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Bianca Mlilo, Business Reporter
The Government should introduce ‘across-the-board’ tariff protection to promote sustainable industry revival as opposed to a quantitative import ban, an expert has said.
Last year the Ministry of Industry and Commerce introduced SI 64 of 2016, which removes a number of products from the open general import licence.
This move was meant to revive local industry by restricting the importation of goods, which Zimbabwean industries are capable of producing.
Professor Ashok Chakravarti, an economist and lecturer with the University of Zimbabwe, said import restrictions such as S I 64 have proven to be ineffective in the long run. He said this was because when protection of this kind is removed, industries that have been protected cannot compete internationally and risk collapse.
Consequently, he said, domestic consumers get hit by high prices and poor quality products.
“SI 64 puts quantitative restrictions on a given list of imports, and these are bad because the domestic industry that grows under such import bans can charge any price for its products, and is consequently totally uncompetitive,” said Prof Chakravarti.
“Other developing countries have found that tariff protection, that is, putting a customs duty on imports for a specified period of time is a better way of protecting industry and it also generates revenue for the government through import duties.
“So for instance if it is found that local industry can only produce an item at a price 50 percent more than imports of similar goods, a maximum tariff of 50 percent can be placed to give full protection to start with.”
He said industry would then need to be told that such protection will not last forever, and they would need to become more efficient, lower their costs of production and lower their prices over time.
For instance, businesses could be told that after 12 months the tariff would be reduced to 30 percent, and a downward review would again be effected after another 12 months.
This, said Prof Chakravarti, will encourage the industry to become more competitive over time, adding that for this reason, tariffs are a better and more flexible way of providing protection than quantitative restrictions like SI 64.
“So Government should ask industry to come up with a comprehensive list of products where capacity exists but currently production is not happening because of import competition,” said Prof Chakravarti.
“Based on an analysis of capacities, and the price differential between domestic and import products, across the board tariff protection at different rates can be given to domestic industry for a limited period with the proviso that these rates will be reduced over time.”
@BiancaMlilo
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