NATIONAL TRADE POLICY FOR BOTSWANA MINISTRY OF TRADE AND INDUSTRY

REPUBLIC OF BOTSWANA NATIONAL TRADE POLICY FOR BOTSWANA MINISTRY OF TRADE AND INDUSTRY July 2009 GABORONE, BOTSWANA i

TABLE OF CONTENTS ABBREVIATIONS... iii 1. INTRODUCTION... 1 2. TRADE OVERVIEW... 2 3. BOTSWANA S TRADE POLICY ENVIRONMENT... 3 3.1 Botswana s Trade-Supportive Domestic Policies and Legislation... 3 3.2 Botswana s External Policy Obligations... 4 4. RATIONALE FOR TRADE POLICY... 5 5. BOTSWANA S TRADE POLICY FRAMEWORK... 6 6. GUIDING PRINCIPLES FOR BOTSWANA S TRADE POLICY... 6 7. OBJECTIVES OF BOTSWANA S TRADE POLICY... 8 8. STRATEGIC POLICY CONSIDERATIONS... 8 8.1 Effective Negotiation of Trade Agreements... 9 8.2 Tariff Based Measures... 9 8.3 Non-Tariff Measures... 10 8.4 Facilitating Trade Development... 11 8.5 Enhancing Trade in Services. 12 9. CROSS-CUTTING ISSUES... 13 10. INSTITUTIONAL ARRANGEMENT... 15 ii

ABBREVIATIONS AfT AGOA BAU BDC BECI BEDIA BEMA BOCCIM BOCONGO CEDA CET EC EPA EU FDI FTA GATT GATS GDP GICO ICT IEPA LDC MFN MRA MTI NDB NCTPN NDP NES NGO NTBs PCFATS PTA RoO RTA SACU SAD SADC SDT SEZs SPS TBTs TRIMS TRIPS TPRM UK USA WTO Aid for Trade Africa Growth and Opportunity Act Botswana Agricultural Union Botswana Development Corporation Botswana Export Credit Insurance and Guarantee Company Botswana Export Development and Investment Authority Botswana Exporters and Manufacturers Association Botswana Confederation of Commerce, Industry and Manpower Botswana Council of Non-Governmental Organisations Citizen Entrepreneurial Development Agency Common External Tariff European Commission Economic Partnership Agreement European Union Foreign Direct Investment Free Trade Area General Agreement on Tariffs and Trade General Agreement on Trade in Services Gross Domestic Product Government Implementation Coordination Office Information Communication Technology Interim Economic Partnership Agreement Less Developed Country Most Favored Nation Mutual Recognition Agreement Ministry of Trade and Industry National Development Bank National Committee on Trade Policy and Negotiations National Development Plan National Export Strategy Non-Governmental Organization Non Tariff Barriers Parliamentary Committee on Foreign Affairs, Trade and Security Preferential Trade Agreement Rules of Origin Regional Trade Arrangement Southern African Customs Union Single Administration Document Southern African Development Community Special and Differential Treatment Special Economic Zones Sanitary and Phyto-sanitary Measures Technical Barriers to Trade Trade Related Investment Measures Trade-Related Intellectual Property Rights Trade Policy Review Mecahnism United Kingdom United States of America World Trade Organization iii

