Effective protection and economic efficiency in Zimbabwe manufacturing in the 1980s

Abstract

Manufacturing industries established and growing in controlled and heavily regulated environments invariably become protected. The levels of such protection and their implications have been the subject of debate in the design of industrialisation strategies for developing countries. Considerable disagreement on the levels of government intervention and acceptable levels of protection still continue. A number of studies have been carried out to establish levels of effective protection created by various forms of government intervention in trade and consequent industrial development. Of major concern and related to effective protection is the efficiency of such industries. The Zimbabwe economy was heavily regulated and controlled starting in 1965. The system of heavy regulation and control was largely maintained after independence; in some cases new controls, largely regarded as increasing effective protection were introduced. This paper investigates the levels of effective protection and the efficiency implications of government policy in Zimbabwe in the 1980s, through the estimation of effective rates of protection (ERPs) and domestic resource cost (DRC) for a sample of firms. However, contrary to the expected effects of government intervention, this research found that the manufacturing firms sampled were generally unprotected and efficient enough to compete internationally. It is concluded that although GDP and gross manufacturing output grew appreciably, and the firms were efficient, the competitiveness could not have been sustained in the circumstances as investment declined and the volume of imports, on which manufacturing depended, also continued to fall.