[Debate] (Fwd) As BRICS break, next WB prez is Kim, tomorrow

[Yoshie Furuhashi]

Hopefully Putin traded his WB vote for Syria.

On Sun, Apr 15, 2012 at 12:35 AM, Patrick Bond <pbond at mail.ngo.za> wrote:

>  (What deal did Putin get from Obama to break the BRICS, tossing support
> for this job to Jim Kim? As for Brazil's whimsical candidate, Bogota was
> always in Washington's pocket so Ocampo's tilt-at-windmills had to fail -
> even if it was not because he was the most progressive candidate. With Kim
> and his supporters Paul Farmer and John Gershman - normally much more ready
> to challenge power ["Thanks in part to Kim’s trailblazing work, development
> approaches have changed" -
> http://www.washingtonpost.com/opinions/kims-smart-stance-on-growth/2012/04/11/gIQA6SqABT_story.html]
> - sounding ever more ridiculous running away from their sensible "Dying for
> Growth" critique of neoliberalism, there will be a heartbreaker of a WB
> president: http://links.org.au/node/2814 ... but this debate at least
> allowed in a bit of ideological chest-thumping and even Nigeria's central
> bank chief - way below - is using the opportunity to sound off against
> extreme neoliberal and imperial power exercised from Washington and
> Beijing. That's interesting.)
>
>
> -------- Original Message --------  Subject: New World Bank President
> will be Selected on Monday, April 16, 2012...  Date: Sat, 14 Apr 2012
> 07:11:12 -0700 (PDT)  From: Dr. Baba Adam <drbadam at yahoo.com><drbadam at yahoo.com>
>
>
>
>
>
>  Greetings.  This is developing and breaking story – if the USA and her
> allies do not have a major change in mind by tomorrow – Pres. Obama's
> nominee – Dr. Jim Yong Kim will be selected the new World Bank President on
> Monday, April 16, 2012.  - We think its all over...
>
> Even though we know Brazil, Russia, India, China and South Africa (BRICS)
> do not have the votes at the World Bank Board need to make a significant
> difference.  Brazil has said that they will make joint decision -
> http://www.reuters.com/article/2012/04/13/us-brazil-worldbank-idUSBRE83C0T720120413and now that with Russia - throwing her support behind Dr. Kim -
> http://en.rian.ru/world/20120413/172809053.html - even without the
> consensus selection process - it will be Mathematically hard for Dr. Ngozi
> Okonjo-Iweala to be selected!
>
>
>  Good try for our sister Dr. Okonjo-Iweala, Nigeria and Africa… may we
> all live long, learn and prosper!
>
>
>  ---------------------------
>
>
>
> We hope the outcome of this World bank Presidency initiative is a wake-up
> call and a lesson for Dr. Okonjo-Iweala, that after all these years doing
> the dastardly bidding for the World Bank (removal of the fuel subsidy,
> devaluation of the Naira, etc) – that is in addition to her world-class
> education at Harvard and MIT (my sons Alma Mata) – they still refused to
> hand her the keys to the World Bank!
>
>
>  So to start with – Dr. Okonjo-Iweala / Nigeria / Africa – must start
> doing the right things!  Nigeria must focus on making the life of her
> citizen second to none in the world and in the process become an economic
> power-house.  Nigeria must start approaching the world in a position of
> strength rather than hoping that by fulfilling others (World Bank's) agenda
> that they may throw us the crumbs!
>
>
>  For example - say Nigeria unilaterally declares that all the buyers of
> Nigeria's crude oil – must pay with the Naira! - We think singular act
> alone will instantly create demand for the Naira and wean Nigeria away from
> her dependence on the almighty Dollar!  Even though some will kick and
> scream, we also think this will bring Nigeria an enormous respect and
> prestige (get her the much coveted UN Security Council seat after foolishly
> giving-away our oil-rich Bakassi, may even help her make a significant
> dent in achieving the 20:2020; etc).
>
>
>  Here is an example from the past that shocked and awed the world
> especially the West - late Gen. Murtala’s visionary decision on the
> liberation of Southern Africa. - On 01/11/1976 in a speech at the
> Organization of African Unity (OAU) – Gen. Murtala said that "Africa is our
> Sphere of Influence" –  this speech is still considered by many as the
> manifesto of African liberation, a guide to its future.
>
> * *
>
> *‘...Africa has come of age. It is no longer under the orbit of any extra
> continental power. It should no longer take orders from any country,
> however powerful. The fortunes of Africa are in our hands to make or to
> mar. For too long have we been kicked around: for too long have we been
> treated like adolescents who cannot discern their interests and act
> accordingly. For too long has it been presumed that the African needs
> outside ‘experts’ to tell him who are his friends and who are his enemies.
> The time has come when we should make it clear that we can decide for
> ourselves; that we know our own interests and how to protect those
> interests; that we are capable of resolving African problems without
> presumptuous lessons in ideological dangers which, more often than not,
> have no relevance for us, nor for the problem at hand...’*
>
> * *
>
> *
> http://web.ccsu.edu/afstudy/upd13-4.html#Reflections%20on%20Nigerian%20Leadership
> *
>
> * *
> [On similar thinking - please see the attachment - great start by the CBN
> Gov. Sanusi in his recent presentation in London on 03/27/2012 - these
