of effec-tive protection was also narrowed.

In a recent study, Jonsson and Subramanian (2000)show that South Africa's increased openness and the re-cent trade liberalization have had a beneficial impact on

dynamic efficiency in the 1990s, in particular on growthin total factor productivity (TPF). The study uses both atime-series approach at the aggregate level and a cross-section approach across different manufacturing sec-tors. Both approaches yield results supportive of astrong and statistically robust relationship betweentrade and total factor productivity. Furthermore, this im-provement in overall efficiency was not a consequenceof reduced employment levels.

The time-series analysis yields a co-integrating rela-tionship between TFP, openness (defined as the sum ofexports and imports of goods and nonfactor services di-vided by GDP), and the share of machinery and equip-ment in total investment, with the evidence suggestingthat causality runs from openness to TFP. On average, a1 percentage point increase in openness results in along-run increase in annual TFP growth of about 0.5percent. Similarly, an increase in the share of invest-ment in machinery and equipment of 10 percentagepoints is associated with higher TFP growth of about 3percentage points. Furthermore, both the openness andthe investment in machinery and equipment variable areimportant for the co-integration result, indicating thatthe two sources complement each other in influencingproductivity. Although research and development(R&D) augments productivity, it is also important toprovide an open and liberal environment in which gainsfrom R&D can be maximized.

In the cross-section analysis, the trade variable ismeasured in terms of domestic policy liberalizationand the results indicate that those manufacturingsubsectors that witnessed greater trade liberalizationduring the 1990s achieved higher TFP growth. On av-erage, a 10 percent reduction in prices induced bytrade liberalization in a sector, led to a 3 percent in-crease in its annual TFP growth.

Typically, countries in the "substantial liberaliza-tion" group embraced a wider range of economicreforms during the 1990s than countries in theother group. This is important insofar as trade lib-eralization is likely to be just one of the factors af-fecting economic performance, and trade reformsare likely to be more successful in an environmentwhere a comprehensive set of reforms is in place orbeing implemented. Mozambique (Box 6.2) andUganda provide positive evidence on the impact ongrowth of bold and comprehensive reforms. Coun-tries that had problems implementing comprehen-sive reforms experienced macroeconomic instabil-ity that undermined any positive effects of tradeliberalization on economic growth (for example,Zambia, Box 6.3).

Per capita GDP growth was also—on average—higher in the "substantial liberalization" group than

in the "moderate-or-no-liberalization" group (Fig-ure 6.1). Growth in export volumes was also posi-tively correlated with trade liberalization whencountries affected by war were excluded, and cur-rent account balances in most liberalizing countriesimproved, while the opposite was true for countrieswith little or no liberalization (Figure 6.2).

Mauritius is an interesting case because it regis-tered high rates of export and GDP growth despitehaving a restrictive trade regime. The lessons of theMauritian experience of "heterodox opening,"however, are not clear, given the arguably uniqueconfiguration of internal and external factors thatcontributed to Mauritius' growth performance (Box6.4). The replicability of the Mauritius model ofexport processing zones is also unclear given theirlimited success as a means of accelerating exportsand growth in other countries (Box 6.5).

25


VI MACROECONOMIC ASPECTS OF TRADE LIBERALIZATION

Box 6.2. Mozambique: Successful Trade Liberalization

Mozambique's trade liberalization began in the late1980s and gathered momentum in the mid-1990s. The re-forms undertaken—within the context of programs sup-ported by the Enhanced Structural Adjustment Facility—involved the removal of quantitative import and exportrestrictions, the simplification of the tariff structure, thenarrowing of tariff dispersion, the curtailment of exemp-tions, and the reduction of import and export taxes (seebelow). By the end of 1997, all significant non-tariff bar-riers had been eliminated, and only standard prohibitionsrelating to firearms and public health remained.

In 1996, the number of tariff rates was reduced from12 to 5, and the average import-weighted tariff rate waslowered from 18.4 percent to 11 percent. A further re-duction in the top tariff rate from 35 percent to 30 per-cent was implemented in April 1999. The current tariffstructure is as follows: 0 percent on essential goods, 2.5percent on raw materials, 5 percent on capital goods, 7.5percent on intermediate goods, and 30 percent on con-sumer goods. Remaining distorting factors are generousexemptions under the investment law and import sur-charges on cement, steel tubes, and sugar.

The government plans to reduce the top import tariffrate to 25 percent by January 2002. A ban on exports of

raw cashews (Mozambique's second-largest exportproduct) was replaced by a 40 percent export tax in1995. The tax was subsequently reduced to 14 percentin 1996, although a new law was passed in October1999 stipulating an increase to 18-22 percent. Noother export taxes are in place.

Trade liberalization has been complemented by acomprehensive package of reforms undertaken duringthe last five years. These reforms comprised the devel-opment of a medium-term expenditure framework, acivil service reform, the rationalization of the tax sys-tem, the liberalization of interest rates, the introduc-tion of interbank foreign exchange and money mar-kets, and the privatization or restructuring of over1,300 state-owned enterprises. The results obtained sofar have been impressive: substantial investment hasbeen channeled toward import substitution and nontra-ditional export activities, and the investment-to-GDPratio rose from under 15 percent in the early 1990s toan average of 25 percent during 1997-99. Economicgrowth averaged 7 percent a year during 1993-95 and10 percent a year during 1996-99, and inflation fellfrom over 50 percent in the early 1990s to single-digitlevels in 1999.

Box 6.3. Zambia: Bold Liberalization but Low Growth

In the 1990s, Zambia implemented an ambitiousmacroeconomic stabilization and structural adjustmentprogram, which included privatization, liberalizationof the agricultural sector, and trade reform. Neverthe-less, growth rates remained low owing to poor imple-mentation of complementary policies and an unfavor-able external environment. A major first step toward amore open trade system was taken in 1990 with a re-duction in the maximum tariff from 100 percent to 50percent. Following a phased reduction in nontariff bar-riers, most of the exchange restrictions on current in-ternational transactions were eliminated in 1994, andthe dispersion of tariffs was further narrowed by rais-ing the minimum rate to 20 percent while lowering themaximum rate from 50 percent to 40 percent. In 1995,there was some reversal of trade liberalization with theintroduction, for fiscal reasons, of an across-the-board5 percent import declaration fee (IDF). The effects ofthe IDF were, however, mitigated by the eliminationof the 20 percent uplift factor applied to the sales taxin the same year. Further trade liberalization tookplace in 1996 when exemptions for government im-ports were abolished, and the average level of tariffswas brought down considerably through a 15 percentcut in most tariffs. The remaining nontariff barrierswere removed in 1996 (except those kept for environ-mental, health, and security reasons), and the IDF waseliminated in 1998. Zambia now has a tariff regimewith four rates, ranging from 0 to 25 percent, a statu-

tory average rate of 14 percent, and specific rates onsome products.

Despite some progress on macroeconomic stabiliza-tion, which was reflected in the reduction in fiscaldeficits and inflation since the early 1990s, economicgrowth has remained subdued, mainly because of re-peated droughts and delays in the privatization of thecopper mines, which play a key role in the economy.Nonetheless, the liberalization effort has pushed theeconomy into a transformation process that has createdfavorable growth opportunities for a large number ofenterprises—often newly established after 1993 or suc-cessfully restructured following privatization—as evi-denced by the strong growth of nontraditional exportssince the beginning of the decade. In 1992, metal ex-ports—mainly copper and cobalt—constituted some 90percent of total exports. However, reflecting generallyweak copper prices and the falling productivity of thestate-owned mining company, the total value of metalexports steadily declined in the following years fromsome US$1 billion in 1992 to only US$574 million in1998. During the same period, nontraditional exportsalmost tripled, rising to US$288 million. The strongestgrowth, albeit from a low base, was recorded in flori-cultural and horticultural products, primary agriculturalproducts, processed foods, engineering products, andtextiles. As mentioned in Section V, Zambia was one ofthe few countries in sub-Saharan Africa that witnessedsignificant diversification of its exports.

26


Fiscal Aspects of Trade Liberalization

Figure 6.1. Eastern and Southern Africa:Trade Liberalization and Economic Perfor-mance

Economic Growth: 1993-99Annual Average (percent)

Slow reformers Fast reformers

Investment Ratios, 1990-99(in percent of GDP)

Slow reformers Fast reformers

Figure 6.2. Eastern and Southern Africa:Trade Liberalization, Fiscal Performance,and External Balance(Changes in percent of GDP)

Changes between 1990-92 and 1993-99

Current account balanceexcluding grants

Fiscal balanceexcluding grants

Box 6.4. Mauritius: Heterodox Opening

At the beginning of the 1990s, Mauritius had ahighly complicated trade regime, ridden with exemp-tions. There were 60 tariff bands, the top rate wasabout 600 percent, and the average tariff rate wasabout 80 percent. Some liberalization was imple-mented during the 1990s, beginning with the reduc-tion of quantitative restrictions in 1991. By 1994, thenumber of non-zero rate bands was reduced to 7, andthe maximum tariff rate was lowered to 80 percent.The export duty on sugar and all controls on exportswere also eliminated, except for some items that stillrequire export permits or prior approvals (for exam-ple, tea, spices, and Pharmaceuticals). In July 1998,however, an additional rate band of 10 percent wasadded. There are also additional import excise leviesranging from 15 to 400 percent. In 1998, the averagetariff was about 19 percent.