1. INTRODUCTION 1.1 Botswana s Trade Policy refers to the complete framework of laws, regulations, international agreements and negotiating positions as well as Government s guidelines and pronouncements on trade which define how the country will conduct its trade with bilateral, regional and multilateral trading 1 partners. 1.2 This Policy plays a key role in the flow of goods and services between Botswana and her trading partners. Even though the Policy is founded on the principles of free trade and competition, Government recognizes the fact that countries rarely put in place policies that permit perfectly free international trade. Instead, each country maintains a mixture of both restrictive and free trade policies. 1.3 Worldwide, the process of globalization has led to the emergence of networked and borderless economies, as well as the mushrooming of regional trade arrangements (RTAs) intended to expand domestic markets for small economies and promote regional integration. Consequently, Botswana s Trade Policy reflects the fact that trade barriers are continuously being dismantled under bilateral, regional and multilateral trade arrangements, and are thus becoming obsolete as the world economy converges to a global village where developed and developing countries, rich and poor countries as well as technology-abundant and poor countries compete for the world s scarce economic resources and limited markets. 1.4 The global trade policy environment is characterized by multiple layers of agreements, frameworks, regimes and institutions, all competing for a trade space where mutually beneficial trade or zero-some game in trade may occur. Therefore, Botswana s Trade Policy reflects this diversity and complexity in world trade. 1.5 Further, the diversity and complexity of Botswana s trade as well as its cross-cutting nature, means that trade policy formulation and implementation is the responsibility of Government, who sets the broad trade policy framework, and all the major stakeholders in the economy, namely, the private sector and parastatal institutions, who are key players as implementers of trade policy in a market economy, civil society, who are the voice of the poor; and the general public, who are at the receiving end as traders and/or consumers. Therefore, Botswana s Trade Policy is grounded upon a participatory, inclusive and supportive process. 1.6 Botswana s Trade Policy reflects a further attempt by the Government to capitalize on the country s strengths while reducing its inherent challenges. Such challenges include Botswana s land-locked status; dependence on a limited number of commodity exports and a few export markets; a small industrial base and a relatively small market; as well as challenges relating to supply-side constraints. These and related issues are being addressed in the Policy with a view to placing Botswana in the world economic arena as an equal trading partner and beneficiary in world trade. 1 This is partly based on Walter Goode s definition of Trade Policy, given as: Trade Policy is defined 1 as the complete framework of laws, regulations, international agreements and negotiating stances adopted by government to achieve legally binding market access for domestic firms, Walter Goode, (2000) Dictionary of Trade Policy Terms, P355. 1

2. TRADE OVERVIEW 2.1 Botswana s exports are highly concentrated on primary products, especially diamonds and copper/nickel and to a lesser extent meat and meat products, textiles and clothing. In 2008, mining accounted for 85.4% of total exports (diamond contributing 66.7%; copper/nickel 18.5% and soda ash, 0.2%). The total exports value of all commodities in 2008 was P29,289 million, down from P31, 702 million in 2007. 2.2 The direction of exports was mainly towards Europe, especially the United Kingdom (UK), which accounted for 64.5% of total exports in 2007 and 57.2% in 2008. Other major export markets in 2008 were: SACU 20.1%; Zimbabwe 4.5%; USA 1.0%; rest of Europe 6%; other Africa 1.5% and all other countries 9.7%. 2.3 Botswana s principal imports fall into five (5) main categories namely; (i) Chemicals & Rubber products; (ii) Food, Beverages & Tobacco; (iii) Fuel; (iv) Machinery & Electrical Equipment; and (v) Vehicles & Transport Equipment. Botswana s total imports for 2008 amounted to P34 525 million, with these groups accounting for 68.3% of total imports. SACU is the major source of imports for Botswana, accounting for 79.2% (P27, 340.5 million) of total imports; with South Africa alone accounting for 99.2% of this figure during 2008. Botswana s imports were also sourced from the United Kingdom (5.8%), the rest of Europe (4.9%), Zimbabwe (0.9%), the USA (1.2%), other African countries (0.3%) and all other countries (7.6%). 2.4 According to the BIDPA/ODI study (2007) 2, for the period 1995/6 to 2004/5, services contributed about 50% to GDP value added in Botswana. These figures ranged from 52.8% in 1995/96 to 46.7% in 2004/05. Corresponding figures for agriculture were [4.1% and 2.1%]; mining [33.9% and 43.2%] and manufacturing [4.8% and 3%], respectively. Commercial services for Botswana, which contribute significantly to these figures are financial services and insurance, transport, tourism and travel, as well as professional services. Therefore, this Trade Policy focuses on trade in goods and services. 2 BIDPA/ODI study (2007) Assessment of Botswana s services sector, www.odi.org.uk. 2

3. BOTSWANA S TRADE POLICY ENVIRONMENT Botswana s trade policy environment is shaped by both domestic legislation and policies, as well as international trade agreements. This section outlines such policies, legislation and agreements and how they impact and shape the country s trade policy space. 3.1 Botswana s Trade-Supportive Domestic Policies and Legislation 3.1.1 Botswana s domestic policies and legislation define the context in which trade policy is implemented in the domestic economy. These seek to provide a private-sector-investment friendly environment with a view to addressing supply-side constraints. A range of policies and strategies are being implemented primarily centred on promoting Botswana s global competitiveness and economic diversification, and based mainly on the public-private sector partnership. The key trade-supportive policies and legislation include: National Development Plan (NDP 10) and Vision 2016 which define the broad trade policy framework for the country and envisage Botswana having achieved economic prosperity in which trade plays a dominant role in the realization of economic diversification and poverty reduction; Industrial Development Policy and Competition Policy which aim at creating a conducive environment for the private sector to develop and flourish under conditions of free and fair trade; Botswana s National Export Strategy (NES) which aims at assisting Botswana firms to develop export competencies, access financial resources and market information, and thus achieve competitiveness that allows them to penetrate global markets; Investment Strategy for Botswana which aims at creating a conducive environment for both domestic and foreign firms to invest and flourish in Botswana; Private Sector Development Strategy which aims at developing a vibrant and globally competitive private sector that is capable of taking advantage of the market access opportunities opened by Trade Policy. 3

