Botswana Institute for Development Policy Analysis...

Botswana Institute for Development Policy AnalysisGaboroneBotswana

ISBN: 99912-911-7-2

The World BankPoverty Reduction and Economic Management 1Southern AfricaAfrica Region

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Prospects for Export Diversification inBotswana

Botswana Institute for Development Policy Analysis

Gaborone, Botswana

The World Bank

Poverty Reduction and Economic Management 1

Southern Africa

Africa Region

PROSPECTS FOR EXPORT DIVERSIFICATION INBOTSWANA

© BIDPA and The World Bank 2006

All rights reserved. No part of this publication may be reproduced, stored ina retrieval system or transmitted in any form or by any means, electronic,mechanical, photocopying, recording or otherwise, without the writtenpermission of the copyright owners.

Design and layout: Impression House, Gaborone, BotswanaPrinted by: Impression House, Gaborone, Botswana, 2006

ISBN: 99912-911-7-2

The views expressed in this book do not necessarily represent the opinion ofBIDPA or The World Bank but that of the authors.

Contact details:

Botswana Institute for Development Policy AnalysisPrivate Bag BR-29GABORONE, BotswanaTel: +267 397 1750Fax: +267 397 1748Homepage: http://www.bidpa.bw

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CURRENCY EQUIVALENTS

Currency Unit = Pula (P.)

US$1 = P4.54

(Effective April 27, 2005)

FISCAL YEAR

July 1 - June 30

Acronyms and abbreviations

ACBF African Capacity Building Foundation

ACP African, Caribbean and Pacific

AGOA African Growth and Opportunities Act

ARCS Administrative and Regulatory Cost Survey

ASYCUDA Automated System of Customs Data Management

ATC Agreement on Textiles and Clothing

BDC Botswana Development Corporation

BDVC Botswana Diamond Valuing Company

BECI Botswana Export Credit Insurance and Guarantee Company Limited

BEDIA Botswana Export Development and Investment Authority

BIDPA Botswana Institute for Development Policy Analysis

BLNS Botswana, Lesotho, Namibia and Swaziland

BMC Botswana Meat Commission

BNCS Botswana National Conservation Strategy

BoB Bank of Botswana

BoBCs Bank of Botswana Certificates

BOBS Botswana Bureau of Standards

BOC Botswana Ostrich Company

BOCCIM Botswana Confederation of Commerce, Industry and Manpower

BOTA Botswana Training Authority

BOTASH Botswana Ash

BPC Botswana Power Corporation

BPO Business Process Outsourcing

BSE Bovine Spongiform Encephalopathy

BTA Botswana Telecommunications Authority

BTC Botswana Telecommunications Corporation

BURS Botswana Unified Revenue Service

BWP Botswana Pula

CAP Common Agricultural Policy

CET Common External Tariff

CEDA Citizen Entrepreneurial Development Agency

CET Common External Tariff

CIF Cost Insurance and Freight

CITES Convention on International Trade in Endangered Species

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COMESA Common Market of Eastern and Southern Africa

COR Certificate of Rights

CSO Central Statistics Office

CYTAX “current year tax”

DAHP Department of Animal Health and Production

DCC Duty Credit Certificate

DFID Department for International Development

DoT Department of Tourism

DTI Direct Trade Input

DWNP Department of Wildlife and National Parks

EAOB Exporters Association of Botswana

EPA Economic Partnership Agreements

EPZ Export Processing Zones

ERP Effective Rate of Protection

ESAMLG Eastern and Southern Africa Anti-Money Laundering Group

EU European Union

FAP Financial Assistance Policy

FDI Foreign Direct Investment

FIAS Foreign Investment Advisory Service

FMD Food and Mouth Disease

FOB Free on Board

FPSG Fixed Period State Grant

FSC Financial Sector Commission

FTA Free Trade Area

GATS General Agreement of Trade in Services

GATT General Agreement on Trade and Tariffs

GCC Gaborone City Council

GDFI General Directorate for Foreign Investment

GDP Gross Domestic Product

GNI Gross National Income

GoB Government of Botswana

GRCO Gaborone Regional Customs Office

HATAB Hotel and Tourism Association of Botswana

HHI Hirschmann-Herfindahl Index

HIES Household Income and Expenditure Survey

HLCC High Level Consultative Council

IBCs International Business Corporations

ICC International Chamber of Commerce

ICD Inland Clearance Depot

IDA Industrial Development Act

IDZs Industrial Development Zones

IFSC International Financial Services Centre

IMF International Monetary Fund

ISC International Services Centre

JITAP Joint Integrated Technical Assistance Programme

LDC Less Developed Countries

LITS Livestock Identification and Trace Back System

LLA Local Licensing Authority

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MCI Monetary Conditions Index

METRs Marginal Effective Tax Rates

MFA Multi-Fibre Agreement

MFDP Ministry of Finance and Development Planning

MFN Most Favoured Nation

MIDP Motor Industry Development Programme

MLHA Ministry of Labour and Home Affairs

MoA Ministry of Agriculture

MoE Ministry of Education

MoH Ministry of Health

MTI Ministry of Trade and Industry

MTR Mid Term Review

NCSA National Conservation Strategy Agency

NDP National Development Plan

NEER Nominal Effective Exchange Rate

NEMIC National Employment, Manpower and Incomes Council

NILA National Industrial Licensing Authority

NISB National Immigrants Selection Board

NLA National Licensing Authority

NTBs Non Tariff Barriers

OECD Organization for Economic Co-operation and Development

OIE Office International des Epizooties

OMPP Ostrich Management Plan Policy

PAYE Pay As You Earn

PEEPA Public Enterprise Evaluation and Privatization Agency

PPI Producer Price Index

PPP Public Private Partnership

PSM Per Square Meter

RC Registrar of Companies

RCA Revealed Comparative Advantage

REER Real Effective Exchange Rate

RIR Real Interest Rate

RISB Regional Immigrants Selection Board

RLA Regional Licensing Authority

ROE Return on Equity

ROW Rest of World

RPMD Registrar of Patents, Marks and Designs

SACU Southern African Customs Union

SACUA Southern African Customs Union Agreement

SAD Single Administrative Document

SADC Southern African Development Community

SARS South African Revenue Service

SAT Self Assessment Tax

SLAAC State Land Allocation Advisory Committee

SMEs Small and Medium Enterprises

SPS Sanitary and Phytosanitary Standards

SPVs Special Purpose Vehicles

TCDA Trade Cooperation and Development Agreement

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TCPB Town and Country Planning Board

TEC Tertiary Education Council

TILB Tourist Industry Licensing Board

TIN Taxpayer Identification Number

TRIPS Trade-Related Aspects of Intellectual Property Rights

TPRM Trade Policy Review Mechanism

TRQ Tariff Quota

TSA Tourism Satellite Accounting

TSG The Services Group

UNCTAD United Nations Conference on Trade and Development

UNICITRAL United Nations Commission for International Trade Law

USA United States of America

USAID United States Agency for International Development

VAT Value Added Tax

VET Vocational Education and Training

VCF Venture Capital Fund

VOIP Voice-Over Internet Protocol

WIPO World Intellectual Property Organization

WTO World Tourism Organization

WTO World Trade Organization

WUC Water Utilities Corporation

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TABLE OF CONTENTS

EXECUTIVE SUMMARY AND ACTION MATRIX................................................................................... I

1. DIVERSIFICATION AND EXPORT GROWTH................................................................................1

ECONOMIC AND EXPORT CONCENTRATION – SOME INDICATORS ........................................... 1COSTS AND BENEFITS TO CONCENTRATION .......................................................................... 2EXPORT PERFORMANCE OVERVIEW ..................................................................................... 6

2. THE ENABLING ENVIRONMENT I: THE NATIONAL POLICY FRAMEWORK................................13

NATIONAL POLICY DEVELOPMENT – AN OVERVIEW............................................................ 13BUSINESS REGULATION AND FOREIGN DIRECT INVESTMENT POLICY.................................... 16THE INCENTIVES REGIME .................................................................................................. 20THE EXCHANGE RATE AND EXPORTS.................................................................................. 29THE LABOR MARKET......................................................................................................... 36

3. THE ENABLING ENVIRONMENT II: EXPORT AND SECTOR-SPECIFIC POLICIES.........................40

SECTOR POLICIES - CASE STUDIES...................................................................................... 40IMPORT TARIFF AND EXEMPTION SCHEMES FOR EXPORTERS ............................................... 60EXPORT PROMOTION AND PRIVATE SECTOR SUPPORT INSTITUTIONS.................................... 62TRADE FINANCE AND EXPORT CREDIT INSURANCE ............................................................. 64LICENSING RULES AND STANDARDS................................................................................... 65

4. TRADE POLICY FOR EXPORT GROWTH...................................................................................69

MAIN TRADE AGREEMENTS ............................................................................................... 69MARKET ACCESS ISSUES ................................................................................................... 73DOMESTIC PROTECTION AND THE TERMS OF TRADE............................................................ 82

5. TRADE FACILITATION AND INFRASTRUCTURE.......................................................................96

CUSTOMS PROCEDURES, MANAGEMENT AND VISA RULES................................................... 96SHIPPING AND PORTS ...................................................................................................... 102LAND TRANSPORTATION ................................................................................................. 105AIR TRANSPORT.............................................................................................................. 109THE BUSINESS COSTS OF UTILITIES .................................................................................. 111

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TABLES

TABLE 1-1: ACTION PLAN...........................................................................................................................................................................iTable 1-1: Composition of Exports (US$'000) ...............................................................................................................................................7Table 1-2: Direction of Exports (as a percentage of total exports) ................................................................................................................8Table 1-3: Botswana’s Trade with the Region .............................................................................................................................................11Table 1-4: Botswana’s Revealed Comparative Advantage ..........................................................................................................................11

Table 1-5: Share of Foreign Companies in Manufacturing – 2000..............................................................................................................12Table 2-1: Summary of Major Incentive Programmes .................................................................................................................................22Table 2-2: Type of investment incentives in selected countries...................................................................................................................27Table 2-3: Regional Interest Rates (nominal) ...............................................................................................................................................30Table 2-4: Unemployment rates by level of training attainment, 2001 .......................................................................................................36Table 3-1: Tourism in Botswana and South Africa ......................................................................................................................................46Table 3-2: Motor Vehicle Exports by Type of Vehicle (in pula) .................................................................................................................57Table 3-3: Firm Survey: Characteristics........................................................................................................................................................58Table 3-4: Phase down in the rate of customs duty on imported light motor vehicles ...............................................................................59

Table 3-5: Prohibitions/Restrictions on Exportable Products ......................................................................................................................65Table 3-6: Botswana: Prohibitions/Restrictions on Imported Products.......................................................................................................67Table 4-1: Principal Trade Agreements Affecting Apparel and Textiles ....................................................................................................73Table 4-2: NTBs in the SADC Region..........................................................................................................................................................77Table 4-3: Rules of Origin for Textiles and Apparel ....................................................................................................................................78Table 4-4: Structure of MFN tariffs of SACU, 1997-02 ..............................................................................................................................84Table 4-5: SADC Non-Tariff Barriers...........................................................................................................................................................86Table 4-6: Botswana Effective Rates of Protection (percent) ......................................................................................................................90

Table 5-1: Documentation Requirements......................................................................................................................................................98Table 5-2: Land & Sea Transport Costs August, 2002...............................................................................................................................102Table 5-3: Shipping Costs- Mauritius to Botswana March, 2002..............................................................................................................102Table 5-4: Shipping services currently offered by Walvis Bay to Europe and the US .............................................................................104Table 5-5: Transport cost to ports for landlocked SADC countries – US$ for a 20-foot container .........................................................106Table 5-6: Botswana Road User Charges....................................................................................................................................................107Table 5-7: Comparative Cost of Infrastructure Services (US Dollars) ......................................................................................................111Table 5-8: Regional comparison of Fixed line call charges as on 2004 (US$/minute).............................................................................113

Table 5-9: Comparison of average tariffs (FY2002) ..................................................................................................................................114Table 5-10: Internal Water Usage and Cost (Botswana Pula, Unit cost)...................................................................................................115Table 5-11: Comparison of average tariffs (FY2002) ................................................................................................................................115Table 5-12: Regional Water Cost Comparison ...........................................................................................................................................115

BOXES

Box 1-1: Has Botswana caught ‘late-onset’ Dutch Disease? .........................................................................................................................5Box 2-1: The Land Problem and Exports......................................................................................................................................................19Box 2-2: Does Botswana’s reliance on diamonds suggest a more ‘activist’ role for government?............................................................21Box 3-1: Infrastructure at Top Tourist Attractions .......................................................................................................................................49Box 3-2: Does Botswana Benefit from Vehicles Protection and the MIDP? ..............................................................................................59

Box 3-3: Does Botswana need an Export Processing Zone (EPZ)?.............................................................................................................61Box 4-1: SACU – Towards a Single Market?....................................................................................................................................71

Box 4-2: Should Government Remove the Export Monopoly of the BMC?...............................................................................................88Box 4-3: Do Anti-Dumping Duties raise the price of inputs and raise the anti-export bias? .....................................................................88

Box 4-4: Evaluating trade diversion: the realities “on the ground” ..................................................................................................92Box 5-1: FIAS (2004) Recommendations on Customs Changes .................................................................................................................99

Box 5-2: Textiles and Walvis Bay....................................................................................................................................................105Box 5-3: Tourism and Air Transport ...........................................................................................................................................................110

FIGURES

Figure 1-1: Measures of Export Diversification, 1990-2003..........................................................................................................................1Figure 1-2: Annual Change in Government Mineral Revenues, 1993/4 to 2002/3.......................................................................................3Figure 1-3: Selected Merchandise Trade Indices, 1993=100 .........................................................................................................................8Figure 1-4: Real Non-Traditional Exports, 1990-2003...................................................................................................................................9

Figure 1-5: Services Exports, 1990/91 – 2002/3...........................................................................................................................................10Figure 2-1: Monetary Conditions Index ........................................................................................................................................................30Figure 2-2: Real Effective Exchange Rate Measures, 1990-2004 ...............................................................................................................33Figure 2-3: Bilateral Real Exchange Rates of the Pula 1990-2004..............................................................................................................34Figure 2-4: Private and Government Salaries by grade October 2003.........................................................................................................38Figure 3-1: Botswana – Overseas Tourist Arrivals, 2000 - 2003.................................................................................................................47Figure 3-2: Textiles Exports including 2004 Year to Date Data..................................................................................................................55

viii

PREFACE

Economic diversification is a major policy objective of the Government of Botswana and has beena key determinant of macro and microeconomic policy. The Ninth National Development Plan,covering the period April 2003 to March 2009, adopted the theme “internationally competitivesustainable economic diversification”. However, despite this policy focus, diamonds remain thedominant export and source of foreign exchange.

Against this background the Government requested that the World Bank undertake a collaborativestudy with the Botswana Institute for Development Policy Analysis (BIDPA) on the constraints andopportunities for export diversification. This partnership has combined the World Bank’s cross-country knowledge with BIDPA’s deep understanding of Botswana’s institutions and politicaleconomy. The study represents the views of both organizations and, it is hoped, will be a majorstep in continued collaboration. The study was also conducted in partnership with COMMARKTrust, a DFID-funded grant making organization focused on making markets work for the poor,which co-financed and implemented the ostrich, and garments and textiles sub-sector studies.

The study was undertaken between May 2004 and May 2005. Elwyn Grainger-Jones (consultant)was team leader and lead author of the report under the supervision of Happy Fidzani (ExecutiveDirector, BIDPA) and Fahrettin Yagci (Lead Economist, World Bank). Kennedy Mbekeani(Senior Research Fellow BIDPA) assisted in coordinating BIDPA’s trade inputs for the study, withJay Salkin (Senior Macroeconomic Policy adviser, BIDPA) as overall BIDPA internal reviewer.Peer reviewers were Dr Joel Sentsho (University of Botswana), Philip English (Senior Economist,WBI Trade, World Bank), and Jeffrey Lewis (Manager, DEC, World Bank).