Despite these reforms, Mauritius' import regimeremains restrictive (with a restrictiveness rating of7 out of 10), as reflected in its still substantial QRs,high and dispersed tariff rates, and complexity. An-other significant feature of the trade regime is thehigh level of unclassified exemptions, exemptionsto the EPZ and other investment incentive schemes,and concessions by ministries. The restrictivenessof the import regime has not translated in a tax onthe two major export products—sugar and tex-tiles—which have been sheltered from the effectsof import protection through the export processingzones and by government measures that until re-cently prevented spillovers of wage pressures fromthe importable to exportable sector. In addition,preferential quotas in export markets for sugar andtextiles have ensured high returns (and rents) to ex-portables that have helped finance higher invest-ment levels. It remains to be seen whether such astrategy will be sustainable in a changing externalenvironment where rents from export quotas beginto decline and where domestic wage spillovers be-come increasingly difficult to prevent.

Fiscal Aspects of TradeLiberalization

A recent study (Ebrill, Stotsky, and Gropp, 1999)examines the theory and experience of the revenueimplications of trade reform. On the theoreticalside, some important conclusions can be drawn.First, revenue is less likely to be affected by tradereform when the initial position is highly restric-tive; when trade liberalization involves the tariffi-cation and/or elimination of quotas, and elimina-tion of exemptions, simplification, and reduction oftariff dispersion; when there are simultaneous re-

27


VI MACROECONOMIC ASPECTS OF TRADE LIBERALIZATION

Box 6.5. Export Processing Zones

In early 1998, the following ESA countries had inplace legislation for export processing zones (EPZs):Botswana, Kenya, Madagascar, Mauritius, Mozam-bique, Namibia, Uganda, and Tanzania (Madani,1999). Although the features of the various EPZs inthe region differ from country to country, most ofthem have some key elements in common: (i) gener-ous corporate income tax exemptions, with tax holi-days of up to 10 years and concessional tax rates after-ward; (ii) duty-free access to inputs and capital goods;and (iii) relaxed labor laws. In some countries, exportprocessing firms that are not located in designated ge-ographical areas are also eligible for the incentives.Despite their appeal, however, EPZs have major disad-vantages, including potentially large tax revenuelosses and leakages, distortive impact on the competi-tiveness of domestic firms that do not benefit from theincentives, and ample scope for abuses. As a result,their overall success in the ESA region and in sub-Sa-

haran Africa in general has been rather limited. Theanticipated gains in foreign direct investment, produc-tion, and employment in EPZs have not materializedin most countries, with the exception of Mauritius,where the establishment of an EPZ in 1971 con-tributed to a substantial increase in exports of clothingand textiles. In addition, the development of EPZs inmost ESA countries has been negatively affected byimplementation problems (notably weak and/or non-transparent administration) and the slow progress insome of the key areas of adjustment, including macro-economic stabilization and infrastructure develop-ment. The experience of these countries underscoresthe view that sound economic policies, coupledwith a strong structural adjustment effort (includingtrade liberalization) are a first-best policy, and thatspecial tax incentives may not be able to offset thenegative impact of an unfavorable and unstable policyenvironment.

Table 6.1. Selected ESA Countries:Tariff Revenue(Percent of GDP)

Country

Botswana

Burundi3

Congo, Dem. Rep. of3

Ethiopia

Kenya

Lesotho

Malawi3

Mauritius3

Rwanda

South Africa

Zambia

Zimbabwe

Average (Sub-Saharan Africa)2

Average (Eastern and Southern Africa)

Non-OECD Asia and Pacific2,4

Middle East2

Non-OECD Western Hemisphere 2

OECD2,5

1980

13.22

3.74

1.94

2.76

3.89

4.09

7.50

2.98

0.72

2.07

1.06

4.82

4.00

3.15

4.18

2.78

0.87

1985

8.162.373.172.783.28

29.26

3.70

9.48

0.73

2.864.57

5.81

6.40

3.53

3.95

2.51

0.75

1990

6.60

3.262.193.83

21.95

3.05

10.21

2.17

0.98

3.535.20

5.20

5.72

4.16

3.27

2.43

0.58

Last Available Year1

5.852.511.332.303.94

32.27

3.02

6.74

3.22

0.18

3.064.30

5.39

5.73

3.42

3.48

2.36

0.37

Sources: IMF, Government Finance Statistics, various issues, and World Economic Outlook (October 1997); and OECD, Revenue Statistics, various issues, ex-

cept as noted.1Last year for which data are available is 1996.2Data are unweighted averages.3Data provided by the country authorities; and IMF staff estimates.4Korea joined the OECD in December 1996.5Excluding the Czech Republic, Hungary, Luxembourg, and Poland. The OECD data for the countries of the European Union (EU) are for tariff collec-

tions at the borders of those countries and accordingly differ from the tariff collections on goods used in each EU country to the extent that there is

transshipment within the union.

28


Fiscal Aspects of Trade Liberalization

forms of customs and tax administration; and whentrade liberalization is supported by macroeconomicpolicies that maintain external balance and avoid aconcomitant real appreciation of the liberalizingcountry's currency. Second, beyond a certain point,and even allowing for the above factors, a reduc-tion of tariffs will lead to a decline in the impor-tance of trade tax revenue, highlighting the needfor domestic tax reform to enhance the domestictax base.

What has been the experience of the ESA coun-tries that have undertaken significant trade and tariffliberalization? Three facts stand out:

• First, at the start of the reforms, ESA countries(with the exception of SACU countries)28 de-pended to a great extent on trade taxes for theirtotal revenues. In 1990, the trade tax revenue-to-GDP ratio of ESA countries was 5.7 percent, sig-nificantly higher than that for other groups of de-veloping countries (Table 6.1). On average, theslow reformers were considerably more depen-dent on trade taxes than the fast reformers (Table6.2). This dependence on trade taxes may haveconditioned the nature and extent of trade liber-alization. In the case of South Africa, fiscal con-siderations did not play a significant role in thedecision to liberalize trade because of the coun-try's limited dependence on customs duties forrevenue generation (customs duties accountedfor just about 4 percent of total revenue, ofwhich a substantial part was transferred toBLNS countries under existing revenue-sharingarrangements). In the case of Malawi, trade lib-eralization in the mid-1990s was reversed be-cause of a deteriorating fiscal situation, which,in turn, led to the imposition of an export tax.Similarly, in Tanzania, extensive leakages stem-ming from weak administration and rampant ex-emptions led to a slowdown of trade liberaliza-tion and efforts to address the tax policy and taxadministration problems.

• Second, there was a substantial reduction in thereliance on trade taxes during the course of the1990s. On average, trade taxes decreased from34 percent to 23 percent of total revenue, witha broadly similar rate of decrease in both fastand slow reformers. But total tax revenue-to-GDP ratios remained rather stable during the1990s, reflecting efforts by ESA countries toreform their domestic tax system and broadenthe base of trade-neutral taxes. The impact of

Table 6.2. Eastern and Southern Africa: TradeTax Revenue as a Share of Total Revenue1

(Percent)

Moderate or no liberalizationAngolaBurundiComorosEthiopiaKenyaMadagascarMauritiusRwandaSeychellesTanzaniaZimbabwe

Average

Substantial liberalizationBotswanaLesothoMalawiNamibiaSouth AfricaSwazilandMozambiqueUgandaZambia

Average

1991/92

3668

414434532218

40

8

264220

24

1997/98

529552615293424262917

26

14

21284

50181216

14

28The BLNS countries are excluded from the analysis here be-cause their "trade taxes" largely represent transfers from SouthAfrica under the revenue-sharing arrangements in SACU.

Sources: IMF, African Department database, and World Eco-nomic Outlook database.

1The averages exclude Botswana, Lesotho, Namibia, andSwaziland.

fiscal reform has varied within the ESA coun-tries. In the case of Tanzania, dependenceon revenue from trade taxes increased, partlyas a result of efforts in the latter part ofthe 1990s to strengthen customs administra-tion; the outcome, however, also reflected amore modest effort of tariff liberalization. InZambia, although tariff reform proceeded at arapid pace, reliance on trade taxes did not di-minish substantially because there was a con-comitant effort to tackle the problem of perva-sive exemptions.

• Third, on average, trade liberalization is associ-ated with an improvement in the overall fiscalposition in 1993-99 (Figure 6.2). Two-thirds ofthe countries in the substantial liberalizationgroup had improved their fiscal balance sincethe early 1990s, despite a reduced reliance ontrade taxes, pointing to the success of offsettingtax and expenditure measures that were part ofbroader programs of fiscal consolidation.

29


VII Trade Policy Issues Ahead

I n coming years, ESA countries will be affected bythe ongoing trend of trade liberalization at the re-

gional level (Table 7.1). The EU-South Africa freetrade agreement (EU-SA FTA) will also have signifi-cant trade and competitiveness effects for ESA coun-tries with strong trade links with both the EU andSouth Africa; it will also have important revenue ef-fects for several countries, notably the BLNS coun-tries (Box 7.1). More fundamentally, it will impel alowering of trade barriers in ESA countries, in partbecause their borders are porous. Direct pressures tolower trade barriers will also arise in the context ofdiscussions about the trade arrangements that willsucceed the Lome Convention.

Each of these developments raises a set of impor-tant issues, namely, the unfinished agenda on unilat-eral liberalization, preferential integration within theregion, preferential integration with industrial countrypartners, multilateral liberalization and the next roundof trade negotiations in the WTO, the role of comple-mentary policies, and the role of trading partners.