3.1.2 The above policies cut across trade in goods and services, with emphasis being predominantly on the former. Other supportive policies include, among others, the Tourism Policy, the Rural Development Policy, The National Poverty Reduction Strategy and the Telecommunications Policy. 3.1.3 In addition to the trade supportive policies, Botswana also has a trade-supportive legislation. The legislation is made to provide a transparent, predictable and reliable investment environment to both domestic and foreign investors. Further, the legislation focuses on achieving equitable, free and fair trade for all investors. Trade legislation include, among others; the Trade Act, the Liquor Act, the Control of Goods, Prices and Other Charges Act, the Copyrights and Neighbouring Rights Act, the Industrial Property Act, the Competition Act and the proposed Legislation on the National Tariff Administration Body. 3.1.4 Government recognizes the need to ensure complementarity between the trade policy and other national policies. Therefore Trade Policy will be mainstreamed into all relevant national policies and strategies with a view to ensuring that export activities and the benefits thereof are equitably distributed across all segments of society. Further, Government will remove trade support institutions mandates overlaps so as to avoid duplication of efforts and resource wastage. As these policies are created, reviewed and sharpened to improve delivery, corresponding legislations will also be improved accordingly in order to maintain Botswana s conducive environment for investors. 3.2 Botswana s External Policy Obligations 3.2.1 Botswana has entered into several trade agreements and arrangements at the multilateral, regional and bilateral levels. These include the World Trade Organization (WTO); the SADC-EC Interim Economic Partnership Agreement (SADC-EC IEPA); the African Growth and Opportunity Act (AGOA); the Southern African Development Community (SADC), the Southern African Customs Union (SACU); and the free trade agreements with Malawi and Zimbabwe. 3.2.2 Botswana became one of the founding Members of the WTO in 1995. The implication of this is that Botswana is bound by all the WTO Agreements, Ministerial Decisions and Understandings, which were adopted as a Single Undertaking. The obligation on the Single Undertaking means that all members are bound and must implement all the Agreements. WTO membership has also committed Botswana to participate in successive multilateral trade negotiations, aimed at progressive liberalisation of trade. The WTO Agreements have extended trade policy from focusing on border control issues into the domestic policy arena to cover issues such as trade in services, intellectual property rights, product standards, investment policy, trade defense measures and agricultural policy. In this regard, Member States policies have to be consistent with the obligations on the Agreements on Agriculture, Trade Related Investment Measures (TRIMS), Trade Related Intellectual Property Rights (TRIPS), the General Agreement on Trade in Services (GATS), the General Agreement on Tariffs and Trade (GATT) and others. Compliance with WTO rules is assessed through the Understanding on the Trade Policy Review Mechanism (TPRM). Failure to comply with WTO Agreements may expose the country to challenges under the WTO Understanding on the Dispute Settlement Mechanism. These obligations establish the parameters and 4