A number of background studies were prepared as an input for the report, and are available asdiscussion drafts on BIDPA’s website (www.bidpa.bw). The case studies for this report werechosen to reflect a mix of traditional, non-traditional sectors, successful and challenged sectors.Sub-sector studies were undertaken on beef, ostrich, textiles, automobiles and parts, tourism andfinancial services exports. Background studies were also conducted on the impact of the exchangerate on exports and on the labour market’s impact on exports.

This study has benefited from a recently-completed Investment Policy Review prepared byUNCTAD, a FIAS study on the regulatory and procedural framework for private investment,studies on diversification in manufacturing, services and agriculture produced by BIDPA for theWorld Bank, a WTO Trade Policy Review of the Southern African Customs Union (SACU),USAID-funded trade work undertaken for the SADC Mid-Term Review, and various other existinggovernment and non-government reports.

A well-attended consultation workshop was held in Gaborone on March 11, 2005. As can be seenfrom the Action Plan, this study requires follow-up and further research on a number of fronts. Assuch it should not be seen as the end-point for collaboration between the World Bank, BIDPA andthe Government of Botswana on this important issue.

Finally, the fact that this study contains many suggestions for policy change should not detractfrom Botswana’s reputation as one of the most successful economies in Africa. Other studies, suchas World Bank (2003) “Botswana: A Case Study in Successful Growth”, focus more on whatcountries can learn from Botswana. This study focuses on how Botswana can sustain this strongrecord.

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ACKNOWLEDGEMENTS

The Study benefited from excellent assistance and collaboration with Government. The study teamwould like to thank in particular the staff of the Ministries of Finance and Development Planning,the Ministry of Trade and Industry, the Bank of Botswana, BEDIA, and the IFSC for valuableguidance and assistance. The study team found government officials to be universally open andhelpful, with a common desire to share knowledge to contribute to development in Botswana.

Funding was generously provided by the Dutch Government under the Bank NetherlandsPartnership Program. Co-financing was generously provided by BIDPA and the COMMARKTrust. COMMARK Trust financed and managed background case studies on the textiles andgarments industry and on the ostrich industry. Lolette Kritzinger-van Niekerk (World Bank SeniorEconomist, Botswana Country Economist) provided valuable advice and guidance. RissernéCarole Gabdibé (Team Assistant, World Bank) provided excellent administrative support.Excellent country support was provided to an intensive schedule of visiting missions by the team inBIDPA.

BIDPA wishes to acknowledge the support it received from the African Capacity Building

for proof reading the manuscript.this

bookFoundation (ACBF) for both its participation in the research activities that led to the production of

Dr

Imogen

Mogotsias well as part funding the publication costs of the book. We are also grateful to

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EXECUTIVE SUMMARY AND ACTION MATRIX

Introduction

Botswana stands out as a successful mineral exporting country in Sub-Saharan Africa

1 Real GDP per capita has increased ten-fold since Independence – the fastest growth rate inGDP per capita in the world. When Botswana achieved Independence in 1966 it had 12kilometres of paved road, 22 Batswana who had graduated from University and 100 fromsecondary school. Botswana is now classified as an upper middle-income country, and hasapproximately 7000 kilometres of tarred roads, a GDP per capita in 2003 of approximatelyUS$4000, almost universal free education, three doctors per thousand population, and infantmortality of approximately 58 per 1000 live births. The proportion of the population that hascompleted primary education has grown from 1.5 percent in 1964 to 33 percent. Botswanawas awarded the highest sovereign credit rating in Africa by both Moody’s and Standard andPoor’s in 2002, 2003 and 2004.

2 Botswana has transformed itself from a largely agrarian and beef exporting country to aneconomy based on mining exports, the service sector and the government sector. This wasachieved because a combination of effective institutions, political stability and soundeconomic policies allowed it to successfully harvest a natural resource abundance indiamonds – Botswana has become the second largest diamond producer by volume in theworld after Australia, and the largest producer in terms of output value (EIU, 2004a).

However, Botswana still faces a number of development challenges

3 First, Botswana has one of the highest HIV infection rates in the world, estimated in 2002 tobe 25 percent for those aged 15-49 years. Second, although poverty has declinedconsiderably, about one-third of the population still lives below the poverty datum line andinequality levels are comparable to Colombia and Brazil. Third, diversifying the economybeyond Botswana’s principal export – diamonds – is a major policy goal for Government, butis proving difficult to achieve. This is the focus of this study.

This concentration of export activity in diamonds features in most indicators of economic

diversity

4 Rough gem diamonds dominate exports, accounting for 83 percent of total merchandisegoods exports in 2003. Since the mid-1980s to the late 1990s, the share of diamonds in totalmerchandise exports averaged 75 percent a year. In recent years, the share has increased to84 percent as non-diamond exports failed to keep pace with diamond growth. Mineral taxesand royalties are projected to account for approximately 46 percent of total governmentrevenues in budget year 2003/04 and 48 percent in the 2005/06 budget. Seventy-five percentof the stock of FDI in 1999 was concentrated in the mining sector (UNCTAD, 2003).Mining accounted for 35 percent of total GDP in 2002/03, although GDP figures mayunderstate the contribution of mining to economic activity – mining revenues sustaingovernment finances, and public sector consumption equals 37 percent of GDP. Generalgovernment accounts for 16 percent of GDP, the second largest component of economicactivity after mining. Similarly, although diamond-mining represents a relatively small shareof employment (3.4 percent), high diamond revenues have allowed a rapid expansion indirect and indirect government employment since Independence.

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5 One positive aspect of export diversification relates to trade in services. Services exportshave been rising steadily, with an average annual growth rate of around 10 percent in realterms between 1990 and 2003 compared to 3 percent a year for goods exports. This wasdriven in part by a growth in tourism revenues and business services. Export diversification,therefore, appears to be taking place in the form of a growth in services exports rather than ashift from diamonds to manufactured exports.

Diamond production has conferred enormous benefits to Botswana, although the old

adage that “there is no rose without thorns” applies…

6 First and foremost, diamond production creates few direct jobs, skills or technology transfer,accounting for about 3 percent of formal employment in 2001. Unemployment remains high,estimated at around 20 percent of the labour force in the 2001 census and almost 24 percentin the 2002/03 HIES. Second, there are high price and demand uncertainties in the diamondmarket. Third, there are questions over whether Botswana’s diamond output growth can besustained - open cast mining is projected to last about another 25 years at current extractionrates although new sources may well appear. Fourth, the government budget relies heavilyon unstable diamond revenues denominated in US dollars, and has finally moved into a long-awaited (small) deficit. After facing large budget surpluses for most of the 1980s and 90s,Botswana has had budget deficits in three of the last five years. Mineral taxes and royalties(mainly diamonds) accounted for approximately 46 percent of total government revenues andgrants in 2002/03.

Key Findings

What should be the policy response in the face of a hugely profitable dominant export

sector and the above challenges?

7 This study does not treat export diversification as an enclave issue that is somehowdisconnected from the rest of the economy. For example, reform of Government monopoliesin telecommunications and air travel is not a new issue. However, we present new evidenceon its impact on export diversification, particularly on tourism and financial services. Hence,instead of one ‘magic bullet’ or hidden growth sector, the study argues that there are a widenumber of policy-related constraints to export growth. The removal of these will inaggregate have a significant impact on exports.

8 Key recommendations that require action at the national, regional and international level areas follows:

At the national level there are many areas where government leadership is necessaryto improve the competitiveness of Botswana’s exports and to help mobilize a supplyresponse. This includes further improvements to the business environment throughfull implementation of the FIAS (2004) recommendations. In addition, Governmentshould introduce better and more systematic monitoring of its various incentivesprograms. Government should adopt best-practice principles for citizenempowerment policies so that this policy thrust does not contradict exportdiversification objectives. The Government review of taxation policies planned for2005 should include consideration of adopting a flat-rate company tax. There shouldbe a comprehensive reform of Vocational and Educational Training, and urgentresolution of the work permits issue.

Reform of utilities would reduce business costs and improve the competitiveness of

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goods and services exports. Government should revitalise its privatization andutilities reform program – particularly in the area of telecoms and air transport.Progress made with the phased agreement towards open skies should be closelymonitored to ensure that it gets implemented within the agreed time frames, if notsooner. To reduce international telecommunications prices, Government shouldconsider instructing Botswana Telecom Authority (BTA) to issue an unlimitednumber of licences for international voice services and lift the ban on providingvoice over internet protocol. The monopoly of Botswana TelecommunicationsCorporation should not be allowed to continue indefinitely to allow BTC torestructure - Government should set a target date for the privatization of BTC.

Some aspects of trade policy are also under the sole authority of nationalpolicymakers. The Botswana authorities should refrain from using import bans as atool to sustain local enterprises against foreign competition. Further, they shouldundertake a detailed review of all import permits, with a view to removing thisrequirement for all but a limited number of commodities for security, public healthand public morality reasons.

In the face of market failures and policy distortions at the sector/industry level,greater Government leadership is also needed to ensure that the right incentives,market structure and capacity-development for growth are in place. In the beefsector, the upcoming Government livestock study should fully consider options forBMC privatisation, the removal of export monopoly (in particular to South Africa)and the potential for trade liberalisation to increase exports. The ostrich sector is stillin a fledgling state, and Government should eliminate the current ostrich export levy.Greater government support to the tourism sector is needed, including bettermarketing, a move away from the current low volume/high cost approach, greatercollaboration with private sector organisations including consideration of a formalpartnership agreement between the public and private sector, and greatercoordination between the Botswana Tourism Board and the Department of Wildlifeand National Parks (DWNP). In the financial sector Government should considerbroadening the incentives available to IFSC companies to all cross-border services,and making further efforts to streamline the incentives approval process. The textilesector requires an active role for BEDIA to encourage much-needed productivityimprovements.

At the regional level the report advocates further regional integration (see paragraph40) and market opening. This includes Botswana using its potential new influence inthe new SACU Secretariat to reenergize the liberalization efforts of SACU. Thiseffort should comprise: a phased program of tariff reforms that would continue theprogress made during the early liberalization period in the 1990s, continuedreductions in the number of anti-dumping initiations, and developing a regionalapproach to easing visa restrictions over the longer run. In addition, Governmentshould develop a ‘Standards Strategy’, to include an assessment of the scope forgreater harmonisation of standards within SACU – in particular whether it would befeasible to introduce a single set of standards across the region, with inspections to bedone by single authority with clear guidelines of why inspections are being done.Botswana should lobby for simplified and liberalised SADC rules of origin in theSADC MTR follow-up discussions.

Many of the recommendations aimed at improved trade facilitation require a

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coordinated SACU solution (with some exceptions, such as opening the Tlokwengborder gate on a 24 hour basis). Government should develop a program for VATharmonisation by SACU members. Further, Government should explore the conceptof a ‘one-stop border post’ with South Africa to reduce border crossing time, with alonger-run objective of establishing a regional SACU customs authority Customs andExcise. Government should explore the scope for the introduction of a single touristvisa for multi-country visits to the region, and undertake a review of restrictivecabotage laws that raise freight costs across the region. A new transport desk couldbe established in the SACU Secretariat that could, for example, tackle intra-SACUtransport issues such as accusations of monopoly pricing by South African railwaysaffecting Botswana’s exports.

At the international level, continued progress in WTO negotiations and access toEU and US markets are essential. This includes improving EU preferences for beefproducts to allow customs duty, quota and special duty free export of a wider rangeof beef and meat products, without excessive administrative and sanitary restrictions.Further, making the AGOA LDC provision permanent would provide predictabilityfor potential investors in a particularly unstable market. Botswana should lobby forimproved rules of origin in all preferential trading agreements – in particular, forEconomic Partnership Agreement with the EU to allow for single transformation ofgoods such as found in the AGOA agreement with the United States. Potential newWTO rules on the Doha Development Agenda could assist in reducing the number ofanti-dumping actions launched by and against SACU, and an effective agreement ontrade facilitation could help to reduce restrictions across the region.

9 Detailed recommendations are presented below. For ease of reference, these are summarizedin the Action Matrix presented at the end of this Executive Summary.

The National Policy Framework

Despite a broadly private-sector friendly overall policy environment there are some

remaining constraints to business and foreign investment…

10 FIAS (2003) identified delays and inefficiencies in the registration of companies. UNCTAD(2003) expressed concerns over a draft Investment Code which suggested a possibletightening up on conditions for FDI. UNCTAD (2003) and FIAS (2004) highlight the impactof restrictive work permits for expatriates, and also identified difficulties for foreign investorsin acquiring commercial land in Gaborone. It is recommended that Government convene aseminar with key stakeholders to monitor implementation of the recommendations of FIAS2004 report, finalise revisions to the Industrial Development Act with the intention ofsimplifying the industrial licensing system, expedite approval of a revised investment codethat drops restrictions on smaller-scale FDI, and expedite reforms to the land allocationsystem.

Adopting best-practice principles on Citizen Economic Empowerment could ensure its

coherence with export diversification

11 ‘Citizen Empowerment’ is a term used to describe the valid objective of empowering citizensby enhancing their skills, resources and opportunities to participate in productive enterprises.The Government’s citizen economic empowerment strategy includes financial intervention toassist local business activities; enterprise development for citizens; job creation; and training

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and education. However, there are also a number of concerns about current and potentialrestrictions arising under the remit of citizen empowerment. Citizen economic empowermenthas driven a wide number of Government schemes, including the local procurement programand the reservation policy, concerns over which are discussed below. Further, there are risksto Citizen Economic Empowerment becoming a form of hidden protectionism in its influenceon economic policy. Considerations over citizen empowerment may explain some of thedelays in dealing with the most pressing economic reform issues identified in this and otherrecent reports on Botswana, such as land allocation, work permits and privatisation. Forexample, the initial acquisition of serviced industrial land on state land is restricted tocitizens, resulting in major delays for overseas investors in obtaining land. It is importantthat government policies learn from international best-practice in empowering citizens – theapproach taken to citizen empowerment in other countries such as South Africa may not bethe most appropriate for Botswana because of the latter’s unique historical circumstances

12 This is clearly a sensitive issue that will have a major impact on export diversification. Onepossible first step towards resolving such conflicts would be for Government to adopt somebest-practice principles for actions taken under the citizen empowerment remit – Chapter 2suggests some possible principles, including principles such as “over-protection andexcessive handholding do not lead to empowerment”, “citizenship does not convey the rightto be shielded from the consequences of making economic decisions”, “creating new jobsleads to more citizen economic empowerment than providing preferential treatment forcitizens in filling existing jobs”, and that “education is a fundamental empowerment tool”.

Also at the national level, a unified flat-rate company tax could remove distortions against

some export sectors and simplify the regulation of IFSC companies…

13 Botswana is a low-tax jurisdiction, with low general rates of tax and investment tax credits invarious forms, including the ability to grant a tax holiday, favourable tax rates or exemptionand special deductions for employment or training. Preferential tax rates apply to themanufacturing sector and to offshore financial services companies approved by the IFSC –the company income tax for manufacturing businesses and IFSC companies is reduced fromthe standard 25 percent to 15 percent. Government can provide company-specific taxconcessions, but rarely makes use of this facility. It is recommended that Governmentconsiders adopting a uniform 15 percent tax rate for all business activities. This wouldremove the implicit discrimination against the tourism sector, and would eliminate theonshore and offshore distinction in financial services for tax purposes. This would of courserequire an assessment of fiscal impacts – non-mineral income tax, which includes personalincome taxes as well, accounts for about fifteen percent of total government revenue. As aninterim measure, consideration should be given to reducing the transaction cost of applyingfor the reduced manufacturing tax rate by awarding it automatically, subject to ex post

oversight. Since tax rates should be assessed in the broad context of macroeconomicmanagement and the overall taxation structure, this should be considered in the context of theoverall assessment of taxation policy planned for 2005.