The Unfinished Agenda of UnilateralLiberalization

As discussed, many ESA countries made substan-tial progress on trade liberalization during the 1990s,but a large unfinished agenda lies ahead. First, 9 outof the group of 22 ESA countries, includingEthiopia, Kenya, and Zimbabwe, still have restric-tive regimes, with pervasive quantitative restrictionsand high tariffs, often in excess of 25 percent. Sec-ond, even in countries that have liberalized theirtrade regimes substantially, a number of problemsrelating to complexity and exemptions remain.South Africa is an example of a country with anoverly complex tariff system, with 72 tariff lines anda high proportion of non-ad valorem tariffs.Mozambique protects its sugar and cashew indus-tries with highly distortive trade taxes, subsidizingfirms of doubtful viability. Furthermore, collectionefficiency in ESA countries is very poor (often lessthan 50 percent), reflecting, among other things, the

continuing problems that arise from generous ex-emptions. In Mauritius, for instance, forgone rev-enues from exemptions amount to about 75 percentof collections, and about 50 percent of collectionswhen exemptions for exports are excluded.

Regional Preferential Integration

Many of the current RTAs in the region do notseem to possess the characteristics of a natural trad-ing bloc in the sense of their products being usefullycomplementary. This is particularly the case ofCOMESA, where countries trade less with eachother than what would be expected on the basis oftheir levels of economic development and geograph-ical proximity (Subramanian and Tamirisa, 2000).This reinforces the principle that preferential tradearrangements in the ESA region should be outward-oriented and pursue MFN liberalization with asmuch vigor as intraregional liberalization. The CBIhas embodied the principle of open regionalism, andCOMESA is moving in that direction too. In the caseof SADC, average external tariffs are lower than forCBI and COMESA countries, but reform needs to beextended to those selected labor-intensive productswhere restrictions remain high.

ESA is, perhaps uniquely, distinguished by the pro-liferation of a number of overlapping and eventuallyinconsistent regional arrangements (see Figure 7.1).This is in contrast to Asia and Latin America, whereRTAs have less overlap and, hence, limited scope forconflict. Several problems arise as a result of suchproliferation. First, some countries that are currentlymembers of a customs union (Namibia and Swazi-land) cannot offer different preferences to othergroups of countries. This problem will be com-pounded if COMESA implements its common exter-nal tariff in 2004 as planned. There are also complica-tions for the SADC countries that are members ofCOMESA, as it is not clear whether they would fol-low COMESA or SADC rules. Second, when coun-tries are simultaneously members of several RTAs,implementation of the agreements can be difficult, asincentives for inefficient diversion of trade through

30


Regional Preferential Integration

Table 7.1. Eastern and Southern Africa: Changes in the Trading Environment1

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EU-South Africa/SACU freetrade agreement (FTA)

Implementation by SouthAfrica/SACU

Implementation by EU

SADC FTAImplementation by South

Africa/SACUImplementation by non-

SACU

COMESA FTA/customs unionImplementation of

intraliberalization2

Implementation ofextraliberalization3

Renegotiation of SACU

CBIImplementation of

intraliberalization2

Implementation ofextraliberalization4

Renegotiation of LomeConvention

Implementation byEastern and SouthernAfrican (ESA) countries

Implementation by EU

East African Communitycustoms union

1Timing depicted in this table is indicative.2Implementation is behind schedule for a number of countries.3COMESA expects to become an FTA by 2000 and a customs union by 2004.4Implementation is behind schedule for a number of countries.

areas with lower external tariffs or less onerous inter-nal procedures emerge and customs officials are facedwith the task of establishing the origin of goods com-ing from different groups of countries. In fact, ESAcountries might find rules of origin impossible to im-plement, particularly if they differ among countries.Rules of origin will also complicate marketing andproduction decisions, as well as the rationalization ofproduction (companies will have an incentive to dif-ferentiate between production for the region withlocal inputs and for the rest of the world with cheaperinputs). Third, the sheer administrative and politicalcosts and distraction stemming from multiple initia-tives create difficulties. Therefore, there is an urgentneed to rationalize these initiatives in order to im-prove the chances for their success and the investmentclimate in the region.

One suggestion to encourage wider regional coop-eration and liberalization is to establish a forumcomprising all ESA countries and to take a closerlook at the costs of these multiple initiatives. The es-sential requirement is not necessarily to combine thedifferent RTAs into one, but at least to ensure thattheir policies are designed and implemented in a mu-tually consistent fashion. In any case, it would behelpful if all the RTAs were to adopt similar and lowexternal tariffs.

Is There a Need for Compensation?

A widely held view among ESA countries is thatregional integration would entail the need for com-pensation, particularly when one of the partners iseconomically dominant. While this argument may

31


VII TRADE POLICY ISSUES AHEAD

Box 7.1. The Impact of Changes in the Trade Environment on the BLNS Countries

Important developments in the trade environmentare expected to have an impact on Botswana, Lesotho,Namibia, and Swaziland (the BLNS countries),which, along with South Africa, constitute the SouthAfrican Customs Union (SACU). The EU-SouthAfrica free trade agreement or FTA, the renegotiationof the revenue-sharing arrangements among SACUcountries, the post-Lome Convention arrange-ments, the SADC FTA (to a lesser extent), and thefuture multilateral trade round under the auspicesof the WTO are expected to have the followingeffects:

• An adverse competitiveness impact, as the EU-SAFTA will reduce many of the preferential marginsthat BLNS suppliers enjoy vis-a-vis the EU underthe Lome Convention. This FTA and the SADCFTA will also erode BLNS suppliers' margin in theSouth African market relative to EU suppliers andnon-SACU SADC suppliers. This could result notonly in lost trade but also in investment diversionaway from BLNS countries, as the erosion of pref-erential margins makes them a less attractivesource of supply.

• A beneficial pull effect will be felt from the growthimpulse imparted to South Africa as a result of thesedevelopments.

•An adverse impact on revenue transfers to theBLNS countries will result from a combination ofreduced total receipts fas tariffs decline under theEU-SA FTA, SADC, and the next WTO round) and

reduced shares stemming from the SACU renegotia-tions (for any given aggregate pool).

The competitiveness impact is likely to be limitedsince BLNS exports do not compete directly with EU orSouth African products. According to a detailed study(IDS/BIDPA, 1998), the value of BLNS productsthreatened by direct competition is relatively small; thequantitative impact will depend on how these productsare treated in the EU-SA FTA and in the post-Lomearrangements. The pull exerted on BLNS countries as aresult of higher growth in South Africa—estimated atabout 1 percent—is difficult to quantify. While small, itcould nevertheless offset any adverse competitivenessimpact in the BLNS countries.

The revenue effect, which is probably the most sig-nificant one, is summarized in the table below.

With respect to the revenue impact, three points arenoteworthy. First, the trade developments are expectedto affect Lesotho and Swaziland most, as they dependmore on SACU revenues than Namibia and Botswana.Second, the full revenue impact will be seen only by theyear 2010 when the EU-SA FTA will be fully imple-mented. Third, the magnitude of impact is subject toconsiderable uncertainty, depending on several factors,including the new revenue-sharing arrangement underSACU, the exemptions under the EU-SA FTA, and thenew WTO round. For these countries, the policy impli-cations are clear: efforts to enhance the domestic taxbase, especially for Lesotho and Swaziland, are impera-tive if the adverse revenue effects arising from changesin the trading environment are to be offset.

SACU revenues (percent of totalrevenues)1

SACU revenues (percent of GDP)1

Reduction in SACU revenues2

Value of Lome preferences(millions of rand)3

Botswana

15.35.5

-5 to -9

9.9

Lesotho

48.123.6

-13 to -21

0.2

Namibia

27.710.1

- 9 to -14

6.1

Swaziland

50.015.6

-14 to -28

20.0

1In 1998/99.2ln percent (IDS and BIDPA, 1998).3lmani (l997).

hold in principle, the case for compensation thatwould be directed at South Africa would be condi-tioned to a large extent on how open the SouthAfrican market becomes, particularly in the labor-intensive sectors in which partner countries have acomparative advantage (for example, clothing andtextiles). Opening these sectors would engender the

perception that partner countries could gain from theagreement and, hence, mute calls for other forms ofcompensation (transfers). Although the principle ofasymmetric liberalization in the SADC is a form oftransitional compensation, it will only have the de-sired effect if it eventually encompasses all the sec-tors that are of particular importance to South

32


Multilateral Liberalization

Africa's regional trading partners, including thosethat are currently highly protected. In the case of theCommon Market of the South (MERCOSUR) andNorth American Free Trade Agreement (NAFTA),the question of compensation never arose because ofthe perception that the smaller countries stood togain from the liberalization unleashed by the agree-ments. In sum, as long as the regional integrationscheme is appropriately designed, a compensationarrangement should not be necessary.

Liberalization of Investment and Services

As noted before, preferential integration for ESAcountries in the area of trade in goods may not be thebest approach to reap the benefits of globalization. Asimilar conclusion can be drawn when looking attrade in services and investment liberalization, be-cause the most efficient service providers are likely tobe in the industrial countries. This does not precludegreater cooperation in services and investment amongESA countries. One possible area of cooperationwould be domestic regulation in the various servicessectors, where ESA countries could pool resourcesand aim to achieve convergence in domestic regula-tory regimes. This objective is already being pursuedin the context of the financial sector and could be ex-tended to sectors such as telecommunications, power,and transport. In the limit, there could even be com-mon regulators for ESA countries in all these areas.