framework within which Botswana will conduct and negotiate trade agreements with her trading partners. 3.2.3 Botswana has signed the Interim Economic Partnership Agreement (IEPA) under the SADC EPA configuration. This gives the country duty free-quota free market access to the European market. In addition, Botswana has been able to negotiate with the USA to be given the AGOA least developed country (LDC) status until 2012 for clothing and apparel products, although the AGOA programme has been extended to 2015. This preferential arrangement gives Botswana made products access to the USA market under very liberal conditions. Therefore, in the pursuit of her bilateral, regional and multilateral trade negotiations agenda, Botswana will continue to protect and preserve her market access preferences in the European Union and US markets; 3.2.4 As a signatory to the SADC Protocol on Trade and a member of the SADC FTA, Botswana is committed to the process of attaining higher regional integration in the form of Customs Union, Common Market, in line with the regional integration agenda. The ongoing negotiations on the SADC Protocol on Trade in Services and rationalization of multiple FTA memberships are also commitments which define parameters for Botswana s Trade Policy. The need to increase intra-sadc trade through the creation of simple, transparent and easyto-apply rules of origin and Member Countries implementation of tariff liberalization commitments also feature strongly in Botswana s regional trade agenda; 3.2.5 Botswana s trade policy parameters are also set by the 2002 SACU Agreement. Key features which prominently factor into Botswana s trade policy include: the commitment to have the consent of other Member States when entering into preferential trade agreements (PTAs) with third parties; the establishment of relevant, effective, transparent and democratic institutions; the tariff revenue sharing among the SACU Member States; the common external tariff with third parties and the development of common policies for equitable industrial development as well as cooperation in the development and implementation of agricultural policy, competition policy and the development of policies and strategies to address unfair trade practices; 3.2.6 Botswana has signed bilateral trade agreements with Malawi (1956) and Zimbabwe (1988) as well as the MFN agreements with a number of countries. Government will continue to explore for opportunities to sign bilateral trade arrangements with strategic trading partners, albeit with more emphasis on regional and multilateral trade arrangements. 3.2.7 In ensuring access to wider markets for Botswana s goods and services, the Government continues to pursue trade arrangements with third parties in accordance with the principles laid out in this policy. 4. RATIONALE FOR TRADE POLICY 4.1. Botswana s trade policy has hitherto been presented in various Government policy documents and statements, without a single and coherently written policy paper. Global trade has become dynamic, complex and diverse, necessitating a well articulated trade policy that takes 5

into account the complexities of both domestic policies and foreign trade policies that have an impact on the country s trade agenda. This trade policy will fill this gap in Botswana s export-led growth strategy for economic development. 4.2. Even though countries still maintain both restrictive and free trade policies, there is a general global shift towards free trade. This necessitates the development of a well-articulated trade policy that outlines how the country will create global market access opportunities for its firms as well as assisting them to exploit the emerging opportunities. 4.3 Botswana s trade Policy is also important as it addresses trade issues that are top in government agenda. These include, among others, export diversification covering product and market diversification, export competitiveness, supply-side constraints, employment creation and poverty reduction as well as diversification of the economy in general. 4.4 Finally, this Policy will strategically place Botswana in the global economy as the most competitive exporter of goods and services. 5. BOTSWANA S TRADE POLICY FRAMEWORK 5.1. Botswana s trade policy framework covers a broad spectrum of issues. The policy covers the country s emerging trade policy environment, points out its diversity and complexity, and thus calls for a well articulated policy which addresses the dictates of trade in today s networked and borderless economies. In this context, the policy also covers the guiding principles as well as the rationale and objectives of trade policy. 5.2. The Policy includes strategic trade policy considerations which form its core elements. These include tariff based measures, taxes and duty drawbacks as well as non-tariff measures, which are used as tools for industrial development; trade defense measures which are used to advance the country s offensive and defensive interests; measures affecting production and trade which are instruments for stimulating export development; trade negotiations which define the country s negotiation strategies to derive maximum benefits from trade agreements while simultaneously protecting its interests; as well as a host of cross cutting issues which are expected to impact on Botswana s trade policy. 6. GUIDING PRINCIPLES FOR BOTSWANA S TRADE POLICY It is important that the policies that are developed to govern trade are grounded on appropriate principles for a robust policy. The following broad guiding principles underlie Botswana s Trade Policy: i. Export led Growth: to ensure that Botswana s export sector plays a key role in the growth and development of the economy; ii. Export Diversification: to develop a diversified export sector and make it a major engine of growth; 6

iii. iv. Economic diversification: to have the export sector contribute towards the diversification of the economy through export-oriented industrialization and development; Free market economy: to uphold Botswana s free market policy in which both domestic and foreign firms operate under free market conditions, with minimum Government intervention; v. Market Access: to create favorable market access conditions for Botswana firms through existing and future bilateral, regional and multilateral trade agreements; vi. vii. viii. ix. Global Competitiveness: to put in place competitiveness strategies that will assist Botswana firms to penetrate world markets and thus place the country in the global economic arena as an equal trading partner and beneficiary; Integration into the global economy: to integrate the Botswana economy into the global economy through active and effective participation in regional integration initiatives and multilateral commitments; WTO Compatibility: to ensure that all trade negotiations and agreements are in line with WTO provisions and principles, including issues for addressing developing countries development concerns; Private sector development: to strengthen the business community to be globally competitive by providing initiatives to build its capacity, enhance its participation in trade policy formulation and implementation as well as affording it to play a leading role in the economy; x. Sustainable development: to protect and preserve the environment with a view to enabling it to successfully meet the needs of current and future generations; xi. xii. xiii. Citizen Economic Empowerment: to ensure that citizens participate and benefit from all the activities and opportunities of increased trade; Social Security: to ensure that citizens enjoy affordable and un-interrupted access to essential needs at all times; Poverty eradication: to ensure that trade results in poverty reduction through citizen participation in trade activities as well as creation of employment for the poor. 7