There should be better monitoring of incentive programs, some of which may have an anti-

export bias…

14 The Central Statistical Office or another suitable agency or think-tank should conduct areview of ongoing impact assessment and monitoring of existing government supportprograms, tax incentives and reservation policies, in particular those supporting non-tradeableactivities. The reservation policy, through which certain economic activities are reserved

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exclusively for citizens and companies which are wholly owned by citizens, should bereviewed to assess whether it has had an impact on building human capital, and whether thisoffsets its negative impact on consumers by restricting trade and investment. Further, CEDAshould prepare more thorough evaluations of project proposals with a view to their netbenefit to Botswana, using shadow prices that place a premium on tradeable goods.Government should commission a cost-benefit review of the industrial rebate for rawmaterials imported for production for sales into domestic market.

15 Recent programs such as the local procurement program and the reservation policy, whichtypically include small-scale business activities and non-tradeable activities (e.g., housingand personal services), constitute an anti-export bias. The procurement program enablescompanies to seek protected government contracts instead of local entrepreneurship beingdirected towards export contracts. However, it is difficult to calculate the extent of the anti-export bias of these schemes. More broadly, it has not been possible to undertake evensimple financial cost-benefit analyses of the impact of Government incentives, in partbecause there is little data collected with which to undertake such analyses.

Import tariff exemption schemes for exporters are well-functioning although they are a

second-best option and require some reforms...

16 Botswana exempts certain customs and excise duties and VAT on raw materials imported byregistered manufacturers. Various exemption schemes function effectively with fewunnecessary delays imposed on importers. They are covered by SACU rules, hence untilrecently they were determined by South Africa with little consultation or predictability withrespect to rules changes. However, although most machinery inputs have zero tariffs andhave VAT payments reimbursed, there are still a number of tariffs that fall outside of thedefinition of ‘raw materials’ or ‘machinery’ that raise the price of operating a goods orservice exporting company. Vehicles are one important example. Hence even efficiently-managed exemption schemes are still a blunt instrument to redress the anti-export bias oftariffs. Critically, exporters are not exempted from anti-dumping tariffs on their inputs.Rebates and exemptions are only allowed on ‘schedule 1’ tariffs, whereas anti-dumpingduties are ‘schedule 2’ tariffs (see paragraph 46 below). Botswana should propose withinSACU that anti-dumping tariffs be eligible for duty exemptions and rebate schemes. With aview to assessing whether there is any practical value to establishing an EPZ, there should bea follow-up review on whether broadening the definition of inputs that are exempt fromcustoms and VAT would make a significant cost difference to exporters.

Export Promotion and Private Sector Support Institutions are well-resourced but are still

developing

17 Botswana has a broad range of export promotion activities. BEDIA is refocusing itsactivities on export development in contrast to export promotion, based on a perception thatweak internal capacity for product development is the major constraint to export. In thiscontext, BEDIA is preparing an export development programme as part of the WTO-UNCTAD-ITC Joint Integrated Technical Assistance Programme (JITAP) II. BEDIA andthe Botswana Development Corporation (BDC) are both involved in the provision of factoryshells. Given the emergence of private sector providers, this should be reappraised. Therehave been a number of complaints about the effectiveness of the Ministry of Trade andIndustry (MTI) in providing political risk insurance – Government should conduct aperformance audit of the provision of political risk insurance, including an assessment ofneed. There are mixed views concerning whether there is sufficient provision of trade

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finance and export credit insurance. Smaller export enterprises have reported difficulties inaccessing trade credit in a timely fashion. FIAS (2004) made suggestions on minoradjustments to the system that would facilitate a more rapid payment of exporters – theseshould be implemented.

There are relatively few self-imposed licensing restrictions on exports from Botswana,

although there is a need to develop a clearer standards strategy…

18 With the exception of diamonds and beef, Botswana allows exports to go largely unhindered.All commercial exports require an Export Declaration Form, although these arestraightforward to obtain. There has been a rapid increase in the number of approvedstandards – from 30 to 167 between 1998-2002. The Botswana Bureau of Standards(BOBS) is facing a number of challenges. It has limited testing facilities, is not able toimplement border controls to monitor the quality of trans-border goods because of theabsence of a holding facility, and legislation of departments linked with BOBS is not yetharmonized in terms of the development of product specifications. Government shoulddevelop a ‘Standards Strategy’. This should include an assessment for the scope for greaterharmonisation of standards within SACU – in particular, whether it would be feasible tointroduce a single set of standards across the region, with inspections to be done by a singleauthority with clear guidelines of why inspections are being undertaken. Under Article 28 ofthe new SACU agreement Botswana and other members have agreed that “Member Statesshall strive to harmonize product standards and technical regulations within the CommonCustoms Area”. A priority for the new SACU Secretariat will be to give some clarity and aroadmap on how Members could achieve this goal. BOBS is already collaborating withSADC countries to develop a regional body for accreditation of conformity assessmentfacilities (SADCA), which would allow mutual recognition among all members. Suchmeasures to avoid duplication should be encouraged. As Botswana’s major market for non-traditional exports and a major source for international exports, continued cooperation withthe South African Bureau of Standards is essential.

Human capital needs to be increased to boost productivity, in particular through a reform

of the vocational and educational training system and a resolution of the work permits

issue…

19 This study conducted a survey of 11 exporting firms to discuss a wide range of labour-relatedissues. Botswana now has a well-resourced education system, although there are twoparticular areas of concern. First, in the absence of any systematic human resource planning,Botswana’s vocational training system has been supply-driven with relatively limitedinvolvement of employers in the development of course content and training standards. Itfocuses mainly on pre-employment, time-bound technician and craft-level skills training forpredominantly male primary and secondary school leavers at government-funded vocationaltraining centres. There is a skill mis-match between this training and the skill needs ofmanufacturing and other key sectors, which rely almost totally on on-the-job training for bothproduction workers and other staff. Training policy and practice is still toocompartmentalised between the Botswana Training Authority (BOTA), the TertiaryEducation Council (TEC), and the Ministry of Education. It is recommended thatGovernment develop a detailed and comprehensive national human resources developmentstrategy, which focuses in particular on the occupational requirements of the key growthsectors in the economy. This should include a comprehensive reform of the vocationaleducation and training (VET) sector. In particular, little use is made of the company tax

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rebate for training, with companies complaining that it is too bureaucratic. This requiresreviewing and replacing it with a more effective incentive for human resource development.

20 Second, obtaining work and residence permits has been consistently identified as among themost difficult investment procedures in Botswana. The total backlog of work permitapplications was 7474 in late 2004. Temporary work permit waivers enable most foreigninvestors to circumvent unwieldy and bureaucratic work permit procedures, although thesehave to be renewed every three months. A resolution of the work permits issue is required,possibly with permits based on a points system and/or a minimum number of permitsawarded automatically for companies. Of particular concern is between 600-1000 percentincrease in work permit fees over the last four years and the twenty-fold increase in visaapplication fees instituted in 2004. Government should review these cost increases.Producers have complained that this has unreasonably raised the costs of obtaining labour.Advanced economies such as the United States still require the importation of large numbersof expatriate experts – Botswana’s stage of development and limited labour pool suggeststhat it should be encouraging rather than discouraging the arrival of skilled immigrants.

The Role of Government at the Sector and Industry Level – the Case Studies

21 Government leadership is needed at the sector level to ensure that the right incentives, marketstructure and capacity-development for growth are in place.

The beef sector faces growing competition and a need for reform…

22 This study commissioned a background study on the beef sector. The Botswana beef exportindustry is in crisis. The recent financial difficulties of the Botswana Meat Commission(BMC) – the Government’s export monopoly for beef – have been exacerbated by temporaryfactors – notably the recent drought and the outbreak of foot and mouth disease (FMD). Butwhile there may well be a cyclical upturn, these cycles are nevertheless occurring around adeteriorating trend. Further, in the past frequent exchange rate depreciations againstEuropean currencies in most years allowed BMC to post regular profits – this has recentlybeen reversed as the exchange rate appreciates.

23 This trend will not be reversed without fundamental change that would increase the numberof cattle sold to BMC for export. There appears to be a consensus that the fundamentalproblem facing the sector is that the cattle off-take rate is too low. This results in poorthroughput (and low weights) for BMC, either because prices on the domestic market arepushed up, making it more attractive than exporting, or simply because there are too fewcattle raised with the intention of bringing them to the market. Various studies suggest thatthere is significant scope for an increase in supply. However, over the period since 1992prices paid to producers have generally gone up by less than the price paid by EU importers.This has occurred for a number of reasons – high costs arising from EU SPS measures andrising demand in the local market, resulting in fewer cattle being sold to BMC and hencehigher unit processing costs.

24 The beef sector has long been a recipient of government support in the form of artificiallyhigh producer prices, heavy direct subsidies into the sector, a very lenient tax system, heavyprovision of livestock-specific infrastructure and trade protection. Industry restructuringwould allow time for either a substantial shake-up to the supply side or an orderly decline ofthe beef export sector. The study cautions against precipitate moves to privatise BMC – atleast until the supply side has been improved. The supply baseline is a throughput sufficient

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for only one abattoir, and standards might be compromised. Another option that should beconsidered is continuing BMC’s monopoly in terms of exports to Europe and other distantmarkets, but its removal for sales to South Africa. At the present time it seems improbablethat any organisation other than BMC would sustain substantial exports outside the region. IfGovernment decides that maintaining the export market is preferable to a domestic-only beefmarket, there should be further consideration of the scope for liberalization of beef imports.This would reduce domestic prices, making selling to BMC for export more attractive forfarmers. In the industrial sector and advanced countries it is commonplace to have intra-industry trade – there is no reason in principle why the same should not occur in Botswana,with the region importing larger quantities of forequarter meat partly in order to releasehindquarter meat for export. The planned livestock study should provide a clear estimate ofthe number of cattle in the country. Better information is essential for policymakers – itwould help to clarify issues such as off-take potential, linkages and the importance of cattleto the Botswana economy.

The ostrich sector is still at a nascent stage, during which time the removal of the export

levy should be considered…

25 The Botswana ostrich industry is at an infant stage. There are currently about 29 activefarmers in the country, holding a total of about 500 breeding hens. About half of theseostriches are held by two large scale producers. In terms of production efficiency, theBotswana industry produces a heavier bird in a relatively shorter space of time than SouthAfrica, although the overall quality of the skin is poor. There is only one abattoir, managedby the Botswana Ostrich Company (BOC). This received certification for exporting directlyto the EU in August 2004. Since then, the BOC has been able to supply around 3 tons permonth to the wholesale trade in Belgium. There is optimism that exports can be increased tothe EU, the target market. There is no tannery for ostrich leather as yet.

26 The government has supported Botswana’s ostrich industry through the provision of a newstate-funded ostrich abattoir and veterinary services, and through its willingness to extendBDC loan facilities despite a failure to repay the initial loan on schedule. The success of theostrich industry depends upon the viability of the BOC as the sole marketing channel forostrich products in Botswana. BOC is currently running at a loss, but is hopeful for apositive supply response from both existing and new producers following the approval toexport to the EU market. The key issue for Government is for how long to subsidise thisindustry – there should not be an assumption that just because the country has the largestpopulation of wild ostriches in the world it is automatically suitable for effective farming.There is significant growth potential, but there should be a clear end-point for the currentpublic subsidy. However, it is premature for the imposition of the current export levy of P32on average per bird, which reduces BOC’s earning by about ten percent per bird.Government should eliminate this levy until the industry reaches a critical mass to attainBOC profitability. According to industry participants, CEDA has so far not been sufficientlyforthcoming in funding ostrich farming projects. Only 10 ostrich projects have so far beenapproved for funding, with none since the EU granted export approval. CEDA’s reticencemay well be based on valid financial reasons, hence this issue should be addressed andnegotiated at an industry level.

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The tourism sector has major potential but requires greater investment and a clearer voice

in policymaking…

27 Apart from its diamonds and beef, Botswana’s natural comparative advantage is in its diverseand abundant wildlife and natural resources, which are a major draw for tourism. Touristnumbers rose rapidly but peaked in 2000. The gradual decline seen in 2004 – set against anet increase in South African tourist numbers – is of serious concern. Nevertheless, thesector has significant growth potential.

2 8 Botswana’s Tourism Policy has generally been based on sound principles that haveacknowledged the environmental value and vulnerability of the resource base. However,there is a need to give greater recognition to the sector in policymaking, and to align thesector support institutions more clearly around a demand-led approach. Further, despite theGovernment’s policy objective of “modified high volume/mixed price” tourism, Botswana isstill largely a low volume/high cost destination. Botswana can sustain its national wildernessareas while increasing visitor numbers. Government should consider greater ‘zoning’ ofwildlife areas to allow higher volumes in certain areas while maintaining greater restrictionsin others. The independent, self drive component of the international tourism market isgrowing continuously – the sector should develop the required infrastructure and marketingpackages to capitalize on this segment of the market.

29 While the various tourism policy frameworks provide some excellent proposals, these are notpart of a clearly defined and prioritized implementation plan, with the result that it is difficultto gauge and monitor implementation. The Department of Tourism (DoT) suffers from alack of adequate funding and a clear competitive marketing strategy, and has to play the roleof “referee and player” by having to regulate the industry while promoting it. Governmentshould allocate and manage the budget allocation and investment for the DoT and theDepartment of Wildlife and National Parks (DWNP) as a whole package within a commonlyagreed tourism development strategy. Due to limited resources and capacity, the promotionof “Brand Botswana” as a global destination of choice has suffered during the past few yearsand marketing has been largely left to the private sector. The recent appointment of the firstBotswana Tourism Board bodes well for destination marketing. There is need for a well-researched, clear marketing strategy that will direct the future marketing focus of the Boardand will inform Botswana’s overall tourism policy and development thrust.

30 An adherence to low volume/high value tourism and limited budgetary allocations have ledto under-investment in essential facilities and infrastructure development for tourism, andmounting pressure is being placed on the existing and limited infrastructure of wildernessparks (in particular Chobe). A formal partnership agreement between the government andthe private sector should be considered, possibly based around a dedicated Tourism andConservation Management Fund. The establishment of local tourism associations in themain tourism centres, affiliated to Hotel and Tourism Association of Botswana (HATAB),should also be considered. Such partnerships should aim to strengthen linkages to the localeconomy. Further research is needed on the costs and benefits of allowing a longerconcession term for tourism leases in wildlife management areas.

The International Financial Services Sector must be underpinned by sound regulation

while incentives should be broadened to all services exports…

31 The Botswana International Financial Services Centre (IFSC) became operational in 2000.IFSC has managed to attract twenty-one companies in a relatively short time. IFSC

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companies are estimated to grow to 244 total employees, of whom 168 are local, in 2005.Unfortunately there are no available data to isolate the impact of the IFSC upon the servicestrade balance.

32 Botswana offers a generous incentives package in its endeavour to set up an internationalfinancial services centre, including a reduced corporation tax regime stabilized to 2020,exemption from VAT on services or imports, and a credit for withholding taxes levied inother jurisdictions. All services must be for clients based outside of Botswana and transactedin foreign currency.

3 3 There are two main sector-specific challenges. First, a necessary condition for aninternational financial centre is to have a modern and well respected regulatory framework.A background study on the financial sector prepared for this report concluded that theregulatory system has so far been in a rather reactionary posture to new developments andhas tried to accommodate new needs within an existing structure. Government should makefurther efforts to streamline the process of obtaining IFSC tax and regulatory approval andreducing the number of bodies involved (currently the IFSC, the MFDP and the Bank ofBotswana) through introducing a one-step approval process. A potential problem arises fromhaving a dual tax regime, marketing an offshore jurisdiction based on a two-tiered tax regime(i.e., one for domestic economy and another for offshore) is becoming increasingly difficult.An overhaul of regulation of the non-bank financial system, including the offshorejurisdiction, is necessary. Further, a key enabling factor for financial services exports is thenumber of double-taxation agreements – Botswana has only ten such agreements, comparedto 40 in Mauritius. Government should increase efforts to negotiate double taxationagreements.

34 Second, Government should reappraise the existing scope of companies eligible for IFSCincentives – its current focus is too narrow and excludes a number of potential cross-borderservice activities (e.g., regional transport companies). Government should considerbroadening IFSC incentives by making all cross-border service exporters eligible forincentives and renaming the ‘IFSC’ (International Financial Services Centre) the ‘ISC’(International Services Centre).