Preferential Agreements withIndustrial Countries

Two important imminent developments for the re-gion are the EU-SA FTA and the renegotiation of theLome Convention. Since the share of non-EU coun-tries in the trade of ESA countries is about 55 percent,there is considerable scope for inefficient trade diver-sion consequent upon the FTA. Unlike integrationwithin the region, integration with the EU will haveimportant revenue consequences, and if the efficiencygains are not forthcoming, ESA countries could be se-riously disadvantaged. To counter these risks, ESAcountries should continue to reduce their MFN tariffswhile strengthening the domestic sources of tax rev-enue. Given the timetables for these agreements, theirimpact is likely to be felt only toward the end of thisdecade. This provides ESA countries with an opportu-nity to adjust to these developments.

Multilateral Liberalization

Sub-Saharan African countries did not, in gen-eral, take advantage of the Uruguay Round in ad-

vancing their own liberalization (Harrold, 1995;and Wang and Winters, 1998) and failed to use theWTO as a mechanism to lock in the reforms thatwere already under way. As described above, thiswas true in the area of both trade in goods and tradein services, as reflected in the large wedge betweenactual trade regimes and the regimes that werebound under the WTO. It must be recognized thatin a mercantilist framework, such as the one under-lying the WTO, ESA countries are disadvantaged tosome extent. By virtue of their small markets, theyhave little to offer to their trading partners and,therefore, face little pressure from them to under-take trade liberalization.

In any new round of multilateral trade negotia-tions, ESA countries should at least use the WTOas a binding mechanism to lock in any reforms theyundertake. In view of the history of reversals, in-cluding during the 1990s, and the attendant loss inpolicy credibility, it would be especially importantto find a credible anchor for trade and other poli-cies. This would apply not only to trade in goods,but also to trade in services. Developing countrieshave recently used the WTO services negotiationsto lock in future regimes and to strengthen domes-tic regulations that can then facilitate further liber-alization of key services sectors (Mattoo, 1999).ESA countries could also emulate this approach fortrade in services.

The Further Decline of Preferences

One of the likely outcomes of the next round ofmultilateral trade negotiations will be the furthererosion of preferential margins enjoyed by ESAcountries. They will thus need to adjust to a tradingenvironment in which reliance on preferences can-not be a basis for integration with the world econ-omy. This erosion will stem from different sources,including further declines in industrial country tar-iffs on industrial products. For ESA countries, theelimination of the multifiber arrangement (the sys-tem of preferential access in textiles and clothing)and any further liberalization of the agriculturalsector in OECD countries will make the biggestdent in their preferential benefits. The liberaliza-tion of agriculture and dismantling of the multifiberarrangement, by reducing world prices, will erodethe rents they currently enjoy as a result of prefer-ential quotas. For countries such as Mauritius, theloss of preferential access may have a significantimpact on their growth strategy, and adjustment tothe new environment acquires real significance.Similarly, the BLNS countries, which have guaran-teed quotas in beef and sugar, will face decliningexport revenues.

33



Figure 7.1. Main Regional Trade Arrangements

SADC

Angola

Botswana

Congo, Republic of

Lesotho

Malawi

Mauritius

Mozambique

Namibia

Seychelles

South Africa

Swaziland

Tanzania

Zambia

Zimbabwe

CBI

Burundi

Comoros

Kenya

Madagascar

Malawi

Namibia

Rwanda

Seychelles

Swaziland

Tanzania

Uganda

Zambia

Zimbabwe

COMESA

Angola

Burundi

Comoros

Congo, Democratic Rep. of

Djibouti

EgyptEritrea

Ethiopia

Kenya

Madagascar

Malawi

Mauritius

Namibia

Rwanda

Seychelles

Sudan

Swaziland

Tanzania

Uganda

Zambia

Zimbabwe

SACU

Botswana

Lesotho

Namibia

South Africa

Swaziland

Role of Complementary Policies

The Need for Fiscal Adjustment

Whether the cause is further unilateral liberaliza-tion or the implementation of regional agreementswithin Africa and with the EU, trade taxes will repre-sent a steadily declining source of revenue for ESAcountries in the coming years. Moreover, the magni-tudes of this decline could be substantial. As the ex-perience in the 1990s has shown, however, the phas-ing in of tariff reductions over a number of yearsleaves sufficient time for the countries in the regionto adjust to the imminent changes. ESA countriesneed to strengthen further domestic sources of rev-enue—through a broadening of the revenue base, theintroduction of new taxes where appropriate, and astrengthening of tax administration. Much of the im-provements in the tax systems will need to comefrom the rationalization of exemptions and generousinvestment incentives. It is far from clear that these

incentives really augment the total flow of invest-ment to the region, and there is scope for cooperationamong ESA countries to avoid wasteful tax competi-tion for investment. This could mean an emphasis ongreater convergence of tax regimes and on cost-effec-tive, transparent, and well-administered incentives.

The Need for ComplementaryDomestic Policies

The individual case studies of trade reform reportedin this paper point to the need for complementary do-mestic policies, in order to allow reforms to be imple-mented and sustained, and to unleash the favorablesupply responses expected from increased integration.The determinants of growth are complex and includea number of policy, institutional, geographical, andexogenous variables (political developments, terms oftrade, etc.). But experience shows that policies aimedat maintaining macroeconomic stability, removing

34


Role of Major Trading Partners

structural bottlenecks, and creating an open and lib-eral investment regime are required to promote rapidand sustainable economic growth.

Role of Major Trading Partners

Achieving integration in the world economy ispredominantly determined by domestic policy ac-tions, although a favorable external trading environ-ment can also play a supportive role. What can ESAcountries' major trading partners do to foster such anenvironment? The first-best approach would be theelimination of all industrial countries' market accessbarriers on African exports on a MFN basis, com-bined with unilateral, nondiscriminatory trade liber-alization by African countries. A second approachwould be for the main industrial countries to enterinto reciprocal free trade agreements with ESAcountries. Under this approach, ESA countrieswould suffer relatively little trade diversion fromsuch comprehensive agreements because nearly alltheir major suppliers (the United States, EU,Canada, and Japan) would be included. A third ap-proach would be for the industrial countries to elimi-nate on an MFN and nonreciprocal basis all marketaccess barriers on products of export interest toAfrican countries and to bind these in the WTO(Wang and Winters, 1998). Another possibilitywould be for trading partners to reduce market ac-cess barriers to African exports on a preferential andnonreciprocal basis and bind these also in theWTO.29 It is far from clear that this approach,involving a continuation and extension of existingnonreciprocal preferential arrangements, such as theLome Convention, would be beneficial. The Africanexperience (under the Lome Convention and Gener-alized System of Preferences) demonstrates thatpreferences have not led to successful integrationand may actually have encouraged inefficientspecialization.

Specific Actions

The first two approaches discussed above wouldbe preferable but difficult to achieve in the near fu-ture. The third one would be nondiscriminatory and,

hence, consistent with WTO rules, but its quantitativeimpact would be uncertain, given that MFN tariffs onAfrican exports are generally low. There are, how-ever, some specific actions industrial countries mightundertake in the short run to promote the integrationof African countries into the world economy.

• MFN bound and applied tariffs on agriculturalgoods of interest to ESA countries could beeliminated, market access commitments couldbe implemented transparently, and exemptionfrom special safeguards measures could begranted. Particular attention should be paid totariff peaks and also to tariffs on processedgoods, so that tariff escalation might be reduced(on wood and leather products, for example). If,as a second best, access is granted to ESA coun-tries preferentially, both new and existing prefer-ences should be tariff free, unconditional, andfree of ceiling quotas. In addition, market accesswould be improved if industrial countries sim-plified their rules of origin requirements.

• The phasing in of Uruguay Round liberalizationon products of export interest to Africa could beaccelerated. Tariff cuts on textiles and garmentsand the abolition of quotas and special safe-guards for these products, for example, will en-courage exports and, if offered preferentially, as-sist the ESA countries to gain market experiencebefore the multifiber arrangement is phased outand a much more competitive environment isushered in.

• More generally, tariff escalation should be re-duced by extending tariff cuts to all stages ofproduction to remove obstacles to the processingof primary commodities and to encourage exportdiversification.30 Even though when preferencesare taken into account sub-Saharan Africancountries face low average tariffs in industrialcountries,31 these low tariffs do not extend toprocessed and temperate agricultural products orto textiles and garments. Outside the Lome Con-vention, African countries face the same hightariffs and nontariff barrier regimes as the indus-trial countries' other non-FTA partners, eventhough their low level of industrialization meansthat their exports attain neither the level nor the

29The African Growth and Opportunity Act, enacted by theU.S. Congress in early 2000, provides for duty-free treatment ofthe exports of sub-Saharan African countries to the United States.The magnitude of benefits to these countries, especially in rela-tion to textiles and clothing products, will be determined by rulesof origin requirements that need to be fulfilled to qualify for duty-free access. An interesting feature of the Act is that it envisagesthe possible negotiation of free trade agreements between theUnited States and African countries in the future.

30Tariff escalation is significant for many product chains rele-vant to sub-Saharan African countries, such as wood products,textiles and clothing, fish, and leather products (Amjadi, Reinke,and Yeats, 1996).

31Pre-Uruguay Round tariffs facing sub-Saharan African coun-tries' exports to the EU, United States, and Japan averaged only0.31 percent, less than for any other group of developing coun-tries (Amjadi, Reinke, and Yeats, 1996).

35



composition necessary to threaten sectors in in-dustrial countries.

• Although the Uruguay Round agreements allowcontingent protection actions in particular cir-cumstances, the industrial countries could ex-empt African countries from antidumping, coun-tervailing, and safeguard actions. Starting fromvery low bases, African exports can sometimesrecord very rapid growth rates and be hard hit bycontingent protection measures. The absolutevolumes of African exports are, however, notlarge enough to be a threat to industrializedcountries, even if they approach the thresholdsset out in the Uruguay Round agreements.

