No industry budgetary support: EU

via No industry budgetary support: EU – DailyNews Live by John Kachembere  10 MARCH 2014

THE European Union (EU) says it has no plans to extend budgetary support to Zimbabwe’s stuttering industry.

Aldo Dell’ Ariccia, the union’s head of delegation to Zimbabwe, said the trading bloc — set to provide $29 million to small-scale local farmers to boost food security — will only assist the industry by way of projects and loans.

“At the moment we have no plans of any budgetary support for Zimbabwe’s industries, but we are trying to help the industries grow through trade,” he said.

“We are currently implementing the Economic Partnership Agreements (Epas), which gives the country 100 percent duty free-quota free access into the EU market with a transition period for rice and sugar,” he said.

Economic experts, however, noted that the move by EU will stifle operations in the local industries that have found it tough to operate in the dollarised economy due to stiff competition from other countries.

Zimbabwean industries — whose competitiveness and production capacity was heavily eroded during the hyperinflationary period — are in serious need of heavy capital injections to resuscitate operations.

According to the Confederations of Zimbabwe Industries 2013 manufacturing survey, capacity utilisation in the local industries fell from 44 percent in 2012 to 39 percent last year owing to lack of cheap money, high labour costs, electricity and water shortages among other things.

However, Dell’ Ariccia noted that signing of an interim Epa (iEPA) with the EU in March 2012 under the umbrella of the East and Southern African (Esa) regional grouping demonstrates Zimbabwe’s active and positive role in the regional integration process, which is in itself a powerful means of fostering integration into the world economy.

Epas aim at progressively removing barriers to trade and enhancing cooperation in all areas related to trade.

“As the EU is a traditional importer of minerals, agricultural products and other raw materials that are produced by Zimbabwe, Epas will stimulate exports by making use of the duty free quota free access to the EU,” he said.

As part of the agreement, the southern African country will liberalise 80 percent of her imports from the EU by 2022.

Zimbabwe and other countries will progressively open their markets along 15 years and the tariffs are reduced over long transitions periods. Zimbabwe left out 20 percent of sensitive products of infant industries and this was to protect industries and products of animal origin, cereals, beverages, paper, plastics and rubber, textiles and clothing, footwear, glass and ceramics, consumer electronic and vehicles.

Those products/infant industries will not be affected by the liberalisation.

Trade between Zimbabwe and the EU has doubled since 2009 and market experts predict that trade between the two is likely to increase further with the ratification of the iEPA.

In 2012, the country’s total exports and imports to EU countries amounted to $800 million, with a positive trade balance of $170 million in favour of Zimbabwe.

The country’s trade with the EU accounted for $447 million in 2009.

The EU is the world’s largest single market with more than 500 million plus consumers and it is Zimbabwe’s second largest trading partner after South Africa.