The textile and apparel sector faces a challenging environment, and there is a clear role

for BEDIA to initiate industry reform to improve productivity

35 Botswana’s textile and apparel industry faces a number of challenges – notably the phase-outof the multi-fibre agreement, the possible ending of special access to the US market, and theending of the Financial Assistance Policy (FAP) subsidies. Despite this, its relatively diverseapparel exports have been growing rapidly to the United States (the ‘AGOA effect’),although exports to South Africa and Europe, while on a growth trend, both dipped in 2004according to preliminary government trade statistics.

36 Government has made extensive use of subsidies and other tax incentives to develop thetextiles and apparel industry. The main subsidy – the Financial Assistance Policy (the FAP)– has ceased and subsidy payments will end in 2005. While the industry may be able tosurvive without cash incentives, it will flourish only if sector efficiency is increased and onlyin an environment where the economy-wide barriers to conducting business discussed in thisreport are removed. The primary threat to the industry is its lack of competitiveness in termsof factory efficiency – productivity levels are very low, with the best examples estimated to

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be 50 percent of established international standards. This is because of inadequately trainedoperators and a lack of control by supervisory management.

37 There is a clear role for the Botswana Export Development and Investment Authority(BEDIA) in developing a comprehensive response to this lack of productivity. They shouldcommission productivity audits and training needs analyses, identify suitable serviceproviders to address the needs of the industry both nationally and regionally, identify meansof financing productivity enhancement and training, and develop the market for trainingservice providers to the industry. BEDIA should facilitate the establishment of an associationof Botswana Textile and Apparel manufacturers as an independent and officially registeredbody. There is also a need to identify niche markets. BEDIA should focus its promotioneffort on suppliers to specific market segments that can create competitive Botswana-basedsupply chains. The most likely market segments are Formal Modern Niche markets inEurope, the USA and South Africa, the replenishment segment of Traditional and ModernMass markets in Europe, USA and South Africa, and South African based apparelmanufacturers supplying the potential future Zimbabwe market.

The Automotive products sector is fairly dependent on the continuation of the South

African Motor Industry Development Programme (the MIDP) and tariff protection…

38 Exports surged between 1996 and 2000 because of the establishment of a large Hyundaiassembly plant in Botswana. This plant closed in 2000 ostensibly because of market accessbarriers and poor management. Rules of origin played a role in its demise. After the plantstarted operations South Africa challenged that there was insufficient value-addition takingplace and ruled that the products failed the rules of origin requirements as originating fromBotswana. South Africa used SACU Article 11(5) to oblige Botswana to cooperate in the

fulfilment of ‘economic objectives’ of its import control legislation for the auto sector.

39 A fledgling automotive products sector remains. This sector evolved through generous FAPincentives, the MIDP program and high tariff protection in the SACU market. Of the fivefirms surveyed for this report, two (the majority by output) benefit from MIDP, while theremaining firms sell to the tariff-protected SACU market (accounting for about one-quarterof employment of the firms surveyed). Further, three firms benefit from (soon to be phasedout) FAP subsidies. Tariffs in SACU are currently 38 percent for cars, and are scheduled tofall to 28 percent by 2009. Automotive products companies, therefore, face a challengingfuture. The MIDP provides a large reduction in import duties on completely built up unitsfor exporting companies, and has been a facilitating factor in choosing South Africa as anassembling centre by western and Japanese automobile giants. This scheme is potentiallyopen to WTO challenge as an export subsidy. This would reduce the attractiveness as alocation for assembling and manufacturing components for export in future. Beyondmaintaining protection at the expense of consumers and business users of transport – whichthis study does not recommend – there were no export constraints specific to this sectoridentified in the background study.

A Case for Greater Regional Integration

A major cross-cutting theme of the report is the need for greater regional integration…

40 Government should develop a clear long-term vision based on a transformation of SACUfrom a customs union to a single market. The new SACU Agreement, renegotiated in 2002,falls well short of a bold new vision for further regional integration. It maintains the basic

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customs union with very limited aspirations towards a single market. The Agreementexcludes cooperation on investment protection and incentives, but does include an agreement“in principle to develop common policies and strategies”. Similarly there is no commitmentto develop a common competition policy, although there is a commitment for Member Statesto cooperate on the enforcement of competition laws and regulations. There is no provisionto allow for the freer movement of people. Services remain outside of the agreement.However, the report identified a wide number of issues that need to be resolved at theregional level (see paragraph 8).

41 A Customs Union, such as SACU, requires a common external tariff, a customs pool and acommon trade policy. However, fiscal borders have remained in place and border controlsare maintained for differences in standards (e.g., safety standards). In contrast, a singlemarket means that goods circulate freely, with a common trade policy, the harmonisation ofstandards, common policies in competition, and harmonization of regulations where there issubstantial intervention in the market.

42 South Africa is the regional superpower, accounting for 90 percent of SACU’s GDP. As thedominant regional economy it has a past record of setting trade and economic cooperationpolicy according to its own interests with little consultation with its smaller neighbours. Thishas led to fears over the pooling of sovereignty associated with closer economic integration.However, this report advocates deeper economic integration in SACU, based on the conceptof “open regionalism” (GEP 2005) where barriers are also reduced between the region andthe outside world. Recommendations for closer integration feature in most sections of thisreport, as summarized in paragraph 8. This is for the following reasons:

First, Botswana cannot ‘go it alone’ given its small population. South Africa islikely to remain the major market for its non-diamond exports because of hightransport costs and the trading benefits of proximity. Apart from Egypt, South Africais the only major market in the region. The use of import substitution in the region topromote demand for more advanced products is not good, and small countries havehad particular difficulties in using such techniques because of their small market size.A small domestic market size is also a major constraint to investment since it limitsthe scope for economies of scale and expansion. A survey of French companiesfound small market size to be the main factor limiting investment in Africa(Charalambides, 2004). Trade ties with South Africa have played a central role inthe development of Botswana. South Africa is the primary market for Botswana’snon-traditional exports, constituting 75 percent of non-traditional exports. The casestudies for this report suggest a mixed reliance on the South African market. Fifteenpercent of beef exports are destined for South Africa, although this may represent amore important market as preferences to the EU are eroded. All ostrich exports aredestined for the EU. Data is not available on financial services direction of exports.Over half of holiday visitors come from South Africa. South Africa has traditionallybeen the dominant market for textiles and apparel exports.

Second, although Botswana has a higher GDP per capita than South Africa, it can

still benefit from South Africa’s more developed private sector, market know-how,

expertise and investment. South Africa is the source of almost half of the stock ofFDI in Botswana. Investors from outside the African continent are so far mainlyinterested in minerals. Attracting high quality investors who actually understand theinternational market is a challenge given that the economy of the entire SACU regionis still approximately the size of Belgium’s economy. Recent surveys of South

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African investment in Africa indicate that familiarity and the need to use SouthAfrica as the “anchor” economy are important determinants of investment(Charalambides, 2004). In some sectors, for example the textile or automotiveproducts sectors, South Africa offers the potential to link into regional supply chains,although progress in developing such linkages has been limited to date.

Third, the harmonization of regulations required to move towards a single market

could act as a major spur to increased investment and trade within the SACU

region and beyond. It would ultimately remove the need for the customs control ofgoods at the border, would encourage inwards investment to the region (sinceinvestors would have a common rules platform), and would encourage greater cross-border competition in services. As argued throughout the report, without suchcooperation the impact of having a customs union with a common external tariff islimited. The European Union did not have free circulation of goods before the singlemarket: “Despite the absence of customs duties in trade between Member States, infact there was little difference in administrative burden or appearances between intra– Community trade and trade with non – member countries… Customs clearance atthe Community’s internal frontiers was elaborate and time consuming” (EuropeanCommission, 1999). Of course, this is not a rapid process – it took the EU thirtyyears to harmonize its non-tariff barriers. Further, the liberalization of movement inpeople would also be beneficial to labour markets within the region, and could takeplace at a pace acceptable to SACU members, given concerns over its impacts. Inthe EU, regulations liberalizing the movement of people were introduced after theliberalization of goods.

Fourth, there is not a choice between aligning Botswana with Europe, North

America or South Africa. Closer integration with South Africa would not be at theexpense of closer trade and investment ties with other regional partners and beyond.“Trade diversion” costs should not be exaggerated – tariffs can be a small part of theimporting decision in relation to other costs (see Box 4-4). Nevertheless, closerregional integration should be accompanied by continued reductions in high externaltariff walls (Hinkle, 2004).

Trade Policy – Actions at the National and Regional Level

Import tariffs are moderate, although there is still a need to reduce protection and simplify

the tariff structure

43 A key feature of the SACU common external tariff (CET) is high tariff dispersion, from 0 to325 percent with a simple average tariff of 8 percent and an import weighted average of 6percent, a cascading tariff and a high tariff variance. This increases effective rates ofprotection and inefficiencies. A combination of high and low tariff rates reflects a SouthAfrican policy of keeping input tariffs low and maintaining high tariffs on some finalproducts. Botswana should initiate a renewed program of trade reforms through the newSACU Secretariat. This should include a phased program of tariff reforms that wouldcontinue the progress made during the early liberalization period in the 1990s, and wouldinclude SACU accelerating its tariff rationalization program to reduce the number of tariffcategories from 41 to six, in line with WTO commitments. SACU tariffs largely protectSouth African industries at the expense of Batswana consumers and businesses (includingexporters – see below). A reduction from over 100 to 41 ad-volorum tariff bands has so far

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taken place. Less complexity would increase transparency, reduce the scope for protectionistlobbying, and therefore facilitate trade.

44 SACU tariffs provide relatively high effective protection to some industries. Using standardtariff analysis, tariffs raised the incentives for Botswana companies to serve the domesticSACU market above the world market by raising the profitability of doing so by on average88 percent for a sample of 33 firms surveyed in Botswana by The Services Group (TSG,2003). The most protected sectors according to the TSG analysis are food processing,textiles, clothing, wood products and furniture production.

4 5 Botswana should use its influence in the new SACU Secretariat to reenergize theliberalization efforts of SACU. This effort should include tariff and non-tariff measures thatfeature throughout this study. On tariffs, this should include a phased program of tariffreforms that would continue the progress made during the early liberalization period in the1990s. This would focus on reducing SACU’s average applied rates (which would bestrongly in Botswana’s interest), urging SACU to accelerate its tariff rationalization programto reduce the number of tariff categories, lobbying within SACU for the number of anti-dumping initiations to be further reduced, and reviewing the impact of liberalizing beefimports with a view to discussing this with SACU neighbours.

Anti-dumping is one of the main ‘trade-policy imposed’ non-tariff barriers. This could

have a significant impact on input costs for some exporters and requires further

investigation…

46 On a trade-weighted basis anti-dumping measures add little to overall protection, althoughthey do make a significant difference at the individual product level. Critically for SACUexporters, most of the challenged products are intermediate products in the productionprocess (Holden, 2002). Hence, while intermediate products typically face a lower MFNtariff level, antidumping duties increased this protection considerably in the 1990s. Theseduties ranged between 15 and 202 percent and averaged 52 percent. Chemicals form thelargest single sector for initiated cases (37 percent), and make up approximately 10 percent ofBotswana’s imports. Similarly, machinery, mechanical and electrical appliances make up afurther 9 percent of anti-dumping cases and constitute 19 percent of Botswana’s imports.Critically, duty exemptions do not apply to anti-dumping duties. Government shouldcommission a short follow-up research piece to isolate how anti-dumping duties haveincreased the anti-export bias by raising the input costs for producers. At the same time,Botswana should act within SACU to further reduce the number of anti-dumping initiationsand to change SACU duty-exemption rules (see paragraph 16 above). Further, Governmentcould advocate the development of tighter rules on anti-dumping for all WTO membersthrough the WTO Doha Development Agenda.

…while Botswana imposes very restrictive non-tariff barriers on some sensitive products it

should refrain from using import bans as a tool to sustain local enterprises against foreign

competition.

47 Import bans are an arbitrary measure that is borne by the consumer and contributes to theanti-export bias. Botswana makes use of import licensing and import bans on the imports ofsome agricultural products (bread, beef, fish produce, eggs, chicken and – when in season –oranges, cabbages, tomatoes, and milk). The limits amount to an import ban for beef, eggs,poultry and bread. Botswana imposed a ban on the importation of bread in October 2003 tosupport local bakeries. Consumers had hitherto chosen higher-quality imported long-life

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bread, but were denied this choice by the ban. More critically for exporters, a further importlimitation is being considered at the time of writing which would ban the importation of allsecond-hand vehicles that are more than five years old. This would be enacted ostensibly onsafety grounds, but would more likely be initiated to protect largely South African producersfrom imports of reconditioned Japanese vehicles.

48 Government should undertake a detailed review of all import permits with a view toremoving this requirement for all but a limited number of commodities for security, publichealth and public morality reasons. In particular, Botswana should avoid any newrestrictions on the import of second-hand vehicles. More broadly, the Botswana authoritiesshould ask the new SACU Secretariat to set up a monitoring program of NTBs in similarfashion to a COMESA exercise.

So is there an ‘anti-export bias’?

49 Yes, but the economics of being in a customs union complicate the analysis. Import tariffs,and restrictions and regulations do impose a moderate anti-export bias on the economy.However, because high protection has supported industries largely in South Africa ratherthan Botswana, SACU tariff barriers have had a less distortionary impact on Botswana thanmight be expected. Botswana is therefore in an unusual position: because of the existence ofthe SACU customs union, a bias towards domestic production within SACU does not fullytranslate into a domestic investment bias towards import-competing production forBotswana.

50 Nevertheless, tariff and non-tariff barriers do have some impact on incentives to export fromBotswana. First, they reduce consumer welfare and thus national income and investment,although the extent to which tariffs are the principal cause of trade diversion in the region canbe disputed (Charalambides, 2004). Second, they have switched demand and thereforeinvestment towards some protected industries in Botswana – textiles and clothing tariffs haveraised the price of clothing on the domestic market throughout SACU, making it moreprofitable to sell into the domestic market and in South Africa. An import ban and a 40percent external tariff may have had a similar impact in the beef sector, where supplies toBMC for export are too low (see paragraph 24). Flour milling, furniture production, eggproduction, and dairy production also depend on non-tariff protection. Third, SACU tariffsand national non-tariff barriers raise the cost of inputs used by export companies. Thetransport sector is a good example. Trucks are not considered as machinery, hence they facetariffs and VAT. Motor vehicles face particularly high tariffs (see Box 3-2). Tariffs oncomputer equipment were reduced to zero only in 2004 after successive requests by theBotswana authorities. Further, some industrial materials still face tariffs, such as steel whichfaces a tariff of 5 percent, furniture of approximately 20 percent, transport equipment(approximately 12 percent), and printing and publishing (approximately 7 percent). Inaddition, anti-dumping duties are passed on to exporters as described above.

Protection of services from foreign and domestic competition also raises business input

costs for exporters, and represents a potential negotiating chip…

51 The state retains a monopoly in key utilities and elements of the transport sector: fixed-linetelecommunications, water supply and sewerage services, electric power supply, the airlineand the railway. The airline and telecommunications represent a major potentialimprovement to exporter efficiency – tourism operators surveyed for this study consistentlyidentified air transport costs as a major restriction (see recommendations on air transport

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reform, paragraph 71). More generally, service companies identify internationaltelecommunications costs as a particular constraint. To reduce internationaltelecommunications prices, Government should consider instructing the BotswanaTelecommunications Authority (BTA) to issue an unlimited number of licences forinternational voice services and to lift the ban on providing voice over internet protocol. Themonopoly of BTC should not be allowed to continue indefinitely to allow BTC to restructure– Government should set a target date for the privatisation of BTC.

52 Such reforms could be used as a ‘negotiating chip’ in regional or WTO trade negotiations.Botswana has committed to under 5 percent of all possible WTO GATS servicescommitments, which is less than the average developing country index of 6.9 percent (WTOTPR, 2003). There are no GATS commitments on supply of services by temporarymovement of people nor (generally) on cross-border trade. This means in some cases thatservice has to be supplied through commercial presence by a supplier who meets all thenormal residency requirements.

