The Namibian government wishes to develop a trade policy, in coordination with various recently released policies such as the Growth at Home and Competition Policy.
This document responds to that desire by setting out a trade policy framework tailored to Namibian realities. It argues that recent moves towards an import substitution approach should be carefully calibrated, and that the emphasis in framing Namibia's external economic integration should lie in encouraging multinational companies to invest in Namibia and to include Namibian companies in their value chains. The emphasis is on a facilitative, rather than coercive, policy mix.
Chapter II of this document contextualises the policy framework by reviewing key data. Namibia's macroeconomic and broader development trajectory is assessed, and found to be steadily progressing, but not at the rates required to significantly dent poverty, unemployment and inequality. This steady progress is mirrored in the trade analysis, which shows that Namibia's export basket, and key country partners, have not diversified substantially in recent years whether the focus is on trade in goods or services. Under these circumstances, and taking account of Namibia's small economic size, it is difficult to see how an import substitution approach, even a tailored one, could decisively shift Namibia's economic trajectory, as it may have substantial counter-productive effects in terms of discouraging inward foreign direct investment into the country. Therefore, emphasis is placed on mobilising inward investment through "plugging into" multinational companies' value chains, through a facilitative approach.
In this light, chapter III reviews recent Namibian economic policy documents relevant to trade policy, as well as Namibia's trade agreements. Some of the former are weighted towards inward-looking approaches, particularly the "Growth at Home" document, and the Investment Bill. The trade agreements, on the other hand, significantly constrain Namibia's freedom to implement coercive, or import substitution measures, in various ways. Since we promote a facilitative approach to trade and investment policies this is not of concern to us, but should the Namibian government adhere to its current path this would require substantial rearrangement of external trade commitments, with uncertain consequences in terms of access to key markets abroad. In our view this reinforces the need for a facilitative approach.
In chapter IV we set out the broad elements of the proposed facilitative approach. This centres on the promotion of inward investment, recognising that investment is the conjoined partner of trade. In essence, should Namibia succeed in this strategy, multinational companies would use the country as a base for their economic interactions with Southern Africa, promoting two-way trade and investment flows via Namibia, and at the same time incorporating successful Namibian firms into their value chains. Successfully implementing such an approach requires a strong apex institution with real political authority to resolve coordination challenges within the Namibian government, such as an investment promotion agency. An essential supplement to this is a suite of favourable external trade deals linking to key source markets for FDI, and linking Namibia to regional markets. However, this may require greater flexibility within the constraints of the Southern African Customs Union, since that structure, built around South Africa's trade policy preferences, is not necessarily favourable to importation of the intermediate products central to the investment promotion strategy.
