The economic evaluation of the Swedish Commodity Import Support Programme (CIP) (1987)

Abstract

Impact of the Swedish CIP on the Balance of Payments: From the balance of payments accounting system point of view, grant CIPs have a neutral effect on the BOP balances. This is because of the netting-off effect of the debit and credit entries. From the economic point of view, however, grant CIPs have a positive impact on the BOP. This is because grant CIPs make it possible for a country to import goods and services over and above what the country can afford without increasing its debt obligations. To this extent the Swedish CIP, which is wholly grant, has a positive effect on the BOP to the extent of the actual value of the CIP plus the interest burden that would have been incurred if the CIP were a loan facility. Effects of the CIP on the Broadening and Reorienting of Zimbabwe's Trade Links with Special Reference to Diverting Trade away from South Africa: The effect of the CIP on this particular issue can be viewed in two ways. Firstly, it leads to a widening of the sources of Zimbabwe's imports to include Swedish imports which hitherto were not being sourced from that country. The idea is that the greater the number of trading partners the greater the stability and the more competitive the trade flows. Secondly, it encourages the reorientation of Zimbabwe's imports away from South African sources to Swedish and other sources. This second aspect is in line with the Government's stated policy of endeavouring to de-link from South Africa.With respect to the first view the CIP has managed to do this to the extent that 23 companies out of the 31 in our sample (i.e. 74%) which were not sourcing their imports from Sweden were now sourcing them from that country. This type of reorientation of trade does have its costs and benefits. Companies may reorient trade (in this case imports) simply because the Swedish private sector CIP is tied and not because of price and quality competitiveness. This issue is discussed further in the relevant section below. Among the 23 companies mentioned above are 11 companies which sourced imports from South Africa prior to the CIP. Quality Competitiveness of Swedish CIP Imports It was generally accepted by the recipients of the Swedish CIP that the goods they were receiving were very competitive in terms of quality. Companies were asked to rate the quality of the goods as "best", "good" or "fair" where "good" would imply that comparable quality goods could be obtained elsewhere, and "fair" would imply that better quality goods could be obtained elsewhere. In our sample survey, of the 31 companies interviewed one company did not give its views on the quality of the goods imported under the CIP. Of the remaining 30 which answered, 23 (or 77% of those who answered) said the quality was the "best" whilst seven (or 23% of those who answered) said the quality was "good" (meaning that the quality was comparable with other known sources). None said the goods were of a "fair" quality (meaning that a better quality product could be obtained from other sources).