Because of various preferential agreements, the levels of external tariffs imposed by

trading partners are not a major barrier to export growth.

53 Diamonds are allowed duty-free access to the EU market regardless of the trade regime inplace. The vast majority of Botswana’s other main products take place under preferentialtrading arrangements or the SACU customs union, hence face few tariff restrictions.

54 Exports to South Africa and other SACU members enter duty and quota-free. Most exportsto the US take place under AGOA. Exports to the EU take place under the Cotonouarrangements, where ACP countries are entitled to a 100 percent reduction in ad valorem

customs duties. The export weighted MFN tariff facing Botswana’s food products to the EUis 55 percent, while the average applied tariff is only a 5 percent (CEPII, 2004). CEPII(2004) find that, given a high level of protection on beef carcasses, there is no evidence oftariff escalation for food products. There are currently no import tariffs or export duties onostrich meat exports to the EU market. Botswana has preferential access to several importantmarkets for garment and textile products. As an ACP country, it has duty and quota-freeaccess for textiles and apparel to the EU. Under AGOA, Botswana qualifies as a ‘least-developed country’. This means that until September 2007 it can produce apparel fromfabric purchased anywhere in the world and ship it to the United States duty-free. As aSADC country, its products are given preferential duty treatment when exported to SADCcountries outside SACU. Zimbabwe and Botswana have a free trade agreement that datesback to 1956.

The erosion of these trade preferences is a concern in a number of sectors

55 Botswana faces the inevitable erosion of its existing preferential market access through thereduction of tariffs and trade barriers under WTO, regional and bilateral trading agreements,.

56 The textile industry has faced the phase-out of multi-fibre agreement (MFA), and faces thepotential removal of AGOA special preferences after September 2007. With MFA phase-out,major low-cost apparel producing countries, most notably China, are likely to take a greatershare of the apparel export market, although it is too early to fully assess the impacts. Thereis no doubt that some buyers will switch from African suppliers to Asian ones, particularlythose in price sensitive markets segments. On the other hand, price is not the only point ofcompetition in apparel: African apparel meeting the rules-of-origin can still be imported

xviii

duty-free into the USA and Europe; many buyers do not want to source all their productsfrom a single country or region; and China and other low-cost Asian producers do not havean infinite capacity to expand production.

57 AGOA has been the dominant driving force behind recent growth of the apparel sub-sector ina number of Sub-Saharan African countries, including Botswana. Botswana’s AGOA ‘LDCstatus’ means that manufacturers are able to source highly competitive Asian manufacturedcloth as their raw material input. Currently, this special LDC advantage will expire midwaythrough 2007 and it is unlikely to be extended. This would have the greatest impact on thewoven apparel segment of the sub-sector, employing 25 percent of the workforce. Thesurvival of these factories is at risk if they cannot source Sub-Saharan qualifying fabric.Botswana needs to start preparing now for this eventuality. Coping strategies could includeshifting market focus away from the USA to other markets, shifting the sourcing of rawmaterial to AGOA eligible countries, reducing manufacturing costs through improved labourand material efficiency and by investing in more automated equipment, and shiftingproduction to apparel made from fabric and yarn that is considered in short-supply in theUSA and, therefore, still duty-free to the USA under AGOA.

58 Botswana is protected from full-scale competition with the most efficient producers of beefin the world in a small number of markets only, of which the EU and South Africa (plusNorway) are probably the most important. ACP countries are covered by Protocol 4 on beefand veal of the ACP–EU Partnership Agreement of 2000 which gives beef a 92 percentreduction in customs duties. The prospect of price competition pushing EU prices belowtheir current level would be increased greatly if Botswana were to face direct competitionwith Latin American or Australasian suppliers. At present, Botswana has a preferential tariffquota (TRQ) under Cotonou. Because both the Cotonou and WTO TRQs are small relativeto the size of the European market, these imports do not significantly push down prices. TheDoha Round or an EU–Mercosur Free Trade Agreement could result in a significant increasein the size of the TRQ for Botswana’s competitors, while a merging of EPA and WTO quotascould have the same impact. While the main policy response is an improvement incompetitiveness in the beef sector, Botswana should nevertheless push for the EU to widenexisting trade preferences for beef products by allowing customs duty, quota and special dutyfree export of a wider range of beef and meat products.

Non-Tariff Barriers represent a more serious market entry restriction than tariffs, and

rules of origin are particularly damaging...

59 For trade with regional neighbours, the more obvious non-tariff barriers (NTBs) – foreigncurrency controls, import licensing, price controls and state marketing – have been removed,but a number of more non-transparent and arbitrary NTBs remain. For exports outside ofSACU, complex rules of origin act as a substantial barrier to exports. The power of rules oforigin is apparent from their positive impact in AGOA, and in their negative impact indecreasing Botswana’s textiles export to Zimbabwe. Rules of origin have proven to be themost contentious part of implementing the SADC Trade Protocol. Current rules of originwill be very difficult to satisfy for regional producers and will therefore hinder regionalvertical integration (Brenton, 2004). Special rules of origin have been applied to certainsectors (e.g., motor vehicles and sugar), and negotiations for other sectors are stillongoing—most notably textiles and apparel, and wheat and flour. For textiles and apparel,imported raw materials will have to undergo a minimum of two stages of production (“doubletransformation”) before they can be considered to have originated in a SADC country.SADC rules of origin on vehicles and components will also make it difficult for Botswana’s

xix

small auto sector to sell to non-SACU SADC countries. SADC Member States plan todiscuss rules of origin as a follow-up discussion to the Trade Protocol Mid-Term Review.

60 Botswana should launch a concerted lobbying effort to improve rules of origin in allpreferential trading agreements, starting with a Government-initiated ‘rules of origin’strategy paper. In particular, this could advocate for the Economic Partnership Agreementwith the EU to allow for single transformation of goods such as found in the AGOAagreement with the United States. In addition, Botswana should lobby for simplified andliberalised SADC rules of origin in the SADC MTR follow-up discussions (quota restrictionsshould be removed and the derogation should become the general rule for all SADC MemberStates). Botswana should press within SACU for a concerted and more liberal approach torules of origin – SACU has been resistant to relaxing rules of origin within SADC, insistingon higher local content to qualify for preferential treatment than other SADC members wouldlike to accept. Botswana should combine efforts with other textile and garment exporters inthe region to lobby for the AGOA LDC provision to be made permanent.

…and the EU’s stringent SPS regulations on beef and ostrich exports are becoming ever

more troublesome and costly to implement.

61 Compliance with the EU’s SPS requirements is necessary not only to continue exporting toEurope, but also to many other high-priced markets for both beef and ostrich sales. Part ofthe reason for the Botswana Meat Commission’s (BMC’s) failure to operate at full capacityhas been the closures required from time to time to deal with animal disease outbreaks. Inthe ostrich sector, the BOC also cannot currently isolate and quantify such costs. One of theirconcerns is that the multi-species abattoir is required by government to meet stringent EUstandards for all its slaughter operations, including cattle service slaughters for domestic beefprocessors. This renders the abattoir less competitive in slaughter service provision relativeto its domestic rivals. Detailed estimates of the costs of compliance in both sectors should bea priority for further research so that policymakers may fully assess the costs and benefits ofthe current emphasis on sales to the European Union.

There are various other non-tariff barriers limiting regional and international exports

from Botswana.

62 Import permits are required for agricultural products in most SADC countries. South Africaimposes specific levies on some imported and domestically produced agricultural products,although these are not high. Local content requirements are used in all SACU countries.Visa restrictions increase the cost of travel and business, and have a particular impact on theservices sector. There is no provision in the new SACU agreement to allow for the freermovement of people. If SACU is to move towards a single market, this is an important steptowards its achievement. Botswana should work with other SACU members to develop aregional approach to easing visa restrictions, starting with a SACU-wide visa, possiblyincluding SADC members.

Trade Facilitation – Actions at the National, Regional and International Level

Botswana faces a number of ‘trade facilitation’ constraints

63 Key features of Botswana’s trade facilitation landscape include proximity to major SouthAfrican markets, distance from major developed country markets, and – as a landlockedcountry - reliance on transit through its neighbours, primarily South Africa. Botswana is onlyfour hours by road to the major South African conurbation of Johannesburg. Botswana’s

xx

exports to the US and EU largely pass through the Port of Durban, which is just 9 hoursjourney from Gaborone. The costs of transport links to other countries in the region areraised by poor and fragmented infrastructure in neighbouring countries. High transport costswere quoted as a major constraint for all of the background sector studies conducted for thisreport. Transportation costs for imports of intermediate and capital inputs and exports fromBotswana to South Africa and beyond are high in comparison to international competitorssuch as Mauritius and South Africa, or Argentina or Brazil for beef.

Shipping costs are expensive from Southern Africa – Government should use its own

procurement program to increase competition

64 Naude (2001) estimates that shipping costs from South Africa are significantly above worldprices – with the margins on imports almost 50 percent higher than the average fordeveloping countries. Despite a general reduction in shipping costs worldwide over the lastthree decades, costs from South Africa have risen. Private freight companies suggest thatGovernment, a major importer of goods, does not provide sufficient scrutiny to its transportcost on imports. Government should undertake a review of government-procured shippingcosts to assess whether greater price pressures could be introduced into the transport market.This could review whether government should import FOB1 and open transit to tender fromnational and international importers. As part of this review, CSO should build an index ofshipping costs on which to base analysis (‘FOB’ and ‘CIF’ costs).

Walvis Bay and the Trans-Kalahari Corridor offer an alternative route out, but has not yet

become popular.

65 By using Walvis Bay, Botswana manufacturers can reduce shipping time to Europe and theEast Coast of the United States by a week or more compared to Durban, although the cost issimilar. This is particularly important in the apparel sector where a short response time toorders is crucial. This route uses the Trans-Kalahari highway linking Pretoria to Walvis Bayvia Botswana. An important component of maritime transport costs is seaport efficiency.South Africa's port turnaround times tend to be up to 5 times as long as that of competitors(Naude, 2001). Port clearance in South Africa on average takes two to three days, and thereare many complaints about congestion, especially at the Port of Durban. Container handlingat Walvis Bay is more efficient than the port of Durban; and, according to some officials,there is less pilferage of goods. Unfortunately, direct call to the USA has not yet beenestablished, in part because Walvis Bay is not yet certified for export directly to the US. TheWalvis Bay route has so far not proved attractive to exporters, partly because traders areaccustomed to the Durban route. Hence, traffic to and from the port to Botswana is low,raising transport costs and limiting the frequency of sailings from Walvis Bay. Governmentshould work with the Walvis Bay Corridor Group and other authorities to encourage greateruse of Walvis Bay route.

Botswana has a relatively well-developed and well-managed land transport infrastructure,

although costs could be reduced through removing cabotage cartage laws and reviewing

road charging

66 For exports requiring sea ports, Botswana faces high inland transportation costs to Durbanand Walvis Bay. The average cost to send a 40 foot container to Durban from Gaborone isapproximately Pula 12,000 (US$2460) to 14,000 (US$2870). This is less than the equivalentcost for Zambia, but equal to Zimbabwe and well above Swaziland (Tagg, 2002). Auto-

1 Bearing in mind that CIF costs often exclude hidden transport costs, such as demurrage charges.

xxi

component exporting firms interviewed for this study reported that the Durban to Gaboroneand back route for raw and finished products constitute nearly 60 percent of total transportcosts. There are four areas of concern on land transport.

67 First, reviews of the domestic road transport market suggest that there are no major policyrestrictions to new entry among the commercially established operators, with the exception ofpassenger transport, which is restricted to citizens-owned enterprises. However, restrictivecabotage laws (common to all SADC countries) contribute to the high costs of transport inthe region – cargo carriers are not allowed to pick up loads at the delivery destination exceptthose destined for their originating country. Government should undertake a review of theimpacts of restrictive cabotage laws with a view to initiating a coordinated effort to liberalisethese restrictions. Regulatory reform has had a significant impact on prices in other countries– for example, liberalization of the transport market in France reduced transport costs bybetween 20-40 percent.

68 Second, road charging is a particularly contentious regional issue. Botswana recently revisedits road user charges for foreign-owned freight vehicles, with an increase of 797 percent infees for the Tlokweng-Gaborone Section. Typical of transport policy changes in the region,the increase was made without consultation with SACU partners. Government should reviewthese new road charges with a view to revoking them, and should encourage greaterconsultation among SACU Transport Ministries, possibly by establishing a transport deskwithin SACU.

69 Third, soda-ash relies on the South African rail parastatal to transport its product withinSouth Africa. The Botswana authorities should investigate the pricing of rail transport bySpoornet, possibly taking up any concerns about monopoly pricing with South Africanofficials through SACU.

70 Fourth, access to many of the main tourism attractions is limited to gravel roads which aremostly only navigable by means of 4-wheel drive vehicles. The undeveloped road systemhas been applied as a control mechanism to limit tourism. Given the need to spreadBotswana’s tourism appeal across a wider spectrum of market segments (in particular theself-drive market), the possibility of upgrading some of the gravel access roads to and withinthe parks should be investigated.

High air transport costs are a major constraint to the development of services exports, re-

enforcing the importance of air liberalisation

71 Passenger travel costs are high. Market access to the air transport sector is quite restrictive incomparison with road transport. Air Botswana is Botswana’s only designated scheduledairline, with the Botswana Government as sole shareholder. A new bilateral agreement withSouth Africa will phase-in an open-skies, multi-designated aviation regime over three yearsfrom 2004. This should have a major impact on prices. As part of an export diversificationstrategy, progress in phasing in the agreement should be closely monitored to ensure that itgets implemented within the agreed time frames, if not sooner. Government should alsoconsider setting a new target date for the privatisation of Air Botswana.

xxii

Botswana Customs is efficient, although the difference between South Africa’s Value

Added Tax (VAT) and Botswana’s VAT creates a second economic border which should be

removed…

72 Customs clearance procedures were recently reviewed and simplified prior to implementationof an UNCTAD project to install the ASYCUDA++ computer system in all the main customsclearance points in the country. Imported inputs for export production get customs clearancelargely without unnecessary restrictions. However, the difference between South Africa’svalue added tax (VAT) and Botswana’s VAT creates a second economic border. Despitebeing major trading partners, Botswana’s VAT rate is 10 percent, while South Africa’s is 14percent. To mitigate the risk of hijacking or pilferage of goods, South Africa recently made ita requirement that all Botswana freight companies forwarding goods to Durban for exportmust pay VAT collected before the goods are allowed through South Africa, then have itreimbursed. There have been a number of complaints about the reimbursement proceduresand delays.

73 Government should propose a SACU-wide strategy for VAT harmonisation. This shouldinclude costings comparing the revenue gains/losses with estimates of the economic lossesassociated with the increased transaction costs of the VAT differentials. A further resultingrestriction is the time allowed for the groupage of products within South Africa – exporters orfreight forwarders must prove that goods leave South Africa within 30 days or face a penalty.This rule makes it difficult to containerise goods in South Africa. Botswana should lobby theSouth African authorities (possibly through SACU) to extend the time allowed for groupage(containerization) of products in South Africa before they are liable for South African VAT.

…while customs-related constraints to regional trade require a push for greater

cooperation.

7 4 Weak and inefficient customs in neighbouring non-SACU countries create significantbarriers to regional integration. The textiles sector is a good example – border constraints inZambia and Zimbabwe will limit the ability of Botswana apparel manufacturers to use cottonfrom these countries in their production chain – this could be particularly important if theAGOA LDC special exemption is ended in 2007 (see paragraph 57). Further, there arediffering customs electronic platforms between South Africa and Botswana, which meansthat traders with South Africa still need to fill out forms manually to clear goods. In addition,although electronic documentation is now available in the larger customs offices, it must stillbe accompanied by a paper version as paper documentation is regarded as the only legaldeclaration.

