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Tales from the Development Frontier
or export goods, Zambia ranked 153rd among 183 countries in trading across borders, compared with its much better ranking overall of 84th among 153 countries. The cost differences between China and Zambia are large. It costs $3,315 to import a 20-foot, 10-ton container in Zambia, but only $545 in China; for exports, the cost is $2,678 for Zambia and $500 for China. More than 85 percent of the cost difference derives from the higher costs for inland transportation and handling in Zambia (around 20 times greater than in China). Similarly, the time required to export or import a container in the case of Zambia is more than twice the corresponding time in the case of China. Half the difference arises because of the extra time needed for document preparation, and a third arises because of the extra time needed for inland transportation given the great distances to ports, the delays at intermediate borders, the high fuel prices, and the poor-quality roads. The poor trade logistics are particularly disadvantageous for large firms, though all firms are affected to some extent because they must import inputs. The one bright spot is Zambia’s competitive trucking industry, which offers lower costs per ton-kilometer relative to other African countries (Raballand and Whitworth 2011). Low worker efficiency. Labor efficiency in Zambia is low because of a
combination of lower worker skills and motivation, outdated equipment, the small scale of operations, and the captive customers that allow firms to sit far below the optimal productivity level.12 In our interviews, managers of apparel firms expressed concern about rising labor costs and declining motivation among workers because of laws and regulations that complicate efforts to compensate workers based on performance, to lay off workers, to hire skilled foreign workers to train Zambian workers, and to employ women. Wages in the informal sector—where workers are not subject to the same regulations— are much lower, and motivation and productivity are reportedly higher. Yet, labor regulations are not the only problem: China seems to be more competitive despite the more stringent labor regulations there.13 Aside from their impact on productivity, many of these factors also contribute to low product quality. Thus, for example, employers have few tools to encourage workers to put in the extra effort to produce export-quality products.