TRALAC - Trade Law Centre

Zambia: Textile Industry Urged to Fully Exploit AGOA

Friday, 17 January 2003

Source: BharatTextile.com

The African Growth Opportunity Act (AGOA) an initiative of the government of the United States of America (USA) has been in existence for two years now.

The initiative was developed by the United States Congress in a bid to assist selected African countries like Zambia to develop their economies by providing export incentives to the USA.

In the last two years a handful of African states have successfully exploited the AGOA and boosted their economies in varying degrees.

Well organised economies however, such as Mauritius and South Africa have made good headway under the AGOA, whilst other countries have set up special industries that were aimed at specifically addressing the new opportunities presented by the act.

Despite the country having enormous yet untapped export growth potential, Zambian companies have not taken up the export opportunities offered by the act.

Zambia’s response to the US initiative has been poor and goods to the value of only US$24, 000 were exported in the first half of 2002.

Unless new sources of economic growth are exploited, such as the new opportunities offered under AGOA, and pushing with the diversification programme of the economy into high productivity sectors, such as manufacturing and certain service industries, the country will remain locked into an uncertain and volatile growth flight.

Regrettably, Zambia, like many other eligible countries, has not been very active in making AGOA a development tool for the country’s economy. There are several reasons for this lack of inertia by Zambia, and two significant areas need to be highlighted.

Firstly, the private sector in the country and possibly the government too, did not believe that the AGOA was real and had some solid reasons to offer.

The country’s experience has been that many developed nations offer third world countries many support programmes that never materialise into tangible results that can be appreciated by the general citizenry.

Secondly, for the few companies and individuals that were able to identify some good opportunities offered through the AGOA, the major set back was the lack of financial support and market knowledge of the USA in order to reap some good results.

On the other hand though, it is interesting to note that the United States agencies that market the AGOA opportunities have dwelled on the textile and apparel industries as favoured sectors for Zambia.

This is in conflict with the country’s Poverty Reduction Strategy Paper (PRSP) that defines Agriculture, Tourism and Manufacturing as the key areas to develop and create jobs to alleviate poverty levels in the country.

The basic raw material in the textile industry is the growing of cotton. Although this may be considered an agriculture-based industry, cotton prices are fixed by the Liverpool index and therefore, provide very small profits to the farmer. This is the industry that parallels copper mining and faces similar marketing obstacles.

Most Zambian’ s now see three major areas where AGOA can be exploited with minimum risk.

The first and most preferred industry is the production of fresh vegetables for export to the USA. This option requires that the United States government certifies the countries agricultural produce for export to that country.

Nine products have been in the United States application pipeline for nearly five years without any results. This physosanitary certification is delayed by bureaucratic red tape in the name of ‘not enough staff’.

The second option is to exploit the much-discussed textiles and apparel industry. Zambia has the potential to exploit this industry from cotton growing to the manufacture of garments for export. Zambia can also export its cotton yarn to other countries for further processing into textiles and garments.

The current situation in this industry offers multidimensional development through enhancement of cotton growing, an increase in the number of cotton ginning and spinning factories, and the resurrection of the textile weaving and garment manufacturing industries.

AGOA eligible countries such as Lesotho have become garment and apparel exporters to the USA by simply inviting one foreign investor into the country.

Zambia can export its cotton yarn to AGOA eligible countries and still provide yarn to local textile manufacturers that can support local garment manufacturers for the AGOA market.

To achieve this it is important to support the weaving and garment manufacturing industries with cheap capital, joint venture partnerships and the extension of the AGOA window that allows Zambia to use foreign fabrics for the manufacture of garments and apparel for export to the US.

This window closes in 2004 and appeals have been made to the United States Department of Trade to extend it to 2007 to allow most eligible countries recover from the two years already lost due to perceived uncertainty.

Common Market for Eastern and Southern Africa (COMESA) is also supportive for the extension of the 2007 AGOA deadline as it would give ample time to countries like Zambia to establish a sound textile industry for export.

However, other COMESA member countries are of the view that the deadline should be respected because it would deny them opportunity for external investors from China and Korea who are willing to open up textile industries in their respective countries.

Current figures indicate that at present even with the foreign fabric window open to AGOA Least Developed Countries (LDC’s), the country’s yarn is still selling on the export market.

Extending the 2004 window would therefore allow Zambia to develop much larger capacities for yarn production to satisfy the export markets as well as growing local market.

Finally, Zambia has not taken advantage of the handicraft and folklore market that the United States offers.

This sector is dominated by women in Zambia and can be exploited if a bilateral agreement could be reached between the government and United States authorities to pave way for bulk exports to various parts of the USA.

Handicraft and folklore products are manufactured throughout the country and can be consolidated for bulk export. This sector has a direct impact on the lives of rural dwellers across the country is extremely easy to harness.

Zambia therefore should utilise the forth coming AGOA conference in Mauritius to be held from January 15 to 17, as a platform to pressurise the United States government to make the opportunities contained in the act accessible and translate them into practical implementable programmes.

Conversely, during the same conference, the United States Department’s of Trade and Agriculture and indeed President George W. Bush is expected to heed to appeals for prompt certification of Zambia’s agriculture produce for export to the US markets.

It is also hoped that the response to the request for the 2004 AGOA window on garments and apparel to be extended to 2007 will be positive such that more industries in the country can be given a second chance to jump on the bandwagon of progress that was eluded two years ago.

AGOA may not have been marketed as effectively as it should have been. But if the opportunities outlined in the act are not fully exploited, the ‘O’ in AGOA will rapidly diminish in the next couple of years.