75 Botswana should push for an effective agreement on trade facilitation in the WTO and shouldalso continue to use existing regional fora, such as SADC, to tackle these obstacles. In thelonger-term, Government should champion the creation of a regional SACU customsauthority. This would ensure common procedures, reducing transaction costs for shippers.The Department of Customs and Excise is exploring the concept of a ‘one-stop border post’with South Africa to reduce border crossing time. As an interim measure, this should bestrongly encouraged.

xxiii

Border constraints are onerous for tourists entering by car, and there is a need to remove

multiple tourism taxes and introduce a regional tourist visa.

76 Botswana’s central location in Southern Africa and the fact that it borders four countriesplaces it at the centre of the Southern Africa tourism circuit. The absence of a coordinatedand tourist-friendly immigration and customs system at the various entry points results inmajor frustrations and lengthy delays, and could impact negatively on the visitor experience.Botswana, Zimbabwe, South Africa and Zambia all have different immigration and customsrequirements and tax regimes, with the result that visitors have to go through a variety ofdiffering procedures in order to move between them. This makes a quick round trip a majorexercise with the visitor having to pass through six border control points, often having to waitin long queues, paying a variety of steep entry taxes and wasting valuable time. Governmentshould explore the scope for the introduction of a single, special tourist visa which includesentry tax costs. This could be approved and purchased in advance of the visit at a foreignoffice of any of the four tourism circuit countries.

Data Limitations

One final point – this study came across a range of data constraints. Resolving these –

particularly the lack of recent trade data – will be necessary in developing an export

strategy

7 7 First and foremost, there has been a two-year delay in accessing reliable trade data.Government should review procedures and capacity for collecting trade data at the CSO. TheMinistry of Finance and Development Planning must find a way to integrate the software ofits two departments that collect (Customs) and analyse (Trade Statistics in CSO). Datashould be made available in a usable format on a quarterly basis. One solution could be tocontract out this role. Second, there are major weaknesses in the quality of services exportand import data (paragraph 1.22). There should be a concerted effort involving the CSO,Bank of Botswana and other relevant departments to reconcile and improve the quality ofservices exports information. Third, good quality data on productivity would help to identifypossible sources of inflationary pressures and the underlying reasons for lack ofcompetitiveness. Fourth, the calculation of a producer price index (PPI) for Botswana wouldfacilitate the calculation of an REER index that is consistent with good international practice.Botswana’s REER calculations should, as far as possible, use PPIs for trading partnerinflation rather than consumer prices indices.

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arag

rap

h 3

.51

).

Th

is w

ou

ld o

f co

urs

e re

qu

ire

an e

stim

atio

n o

f th

e b

ud

get

im

pac

ts a

nd

an

ass

essm

ent

of

ho

w t

his

wo

uld

fit

into

ov

eral

l ta

x p

oli

cy.

No

n-m

iner

al i

nco

me

tax

, w

hic

h i

ncl

ud

es p

erso

nal

in

com

e ta

xes

as

wel

l,

acco

un

ts f

or

ab

ou

t fi

fteen

perc

en

t o

f to

tal

go

vern

men

t re

ven

ue,

alt

ho

ug

h i

t is

beco

min

g m

ore

imp

ort

ant

as m

iner

al r

even

ues

sta

gn

ate

and

SA

CU

rev

enu

es d

ecli

ne

(par

agra

ph

2.2

3).

MF

DP

Nex

t 3

yea

rs

MODERATE

9.

Co

nsi

der

atio

n s

ho

uld

be

giv

en t

o r

emo

vin

g t

he

nee

d f

or

a m

anu

fact

ure

r to

ap

ply

to

th

e M

inis

try

of

Fin

an

ce a

nd

Dev

elo

pm

en

t P

lan

nin

g i

n o

rder

to b

e e

lig

ible

fo

r th

e r

ed

uced

tax

rate

.

Th

e c

urr

en

t

syst

em

, w

here

by

an

ap

pli

cati

on

is

lod

ged

wh

ich

is

then

care

full

y s

cru

tin

ized

, se

em

s to

ad

d a

n

un

necess

ary

lay

er

of

bu

reau

cra

cy

.

Co

mp

an

ies

co

uld

be p

erm

itte

d t

o t

ak

e a

po

siti

on

as

to t

heir

elig

ibil

ity

(in

lin

e w

ith

sel

f-as

sess

men

t p

rin

cip

les)

, w

ith

th

e D

epar

tmen

t o

f T

axes

th

en a

ble

to

rev

iew

any

cla

im (

par

agra

ph

2.2

6).

MF

DP

2006

MODERATE

Th

e

Ince

nti

ves

Reg

ime

10.

Th

e re

serv

atio

n p

oli

cy s

ho

uld

be

refo

rmed

. A

s it

sta

nd

s, i

t is

a r

estr

icti

on

on

tra

de

in c

erta

in a

reas

of

com

mer

cial

act

ivit

y (

Tab

le 2

-1:

Su

mm

ary

of

Maj

or

Ince

nti

ve

Pro

gra

mm

es a

nd

par

agra

ph

2.1

2).

MT

I

Nex

t 3

yea

rs

MODERATE

iii

11.

Go

ver

nm

ent,

in

co

op

erat

ion

wit

h S

AC

U a

nd

SA

DC

, sh

ou

ld e

stab

lish

a c

lear

er r

ole

fo

r co

op

erat

ion

to

avo

id t

ax c

om

pet

itio

n i

n t

he

reg

ion

(p

arag

rap

h 2

.32

).

MF

DP

, B

UR

S

Longer

-run

MO

DE

RA

TE

12.

Go

ver

nm

ent

to c

om

mis

sio

n c

ost

-ben

efit

rev

iew

of

ind

ust

rial

reb

ate

for

raw

mat

eria

ls i

mp

ort

ed f

or

pro

du

ctio

n f

or

sale

s in

to t

he

do

mes

tic

mar

ket

(p

arag

rap

h 3

.75

).

MF

DP

2006

MO

DE

RA

TE

13.

As

par

t o

f a

bro

ad e

xp

ort

div

ersi

fica

tio

n s

trat

egy

, B

ots

wan

a sh

ou

ld r

eco

nsi

der

an

d a

pp

rais

e an

y b

road

or

specif

ic s

ub

sid

ies

(esp

ecia

lly

in

tere

st r

ate

su

bsi

die

s) f

or

no

n-t

rad

eab

le g

oo

ds

acti

vit

ies.

F

or

exam

ple

, C

ED

A s

ho

uld

ev

alu

ate

pro

ject

pro

po

sals

wit

h a

vie

w t

o t

hei

r n

et b

enef

it t

o B

ots

wan

a, u

sin

g

shad

ow

pri

ces

that

pla

ce a

pre

miu

m o

n t

rad

eab

le g

oo

ds

(par

agra

ph

2.1

9).

MF

DP

Nex

t 3

yea

rs

MO

DE

RA

TE

14.

Cen

tral

Sta

tist

ical

Off

ice

or

ano

ther

su

itab

le a

gen

cy o

r th

ink

-tan

k t

o c

on

du

ct a

rev

iew

of

on

go

ing

imp

act

mo

nit

ori

ng

of

exis

tin

g g

ov

ern

men

t su

pp

ort

pro

gra

ms,

tax

in

cen

tiv

es a

nd

res

erv

atio

n p

oli

cies

set

ou

t in

Tab

le 2

-1:

Su

mm

ary

of

Maj

or

Ince

nti

ve

Pro

gra

mm

es.

MF

DP

, C

SO

Nex

t 2

yea

rs

HIG

H

15.

Go

vern

men

t co

uld

dev

elo

p a

deta

iled

an

d c

om

pre

hen

siv

e n

ati

on

al

hu

man

reso

urc

es

dev

elo

pm

en

t

stra

teg

y,

wh

ich

fo

cuse

s in

par

ticu

lar

on

th

e o

ccu

pat

ion

al r

equ

irem

ents

of

the

key

gro

wth

sec

tors

in

th

e

eco

no

my

. T

he

dev

elo

pm

ent

of

a la

bo

ur

mar

ket

in

form

atio

n s

yst

em i

s es

sen

tial

. M

ost

im

po

rtan

tly

,

this

sh

ou

ld i

ncl

ud

e a

com

pre

hen

siv

e re

form

pla

n f

or

the

vo

cati

on

al e

du

cati

on

an

d t

rain

ing

sec

tor

(par

agra

ph 2

.70).

ML

HA

, M

OE

,

MF

DP

, B

OT

A,

TE

C

Nex

t 2

yea

rs

HIG

H

16.

Th

e c

om

pan

y t

ax

in

cen

tiv

e f

or

train

ing

req

uir

es

rev

iew

ing

an

d r

ep

lacin

g w

ith

a m

ore

eff

ecti

ve

ince

nti

ve

for

hu

man

res

ou

rce

dev

elo

pm

ent

(par

agra

ph

2.2

8).

MF

DP

2006

MO

DE

RA

TE

Th

e L

abo

r

Mar

ket

17.

A r

eso

luti

on

of

the

wo

rk p

erm

its

issu

e is

als

o r

equ

ired

, p

oss

ibly

wit

h p

erm

its

bas

ed o

n a

po

ints

sy

stem

and

/or

a m

inim

um

nu

mb

er o

f p

erm

its

awar

ded

au

tom

atic

ally

fo

r co

mp

anie

s (p

arag

rap

h 2

.65

).

In

par

ticu

lar,

Go

ver

nm

ent

sho

uld

rea

sses

s th

e co

st o

f o

bta

inin

g a

wo

rk p

erm

it a

nd

vis

a.

DW

P

2005-6

VE

RY

HIG

H

iv

CH

AP

TE

R 3

: T

HE

EN

AB

LIN

G E

NV

IRO

NM

EN

T I

I: E

XP

OR

T A

ND

SE

CT

OR

-SP

EC

IFIC

PO

LIC

IES

Sec

tor

Po

lici

es -

Cas

e S

tud

ies

Beef

18.

Up

com

ing

Go

ver

nm

ent

liv

esto

ck s

tud

y t

o f

ull

y c

on

sid

er o

pti

on

s fo

r B

MC

pri

vat

isat

ion

, th

e re

mo

val

of

exp

ort

mo

no

po

ly (

in p

arti

cula

r to

So

uth

Afr

ica)

an

d t

he

po

ten

tial

fo

r tr

ade

lib

eral

isat

ion

to

in

crea

se

export

s (p

arag

raph 3

.12

).

MoA

2005-6

VE

RY

HIG

H

Ostriches

19.

Go

ver

nm

ent

to e

lim

inat

e th

e cu

rren

t o

stri

ch e

xp

ort

lev

y (

par

agra

ph

3.2

4).

MoA

2005-6

HIG

H

Tourism

20.

Th

e es

tab

lish

men

t o

f lo

cal

tou

rism

ass

oci

atio

ns,

wh

ich

are

aff

ilia

ted

to

HA

TA

B,

in t

he

mai

n t

ou

rism

cen

tres

is

reco

mm

end

ed.

L

oca

l b

usi

nes

ses

of

such

ass

oci

atio

ns

cou

ld c

oll

abo

rate

wit

h t

he

pu

bli

c

sect

or

on

iss

ues

, su

ch a

s th

e cl

ean

ing

up

an

d b

eau

tifi

cati

on

of

tou

rism

to

wn

s, s

afet

y,

infr

astr

uct

ura

l

issu

es, co

mm

unit

y a

war

enes

s an

d t

ouri

sm i

nfo

rmat

ion p

rovis

ion a

nd r

eser

vat

ions

(par

agra

ph 3

.37).

21.

It i

s cr

uci

al t

hat

th

e D

WN

P b

e an

act

ive

and

key

par

tner

in

th

e fo

rmu

lati

on

an

d i

mp

lem

enta

tio

n o

f th

e

nat

ion

al t

ou

rism

str

ateg

y,

be

clo

sely

ali

gn

ed t

o t

he

Bo

tsw

ana

To

uri

sm B

oar

d,

and

th

at t

he

Go

ver

nm

ent

allo

cate

an

d m

anag

e it

s b

ud

get

all

oca

tio

n a

nd

in

ves

tmen

t in

th

e D

OT

an

d t

he

DW

NP

as

a h

oli

stic

pac

kag

e, w

ith

in a

co

mm

on

ly a

gre

ed t

ou

rism

dev

elo

pm

ent

stra

teg

y (

par

agra

ph

3.3

7).

22.

Sin

ce t

he

tou

rism

su

cces

s o

f em

erg

ing

des

tin

atio

ns

is r

elia

nt

up

on

th

e ac

tiv

e p

arti

cip

atio

n a

nd

jo

int

vis

ion

ing

of

the g

ov

ern

men

t an

d t

he p

riv

ate

secto

r, a

fo

rmal

part

ners

hip

ag

reem

en

t sh

ou

ld b

e

con

sid

ered

, w

ith

bo

th p

arti

es c

om

mit

tin

g t

hem

selv

es t

o t

he

imp

lem

enta

tio

n o

f a

join

tly

ag

reed

nat

ion

al

tou

rism

str

ateg

y t

hat

wil

l g

uid

e to

uri

sm d

evel

op

men

t o

ver

th

e n

ext

dec

ade

(par

agra

ph

3.3

9).

23.

A f

orm

al p

artn

ersh

ip a

gre

emen

t b

etw

een

th

e g

ov

ern

men

t an

d t

he

pri

vat

e se

cto

r sh

ou

ld b

e co

nsi

der

ed.

HA

TA

B

Nex

t 3

yea

rs

MO

DE

RA

TE

MF

DP

, D

WN

P

Nex

t 2

yea

rs

MO

DE

RA

TE

DW

NP

,

HA

TA

B

Nex

t 2

yea

rs

MO

DE

RA

TE

DW

NP

v

Th

is c

ou

ld i

ncl

ud

e fu

nd

ing

co

op

erat

ion

an

d i

n t

his

reg

ard

th

e es

tab

lish

men

t o

f a

ded

icat

ed T

ou

rism

and

Co

nse

rvat

ion

Man

agem

ent

Fu

nd

, to

be

fun

ded

th

rou

gh

rea

list

ic l

evie

s an

d c

har

ges

at

all

tou

rism

po

ints

su

ch a

s p

ark

s, m

ob

ile

tou

r o

per

ato

rs,

ho

spit

alit

y e

stab

lish

men

ts,

etc.

(A

to

uri

sm b

ed l

evy

is

curr

entl

y b

ein

g c

har

ged

, b

ut

it i

s sm

all

and

on

ly a

pp

lica

ble

to

acc

om

mo

dat

ion

en

terp

rise

s) (

par

agra

ph

3.3

9).

24.

Fu

rth

er r

esea

rch

is

nee

ded

on

th

e co

sts

and

ben

efit

s o

f al

low

ing

a l

on

ger

co

nce

ssio

n t

erm

fo

r to

uri

sm

leas

es i

n w

ild

life

man

agem

ent

area

s (p

arag

rap

h 3

.41

).

Nex

t 2

yea

rs

MODERATE

DW

NP

2006

MODERATE

Fin

an

cial

Ser

vice

s E

xport

s

25.

Go

vern

men

t to

co

nsi

der

bro

ad

en

ing

IF

SC

in

cen

tiv

es

by

mak

ing

all

serv

ice e

xp

ort

ers

eli

gib

le f

or

ince

nti

ves

an

d r

enam

ing

th

e IF

SC

(In

tern

atio

nal

Fin

anci

al S

erv

ices

Cen

tre)

th

e IS

C (

Inte

rnat

ion

al

Ser

vic

es C

entr

e) (

par

agra

ph 3

.48).

26.

Go

ver

nm

ent

to i

ncr

ease

eff

ort

s to

neg

oti

ate

do

ub

le t

axat

ion

ag

reem

ents

27.

Go

vern

men

t to

ex

ped

ite a

co

mp

lete

ov

erh

au

l o

f th

e r

eg

ula

tio

n o

f th

e n

on

-ban

k f

inan

cia

l sy

stem

,

incl

ud

ing

off

sho

re j

uri

sdic

tio

n.