7. OBJECTIVES OF BOTSWANA S TRADE POLICY Botswana s Trade Policy is designed to facilitate the achievement of the broadest possible free and reliable access to markets for the country s exports of goods and services, while also enabling producers and consumers to access the widest choices of international goods and services on the best possible terms. In addition to this broad objective, Botswana s trade policy has the following specific objectives: i. to develop strategies that will make trade the main engine of growth for Botswana; ii. iii. iv. to diversify the export sector and the Botswana economy in general; to develop a viable and vibrant private sector that will be able to exploit the emerging export opportunities availed by the trade policy; to increase and improve market access and international competitiveness for Botswana s goods and services; v. to support/advocate for carefully planned liberalization, restructuring and simplification of both tariffs and non-tariff barriers; vi. vii. viii. ix. to improve trade facilitation processes and procedures between Botswana and her trading partners; to ensure that natural resources are sustainably used in trade activities; to mainstream all relevant citizen economic empowerment strategies and initiatives into the trade policy; to ensure that trade activities contribute towards poverty reduction; x. to ensure that Botswana trade rules and practices support regional integration and are WTO compatible; xi. xii. to integrate Botswana into the world trading economy; To harmonize cross-cutting issues with Botswana s trade policy initiatives. 8. STRATEGIC POLICY CONSIDERATIONS Government recognizes that strategic policy considerations should successfully influence the direction and pattern of Botswana s trade in goods and services. The trade negotiations process and the use of specific instruments to enhance trade are guided by the country s need to stimulate domestic production, secure access to markets, promote exports, safeguard 8

domestic industry against unfair trade practices, uphold transparency, protect consumer rights and foster fair competition. Botswana s trade has the following strategic policy considerations: 8.1 Effective Negotiation of Trade Agreements 8.1.1 Botswana is committed to the creation of market access opportunities for her existing and new export products, increasing trade in services as well as access to a variety of imported goods and services at affordable prices for the country as a whole. To this end, Botswana will pursue trade policy negotiations with strategic bilateral, regional and multilateral trading partners. Botswana s trade negotiations are guided by the parameters and obligations set out in the country s domestic and international trade obligations. 8.1.2 The Ministry of Trade and Industry, in consultation and collaboration with relevant Government Institutions and Non-State Actors, and through the NCTPN, ensures that the national negotiation mandate and positions are developed through a participatory, inclusive and transparent process. 8.2 Tariff Based Measures 8.2.1 Botswana uses tariff-based measures as key trade policy instruments to support industrial development objectives, achieve balance of payments objectives and protect domestic producers from unfair external competition. Government engages stakeholders as well as major trading partners in the use of these instruments. The following tariff-based measures are predominantly used in the execution of Botswana s trade policy. 8.2.2 Tariffs Botswana s tariff structure is influenced by her regional and multilateral trading arrangements. Botswana s trade with non-sacu countries is administered through the SACU common external tariff; intra-sadc trade is based on the SADC Protocol on Trade while extra-regional trade is based on both the WTO negotiated tariff liberalization process as well as bilateral and/or inter-regional trade arrangements. Government supports a carefully planned tariff liberalization process, restructuring and simplification with a view to achieving the country s objective of moving away from the use of the tariff as a source of revenue to a tool for industrialization. Notwithstanding this, where feasible and necessary, Government maintains the use of tariffs for infant industry protection purposes. 8.2.3 Export Taxes, Charges, and Levies Export taxes, charges and levies are instruments for promoting value addition to raw materials to stimulate the export of value added products. Where WTO regulations and other trade arrangements permit, Botswana maintains export levies and taxes on certain commodities in order to achieve the country s objectives of food security and domestic industry access to essential raw materials. 9

