Anda di halaman 1dari 2

Evaluate Zambia's strategy for future Economic growth

AO1/AO2;
In the short run, economic growth is the annual percentage rise in real national output. and can also
be shown by a rise in gdp through aggregate demand. In the long run, economic growth is the rise in
productive capacity and productive potential. This can be shown by a rise in the long run aggregate
supply curve.
Zambia have applied supply side reforms, i.e. policies that will affect its aggregate supply, in order to
promote economic growth. This is done through multiple methods such as rises in infrastructure such
as transport different methods of deregulation with the aim to increase business
AO3/AO4;
Zambia have a primary commodity of copper. This natural resource has attracted the FDI from Chinese
MNCs. The introduction of FDI into Zambia has allowed for the plugging of the savings gap and in turn
has allowed for spending in infrastructure. Better infrastructure such as transport links and stable
electricity can allow for firms in Zambia to produce more efficiently. e.g. better transport, easier to
export/import, free movement of capital, there can be increases in productive efficiency as costs fall.
The result can be seen by a shift in the long run aggregate supply curve to
the right. This indicates long run economic growth as the productive
potential of the nation has increased. Also, with better infrastructure in place,
this could attract more FDI, creating a domino effect of improving
infrastructure.
However, increasing Infrastructure may not have the desired effects. if
the initial
state of the economy is poor, such as low aggregate demand in relation to
supply, increasing infrastructure and productive potential will have no affect on the level of GDP and
there will be no 'visible' affect.
Improving infrastructure is very significant as a strategy for economic growth as Zambia are currently
facing the supply side constraint of poor infrastructure.
Zambia can implement deregulation policies. This would tackle the excessive bureaucracy in Zambia.
Cutting down on paperwork needed for start up businesses can have significant affects. This would cut
the cost of production for established businesses and make it easier for upcoming firms and start ups.
With the increase of firms, FDI may increase, again having the similar effects. With less paperwork, it is
clear that there is a lower level of government intervention, which eliminates the possibility of
corruption to occur.
This can be further implemented by the creation of economic zones, where firms pay lower tax such as
lower corporation tax. again this would increase the incentive for business and allow for more firms to
emerge in Zambia. However, with falls in tax, there may be falls in tax revenue to the government,
which means that spending on public services will also see a fall. Here services such as health,
education and policing may see negative effects which may cause falls in the productive potential of
Zambia. In addition, the copper mining firms are from the Chinese MNCs. It is clear that profits may be
sent back to the host nation, i.e. China, preventing Zambia from seeing the effects of the profits made.
Here, Zambia has adopted the policy of resource nationalization. Where the government takes
ownership of its natural resource. However, as seen in figure 5.1, in 2011 when resource
nationalization was put into place. gross capital formation fell. indicating that resource nationalization
lead to the fall in incentive from MNCs and in turn a fall in FDI.

As FDI in Zambia mainly comes from the Chinese MNCs, it is clear that the global economy must be
taken into account. Economic growth in China is slowing and this could be reflected in FDI values. Also,
as copper is a primary commodity, its price can be volatile and unreliable in the long run. Thus it is
clear that Zambia must reduce dependence on the primary commodity and diverge from the primary
sector into secondary and tertiary sectors to allow for more of a reliable means of economic growth in
the future.