This discussion of the main trade policy issuesfacing ESA countries leads to the following conclu-sions. First, for a number of ESA countries, particu-larly those with restricted trade regimes, there is anurgent need to push ahead with unilateral liberaliza-tion so that the benefits of reduced rent-seeking ac-tivities, increased efficiency, and improved exportperformance can be reaped. Second, liberalizationshould extend beyond trade in goods to cover ser-

vices and investment regimes. Third, in any newround of multilateral trade negotiations, ESA coun-tries should use the WTO to lock in any reforms theyundertake and reap the attendant benefits of signal-ing the durability of reform efforts. Fourth, there is aneed to rationalize the multiplicity of regional initia-tives and to embrace the principle of open regional-ism by reducing barriers to trade with all countries,thereby minimizing the risks associated with prefer-ential integration. Fifth, industrial countries shouldassist the trade liberalization efforts of ESA coun-tries by reducing market access barriers and elimi-nating restrictions on African exports. An attractiveoption in this regard would be for the major indus-trial countries to negotiate reciprocal free tradeagreements with ESA countries. This would improvemarket access for ESA countries while also further-ing their own liberalization efforts. Lastly, it is im-portant to emphasize that the success of these effortswill depend critically on a comprehensive set ofcomplementary domestic policies aimed at ensuringmacroeconomic stability, strengthening domestic in-stitutions, and providing a more secure and pre-dictable environment for investment.

36


Appendix I Overall Trade RestrictivenessClassification Scheme

A s noted in Sharer and others (1998), the restric-tiveness of the tariff regime depends on many

factors, including the minimum and maximum tariffrates, the number of bands, the allocation of individ-ual items to the bands, the existence of "exceptional"rates that lie outside the basic tariff structure, anyother duties and charges (such as differential rates ofexcise or value-added taxes on imports, import sur-charges, and statistical fees), and the extent of ex-emptions from customs duties. The classificationscheme for overall trade restrictiveness used in thisstudy builds on the approach developed by Sharerand others by including information on export taxesand by adding another category of nontariff barrier(NTB) restrictiveness.

Under this approach, a country is assigned a re-strictiveness ranking for both its price-based (im-port tariffs and export taxes) measures and itsNTBs, based on the classification schemes de-scribed below. Consistent with the Lerner theoremthat an export tax is equivalent to an import tax,the price-based measure is computed as the sum ofimport and export taxes. Whenever possible, an

unweighted average of statutory tariff rates includ-ing other duties and charges was used. An averageof statutory tariff rates is preferable to one basedon customs collections since the latter reflects(often extensive) exemptions. An unweighted aver-age is preferable to a trade-weighted average sinceitems with high tariffs are likely to have smalltrade weights. Other duties and charges shouldalso be included. The restrictiveness ranking ac-cords greater weight to NTBs, which are inher-ently less transparent and more distortionary thantariffs.

NTBs include quantitative restrictions, restruc-ture licensing, bans, state trading monopolies, re-strictive foreign exchange practices that affect thetrade regime (for example, a surrender requirementat a nonmarket exchange rate, multiple exchangerates), quality controls, and customs proceduresthat act as trade restrictions. Such measures in ef-fect provide indirect subsidies to import-competingdomestic producers in a nontransparent manner.However, information on NTBs and their restric-tiveness as measured, for instance, by ad valorem

Trade Taxes2Absolutely No

Restrictions

12345

10

Nontariff Barriers1

Few Restrictions;0-20 Percent

Coverage3

34567

10

SubstantialRestrictions;

20-40 PercentCoverage3

56789

10

PervasiveRestrictions;Greater than40 PercentCoverage3

789

101010

< 10 percent10 to 15 percent15 to 20 percent20 to 25 percent25 to 35 percent>35 percent

1Includes restrictions on exports and imports and other NTBs.2Includes customs duties and all other charges levied exclusively on imports, as well as export taxes.3Refers to the share of total trade being affected by NTBs.

37


equivalents,1 may either not be available for allcountries or be of limited use.2 A review of previ-ous studies on trade reform in developing countriesbelow shows that other researchers have faced sim-

1The ad valorem equivalent of an import quota is the rate of advalorem tariff that would yield the same import quantity as thequota. There are many circumstances in which import quotas andimport tariffs are not equivalent, including imperfect marketstructures and changes in supply and demand.

2Trade or production coverage of NTBs may be useful but doesnot fully capture their restrictiveness.

ilar difficulties. In view of this, this study utilizesfour categories of NTBs (see table above).

The table illustrates the assignment of price-based and NTB categories on the 10-point scale. Acountry is assigned an overall rating of 10 as longas the average tariff rate exceeds 35 percent, evenif the nontariff trade regime is classified as open.Countries with an overall rating of between 7 and10 are classified as restrictive; those with a 5 or a 6rating are classified as moderately restrictive; thosewith 3 or 4 as moderately open; and those with 1 or2 as open.

38

APPENDIX I


Appendix II Statistical Tables

Table A1. Eastern and Southern Africa: Structure of Production (Constant Prices), 1985-971

AngolaBotswana2

BurundiComorosCongo, Dem. Rep. of



Seychelles3

South AfricaSwazilandTanzania4

Uganda

ZambiaZimbabweEastern and Southern Africa

(weighted)Eastern and Southern Africa

(unweighted)

Sub-Saharan AfricaMiddle Income5

1985

14.05.6

50.238.330.0

...

...35.723.530.6

29.417.633.510.043.1

...4.5

32.044.357.8

22.918.7

11.1

28.5

18.4n.a.

Agriculture

1990

12.25.5

48.842.232.7

...

...34.420.731.2

26.712.826.312.039.6

8.05.0

22.544.356.4

24.016.1

12.2

26.1

19.212.9

1997

8.24.6

51.244.561.8

...

...30.712.332.4

36.39.4

30.211.336.4

5.05.3

17.146.646.0

16.016.6

13.1

26.1

20.113.2

1985

50.268.122.715.735.7

...

...16.323.714.0

19.327.839.033.624.0

...41.923.722.610.0

46.133.1

38.1

29.9

37.0

...

Industry

1990

54.154.522.7

9.627.6

...

...16.430.913.6

20.932.919.531.222.6

21.540.341.222.911.3

49.334.3

36.0

28.9

35.738.0

1997

68.050.617.314.617.4

...

...15.739.113.7

17.533.126.432.124.2

35.438.743.521.416.9

35.628.1

35.5

29.5

33.841.9

1985

35.443.028.257.343.7

...

...48.557.755.9

51.855.327.556.132.9

...53.251.633.433.0

43.248.4

49.5

45.1

47.1

...

Services

1990

33.945.129.957.543.1

...

...49.551.255.6

53.954.754.157.237.8

102.154.538.933.232.9

39.849.8

49.7

48.7

47.050.6

1997

26.055.830.255.121.7

...

...53.548.654.0

43.757.543.456.839.4

88.056.039.931.936.8

62.155.3

52.1

47.8

47.454.3

Source: World Bank, World Development Indicators, 1999.1Ratio of appropriate sectoral variable to GDP at factor cost. All averages are unweighted unless indicated otherwise. In a few cases, shares do not

add up to 100.2Final period refers to 1995.3Initial period refers to 1988.4Initial period refers to 1988 and final period to 1996.5Initial period refers to 1988.

39


Table A2. Eastern and Southern Africa: Countries with IMF Arrangements During the 1990s

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Source: IMF, International Financial Statistics.

APPENDIX II

40





ZambiaZimbabwe

•

•••

•

•

••

••

•••

•

•

•

••

••

••••

•

•

•

••

•

••

•••

•

•

•

••

•

••

• ••• •

• •

• •

•

•• •

•

• •

•

••••

•

•

••

•

•

••••

•

•

••

•

• •

• •• •

• •

• •

• •

• •

• •• •

•

• •


Table A3. Sachs-Warner Classification of Trade Policy of ESA Countries,1980s and 1990s

1980sOverall

Open

...Closed...Closed

ClosedClosed

...

...Closed

OpenClosed

...Closed

...Closed

...ClosedClosedClosed

Closed

2147

257

15

293

222224

Late 1990s1

Overall

ClosedOpen

ClosedClosed

Open

OpenOpenOpenOpenOpen

OpenOpenOpenOpen

Closed

OpenOpenOpenOpenOpen

Closed

17211825II15

19

22222424





Zimbabwe

No. of "open" countries in ESATotal countries in ESANo. of "open" countries in SSATotal countries in SSANo. of "open" countries in AsiaTotal countries in AsiaNo. of "open" countries in Middle East

and North AfricaTotal countries in Middle East and North AfricaNo. of "open" countries in W. HemisphereTotal countries in Western HemisphereNo. of "open" industrial countriesTotal industrial countries

1IMF staff's calculations applying the Sachs-Warner criterion for tariffs and nontariff barriers. That is, a country is

classified as closed if its NTBs covered 40 percent or more of the value of trade or if its average tariff exceeded

40 percent.

