FMB’s head start banking on services

The Common Market for Eastern and Southern Africa (Comesa) has not yet concluded liberalisation in trade in services negotiations, but the First Merchant Bank (FMB) has already spread its commercial presence in southern Africa.

FMB, recently announced the acquisition of International Commercial Bank (ICB) Malawi, Mozambique and Zambia, extending its commercial presence beyond Malawi and Botswana where it already exists.

FMB acquired 100 percent shares in ICB Malawi, 70 percent of ICB Mozambique and 62 percent of shares in ICB Zambia, all of which are licensed commercial banks in their respective countries.

FMB managing director Dheeraj Dikshit said the acquisitions will strengthen the bank’s position in Malawi and enable the group to expand its regional footprint and gain entry into the fast growing economies of Zambia and Mozambique.

Dikshit noted that regional expansion will enable the bank to serve better the growing number of customers with cross-border businesses and interests in several territories and, therefore, make meaningful contribution to profits.

Comesa members—Zambia and Malawi—are negotiating a fully fledged trade in services programme as part of the bloc’s integration drive.

Trade in services

The programme envisages liberalisation in trade in services—communication, financial, tourism and travel-related and transport.

Arguably, liberalisation will promote growth and development, enhancement of cooperation, and improve the efficiency and competitiveness of the services sector in the region.

Members are in the final stages of the negotiations on the schedules of specific commitments in these four priority services sectors which indicate the level of market access and national treatment that will be granted to other members.

Comesa trade in services and trade facilitation coordinator Emily Mburu-Ndoria told Business News that free flow of trade in services is one of the important elements in realising the Comesa free trade area.

“There should be substantially no restriction to Comesa services suppliers in providing services and in establishing companies across national borders within the region, subject to prevailing domestic regulations. Studies have shown that opening up trade in services would benefit all countries alike, despite a perception in poorer countries that they will lose out because their domestic service industries are inefficient.

“The gains from more open services trade are substantially greater than those from liberalising trade in goods. This has been evidenced by the liberalisation of telecommunication services in the region. Trade liberalisation benefits countries, firms and consumers,” said Mburu-Ndoria, in an e-mail response to a questionnaire.

World Trade Organisation (WTO) chief of staff, Arancha Gonzalez was quoted as saying that trade in services sector is vital to trade, especially to landlocked countries such as Zambia and Malawi.

He pointed out that trade in services plays a greater role than previously thought in international trade.

This, therefore, calls for members to give more attention to trade liberalisation in the services sector such as banking and tourism.

Malawi relies on agriculture and specifically tobacco for foreign exchange earnings and employment.

But with anti-smoking lobbyists threatening tobacco trade, the country needs a fallback or a better alternative altogether.

Therefore, FMB’s recent expansion of its footprint initially to Botswana, and now to Zambia and Mozambique is an example of how firms from Malawi—one of the poorest country in the region—can embrace trade in services.

This also illustrates against the misconception that liberalisation of trade in services will see industries in poor countries being taken over by those in the rich because of their associated inefficiencies.

Liberalisation of trade

Comesa’s framework for liberalisation of trade in services largely follows the WTO General Agreement on Trade in Services (Gats).

The Comesa programme was adopted in June 2009 and includes the regulations on trade in services that includes an annex on the temporary movement of businesspersons.

The framework provides Comesa member States with the parameters to be considered in the negotiations and establishes the Committee on Trade in Services as the negotiating body.

The Comesa guidelines for services negotiations provide for seven priority sectors identified by member States to be crucial for the development of trade in services and for facilitating trade.

These priority areas are business, communication, construction and engineering, energy-related, financial, tourism and travel-related, and transport services.