A RECENT report says Zimbabwe has become one of the world’s least competitive economies, but analysts foresee growth if the relative stability brought about by the formation of the coalition government is followed through with policies that can unlock credit and investment.
According to the 2010-2011 Global Competitiveness Report released by the World Economic Forum (WEF) last week, Zimbabwe is six places down the previous year at 136th out of 139 countries.
The economy, which had been on a free-fall until the formation of the coalition government, has failed to significantly grow despite the country holding strategic minerals such as gold, diamonds and platinum.
Economic researchers who compiled the report pointed out that dilapidated infrastructure, limited healthcare and education services and poor institutional frameworks made Zimbabwe less competitive in the global marketplace. Over 13 500 business leaders worldwide were polled before the report was compiled.
Economists who spoke to the Zimbabwe Independent this week noted that while Zimbabwe was still recovering from a 10-year economic decline, lines of credit, sound, consistent economic policies and trade were crucial to increasing the country’s competitiveness.
Farayi Dyirakumunda, an economist and executive director at African Investment Markets, told the Independent that Zimbabwe was in the initial stages of an economic recovery cycle and indications on the ground revealed “a changing corporate landscape driven by a set of reforms including dollarisation, and deregulation across various sectors”.
“The country’s competitiveness will continue to improve if we maintain policies that place a focus on the drivers and facilitators of productivity,” he said.
“The country’s overall global competitiveness has been hindered over the years by shortcomings across the basic requirements of productivity. Limited attention has been given towards efficiency enhancers and there is a deficiency of innovation and sophistication factors,” said Dyirakumunda.
According to the WEF report, the sharp fall in Zimbabwe’s ranking was due to a decline in the majority of the 12 pillars used to rank overall competitiveness of each country. These are institutions, infrastructure, macro-economic stability, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation.
Economic analyst Eric Bloch told the Independent on Monday that Zimbabwe’s economic rating will improve, but this would be “very long and slow”.
“The most critical requirement for significant improvement to be achieved is the creation of an internationally acceptable secure investment environment, including unequivocal governmental and activist organisations and respect for property rights,” he said.
Bloch said unlawful expropriation, occupation and or abuse of property must cease. Unreserved compliance with Bilateral Investment Promotion and Protection Agreements (Bippas), he said, was a key element missing in Zimbabwe.
“There is need for unequivocal respect by government, police and armed forces, and the courts for human rights,” Bloch said.
Bloch and Dyirakumunda both said Zimbabwe’s ranking was “fair” as the economic recovery that commenced in 2009 was snail paced.
“Currently Zimbabwe has minimal economic competitive ability due to the immense volatility in governmental policies, and in parastatal service delivery,” Bloch said
Economists said Zimbabwean businesses could become more competitive if the government and international partners improve access to finance, resist pressure to erect trade barriers, upgrade infrastructure, improve healthcare and educational systems and strengthen governance institutions.
Coronation Financial Service investment analyst Lance Mambondiani called for regional integration to increase Southern Africa’s trade competitiveness.
“Integration tends to promote higher growth through such channels as improved resource allocation, greater competition, technology transfers and learning and improved access to foreign capital. Trade and investment tend to increase in countries which have opened themselves up to the world economies and growth itself tends to promote integration,” he said.
“Needless to say, Zimbabwe and Africa are a totally different proposition to the European Union or Nafta countries. African countries have a history of bad governance, dictatorships and protectionism. Whether a common ground can be achieved to narrow political divisions is perhaps the biggest stumbling block in implementation,” he said. The US, Mexico and Canada make up the North American Free Trade Agreement, shortened to Nafta.
The WEF report corroborates findings by the World Bank/International Finance Corporation (IFC)’s Doing Business Report which noted that despite notable improvements in some key indicators, Zimbabwe was still rated unfavourably for business. The two indices are the world’s most widely followed gauges of economic competitiveness.
Zimbabwe is rated 159 out of the 183 economies surveyed by the Doing Business Report, released earlier this year.
The ranks are important determinants of the global distribution of Foreign Direct Investment.
FDIs marginally grew to US$60 million in 2009, up $8 million from the US$52 million recorded in 2008, according to United Nations Conference on Trade and Development figures released in July.
Economic analyst John Robertson said a stable political environment was key to competitiveness globally.
“Zimbabwe needs to invest and attract investment in major sectors of the economy to improve infrastructure, limited healthcare and educational services, and poor institutional frameworks that make it less competitive in the global marketplace,” he said