VZCZCXRO6940
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0309/01 0771358
ZNR UUUUU ZZH
P 171358Z MAR 08
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 5577
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 02 LUSAKA 000309 
 
SIPDIS 
 
DEPARTMENT FOR AF/EPS, EEB/TPP, AND DRL 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON ZA
SUBJECT: INPUT FOR PRESIDENT'S REPORT ON AGOA 
 
REF:  SECSTATE 20082 
 
¶1. Summary.  This cable is a response to the reftel action request, 
regarding input for the 2008 President's Report on AGOA.  Zambia is 
currently eligible for AGOA trade benefits, including textile and 
apparel benefits.  There have been no significant developments since 
the 2007 report that would appear to disqualify Zambia from AGOA 
eligibility.  Zambia's ability to take advantage of AGOA benefits 
has been limited, due in part to high transportation costs.  End 
Summary. 
 
Market Economy/Economic Reform/Elimination of Trade Barriers: 
 
¶2. Zambia has made significant progress toward macroeconomic 
stabilization. Zambia experienced positive economic growth for the 
ninth consecutive year in 2007 with a GDP of USD 10.9 billion and a 
real growth rate of six percent (according to preliminary IMF 
estimates).  The rate of inflation dropped from 30 percent in 2000 
to 8.9 percent by December 2007 due to fiscal and monetary 
discipline and the growth of the domestic food supply.  Zambia has 
qualified for substantial HIPC and G-8 debt relief programs. 
Although it did not qualify for an MCA Compact due to its 
performance on corruption, Zambia will complete its MCA Threshold 
Program in mid-2008, and is likely to commence a second Threshold 
Program in late 2008. 
 
¶3. Zambia has liberalized markets and most prices are market-driven. 
 Many trade barriers have been reduced and direct import and export 
subsidies have been removed, although the Government still imposes 
import and export bans on key agricultural commodities and offers 
subsidized fertilizer and, in some cases, seed to farmers.  Zambia 
continues to work toward lower trade barriers regionally, especially 
through the COMESA Free Trade Area.  Most state-owned companies have 
been privatized.  However, key industries such as power generation, 
telecommunications, and oil refining remain under government 
monopoly control, and as a result, these services are inefficient, 
resulting recently in an electrical power crisis that is likely to 
last for years, and regularly recurring fuel shortages. 
 
¶4. Zambia is seeking increased private sector investment by offering 
generous incentives to both local and foreign investors, such as tax 
holidays and non-resident employment permits.  However, the 
Government announced plans to change the tax regime for the mining 
sector, which if implemented as planned would violate the 
contractual obligations made by the Government in Development 
Agreements for large copper mining projects. 
 
Political Pluralism/Rule of Law/Anti-Corruption: 
 
¶5. Zambia has held four free, multiparty elections since 1991. 
International election observers agreed that the 2006 elections were 
generally free and fair.  At the outset of his presidency in 2001, 
President Mwanawasa launched an anti-corruption campaign to 
prosecute high-level corruption during the administration of former 
President Chiluba.  Trials in these cases are underway, and have 
resulted in three convictions and one successful civil suit against 
former President Chiluba.  The Zambian Government is instituting 
programs to reduce the rampant levels of administrative corruption. 
 
 
¶6. Good governance reforms affecting a broad range of Zambian 
Government institutions are underway, including review of the 
constitution, Parliamentary and judicial reforms, and strengthening 
of public sector management.  The constitution and law provide for 
an independent judiciary; however, the judicial system is hampered 
by inefficiency, corruption, and lack of resources.  There are 
lengthy delays before trials.  In 2007 the courts continued to act 
independently and at times made judgments and rulings critical of 
the government. 
 
Poverty Reduction: 
 
¶7. In its implementation of economic reforms, the Government has 
shown a commitment to poverty reduction.  In the 2008 budget and the 
five-year National Development Plan, continuing its poverty 
reduction strategy's emphasis on economic growth, the Government 
seeks to diversify the economy and create jobs, with a growing focus 
on agriculture; but the strategy remains strongly infused with 
socialist entitlements that continue to hinder meaningful growth and 
impede the reduction of poverty.  HIV/AIDS presents a major 
challenge to economic development and poverty reduction.  The 
Government is leading the response to the epidemic, but depends on 
significant donor support in the health sector. 
 
Labor/Child Labor: 
 
¶8. Unions remain a significant force in civil society and play a 
prominent role in public debate over political issues.  Although 
workers' rights are legally protected, and an Industrial Relations 
Court adjudicates complaints, the law governing workers' rights of 
association and collective bargaining prescribe burdensome 
 
LUSAKA 00000309  002 OF 002 
 
 
procedures that make legal strikes almost impossible.  In addition, 
the enforcement of the labor law generally remains weak.  Zambia has 
ratified all eight core ILO labor Conventions. 
 
¶9. The legal minimum age for employment is 15 for regular labor and 
18 for hazardous labor.  Children between the ages of 12 and 14 are 
allowed to perform "light" work that is not hazardous to their 
health and does not interfere with their schooling.  A recent 
International Labor Organization (ILO) study found that over 1.2 
million five to 14 year-olds are working in Zambia, a figure that 
represents 39 percent of the age group.  Children generally work in 
agriculture, domestic service, transportation, and in the 
hospitality industry, and some are also exploited in prostitution 
and trafficked for commercial sexual exploitation.  The Government 
has taken several steps to address Zambia's child labor problem, 
including participating in several U.S. Department of Labor-funded 
programs that aim to eliminate the worst forms of child labor in the 
country, supporting professional training programs for young people, 
and adapting school curricula to students who enter schooling late 
or drop out due to their need to work. 
 
MARTINEZ