8.2.4 Taxation, Duty Drawback and Import Duty Concessions These are tax concessions provided with the goal of stimulating production and exports by reducing the costs of inputs. Government will continuously undertake a rationalization of the tax regime as well as the development of appropriate and WTO compatible tax concession schemes to stimulate production and encourage investment in export activities. 8.2.5 Trade Remedies Trade Remedies refer to emergency measures a country may apply to protect its industries from unexpected surges in imports which have the potential to cause material or serious injury to domestic industries. Government recognizes the importance of using anti-dumping measures, safeguard measures and countervailing measures to ensure development and protection of domestic industries. Government will establish a National Body to administer tariffs and institute appropriate remedial measures on dumped, subsidized or damaging import surges. 8.3 Non-Tariff Measures 8.3.1 Non-tariff measures are measures that are ordinarily not meant to restrict trade, but have over the years come to be used to restrict trade as tariffs were being dismantled. Non-tariff barriers (NTBs) may take the form of trade remedies, Sanitary and Phyto-sanitary Measures, Technical Barriers to Trade, licensing, registration, accreditation procedures, manufacturing or production requirements of goods, import bans and prohibitions, and levies. Such barriers increase the cost of trade and reduce the competitiveness of producers, possibly leading to an unpredictable business environment. Government recognizes the negative impact that NTBs may cause to the free flow of trade. Consequently, Government is committed to: where feasible and appropriate, the elimination of NTBs in line with the WTO provisions and regional trade agreements; implementing the measures that constitute NTBs in such a way that they do not constitute disguised barriers to trade. 8.3.2 Documentation and Procedures These will be administered in a way which ensures that the clearance and physical movement of goods across the nation s borders is smooth, timely, transparent and not onerous on traders. Appropriate mechanisms to address challenges associated with customs related activities such as border opening times, fees and formalities, transportation corridors, paperwork and other procedures will be developed. Efforts will be made to ensure that there is a coordinated approach between Ministries in developing and implementing import and export procedures; and that controls that are necessary to ensure health and safety are executed in a transparent manner. This commitment to greater trade facilitation is extended to regional and international trading partners. As such, Botswana will continue to work closely with other members of SACU and 10

SADC to reduce border transaction costs. Further, Government negotiates with other trading partners on the same with a view to achieving simplified customs procedures and facilitating timely clearance of goods. 8.3.3 Rules of Origin (RoO) RoO relate to the laws, regulations and administrative determinants applied by countries to determine the economic origin of goods, services and investment as well as subsequent treatment in the context of a PTA. RoO are also used as a tool to prevent the trans-shipment of goods. SACU has no commonly agreed set of RoO. Instead, RoO are negotiated with each trading partner(s) through a collaborative process involving all SACU Member States. For SADC, RoO are negotiated in accordance with the SADC Protocol on Trade Annex on Rules of Origin. RoO serve to strike a balance between encouraging domestic producers to utilize locally available raw materials while simultaneously allowing access to third country input materials. Products are designated as originating according to the RoO negotiated with each respective trading partner(s). Government aims to attain simple, flexible and transparent RoO with a view to fostering exports of originating products and importing affordable input materials for producers as well as importing more affordable goods for consumers. 8.3.4 Technical Standards and Regulations Technical Standards and Regulations are developed in accordance with the domestic regulatory framework and policies as well as internationally accepted standards and quality. The standards and regulations are applied in a manner which ensures the protection of human, animal and plant life and health through the use of appropriate sanitary and phyto-sanitary measures. Government continues advocating for a balanced application of such measures, ensuring that the technical standards and regulations are not overly burdensome and do not restrict trade more than is necessary. 8.4 Facilitating Trade Development 8.4.1 Economic Incentives These are usually used to address supply-side constraints, reduce the cost of production and thus increase firms international competitiveness. Economic incentives may take the form of an attractive tax system, tax holidays, loan guarantees, duty drawback facilities and allocation of serviced land and other forms of subsidies. Government will explore innovative ways of using economic incentives through the development of a two-tier incentive system: one set of incentives applicable to export firms located inside the special economic zones (SEZs) and a general set of incentives applicable to firms located outside the SEZs and the hubs operating outside the SEZs. Further, Government will continue with the rationalization and targeted provision of economic incentives to encourage domestic production, export development as well as both domestic and foreign direct investment. Government will continue to develop economic incentive packages that are in line with her bilateral, regional and multilateral trade arrangements and commitments. 11