Appendix II

41


Table A4. Eastern and Southern Africa: Current Account ExchangeRestrictions, 1990 and 1999





ZambiaZimbabwe

Total "yes"In percent of total

Memorandum itemIMF membership2

Article VIII

19901

no

no

no

no

no

no

no

no

no

no

no

no

no

no

no

yes

yes

yes

no

no

no

no

314

46

Status

19991

no

yes

no

yes

no

no

no

yesyes

yes

yes

yes

no

yes

yes

yesyesyes

yes

yes

no

yes

1568

81

Date ofAcceptance

Nov. 1995

Jun. 1996

Jun. 1994Mar. 1997Sep. 1996

Dec. 1995Sep. 1993

Sep. 1996Dec. 1998

Jan. 1978Sep. 1973

Dec. 1989Jul. 1996

Apr. 1994

Feb. 1995

Sources: IMF (1991); and IMF (2000).1As of December 31.2As of December 31, 1999, in percent of total.

APPENDIX II

42


Table A5. Eastern and Southern Africa: Nontariff Barriers to Imports, December 1998

Quantitative

Bans

NoNoNoNoYes

NoNoNoNoNo

NoNoNoNoNo

NoNoNoYesNo

No

Restrictions

Quotas

NoYesNoNoNo

NoNoNoNoNo

NoNoYesNoYes

NoNoNoNoNo

No

Restrictive LicensingRequirements

For allproducts

YesNoNoNoNo

NoNoNoNoNo

NoNoNoNoYes

NoNoNoNoNo

No

For someproducts

YesYesNoNoYes

YesNoNoNoNo

NoNoYesNo

NoNoNoNoNo

Yes

Import StateTrading

Monopolies

NoNoNoYesYes

YesNoNoNoNo

YesNoYesNoYes

NoYesYesNoNo

Yes

Other1

NoNoYesNoNo

NoNoNoNoNo

NoYesNoNoNo

YesNoNoNoNo

No

AngolaBotswanaBurundiComorosEritrea




Zimbabwe

Sources: World Bank and IMF staff reports; and data provided by the authorities.1Includes countervailing duties, dumping, etc.

43

Appendix II


Table A6. Eastern and Southern Africa: Nontariff Barriers to Exports,December 1998

Angola

Botswana

Burundi

Comoros

Eritrea

Ethiopia

Kenya

LesothoMadagascarMalawi

Mauritius

MozambiqueNamibia

Rwanda

Seychelles

Swaziland

South Africa

Tanzania

Uganda

Zambia

Zimbabwe

Quantitative

Bans

NoNoNoNoYes

NoNoNoNoNo

NoNoNoNoNo

NoNoNoNoYes

No

Restrictions

Quotas

NoNo2

NoNoNo

NoNoNoNoNo

NoNoNo2

NoNo

NoNoNoNoNo

Yes

Licensing1

YesYes3

NoNoNo

YesYesNo2

NoNo

NoNoYes3

NoNo

NoNoNoNoNo

Yes

Duties

YesNoYesYesNo

YesNoNoNoNo

NoYesNoYesNo

YesYesNoNoNo

No

Marketing

Monopolies

NoYesYesNoNo

NoYesNoNoNo

NoNoYesNoNo

YesNoNoNoNo

Yes

Sources: World Bank and IMF staff reports; and data provided by the authorities.1Only for restrictive (and not for statistical) purposes.2Except for diamonds.3AII exports, except to SACU member countries, require a license. Within SACU, textiles and meat products re-

quire a license.

44

APPENDIX II


Ap

pen

dix II

Table A7. Eastern and Southern Africa: Summary of Uruguay Round Commitments in Agriculture and Industry

Agriculture

Total Industryaverage

Average tariff Share of Average Total average Gap betweenAverage bound binding Previous lines bound Average bound binding Actual tariffs bound and actual

bound duty ODC1 (duty+ODC) bindings in UR bound duty ODC (Duty+ODC) (Early 1990s) (1998) (Early 1990s) (1998)

(Percent) (Percent (Percent)

of lines)Angola 80 0.1 80 0 4 80 0.1 80 24 24 56 56Botswana 40 ... 40 31 68 17 ... 17 45 15 -28 2Burundi 100 30 130 ... 2 100 30 130 39 41 91 89Kenya 100 0 100 0 2 54 0 54 44 19 10 35Madagascar 30 250 280 ... 11 30 250 280 30 18 250 262Malawi 124 20 144 ... 4 47 20 67 18 12 49 55Mauritius 120 17 135 0 2 65 17 82 34 19 48 63Mozambique 100 300 400 0 2 80 300 380 19 10 362 370Namibia 40 0 40 31 68 17 0 17 45 15 -28 2Rwanda 80 ... 80 ... 100 100 ... 100 35 22 65 78

SouthAfrica 40 ... 40 17 98 17 ... 17 45 15 -28 2Swaziland 40 ... 40 31 68 17 ... 17 45 15 -28 2Tanzania 120 120 240 0 0.1 120 120 240 25 20 215 220Uganda 80 0 80 0 3 50 ... 50 18 9 32 41Zambia 124 0 124 ... 4 42 ... 42 37 14 5 28

Zimbabwe 146 15 161 8 1 38 29 66 30 32 36 34

Sources: Sorsa (1996); and IMF staff estimates.

'Other duties and charges.

45


AP

PE

ND

IX II

Table A8. Eastern and Southern Africa: Commitments Undertaken in Trade in Services in the WTO

Health TourismBusiness Communications Construction Distribution Educational Environmental Financial and Social and Travel Recreational Transport Other Total

AngolaBurundiBotswanaCongo, Dem.

Rep. of


MozambiqueNamibiaRwandaSouth AfricaSwaziland


Total

//

///

////

/

10

/

//

/

/

/

/

7

/

/

/

/

/

5

/

/

/

3

/

/

2

/

//

3

/

//

//

/

/

/

8

/

/

/

/

4

///

/

//

//

////

////

16

/

/

/

3

//

/

3

//

/

3

353

2

510153

12593

1243

67

Source: Based on schedules of commitments submitted to the WTO.

46


Table A9. SADC: Intraregional and Extraregional Trade

1990

Imports

1994 1999 1990

Exports

1994 1999


SADC tradeIntraregional1

By SACU from/to rest of SADC regionBy rest of SADC region from/to SACUBetween rest of SADC region


Total

SADC tradeIntraregional

By SACU from/to rest of SADC regionBy rest of SADC region from/to SACUBetween rest of SADC region


Total

Memorandum itemsIntraregionalExtraregional

Total

1,53179974478

27,667381

12,5023,0672,3789,339

29,199

5.20.33.31.6

94.81.3

42.810.58.1

32.0

100

0.916.9

17.9

3,042560

2,034448

31,115327

13,3934,4562,93210,008

34,158

8.91.66.01.3

91.11.0

39.213.08.6

29.3

100

1.717.6

19.3

4,705571

3,473661

35,521630

15,6654,0472,22212,957

40,226

1,058402173484

33,3271,2249,2774,3672,07416,385

34,386

(Percent of total)

11.71.48.61.6

88.31.6

38.910.15.5

32.2

100

3.11.20.51.4

96.93.6

27.012.76.0

47.7

100

(Percent of GDP)

2.619.9

22.5

0.620.4

21.0

2,9552,004442508

31,970633

7,6563,8961,593

18,192

34,924

8.55.71.31.5

91.51.8

21.911.24.6

52.1

100

1.718.0

19.7

4,4033,135619650

48,3301,162

14,8806,1712,477

23,640

52,733

8.35.91.21.2

91.72.2

28.211.74.7

44.8

100

2.527.0

29.5

Source: IMF Direction of Trade Statistics.1Import and export data differ mainly because partner country data are used directly or indirectly in estimating missing figures. Imports are measured

c.i.f., exports are measured f.o.b.

Appendix II

47


Table A10. COMESA: Intraregional and Extraregional Trade

Imports Exports

1990 1994 1999 1990 1994 1999

COMESA tradeIntraregional1

Extraregional1

South AfricaRest of AfricaEUUnited StatesJapanRest of world

Total

COMESA tradeIntraregionalExtraregional


Total


Total


1,01525,296982388

11,5852,3021,3058,733

26,311

3.996.13.71.5

44.08.85.0

33.2

100

0.921.9

22.8

1,05425,0791,854315

9,3282,6631,2709,649

26,133

4.096.07.11.2

35.710.24.9

36.9

100

0.922.022.9

1,62442,3203,932291

15,9154,2591,845

16,077

43,944

89913,944169320

5,4852,939588

4,443

14,843

(Percent of total)

3.796.38.90.7

36.29.74.236.6100

6.193.91.12.2

37.019.84.0

29.9

100

(Percent of GDP)

1.00.2

1.2

0.812.1

12.8

98515,330428495

5,8093,231592

4,774

16,316

6.094.02.63.0

35.619.83.6

29.3100

0.913.5

14.3

1,61619,780696205

8,6953,923711

5,55021,397

7.692.43.31.0

40.618.33.3

25.9

100

1.012.2

13.2



APPENDIX II

48


Table A11. CBI: Intraregional and Extraregional Trade

Imports Exports

1990 1994 1999 1990 1994 1999

CBI tradeIntraregional1

ExtraregionalSouth AfricaRest of AfricaEUUnited StatesJapanRest of world

Total

CBI tradeIntraregionalExtraregional


Total


Total


67410,798

984329

5,042634743

3,066

11,472

5.994.18.62.9

43.95.56.5

26.7

100

1.524.5

26.0

724

11,0031,670134

3,981584705

3,930

11,727

6.293.814.21.1

33.95.06.0

33.5

100

1.9

28.5

30.4

1,11012,1752,867126

3,671531565

4,415

13,285

6125,677169364

2,834521362

1,425

6,288

(Percent of total)

8.491.621.61.0

27.64.04.3

33.2

100

9.790.32.75.8

45.18.35.822.7

100

(Percent of GDP)