In

th

is r

egar

d,

a u

nif

ied

no

n-b

ank

fin

anci

al s

yst

em r

egu

lato

r ap

pro

ach

,

sim

ilar

to M

auri

tius

and S

outh

Afr

ica,

could

be

one

poss

ible

cours

e to

foll

ow

(par

agra

ph 3

.53).

28.

Go

ver

nm

ent

to m

ake

furt

her

eff

ort

s to

str

eam

lin

e th

e p

roce

ss o

f o

bta

inin

g I

FS

C t

ax a

nd

reg

ula

tory

app

rov

al a

nd

red

uci

ng

th

e n

um

ber

of

bo

die

s in

vo

lved

(cu

rren

tly

th

e IF

SC

, th

e M

FD

P a

nd

th

e B

ank

of

Bots

wan

a), poss

ibly

thro

ugh i

ntr

oduci

ng a

one-

step

appro

val

pro

cess

(par

agra

ph 3

.46

).

MF

DP

2005-6

HIGH

MF

DP

Ongoin

g

MF

DP

, B

OB

Nex

t 2

yea

rs

HIGH

MF

DP

, B

OB

2005-6

HIGH

Th

e A

pp

are

l S

ecto

r

29.

BE

DIA

co

uld

ho

ld a

co

nsu

ltati

on

meeti

ng

wit

h t

he m

an

ufa

ctu

rers

wh

o a

re c

urr

en

tly

receiv

ing

sub

sid

ies

un

der

FA

P t

o f

ind

ou

t w

hat

bar

rier

s to

co

mp

etit

iven

ess

each

fac

es.

BE

DIA

nee

ds

to m

ake

sure

th

at t

hes

e b

arri

ers,

so

me

of

wh

ich

are

dis

cuss

ed i

n t

his

rep

ort

, ar

e o

ver

com

e as

far

as

po

ssib

le

(par

agra

ph 3

.62).

30.

In-c

om

pan

y i

nte

rven

tio

ns

to b

e d

evel

op

ed a

s p

art

of

the

nat

ion

al H

IV/A

IDS

str

ateg

y (

par

agra

ph

3.6

6).

31.

BE

DIA

co

uld

dev

elo

p a

co

mp

reh

ensi

ve

resp

on

se t

o t

he

low

lev

els

of

pro

du

ctiv

ity

in

th

e te

xti

le a

nd

BE

DIA

2005

MODERATE

MoH

,

Ongoin

g

vi

ap

pare

l in

du

stry

.

It s

ho

uld

co

mm

issi

on

pro

du

cti

vit

y a

ud

its

an

d t

rain

ing

need

s an

aly

sis,

id

en

tify

suit

able

ser

vic

e p

rov

ider

s to

ad

dre

ss t

he

nee

ds

of

the

ind

ust

ry b

oth

nat

ion

ally

an

d r

egio

nal

ly,

iden

tify

mea

ns

of

fin

anci

ng

pro

du

ctiv

ity

en

han

cem

ent

and

tra

inin

g a

nd

dev

elo

p t

he

mar

ket

fo

r tr

ain

ing

ser

vic

e

pro

vid

ers

to t

he

indust

ry (

par

agra

ph 3

.65

).

32.

Ind

ust

rial

ists

in

th

is s

ecto

r sh

ou

ld b

e en

cou

rag

ed a

nd

ass

iste

d t

o f

orm

an

in

du

stri

al a

sso

ciat

ion

to

lob

by

an

d

neg

oti

ate

fo

r th

eir

sp

ecif

ic

need

s.

BE

DIA

co

uld

u

se

its

off

ices

to

facil

itate

th

e

esta

bli

shm

ent

of

an a

sso

ciat

ion

of

Bo

tsw

ana

Tex

tile

an

d A

pp

arel

Man

ufa

ctu

rers

th

at i

s co

nst

itu

ted

as

an i

nd

epen

den

t, o

ffic

iall

y r

egis

tere

d b

od

y1.

Th

is a

sso

ciat

ion

wo

uld

th

en b

eco

me

the

key

po

int

of

con

tact

wit

h t

he

ind

ust

ry a

nd

wo

uld

rep

rese

nt

its

inte

rest

s in

dis

cuss

ion

s w

ith

Go

ver

nm

ent

and

Lab

ou

r

Un

ion

s, a

nd

co

uld

par

tici

pat

e in

th

e p

rep

arat

ion

s fo

r tr

ade

neg

oti

atio

ns

(par

agra

ph

3.6

7).

BE

DIA

2006

VE

RY

HIG

H

BE

DIA

2006

MO

DE

RA

TE

33.

Bo

tsw

ana

sho

uld

pro

po

se,

wit

h S

AC

U,

a ch

ang

e in

th

e tr

ade

reg

ime

to a

llo

w a

nti

-du

mp

ing

tar

iffs

to

be

elig

ible

fo

r d

uty

ex

emp

tio

ns

and

reb

ate

sch

emes

(B

ox

4-3

).

MT

I

2006

MO

DE

RA

TE

Imp

ort

Tar

iff

and

Ex

emp

tio

n

Sch

emes

for

Ex

po

rter

s34.

Go

ver

nm

ent

to t

ake

foll

ow

-up

rev

iew

on

wh

eth

er b

road

enin

g t

he

def

init

ion

of

inp

uts

th

at a

re e

xem

pt

fro

m c

ust

om

s an

d V

AT

wo

uld

mak

e a

sig

nif

ican

t co

st d

iffe

ren

ce t

o e

xp

ort

ers

( Erro

r!

Refe

ren

ce

sou

rce n

ot

fou

nd

.).

MT

I

2005

MO

DE

RA

TE

Tra

de

Fin

ance

an

d

Export

Cre

dit

Insu

rance

35.

Co

nd

uct

a p

erf

orm

an

ce a

ud

it o

f th

e p

rov

isio

n o

f p

oli

tical

risk

in

sura

nce b

y M

TI,

in

clu

din

g a

n

asse

ssm

ent

of

nee

d (

par

agra

ph 3

.85

).

MF

DP

2006

MO

DE

RA

TE

36.

BE

DIA

an

d B

DC

to

ap

pra

ise w

heth

er

they

sh

ou

ld c

on

tin

ue i

n t

he p

rov

isio

n o

f fa

cto

ry s

hell

s

(par

agra

ph 3

.82).

BE

DIA

-BD

C

2005

MO

DE

RA

TE

Export

Pro

mo

tio

n

and

Pri

vat

e

Sec

tor

Support

Inst

itu

tio

ns

37.

BE

DIA

to

co

ord

inat

e JI

TA

P i

mp

lem

enta

tio

n t

o b

uil

d o

n w

ork

un

der

tak

en i

n t

his

stu

dy

(p

arag

rap

h

3.8

1).

BE

DIA

2005

MO

DE

RA

TE

vii

38.

Un

der

tak

e a

det

aile

d r

evie

w o

f al

l im

po

rt p

erm

its,

wit

h a

vie

w t

o r

emo

vin

g t

his

req

uir

emen

t fo

r al

l b

ut

a li

mit

ed n

um

ber

of

com

mo

dit

ies

for

secu

rity

, p

ub

lic

hea

lth

an

d p

ub

lic

mo

rali

ty r

easo

ns.

G

ov

ern

men

t

cou

ld r

evie

w t

he

Co

ntr

ol

of

Go

od

s, S

erv

ices

an

d O

ther

Ch

arg

es A

ct,

po

ssib

ly a

pp

lyin

g a

co

sts

and

ben

efit

s ap

pro

ach

to

ass

ess

wh

eth

er a

red

uce

d s

cop

e fo

r th

e A

ct i

s b

enef

icia

l.

Th

is s

ho

uld

in

clu

de

an

asse

ssm

ent

of

the

scope

of

allo

win

g i

ssuin

g o

f im

port

per

mit

s outs

ide

of

Gab

oro

ne

(par

agra

ph 3

.94

).

MT

I

2006

HIG

H

39.

Go

ver

nm

ent

to d

evel

op

a ‘

Sta

nd

ard

s S

trat

egy

’, w

hic

h c

ou

ld i

ncl

ud

e an

ass

essm

ent

of

the

sco

pe

for

gre

ate

r h

arm

on

isati

on

of

stan

dard

s w

ith

in S

AC

U –

in

part

icu

lar

wh

eth

er

it w

ou

ld b

e f

easi

ble

to

intr

od

uce

a s

ing

le s

et o

f st

and

ard

s ac

ross

th

e re

gio

n,

wit

h i

nsp

ecti

on

s to

be

do

ne

by

sin

gle

au

tho

rity

wit

h c

lear

gu

idel

ines

of

wh

y i

nsp

ecti

on

s ar

e b

ein

g d

on

e (p

arag

rap

h 3

.89

).

MT

I- B

ots

wan

a

Bure

au o

f

Sta

ndar

ds

2006

MO

DE

RA

TE

Lic

ensi

ng

Ru

les

and

Sta

ndar

ds

40.

At

the

bo

rder

, th

e D

epar

tmen

t o

f C

ust

om

s an

d E

xci

se c

on

du

cts

ver

ific

atio

n o

f im

po

rt p

erm

its

and

ph

ysi

cal

exam

inat

ion

of

go

od

s o

n b

ehal

f th

e D

epar

tmen

t o

f C

rop

Pro

du

ctio

n a

nd

Fo

rest

ry.

Th

ese

dep

artm

ents

sh

ou

ld b

e li

nk

ed e

lect

ron

ical

ly t

o a

vo

id d

elay

s fo

r im

po

rter

s in

cle

arin

g g

oo

ds

in t

he

even

t o

f q

uer

ies

(par

agra

ph

3.9

4).

Cust

om

s,

MF

DP

2005

MO

DE

RA

TE

CH

AP

TE

R 4

– T

RA

DE

PO

LIC

Y F

OR

EX

PO

RT

GR

OW

TH

42.

Bo

tsw

ana

sho

uld

lau

nch

a c

on

cert

ed l

ob

by

ing

eff

ort

to

im

pro

ve

rule

s o

f o

rig

in i

n a

ll p

refe

ren

tial

trad

ing

ag

reem

ents

, st

arti

ng

wit

h a

Go

ver

nm

ent-

init

iate

d ‘

rule

s o

f o

rig

in’

stra

teg

y p

aper

. I

n p

arti

cula

r,

this

co

uld

ad

vo

cate

fo

r th

e E

co

no

mic

Part

ners

hip

Ag

reem

en

t w

ith

th

e E

U t

o a

llo

w f

or

sin

gle

tran

sfo

rmat

ion

of

go

od

s su

ch a

s fo

un

d i

n t

he

AG

OA

ag

reem

ent

wit

h t

he

Un

ited

Sta

tes.

In

ad

dit

ion

,

Bo

tsw

ana

sho

uld

lo

bb

y f

or

sim

pli

fied

an

d l

iber

alis

ed S

AD

C r

ule

s o

f o

rig

in i

n t

he

SA

DC

MT

R f

oll

ow

-

up

dis

cuss

ion

s (q

uo

ta r

estr

icti

on

s sh

ou

ld b

e re

mo

ved

an

d t

he

der

og

atio

n s

ho

uld

bec

om

e th

e g

ener

al

rule

fo

r al

l S

AD

C M

emb

er S

tate

s).

Bo

tsw

ana

sho

uld

pre

ss w

ith

in S

AC

U f

or

a co

nce

rted

an

d m

ore

lib

eral

ap

pro

ach

to

ru

les

of

ori

gin

– S

AC

U h

as b

een

res

ista

nt

to r

elax

ing

ru

les

of

ori

gin

wit

hin

SA

DC

,

insi

stin

g o

n h

igh

er l

oca

l co

nte

nt

to q

ual

ify

fo

r p

refe

ren

tial

tre

atm

ent

than

oth

er S

AD

C m

emb

ers

wo

uld

lik

e to

acc

ept

(par

agra

ph

4.3

0).

MT

I

Nex

t 2

yea

rs

VE

RY

HIG

H

Mar

ket

Acc

ess

Issu

es

43.

Lo

bb

y t

he

EU

to

im

pro

ve

exis

tin

g t

rad

e p

refe

ren

ces

for

bee

f p

rod

uct

s to

all

ow

cu

sto

ms

du

ty,

qu

ota

an

d sp

ecia

l d

uty

fr

ee ex

po

rt o

f a w

ider

ran

ge o

f b

eef

an

d m

eat

pro

du

cts

, w

ith

ou

t ex

cess

ive

adm

inis

trat

ive

and

san

itar

y r

estr

icti

on

s (p

arag

rap

h 4

.17

).

MT

I, M

OA

Nex

t 2

yea

rs

HIG

H

vii

i

44

.P

rep

are

det

aile

d e

stim

ates

of

the

cost

s o

f co

mp

lian

ce n

eed

to

be

pre

par

ed i

n o

rder

to

fu

lly

ass

ess

the

cost

s an

d b

enef

its

of

the

curr

ent

emphas

is o

n s

ales

to t

he

Euro

pea

n U

nio

n (

par

agra

ph 4

.37).

MoA

2006

HIG

H

45

.B

ots

wan

a sh

ou

ld c

on

tin

ue

to l

ob

by

fo

r th

e A

GO

A L

DC

pro

vis

ion

to

be

mad

e p

erm

anen

t in

ord

er t

o

pro

vid

e p

red

icta

bil

ity

fo

r p

ote

nti

al i

nv

esto

rs i

n a

par

ticu

larl

y u

nst

able

mar

ket

(p

arag

rap

h 4

.21

).

MT

I

Nex

t 2

yea

rs

HIG

H

Do

mes

tic

Pro

tect

ion

and

th

e

Ter

ms

of

Tra

de

46

.T

he

Bo

tsw

ana

auth

ori

ties

sh

ou

ld r

efra

in f

rom

usi

ng

im

po

rt b

ans

as a

to

ol

to s

ust

ain

lo

cal

ente

rpri

ses

ag

ain

st fo

reig

n co

mp

eti

tio

n.

T

his

is

an

arb

itra

ry m

easu

re th

at

is b

orn

e b

y th

e co

nsu

mer

an

d

con

trib

ute

s to

th

e an

ti-e

xp

ort

bia

s.

Go

ver

nm

ent

sho

uld

rec

on

sid

er t

he

effe

ctiv

e im

po

rt b

an o

n b

read

and n

ot

impose

new

res

tric

tions

on i

mport

s of

seco

nd-h

and v

ehic

les

(Par

agra

ph 4

.59

).

MT

I, M

FD

P

Ongoin

g

VE

RY

HIG

H

ix

47

.B

ots

wan

a sh

ou

ld u

se i

ts i

nfl

uen

ce i

n t

he

new

SA

CU

Sec

reta

riat

to

ree

ner

giz

e th

e li

ber

aliz

atio

n e

ffo

rts

of

SA

CU

. T

his

eff

ort

sh

ou

ld i

ncl

ud

e: a

ph

ased

pro

gra

m o

f ta

riff

ref

orm

s th

at w

ou

ld c

on

tin

ue

the

pro

gre

ss m

ade

du

rin

g t

he

earl

y l

iber

aliz

atio

n p

erio

d i

n t

he

19

90

s. T

his

sh

ou

ld f

ocu

s o

n:

reduci

ng S

AC

U’s

aver

age

appli

ed r

ates

(w

hic

h w

ould

be

stro

ngly

in B

ots

wan

a’s

inte

rest

).

urg

ing

SA

CU

to

acc

eler

ate

its

tari

ff r

atio

nal

izat

ion

pro

gra

m t

o r

edu

ce t

he

nu

mb

er o

f ta

riff

cate

go

ries

fro

m 4

1 t

o s

ix,

in l

ine

wit

h W

TO

co

mm

itm

ents

(p

arag

rap

h 4

.52

).

lob

by

ing

wit

hin

SA

CU

fo

r th

e n

um

ber

of

anti

-du

mp

ing

in

itia

tio

ns

to b

e fu

rth

er r

edu

ced

(Bo

x 4

-3).