8.4.2 Trade Development and Promotion This comprises of instruments that are meant to stimulate export development, the transformation of production processes and addressing supply side constraints in export development. Trade development and promotion includes all activities relating to the work of export promotion agencies, special economic zones and export facilitation procedures. Government is committed to supporting and strengthening export development and promotion through (i) the development of export-oriented SEZs in strategic locations across the country; (ii) promotion of Botswana s globally competitive exports through BEDIA s effective implementation of Botswana s Investment Strategy and (iii) simplification of trade rules and procedures as well as removal of all factors that impede trade facilitation in Botswana. 8.4.3 Development and Promotion of Domestic Industries Botswana s Trade Policy is anchored on the principle of mutually beneficial trade between the country and its trading partners. However, trade data show that Botswana has trade deficit with most of her trading partners that runs into millions of Pula in areas such as motor vehicles and parts, ceramic products, cement and concrete products, chemical products, electrical products and metal products. In most of these areas, Botswana has comparative advantage as well as import quantities that would justify establishment of the required production plant(s) for the product(s). Consequently, Government will continue to provide a conducive environment to encourage both domestic and foreign firms to set up industries that satisfy the above criteria. 8.4.4 Export Financing and Insurance Botswana has no entity dedicated to providing financing for export activities. There are, however, institutions which provide general business financing, namely, the Citizen Entrepreneurial Development Agency (CEDA), the National Development Bank (NDB) and Botswana Development Corporation (BDC). The Botswana Export Credit and Insurance (BECI) are dedicated to providing credit insurance that covers both commercial and political risks. Government encourages financial institutions in both the public and Private Sectors to provide export financing and insurance facilities to support export development. Government ensures that such services are affordable and accessible to all investors engaged in export activities. 8.5 Enhancing Trade in Services 8.5.1 Trade in services is increasingly becoming an important engine of growth for both developed and developing countries, because of its contribution to Gross Domestic Product (GDP), exports, employment creation and poverty reduction. Services also play other important functions in the economy, namely, the intermediate input function; the business service function; the consumption, entertainment & leisure function and the social welfare function. Consequently, Government recognizes the need to encourage the growth of both inward and outward trade in services. 12

8.5.2 Government recognizes the need to liberalize the services sector and ensure that the level and pace of liberalization is commensurate with the level of development and the needs of the sector. Government also recognizes that certain requirements such as licensing and certification are important for securing conformity with the required standards for quality service delivery. While these requirements vary according to the peculiarities of industries, they are administered in a transparent, equitable and non-discriminatory manner. 8.5.3 The removal of impediments is carefully balanced with the right to regulate. Government recognizes the need to ensure effectively functioning regulatory mechanisms and ensures adequate co-ordination and collaboration across the relevant Ministries. Openness, coupled with transparent and non-discriminatory regulations, is encouraged as the basis of Botswana s approach to liberalizing the service sector. 8.5.4 In order to expand trade in services, Government will deliberately adopt sector-specific strategies as well as negotiating Mutual Recognition Agreements to provide more opportunities for Batswana to participate in supplying their skills and services in other countries. 9. CROSS-CUTTING ISSUES Botswana s Trade Policy covers cross-cutting issues which are of fundamental importance to trade, and thus need to be addressed if the Policy is to deliver on its mandate. In view of this, the Trade Policy addresses the following key issues: 9.1 Environment: Government recognises the importance of sustainable use of the environment in facilitating trade. Therefore, the Ministry of Trade and Industry collaborates with relevant Ministries and Departments as well as the Private Sector and other Non-State Actors to ensure that commitments, policies and strategies affecting trade do not violate national and international environmental commitments; 9.2 Infrastructural Development: Government aims to effectively combat the problem of skewed export and economic development in the country. Government works with the Private Sector and other stakeholders to provide relevant infrastructure to facilitate development of export activities and trade in critical and strategic parts of the country; 9.3 Gender and Youth: Government will ensure that opportunities which arise in trade activities are gender neutral, afforded to individuals on an equal basis and support economic development. In addition, Government will collaborate with relevant stakeholders in mainstreaming gender and youth related policies and programmes into the Trade Policy in order to eliminate challenges which result from inequalities based on gender and age; 9.4 Health: Government is committed to ensuring that trade in goods and services are conducted in a manner which protects human, plant and animal health. Government seeks to improve access to affordable medical resources through continued participation in relevant fora, such as the World Trade Organisation(WTO), World Health Organisation (WHO) and 13