2.20.3

2.5

1.412.9

14.3

7257,052320485

3,249621368

2,009

7,777

9.390.74.16.2

41.88.04.7

25.8

100

1.918.3

20.1

1,0558,105594399

4,153722417

1,820

9,160

11.588.56.54.4

45.37.94.519.9

100

2.116.1

18.2



49

Appendix II


AP

PE

ND

IX II

Table A12. Selected Eastern and Southern African Countries:Tariff Preferences(In percent, unless otherwise indicated)

Export Loss E x p o r t L o s s

if Preferences underOECD European Union Japan USA Eliminated Uruguay

Average Average Average Average Average (Thousands (Percent Roundtariff preference tariff Preference tariff on Preference tariff on Preference of of total (Percent of

on exports margin1 on exports margin1 exports margin1 exports margin1 U.S. dollars) exports) total exports)

AngolaBotswanaBurundiComorosEthiopia

LesothoKenyaMadagascarMalawiMozambique

MauritiusRwandaSwazilandUgandaTanzania

ZambiaZimbabwe

0.20.3

0.7

0.50.5I.I

1.3

0.80.90.1

0.30.9

1.52.8

1.3

3.32.02.4

3.1

4.42.42.3

1.72.5

0.30.1

0.1

0.20.40.1

0.2

0.50.60.0

0.50.2

3.22.9

1.9

3.52.73.5

3.4

4.93.02.5

2.93.3

1.80.0

1.5

2.40.80.0

4.8

6.70.01.4

0.01.2

0.02.1

1.3

I.I0.20.1

I.I

3.00.01.0

0.61.0

0.13.5

2.0

3.10.85.4

6.4

3.52.10.0

1.44.0

0.4I.I

0.4

2.31.00.6

1.8

1.90.32.4

1.41.0

3,497-399

5,769

24,6204,7652,776

47,441

2,9399,3714,192

7,29719,770

0.3-0.6

2.50.61.9

2.61.71.41.3

4.83.81.73.31.4

1.01.4

-0.30.10.1

0.02

-3.4

0.10.10.1

0.1

0.20.0

0.5

Sources:Yeats (1994); and Harrold (1995).'Difference between unweighted tariff faced by African exports and those paid by competitor countries.

50


Table A13. Sub-Saharan Africa: Compound Annual Growth Rates for Exports in U.S. Dollars(Percent)

Exporting Country 1980-85 1985-90 1990-93 1993-96 1994-96

All non-oil goodsKenyaMadagascarMalawiMauritiusSACUUgandaZambiaZimbabwe

Eastern and Southern Africa (ESA) countriesESA countries, excl. SACU14 SSA countriesAll non-SSA countries

All foodsKenyaMadagascarMalawiMauritiusSACUUgandaZambiaZimbabwe

ESA countriesESA countries, excl. SACU14 SSA countriesAll non-SSA countries

All manufacturesKenyaMadagascarMalawiMauritiusSACU1

UgandaZambiaZimbabwe

ESA countriesESA countries, excl. SACU14 SSA countriesAll non-SSA countries

0.7-8.5

1.9-0.6-6.9-2.215.111.0

-2.5-1.8-5.2

0.9

3.0-9.0

2.4-7.7-12.8-3.4-11.410.9

-3.5-2.2

0.0-1.7

-6.91.1

-8.912.9-7.2-26.9-21.8

3.2

-6.8-6.8-0.1

2.2

2.73.42.8

20.67.2

-10.414.312.1

6.66.56.5

16.0

0.80.52.89.6

11.8-10.7

11.214.1

5.04.02.1

11.6

10.910.88.8

29.33.4

-8.129.614.1

12.413.67.0

17.0

2.65.4

-0.42.2

-0.2-11.2-13.5

-4.1

-2.4-2.7

0.03.5

1.65.3

-0.50.6

-41-13.4

-2.61.0

-1.5-1.1

0.02.5

5.719.3

1.92.78.9

30.8-1.8-3.2

8.07.96.54.1

9.418.95.56.8

15.953.3-1.713.4

15.215.114.412.9

9.611.56.27.8

19.862.214.414.3

18.218.016.410.9

1.636.9

-10.66.4

17.2-9.0

7.37.9

7.25.8

15.313.2

9.912.41.4

10.715.116.3-7.3

8.5

8.47.4

12.410.8

13.34.01.3

12.18.4

18.034.04.0

11.912.411.18.8

-7.528.3-9.010.219.325.9

8.815.0

11.410.217.811.4

Source: Yeats (1998).

Appendix II

51


AP

PE

ND

IX II

Table A14. Sub-Saharan Africa: Structure of Exports, 1985-96

Kenya198519901996

Madagascar198519901996

Malawi198519901996

Mauritius198519901996

South Africa198519901996

Uganda198519901996

Zambia198519901996

Zimbabwe198519901996

ESA countries198519901996

14 SSA countries198519901996

Value(US$ million)

867992

1,423

287331658

263297343

4751,2111,581

9,73313,15418,117

404208564

6041,087

509

6301,0351,322

13,26118,31324,516

20,61926,10333,606

Allfoods

80.673.072.8

80.471.155.1

93.793.695.3

51.531.631.7

11.214.315.3

87.989.695.5

1.91.65.1

38.740.647.8

23.522.525.3

29.325.228.8

Percent Share in Total Exports

Agriculturalmaterials

7.29.7

13.2

3.05.04.8

2.61.71.5

0.80.50.5

6.86.14.6

11.09.33.6

1.80.72.0

14.69.49.6

6.75.75.0

8.19.38.1

Fuels

1.41.40.5

0.00.42.3

0.00.00.0

0.00.00.0

16.312.612.0

0.00.00.0

0.00.00.0

0.00.00.7

12.19.19.0

23.218.416.1

Ores andmetals

0.51.30.8

5.98.13.7

0.00.00.1

0.10.10.0

30.336.627.2

0.10.10.0

94.393.883.2

20.822.114.2

27.733.322.7

18.925.017.5

Manu-factures

9.513.711.8

10.414.932.7

3.44.43.0

47.567.567.3

33.229.039.1

0.91.00.6

1.93.89.5

25.627.727.2

28.328.236.5

19.321.328.3

Misc.goods

1.41.40.5

0.00.42.3

0.00.00.0

0.00.00.0

16.312.812.0

0.00.00.0

0.00.00.0

0.00.00.7

12.19.29.0

23.218.416.1

Manufactures Subgroup (Percent Share in Total Exports)

Leatherand rubber

2.25.11.6

0.8I.I0.2

0.00.10.0

0.10.00.0

0.60.81.3

0.00.10.2

0.00.10.1

1.00.91.5

0.70.9I.I

0.40.70.9

Wood andpaper

0.20.30.5

0.00.10.4

0.00.10.1

0.20.20.1

1.62.02.4

0.00.00.0

0.00.00.0

0.00.00.3

1.21.51.8

I.I1.51.7

Textiles

0.30.40.4

6.65.92.1

3.01.9I.I

1.52.32.2

0.90.71.0

0.00.00.0

0.10.97.0

1.62.01.9

1.01.01.2

0.90.91.0

Ironand steel

0.00.00.0

0.20.00.0

0.00.00.0

0.20.00.0

11.28.9

11.9

0.00.00.0

0.80.00.0

20.718.714.8

9.37.49.6

6.05.27.0

Clothing

0.60.62.4

0.03.4

25.8

0.11.81.0

36.952.654.6

0.70.71.4

0.00.00.0

0.00.10.1

1.23.33.6

1.94.35.6

1.23.14.1

Footwear

0.10.10.0

0.00.00.0

0.00.00.0

0.00.00.1

0.00.00.1

0.00.00.0

0.00.00.0

0.00.00.0

0.00.00.1

0.00.00.1

Source: Yeats (1998).

52


Table A15. Selected Eastern and Southern African Countries: Concentration of Exports, 1988and 1996

Exporter

Kenya

Madagascar

Malawi

Mauritius

South Africa

Uganda

Zambia

Zimbabwe

Number of Items Exported1

1988

13

13

8

II

22

5

3

14

1996

13

15

6

9

22

6

9

16

Largestproduct

30

29

62

50

14

90

88

22

1988

Share

Threelargest

65

69

84

87

32

95

94

54

in Total Exports2

(Percent)

Largestproduct

29

25

74

55

II

80

64

37

1996

Threelargest

61

51

90

84

26

92

92

57

Source: Yeats (1998).1Items are defined at the four-digit level of the Standard International Trade Classification (SITC) Revision I system. At this level, the SITC distinguishes

among 632 individual products. To be included in the tabulation of an export product, the item had to account for 1 percent or more of total exports.2The share of the largest and three largest four-digit SITC products in total exports.

Table A16. Selected Eastern and Southern African Countries: Intra-lndustry Trade Ratios, 1988and 1996

Country

Kenya

Madagascar

Malawi

Mauritius

South Africa

Uganda

Zambia

Zimbabwe

Memorandum itemsBrazilChileRep. of KoreaTurkeyTaiwan, Province of China

Year

19881996

19881996

19881996

19881996

19881996

19881996

19881996

19881996

19961996199619961996

Intra-lndustry Trade Ratios1

Transport and machinery Other manufactures

0.040.05

0.010.02

0.020.03

0.040.09

0.070.20

0.020.02

0.020.01

0.020.02

0.570.080.560.230.64

0.100.14

0.060.12

0.050.11

0.200.18

0.250.36

0.020.02

0.050.04

0.070.13

0.500.280.560.340.52

All manufactures

0.070.11

0.040.09

0.040.08

0.150.15

0.180.30

0.020.02

0.040.03

0.060.10

0.530.220.550.280.57

Source: Yeats (1998).1The intra-industry trade ratio for any industry i is calculated as li = 1 - ( | Xi-Mi | ) / (Xi+Mi), where Xi and Mi are the industry's exports and im-

ports, respectively. The value of the index lies between 0 (no intra-industry trade) and 1 (full intra-industry trade).

