I. Commercial Overview

 Overview of Import Market

 The Zambian annual GDP is roughly USD 4 billion per year.
 Historically imports and exports have balanced at roughly USD 1
 billion per year.  In 1993 this figure was down to about 800
 million due to a heavy debt service burden and recession in
 several sectors.  Petroleum products are the largest import
 category followed by fertilizer.  Other imports include vehicles
 and parts, Mining and agricultural machinery, chemicals and
 pharmaceuticals.  South Africa is the largest source of imports
 followed by the European Union.


 Commercial Environment

 Zambia is undergoing a transition from a government controlled
 economy to a free market economy.  The first stage of
 stabilization is mostly complete.  A cash budget is keeping
 inflation under control and the exchange rate has been freed and
 is now fairly stable.  Price controls and exchange controls have
 been removed.  Interest rates are free but real interest rates
 are high, making it difficult for local businesses to borrow.
 Financing can thus be crucial in trade deals.  Trade barriers
 have been lowered, but the effective rate of protection remains
 high.  Other reforms--privatization of state owned enterprises,
 land reform, and civil service reform are proceeding very
 slowly.  An exception is a new revenue authority which is
 improving the efficiency of tax and customs collections.


 Business Attitudes toward the U.S.

 The United States has a positive image among Zambian business
 people and government officials.  Most businesses would like to
 work with U.S. partners and the U.S. products are considered
 high quality and cutting edge.  However, it is a common
 perception that the distance to the U.S. means that transport
 costs make U.S. products much more expensive than competitors'.
 There is also a common perception that many U.S. companies do
 not provide strong after sales support.


 Major Business Opportunities

 Most major projects in Zambia are financed by either bilateral
 donors or by multilateral lending institutions such as the World
 Bank and African Development Bank and are subject to
 international competitive bidding.  Currently on line are an oil
 pipeline rehabilitation project financed by the World Bank and
 water and sewer projects in the Copperbelt financed by the
 African Development Bank.  The US is financing a feasibility
 study for a Hydroelectric plant on the Kafue River.  ZCCM, the
 copper conglomerate is seeking finance to open a deep
 underground mine at Konkola.  There are numerous plans on the
 drawing board to develop the agricultural sector, particularly
 marketing, storage and processing.


 Major Roadblocks to Doing Business

 Financing is a chronic problem for both the private and public
 sector in Zambia.  The government debt is more than 1.5 times
 GDP.  For the private sector little credit is available and only
 at high interest rates.

 Government inefficiency and a general lack of transparency can
 create problems with contracts being more or less indefinitely
 on hold.  There is still a problem with business being directed
 away from competitive private sector businesses to parastatals.


 Local and Third Country Competition

 The competitiveness of local companies varies widely, but the
 new economic conditions are forcing companies to become more
 competitive.  The mining industry is bloated and needs to cut
 costs, manufacturing is generally too dependent on imported
 inputs, agriculture is basically sound but underdeveloped.  The
 parastatal sector also varies widely in quality.

 South African businesses have a large share of the Zambian
 market and are increasingly visible and aggressive as a result
 of the transition in South Africa.  Zimbabwe also holds a strong
 trading position in the region.