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Investment Policy Review - Zambia

image of Investment Policy Review - Zambia

To date, the performance of the Zambian private sector had been poor due largely to the high cost of capital and domestic inputs for local production, which make sustaining competitiveness in an open economy practically difficult. The present Investment Review notes that since the introduction of major economic policy reforms In the early 1990s, private investment, including FDI, had been playing a greater role in Zambia's economy. FDI had also contributed to the long-term policy objective of Zambia, which is to diversify its production and export base from mining to other products and services.

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Conclusions and recommendations

Since the introduction of major economic policy reforms in the early 1990s, private investment, including FDI, has been playing a greater role in Zambia's economy. FDI inflows during this period were considerably higher than the previous two decades and its share in total national investment increased pushing the investment rate of the entire economy to levels not seen for many years. More importantly, FDI has been instrumental in rehabilitating the declining copper industry, initially through takeovers of state-owned mines and more recently through greenfield investment in new mines and post-privatization investment in acquired mines. This has contributed to the recent growth in the production and export of copper – the key earner of export revenues for Zambia. Employment also increased after initial reductions related to privatization and the restructuring of the mines. Prospects are good as world demand for copper and prices increased considerably in 2004 and are expected to stay at a higher level for some time due to increasing demand for copper from growing economies such as China.

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