Appendix II

53


AP

PE

ND

IX

II

Table A17. Eastern and Southern Africa: Economic Conditions, 1990-92(Average annual rate in percent, unless otherwise indicated)


Average


Average

GDP Growth

-1.83.12.7

-2.51.8

-0.75.30.95.73.21.2

1.7

5.94.72.43.3

-1.24.5

-0.73.50.3

2.5

GDP Per CapitaGrowth

-4.50.11.9

-5.5- I . I-4.0

4.2-1.9

4.90.6

-1.9

-0.6

3.1I.I

-0.9-0.1-3.9

1.0-2.6

0.7-3.3

-0.5

Export VolumeGrowth

4.311.07.2

-24.82.12.00.94.6

13.1-0.3-5.9

1.3

3.526.111.82.93.13.8

10.818.2-0.6

8.9

Inflation

128.56.8

-2.415.719.411.98.8

11.13.1

26.827.6

23.4

13.115.514.413.914.510.940.736.2

124.3

31.5

Investment-to-GDP Ratio(Percent)

4.714.620.710.420.9

5.130.012.322.626.618.9

17.0

21.38.98.2

24.916.222.215.717.413.4

16.5

Fiscal Balance,Excluding Grants(Percent of GDP)

-17.2-10.4-17.2-11.1

-8.3-7.6-2.3

-11.8-5.1-5.3-7.4

-9.4

8.5-8.4-8.4-3.7-5.5

2.6-16.1-11.1-13.8

-6.2

CurrentAccount Balance,Excluding Grants(Percent of GDP)

-8.0-19.6-19.5

-4.4-5.2

-11.5-2.8

-10.4-6.2

-16.9-7.2

-10.2

1.6-57.4-12.9-11.7

I.I-10.1-32.8-15.9-16.1

-17.1

Sources: IMF, African Department database, and World Economic Outlook database.

54


Ap

pen

dix

II

Table A18. Eastern and Southern Africa: Economic Conditions(Average annual rate between 1993 and 1999, unless otherwise indicated)

AverageCurrent Annual Real

Investment-to- Fiscal Balance, Account Balance, Exchange RateGDP Per Capita Export Volume GDP Ratio Excluding Grants Excluding Grants Deppreciation

GDP Growth Growth Growth Inflation (Percent) (Percent of GDP) (Percent of GDP) (1990-98)


Average


Average

2.0-2.2-0.8

6.32.52.65.22.62.63.33.3

2.5

5.13.45.52.62.32.38.77.1

-0.9

4.0

-0.8-3.1-3.4

3.2-0.3-0.5

3.93.20.70.50.0

0.3

2.5I.I2.3

-0.40.00.06.34.1

-2.9

1.4

7.44.4

-4.411.75.69.61.8

-0.324.74.42.7

6.2

6.98.65.9

-0.14.64.6

11.817.5-2.1

6.4

1,373.517.45.83.8

15.219.67.0

17.60.7

20.729.3

137.3

9.88.9

37.58.27.97.9

30.49.1

55.9

19.5

14.010.621.717.219.012.127.911.034.319.121.7

18.9

28.449.016.420.416.316.320.717.714.0

22.1

-17.6-8.5

-14.3-7.8-2.8-8.7-4.1

-11.4-11.5

-4.3-9.3

-9.1

2.0-3.8

-13.9-4.4-AS-4.8

-13.3-7.4

-10.4

-6.7

-21.6-12.2-19.1

-8.1-3.0-9.4-0.7

-22.2-11.1-17.9

-4.4

-11.8

5.0-48.2-15.3

-7.9-0.2-0.2

-28.7-8.5

-13.1

-13.0

-8.8-1.3

—6.0

-3.90.1

-0.1-1.6

0.1-5.1

9.6

-1.3

-0.90.62.70.31.50.22.71.3

-1.3

0.7

Sources: IMF, African Department database, and World Economic Outlook database.

55


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References


OCCASIONAL PAPERS

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195. The Eastern Caribbean Currency Union—Institutions, Performance, and Policy Issues, by Frits van Beek,Jose Roberto Rosales, Mayra Zermeno, Ruby Randall, and Jorge Shepherd. 2000.

194. Fiscal and Macroeconomic Impact of Privatization, by Jeffrey Davis, Rolando Ossowski, ThomasRichardson, and Steven Barnett. 2000.

193. Exchange Rate Regimes in an Increasingly Integrated World Economy, by Michael Mussa, Paul Masson,Alexander Swoboda, Esteban Jadresic, Paolo Mauro, and Andy Berg. 2000.

192. Macroprudential Indicators of Financial System Soundness, by a staff team led by Owen Evans, AlfredoM. Leone, Mahinder Gill, and Paul Hilbers. 2000.

191. Social Issues in IMF-Supported Programs, by Sanjeev Gupta, Louis Dicks-Mireaux, Ritha Khemani,Calvin McDonald, and Marijn Verhoeven. 2000.

190. Capital Controls: Country Experiences with Their Use and Liberalization, by Akira Ariyoshi, Karl Haber-meier, Bernard Laurens, Inci Otker-Robe, Jorge Ivan Canales Kriljenko, and Andrei Kirilenko. 2000.

189. Current Account and External Sustainability in the Baltics, Russia, and Other Countries of the Former So-viet Union, by Donal McGettigan. 2000.

188. Financial Sector Crisis and Restructuring: Lessons from Asia, by Carl-Johan Lindgren, Tomas J.T.Baliño, Charles Enoch, Anne-Marie Guide, Marc Quintyn, and Leslie Teo. 1999.

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182. Tax Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union, by a Staff Team Ledby Liam Ebrill and Oleh Havrylyshyn. 1999.

181. The Netherlands: Transforming a Market Economy, by C. Maxwell Watson, Bas B. Bakker, Jan KeesMartijn, and Ioannis Halikias. 1999.

180. Revenue Implications of Trade Liberalization, by Liam Ebrill, Janet Stotsky, and Reint Gropp. 1999.

179. Disinflation in Transition: 1993-97, by Carlo Cottarelli and Peter Doyle. 1999.

178. IMF-Supported Programs in Indonesia, Korea, and Thailand: A Preliminary Assessment, by Timothy Lane,Atish Ghosh, Javier Hamann, Steven Phillips, Marianne Schulze-Ghattas, and Tsidi Tsikata. 1999.

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169. Financial Sector Development in Sub-Saharan African Countries, by Hassanali Mehran, Piero Ugolini,Jean Phillipe Briffaux, George Iden, Tonny Lybek, Stephen Swaray, and Peter Hayward. 1998.

168. Exit Strategies: Policy Options for Countries Seeking Greater Exchange Rate Flexibility, by a staff teamled by Barry Eichengreen and Paul Masson with Hugh Bredenkamp, Barry Johnston, Javier Hamann,Esteban Jadresic, and Inci Otker. 1998.

167. Exchange Rate Assessment: Extensions of the Macroeconomic Balance Approach, edited by Peter Isardand Hamid Faruqee. 1998

166. Hedge Funds and Financial Market Dynamics, by a staff team led by Barry Eichengreen and DonaldMathieson with Bankim Chadha, Anne Jansen, Laura Kodres, and Sunil Sharma. 1998.

165. Algeria: Stabilization and Transition to the Market, by Karim Nashashibi, Patricia Alonso-Gamo, StefaniaBazzoni, Alain Feler, Nicole Laframboise, and Sebastian Paris Horvitz. 1998.

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163. Egypt: Beyond Stabilization, Toward a Dynamic Market Economy, by a staff team led by Howard Handy.1998.

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161. The Nordic Banking Crises: Pitfalls in Financial Liberalization? by Burkhard Dress and CeylaPazarba§ioglu. 1998.

160. Fiscal Reform in Low-Income Countries: Experience Under IMF-Supported Programs, by a staff teamled by George T. Abed and comprising Liam Ebrill, Sanjeev Gupta, Benedict Clements, Ronald Mc-Morran, Anthony Pellechio, Jerald Schiff, and Marijn Verhoeven. 1998.

159. Hungary: Economic Policies for Sustainable Growth, Carlo Cottarelli, Thomas Krueger, RezaMoghadam, Perry Perone, Edgardo Ruggiero, and Rachel van Elkan. 1998.

158. Transparency in Government Operations, by George Kopits and Jon Craig. 1998.

157. Central Bank Reforms in the Baltics, Russia, and the Other Countries of the Former Soviet Union, by astaff team led by Malcolm Knight and comprising Susana Almuiña, John Dalton, Inci Otker, CeylaPazarba§ioglu, Arne B. Petersen, Peter Quirk, Nicholas M. Roberts, Gabriel Sensenbrenner, and JanWillem van der Vossen. 1997.

156. The ESAF at Ten Years: Economic Adjustment and Reform in Low-Income Countries, by the staff of theInternational Monetary Fund. 1997.

155. Fiscal Policy Issues During the Transition in Russia, by Augusto Lopez-Claros and Sergei V. Alexas-henko. 1998.

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Note: For information on the title and availability of Occasional Papers not listed, please consult the IMF Publications Catalog or contact IMFPublication Services.

59


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