G

ov

ern

men

t sh

ou

ld i

nit

iate

a s

ho

rt f

oll

ow

-up

rev

iew

of

the i

mp

act

of

an

ti-

du

mp

ing

du

ties

on

th

e c

ost

of

Bo

tsw

an

a’s

bu

sin

ess

in

pu

ts.

Go

vern

men

t to

ad

vo

cate

th

e

dev

elo

pm

ent

of

tig

hte

r ru

les

on

an

ti-d

um

pin

g f

or

all

WT

O m

emb

ers

thro

ug

h t

he

WT

O D

oh

a

Dev

elo

pm

ent

Ag

end

a.

urg

ing

SA

CU

to

set

up

mo

nit

ori

ng

pro

gra

m o

f N

TB

s in

sim

ilar

fash

ion

to

a C

OM

ES

A

exer

cise

.

rev

iew

ing

th

e im

pac

t o

f li

ber

aliz

ing

bee

f im

po

rts

wit

h a

vie

w t

o d

iscu

ssin

g t

his

wit

h S

AC

U

nei

ghbours

(par

agra

ph 4

.63

).

dev

elo

pin

g a

reg

ion

al a

pp

roac

h t

o e

asin

g v

isa

rest

rict

ion

s o

ver

th

e lo

ng

er r

un

, st

arti

ng

wit

h a

SA

CU

vis

a, p

oss

ibly

incl

udin

g S

AD

C m

ember

s (p

arag

raph 4

.45

).

Pro

po

sin

g,

wit

hin

th

e S

AC

U f

ram

ewo

rk,

a ti

gh

ten

ing

of

SA

CU

mem

ber

s’ a

bil

ity

to

mak

e

use

of

Art

icle

17

(p

arag

rap

h 4

.46

).

pro

po

sin

g S

AC

U-w

ide

lim

itat

ion

s o

n t

he

use

of

loca

l co

nte

nt

req

uir

emen

ts t

hat

res

tric

t th

e

abil

ity o

f oth

er S

AC

U m

ember

s to

tra

de

wit

h t

hei

r S

AC

U n

eig

hbours

(par

agra

ph 4

.47).

MT

I

Nex

t 5

yea

rs

VE

RY

HIG

H

x

CH

AP

TE

R 5

– T

RA

DE

FA

CIL

ITA

TIO

N

48

.D

evel

op

a p

rog

ram

fo

r V

AT

har

mo

nis

atio

n b

y S

AC

U m

emb

ers,

in

clu

din

g a

n a

sses

smen

t o

f co

stin

gs,

co

mp

ari

ng

th

e r

ev

en

ue g

ain

s/lo

sses

wit

h e

stim

ate

s o

f th

e e

co

no

mic

lo

sses

ass

ocia

ted

wit

h t

he

incr

ease

d t

ran

sact

ion

co

sts

of

the

VA

T d

iffe

ren

tial

s (p

arag

rap

h 5

.7).

F

urt

her

, G

ov

ern

men

t to

pro

po

se

dev

elo

pm

ent

of

a tr

ansi

t sy

stem

th

at c

ov

ers

mo

vem

ent

thro

ug

h a

ll S

AC

U M

emb

er S

tate

s.

MF

DP

2005-6

HIG

H

49

.L

ob

by

So

uth

Afr

ican

au

tho

riti

es t

o e

xte

nd

tim

e al

low

ed f

or

gro

up

age

(co

nta

iner

izat

ion

) o

f p

rod

uct

s

in S

ou

th A

fric

a b

efo

re t

hey

are

lia

ble

fo

r S

ou

th A

fric

an V

AT

(p

arag

rap

h 5

.7).

DoT

, M

TI

2006

MO

DE

RA

TE

50

.E

xp

lore

th

e co

nce

pt

of

a ‘o

ne-

sto

p b

ord

er p

ost

’ w

ith

So

uth

Afr

ica

to t

he

red

uce

bo

rder

cro

ssin

g t

ime

(par

agra

ph 5

.11).

Cu

sto

ms

2006

MO

DE

RA

TE

51.

Explo

re d

esir

abil

ity o

f m

ovin

g t

ow

ards

a re

gio

nal

SA

CU

cust

om

s au

thori

ty (

par

agra

ph 5

.11

).M

TI,

MF

DP

2005-6

MO

DE

RA

TE

52.

Imple

men

tati

on o

f F

IAS

(2004)

Cust

om

s R

ecom

men

dat

ions

(Box 5

-1).

MT

I, C

ust

om

s

MO

DE

RA

TE

53

.G

ov

ern

men

t co

uld

set

up

a ‘

com

pla

ints

/ su

gg

esti

on

s’ p

ost

at

the

mai

n b

ord

er p

ost

s, f

oll

ow

ing

a

sim

ilar

in

itia

tiv

e b

y C

OM

ES

A s

tate

s (p

arag

rap

h 5

.13

)

Cu

sto

ms

2006

MO

DE

RA

TE

Cu

sto

ms

Pro

cedure

s,

Man

agem

ent

and V

isa

Ru

les

54

.C

ust

om

s an

d E

xci

se t

o o

pen

Tlo

kw

eng

bo

rder

gat

e o

n a

24

ho

ur

bas

is (

at p

rese

nt

it i

s 0

60

0 t

o 2

20

0)

to r

edu

ce c

on

ges

tio

n (

par

agra

ph

5.1

3).

Cu

sto

ms

2005

MO

DE

RA

TE

xi

55.

Go

ver

nm

ent

to e

xp

lore

th

e sc

op

e fo

r th

e in

tro

du

ctio

n o

f a

sin

gle

, sp

ecia

l to

uri

st v

isa

that

co

uld

be

app

rov

ed a

nd

pu

rch

ased

in

ad

van

ce o

f th

e v

isit

at

a fo

reig

n o

ffic

e o

f an

y o

f th

e fo

ur

tou

rism

cir

cuit

co

un

trie

s (B

ots

wan

a,

Nam

ibia

, Z

am

bia

an

d Z

imb

ab

we),

wh

ich

wil

l p

rov

ide a

ccess

to

all

fo

ur

countr

ies

(par

agra

ph 5

.17

).

Imm

igra

tio

n

Nex

t 2

yea

rs

HIGH

56.

Go

ver

nm

ent

to e

xp

lore

sco

pe

for

red

uci

ng

or

com

bin

ing

mu

ltip

le t

axes

th

at a

pp

ly w

hen

co

mb

inin

g

Zim

bab

we

and

Bo

tsw

ana

in a

reg

ion

al t

rav

el p

ack

age

(par

agra

ph

5.1

8).

MF

DP

,

Cu

sto

ms

2005-6

HIGH

57.

Bo

tsw

ana

sho

uld

pu

sh f

or

an e

ffec

tiv

e ag

reem

ent

on

tra

de

faci

lita

tio

n i

n t

he

WT

O t

hat

ref

lect

s th

e

var

yin

g i

mp

lem

enta

tio

n c

apac

itie

s o

f d

evel

op

ing

co

un

trie

s an

d r

edu

ces

con

stra

ints

to

tra

de.

It

sh

ou

ld

also

co

nti

nu

e to

use

ex

isti

ng

reg

ion

al f

ora

, su

ch a

s S

AD

C,

to t

ack

le t

hes

e o

bst

acle

s (p

arag

rap

h 5

.14

).

MT

I, F

ore

ign

Aff

airs

2005-6

MODERATE

58.

Go

ver

nm

ent

sho

uld

pro

po

se S

AC

U-w

ide

lim

itat

ion

s o

n t

he

use

of

loca

l co

nte

nt

req

uir

emen

ts t

hat

rest

rict

the

abil

ity o

f oth

er S

AC

U m

ember

s to

tra

de

wit

h t

hei

r S

AC

U n

eighbours

(par

agra

ph 4

.47).

MT

I

2006

MODERATE

59

.G

ov

ern

men

t to

wo

rk w

ith

Wal

vis

Bay

Co

rrid

or

Gro

up

an

d o

ther

au

tho

riti

es t

o e

nco

ura

ge

gre

ater

use

of

Wal

vis

Bay

ro

ute

. T

his

co

uld

be

ach

iev

ed b

y a

gg

ress

ive

and

co

nti

nu

ou

s m

ark

etin

g n

eed

s to

be

dir

ecte

d a

t b

oth

su

pp

lier

s an

d s

hip

pin

g a

gen

ts;

com

pre

hen

siv

e m

easu

rem

ent

of

vo

lum

e an

d t

yp

e o

f

frei

gh

t tr

affi

c in

th

e co

nte

xt

of

a st

ud

y t

o i

nv

esti

gat

e th

e p

oss

ibil

ity

of

a co

ord

inat

ed e

ffo

rt b

y p

riv

ate

secto

r g

rou

ps

to u

se W

alv

is B

ay

.

Fu

rth

er,

BE

DIA

co

uld

req

uest

th

e S

ou

thern

Afr

ican

Glo

bal

Co

mp

eti

tiv

en

ess

Hu

b t

o f

acil

itate

eff

icie

nt

tran

spo

rtati

on

ov

er

the Z

am

bia

-Zim

bab

we-B

ots

wan

a

tran

spo

rtat

ion

co

rrid

or

in t

he

sam

e w

ay t

hat

it

has

fo

r th

e T

ran

s-K

alah

ari

and

Dar

-Lu

sak

a co

rrid

ors

.

MT

I-

Dep

artm

ent

of

Tra

nsp

ort

2005-6

MODERATE

60

.G

ov

ern

men

t to

un

der

tak

e a

rev

iew

of

go

ver

nm

ent-

pro

cure

d s

hip

pin

g c

ost

s to

ass

ess

wh

eth

er g

reat

er

pri

ce p

ress

ure

s co

uld

be

intr

od

uce

d i

nto

th

e m

ark

et.

Th

is c

ou

ld r

evie

w w

het

her

go

ver

nm

ent

sho

uld

imp

ort

FO

B a

nd

op

en t

ran

sit

to t

end

er f

rom

nat

ion

al a

nd

in

tern

atio

nal

im

po

rter

s (p

arag

rap

h 5

.25

).

MF

DP

2006

MODERATE

xii

61

.U

nd

erta

ke

a re

vie

w o

f th

e im

pac

ts o

f re

stri

ctiv

e ca

bo

tag

e la

ws

(co

mm

on

to

all

SA

DC

co

un

trie

s) w

ith

a v

iew

to

in

itia

tin

g a

co

ord

inat

ed e

ffo

rt t

o l

iber

alis

e th

ese

rest

rict

ion

s (p

arag

rap

h 5

.35

).

Dep

artm

ent

of

Tra

nsp

ort

2005-6

HIGH

62.

Go

ver

nm

ent

to r

evie

w t

he

road

ch

arg

es t

hat

sta

rted

in

Mar

ch,

20

04

, w

ith

a v

iew

to

rev

ok

ing

th

em,

an

d f

ull

y c

on

sult

ing

wit

h o

ther

Mem

ber

Sta

tes

befo

re i

nv

ok

ing

an

y s

uch

ch

arg

es

in t

he f

utu

re

(par

agra

ph 5

.36

).

Dep

artm

ent

of

Tra

nsp

ort

2005

MODERATE

63.

Go

vern

men

t to

en

co

ura

ge

gre

ate

r co

nsu

ltati

on

am

on

g

SA

CU

T

ran

spo

rt

Min

istr

ies,

p

oss

ibly

esta

bli

shin

g a

tra

nsp

ort

des

k w

ith

in S

AC

U,

and

en

cou

rag

e in

tra-

SA

CU

dia

log

ue

bet

wee

n t

ran

spo

rt

auth

ori

ties

(p

arag

rap

h 5

.36

).

MT

I,

Dep

artm

ent

of

Tra

nsp

ort

Nex

t 3

yea

rs

MODERATE

64.

Bo

tsw

ana

to t

ake

up

Sp

oo

r-n

et p

rici

ng

iss

ue

wit

hin

SA

CU

, an

d t

o e

xp

lore

wh

eth

er S

ou

th A

fric

an

com

pet

itio

n l

aws

allo

w f

or

consi

der

atio

n o

f ra

il p

rici

ng c

om

pla

ints

by B

OT

AS

H (

par

agra

ph 5

.38).

MT

I,

Dep

artm

ent

of

Tra

nsp

ort

2006

MODERATE

Lan

d

Tra

ns-

po

rtat

ion

65

.G

ov

ern

men

t to

in

ves

tig

ate

the

po

ssib

ilit

y o

f u

pg

rad

ing

so

me

of

the

gra

vel

acc

ess

road

s to

an

d w

ith

in

the

par

ks

– f

or

exam

ple

, fr

om

Mau

n t

o M

ore

mi,

bet

wee

n C

ho

be

and

Mo

rem

i an

d w

ith

in p

arti

cula

r

zon

es o

f th

e p

ark

s.

Su

ch u

pg

rad

es s

ho

uld

be

acco

mp

anie

d b

y i

nfr

astr

uct

ure

im

pro

vem

ents

in

th

e

sele

cted

hig

h d

ensi

ty a

reas

of

the

par

ks

so a

s to

acc

om

mo

dat

e in

crea

sed

vis

ito

r fl

ow

s in

a s

ust

ain

able

man

ner

(p

arag

rap

h 5

.42

).

Dep

artm

ent

of

Tra

nsp

ort

,

DW

NP

Nex

t 3

yea

rs

MODERATE

66

.P

rog

ress

mad

e w

ith

th

e p

has

ed a

gre

emen

t to

war

ds

op

en s

kie

s sh

ou

ld b

e cl

ose

ly m

on

ito

red

, so

as

to

ensu

re t

hat

it

get

s im

ple

men

ted

wit

hin

th

e ag

reed

tim

e fr

ames

, if

no

t so

on

er (

par

agra

ph

5.4

5).

MF

DP

Nex

t 3

yea

rs

HIGH

Air

Tra

nsp

ort

67

.G

ov

ern

men

t to

set

a n

ew t

arg

et d

ate

for

the

pri

vat

isat

ion

of

Air

Bo

tsw

ana

(par

agra

ph

5.4

4).

MF

DP

HIGH

xii

i

68

.R

evit

alis

e th

e p

riv

atiz

atio

n p

rog

ram

– p

arti

cula

rly

in

th

e ar

ea o

f te

leco

ms

and

air

tra

nsp

ort

(p

arag

rap

h

5.5

0).

MF

DP

2005

HIG

H

69

.T

o r

edu

ce i

nte

rnat

ion

al t

elec

om

mu

nic

atio

ns

pri

ces,

Go

ver

nm

ent

sho

uld

co

nsi

der

in

stru

ctin

g B

TA

to

issu

e an

un

lim

ited

nu

mb

er o

f li

cen

ces

for

inte

rnat

ion

al v

oic

e se

rvic

es a

nd

lif

t th

e b

an o

n p

rov

idin

g

vo

ice

ov

er I

P.

Th

e m

on

op

oly

of

BT

C s

ho

uld

no

t b

e al

low

ed t

o c

on

tin

ue

ind

efin

itel

y t

o a

llo

w B

TC

to

rest

ruct

ure

- G

ov

ern

men

t sh

ou

ld s

et a

tar

get

dat

e fo

r th

e p

riv

atis

atio

n o

f B

TC

(p

arag

rap

h 5

.53

).

BT

A

Nex

t 2

yea

rs

VE

RY

HIG

H

Th

e B

usi

nes

s

Cost

s of

Uti

liti

es

70

.T

he

Go

ver

nm

ent

sho

uld

en

cou

rag

e th

e W

ater

Uti

liti

es C

orp

ora

tio

n (

WU

C)

to s

up

ply

raw

wat

er t

o t

he

ind

ust

rial

est

ates

wh

ere

tex

tile

an

d a

pp

arel

man

ufa

ctu

rers

are

lo

cate

d.

Th

is w

ou

ld b

e an

en

orm

ou

s

ince

nti

ve

to p

ote

nti

al i

nv

esto

rs i

n w

eav

ing

, k

nit

tin

g a

nd

dy

ein

g p

lan

ts (

par

agra

ph

5.6

0).

MF

DP

2005-6

MO

DE

RA

TE

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Botswana Institute for Development Policy Analysis...

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