TRADE-ZIMBABWE: ”Look East” Policy Yet to Bear Fruit

By Ignatius Banda Reprint | | Print |

Ignatius Banda

BULAWAYO, Apr 27 2007 (IPS) - Zimbabwe’s isolation by its traditional international trading partners after 2000 has hit the country hard amid failure to strike up new bilateral trade deals as part of its ”look east” trade strategy.

The southern African nation is battling a crippling economic crisis with record inflation of over 1,000 percent. The situation has prompted politicians to look to Asian countries for economic relief.

President Robert Mugabe, in power since 1980, is seeking new trading partners as relations falter with the major importers of Zimbabwean goods, the EU and the US. The ”look east” policy has been touted as a step that will resuscitate the economy. This campaign to export to Asian markets is aimed at raising foreign exchange.

Since the government’s land reform programme started in 2000, US business interests left in droves to relocate to neighbouring South Africa, depriving Zimbabwe of millions in potential foreign exchange earnings.

European countries have expressed concerns over the Zanu-PF regime’s increasing human rights abuses in response to political opponents’ popularity in elections over the past seven years.

China and Iran have committed themselves to bilateral trade agreements with Zimbabwe without attaching any conditions in the manner of Zimbabwe’s trading partners in the west.

In 2004, the ministry of industry and international trade produced an industrial development policy document on attracting investment from domestic and foreign investors. A deadline of 2010 was set when progress with the plan has to be assessed.

The policy proposed to encourage exports and mineral processing. These measures have largely seen China and Iran being given mining concessions in exchange for relief loans.

Zimtrade, the country’s export promotion agency, has no recent figures on trade with the east. However, it has not reported any significant increase in mineral, agricultural or other exports to Asia in the last two years despite the various memoranda of understanding that Zimbabwe has signed.

Although the ”look east” policy has been a major talking point for a few years, government officials have hinted that it has not performed to expectations.

Zimbabwean ambassador to China, Christopher Mutsvangwa, recently told the government media that while local products had ”potential to penetrate the Chinese market” and China had ”shown” interest in investing in Zimbabwe, ”local business was reluctant to partner” Chinese business.

Zimbabwe has raw materials such as tobacco and cotton that the Chinese are in dire need of, the ambassador added.

Economists and opposition political parties here have criticised the concessions for failing to bring any relief to the ailing economy. The country’s foreign exchange earnings continue to decline amid reports that Zimbabwe’s Central Bank has on numerous occasions turned to the parallel market to buy hard currency to settle national bills.

These bills include electricity and fuel.

The Confederation of Zimbabwean Industries, a body representing local business leaders, says the bilateral agreements have not improved the country’s ability to settle its debt with international lenders including the International Monetary Fund (IMF).

The government offered Iranians a stake in the iron and steel industry. However, says Thomas Sagomba, an economics lecturer at the National University of Science and Technology in Bulawayo, this agreement is yet to help Zimbabwe move toward meeting its payment obligations.

”The trade concessions ought to show in real terms how Zimbabwe is benefiting. So far, there has been a tendency to celebrate the country’s bilateral agreements with Asian countries without much on the ground,” Sagomba told IPS.

”The reason for looking east is that Zimbabwe has been isolated by its traditional lending and trading partners. It is difficult to judge how business with the east will return the country to its former state of prosperity,” Sagomba points out.

”There are yet to be visible gains from these bilateral engagements since the IMF closed Zimbabwe’s credit lines,” according to Sagomba.

Iran has an eye on farming in return for technical and other skills cooperation. The Central Bank has voiced concern that the continued interruption of farming activities by pro-government activists has slowed down production.

Analysts are also wary that the ”look east” policy is unlikely to match the earnings the country derived from trade with the west. The EU was once the largest consumer of Zimbabwean beef, with more than 9,000 tons per year being exported at the peak of the bilateral trade relations.

It has since set stringent conditions for the importation of Zimbabwean beef products. Last month, the ministry of lands and agriculture suspended all efforts to resume trade with the European beef market, citing EU conditions.

”The EU wants all the cattle in the country to be linked to the farm and dipping tank of origin through a process called ear-tagging,” an official with the state veterinary services told IPS. ”We do not have that kind of money, considering our foreign exchange situation.”

The ministry said it was redirecting its efforts to some Asian countries as the ”look east” policy still holds promise with few bilateral agreements having been entered into. The government stopped beef exports to Asia in 2001 after the outbreak of foot and mouth disease. Authorities are keen to re-open the trade links.

Charles Shunje of the University of Zimbabwe’s Business School says Zimbabwe will have a tough time raising its tobacco or beef exports destined for Asia to the level of exports to the EU.

”Zimbabwe’s national herd has dwindled from about 2 million at its peak to just over 250,000. Satisfying the Asian market will take a lot more than that,” says Shunje.