the World Intellectual Property Organization (WIPO). Industries are encouraged to undertake workplace programmes that effectively address the health needs of staff and their families. 9.5 Information and Communication Technology (ICT): Government views ICT as an important catalyst in strengthening linkages between buyers and sellers in both local and international markets. Government promotes the provision of affordable and enhanced access to ICT infrastructure and encourages the use of electronic connectivity to facilitate trade. Government also aims to develop proper regulatory regime and related enforcement of e-commerce and e-government activities; 9.6 Capacity Development: Government recognizes the importance of developing the capacity of the Public Sector, Private Sector and Non-State Actors to effectively participate in trade. Government will therefore ensure that: Human Skills: Government ensures that human skills are developed to meet the needs of all industries and that such personnel is appropriately placed. Government collaborates with relevant stakeholders to formulate policies and programmes that ensure that the education system is orientated to produce graduates with the professional and skill capacities for trade development; Private Sector Capacity is developed to take advantage of the market opportunities that Government has secured, by ensuring that training programmes are appropriately tailored to the needs of industry, through partnership with national, regional and international organizations which provide aid for trade and capacity development. The public-private sector partnership will be strengthened to address trade challenges; Institutional Capacity of Ministries and Parastatals involved in trade and trade-related activities are developed through the formulation and implementation of relevant programmes. Such programmes will be undertaken in partnership with relevant national, regional and international development partners which provide aid for trade and other forms of technical assistance for trade and economic development. 9.7 Intellectual Property Rights Protection: Government ensures that Intellectual Property Rights protection functions as a stimulus for innovation and technology diffusion. Government is committed to the protection, recognition and equitable sharing of intellectual property rights trade benefits in line with her national and international commitments. 9.8 Labour: Government remains committed to fostering human rights and worker safety and shall strive to have labour policies that support Botswana s export-led growth strategy. Government ensures that trade is negotiated and conducted in a way that upholds the country s labour laws as well as the International Labour Organisation core labour standards. 9.9 Government Procurement: Government recognises that the provision of goods and services for state projects can be instrumental in the pursuit of economic and social objectives. To enhance effective participation of nationals in the economy, more especially in large and mega government projects, Government will continue to uphold the reservation and preference schemes for citizens while simultaneously encouraging active participation of 14

foreign firms in Government projects through a competitive, transparent and legitimate tendering process. 10. INSTITUTIONAL ARRANGEMENT 10.1 The Ministry of Trade and Industry is tasked with coordinating the development and implementation of trade policy in consultation with key stakeholders. These include Government Ministries and Departments, Local Authorities, Parastatals, the private sector and civil society. 10.2 The Parliamentary Committee on Foreign Affairs, Trade and Security (PCFATS) acts as a link between the Ministry of Trade and Industry and Parliament on Botswana s trade agenda. The PCFATS closely follows and contributes to trade and development issues. Once completed, the Policy is submitted to Cabinet and Parliament for endorsement and ratification. 10.3 The National Committee on Trade Policy and Negotiations (NCTPN) serves as the main consultative forum in the development and execution of trade policy and provides guidance and advice on the ensuing trade negotiating mandate. 10.4 On the international scene, the Ministry collaborates closely with International Development Partners to ensure that Botswana accesses Aid for Trade (AfT) and other critical support to implement the policy. 10.5 Botswana s institutional arrangement for the implementation of the Trade Policy is summarized in Figures 10.1 and 10.2, overleaf. Botswana s Trade Policy will be reviewed every five years or as and when the Ministry deems it necessary. 15

Figure 10.1 Botswana Trade Policy Institutional Arrangement Development of Policy Ministry of Trade and Industry in consultation with stakeholders through the NCTPN, Cabinet Implementation of Policy Ministries Parastatals [BEDIA] Private sector Monitoring Implementation of Policy State Actors Ministries Parastatals PCFATS Non-State Actor Academia BOCCIM BEMA BAU BOCONGO WIBA Regulatory Framework Ministries Regulatory Bodies Attorney General s Chambers BOCCIM, BEMA BEMA Beneficiaries Private Sector Consumers Evaluation and Review NCTPN GICO PCFATS MTI 16

Figure 10.2: Institutional Arrangement Flow Chart for Trade Policy Development of Trade Policy Regulatory Framework Beneficiaries/End User Implementation of Trade Policy Evaluations and Review Monitoring of Implementation Process 17