Harare — WHEN Zimbabwe, among other countries, started Economic Partnership Agreements negotiations with the European Union, the major objective was to widen the country's export base and also integrate its economy into the global market.

Thus far, the Government has signed EPAs on an interim basis while negotiations from the full EPA should be completed by end of this year.

What, however, appeared as a possible major EU market breakthrough for local industry might turnout to be a threat owing to its current fragile state.

The big question amongst the captains of industry today is, Will local firms be ready to face the level of competition posed by products from the EU from 2013 when 45 percent of its goods enter Zimbabwe duty free?

The percentage threshold of products from the EU community would rise to 80 percent by 2022 subject to the completion of EPA negotiations.

There are fears within industry itself that in as much as the EPAs present more export opportunities to Zimbabwe they also pose quite a serious threat.

EU producers enjoy the best production facilities and benefits, giving them an urge over local producers with regard to competitiveness, all round.

For instance, the EU area interest rate stands at 1 percent per annum compared to the local threshold of around 20 percent, which, naturally, makes the cost of funding for local firms by far more expensive.

EU firms also get quite a lot of export subsidies, which in essence give them an unfair advantage which local firms might never get because of pressure on limited Government resources as the economy is still limping.

Such subsidies have been an issue of contention in the developing world, especially EU export subsidies on agriculture related goods under which the EU paid exporters the difference between the purchase and global price.

This has the effect of lowering prices of goods in receiving countries, which then has the effect of pricing local producers out of business as they would have to sell at below cost of production to match prices of imports.

In addition, EU producers enjoy quite huge economies of scale because of their sheer size and the synergies available to them, giving them much more latitude to produce for the export market at the least possible cost.

Furthermore, there is the issue of stringent requirements with regards to standards and environmental impact requirements that local firms must meet for their products to access the EU markets.

Local industry recently expressed reservations over such stringent requirements by the EU and called for relaxation of some of these as they amounted to some form of non-tariff barriers against local producers.

It is against this background that the Government of Zimbabwe might have to reconsider its position on the first deadline for the 45 percent EU products that would have to enter Zimbabwe duty free by 2013.

The general feeling in the local industry is that local firms might not be ready to face the sophisticated level of competition and standards required by the EU to be able to export on a larger scale.

The local economy endured almost 10 volatile years during which the industry's manufacturing base was eroded and requires renewal.

Funding is a major constraint for local firms since, besides the option of loans from local and international markets, most shareholders' financial wherewithal has been heavily decimated over the past few years.

The fact that Zimbabwe is coming from a fragile economic base means there is need to give local firms breathing space and time to recover to the glorious era of 1996 when the economy performed at its best.

Confederation of Zimbabwe Industries vice president Mr Joseph Kanyekanye recently implored the Government to consider pushing forward the deadline when 45 percent EU products start coming in duty free.

"Considering the challenges that local firms are faced with regarding low capacity, old equipment and cost of finance, EPAs are a challenge, in fact, they are a threat.

"If you (firms) that are not globally competitive do not take measures to be globally competitive, you will be in trouble," said Mr Kanyekanye during a workshop to discuss opportunities and benefits of EPAs.

The CZI boss suggested that if it was possible the Government could renegotiate the EPAs, with regard to the 2013 deadline, to give local firms time to find their feet before opening the economy.

Another worrying issue is that in addition to the myriad of operational and financial challenges the local industry is faced with, there is little understanding of the EPAs and their implications to the local industry and economy.

A major worrying issue to the Ministry of Regional Integration and International Cooperation has been the fact that captains of industry have more often than not sent junior representation to forums that have been organised to discuss trade agreements being negotiated with the EU.