> words must be followed by action but to say the least - we were very
> impressed.]
>
>
>  Regards,
>
>
>
>  Baba...
>
>
>  ------------------------------
>
>
>
>  Rueters
> Ocampo ends World Bank bid, backs Nigerian
>
>
>  By Lesley Wroughton<http://blogs.reuters.com/search/journalist.php?edition=us&n=lesley.wroughton&>and Tiago Pariz
>
> WASHINGTON/BRASILIA | Fri Apr 13, 2012 8:44pm EDT
>
>
>  (Reuters) - Former Colombian finance <http://www.reuters.com/finance>minister Jose Antonio Ocampo ended his bid to become World Bank president
> on Friday, leaving two candidates in an unprecedented challenge to U.S.
> control of the global development institution.
>
>
>  With the board of the World Bank to meet on Monday to pick a new
> president, Ocampo said he hoped emerging-market nations would rally behind
> Nigerian Finance Minister Ngozi Okonjo-Iweala in a race that he said had
> turned highly political.
>
>
>  Okonjo-Iweala, a former World Bank managing director, is now the sole
> candidate from developing nations in a race against U.S. nominee Jim Yong
> Kim, a Korean-American health expert who appears almost certain to secure
> the post.
>
>
>  Ocampo, who was nominated by Brazil<http://www.reuters.com/places/brazil>,
> said his candidacy had been "handicapped" by a lack of support from his own
> country. Colombia said last month it was focusing on a bid for the
> presidency of the International Labor Organization, where it had a greater
> chance of success.
>
>
>  "It is clear that the process is shifting from a strict merit-based
> competition, in which my candidacy stood on strong grounds, into a more
> political-oriented exercise," he said in a statement.
>
>
>  "In this process, I stand on weaker grounds due to the lack of open
> support from the government of my home country, Colombia," he added.
>
>
>  Ocampo, now the director of economic and political development at
> Columbia University in New York, said he did not believe the selection
> process had been conducted in a fully open, transparent and merit-based
> fashion, but it had established a strong precedent.
>
>
>  However, his decision to leave the race does not mean all developing
> countries will support Okonjo-Iweala in a straw poll on Monday when the
> World Bank board tries to find consensus on a successor to Robert Zoellick,
> who is departing in June.
>
>
>  Indeed, the promise of a united front from emerging markets evaporated
> on Friday when Russia <http://www.reuters.com/places/russia> said it
> would support Kim, becoming the first major emerging economy to do so.
>
>
>  "Taking into account Mr. Kim's considerable professional qualities, as
> well as his experience and knowledge, the Russian Federation will support
> the candidacy of Jim Yong Kim during the voting by the bank's board of
> directors," the Russian Finance Ministry said in a statement.
>
>
>  Under a informal agreement, the World Bank has always been headed by an
> American and the International Monetary Fund by a European.
>
>
>  Emerging-market nations have been seeking to challenge U.S. leadership
> at the bank to increase their influence in global economic institutions
> long dominated by rich nations.
>
>
>  While Kim is still the favorite to win the World Bank presidency due to
> backing from the United States and European countries, a rigorous challenge
> from developing countries could put them in a stronger position to extract
> concessions.
>
>
>  It also increases their odds of winning senior jobs coming open in the
> next few months, including chief economist and head of the International
> Finance Corp, the World Bank's private-sector lending arm.
>
>
>  Okonjo-Iweala thanked Ocampo and said his presence had helped to further
> a shared goal of an open selection process.
>
>
>  "I am proud that Dr. Ocampo and I have helped make history by changing
> the way that World Bank presidential elections are contested," she said in
> a statement.
>
>
>  (Editing by David Brunnstrom<http://blogs.reuters.com/search/journalist.php?edition=us&n=david.brunnstrom&>
> )
>
>
>
> http://www.reuters.com/article/2012/04/14/us-brazil-worldbank-idUSBRE83C1IY20120414
>
>
> ***
>
> Neither the Washington nor Beijing Consensus: Developmental Models to fit
> African Realities and Cultures
> Sanusi Lamido Sanusi, CON
> Governor
> Central Bank of Nigeria
> Presented at the Eirenicon Africa Public Lecture Series (EAPLS) held at
> The Royal School of Medicine, 1 Wimpole Street, London, United Kingdom
> March, 27, 2012
> 1 | P a g e
> 1.0 Introduction
> The need for radical re-thinking on development strategy is imperative for
> African countries to be relevant in the global economy. This is further
> reinforced by the stark reality of extreme poverty in Africa. Over the
> years, the share of Africa in global trade remained insignificant despite
> the implementation of the policies that were recommended by international
> financial and development institutions, such as the International Monetary
> Fund (IMF) and the World Bank. The dismal performance of African economies
> calls to question, the effectiveness of the economic ideologies being
> prescribed by international institutions, and points to the need for a
> paradigm shift in order to achieve sustainable development. Over the last
> quarter of a century, Africa has been at the receiving end of liberal
> orthodoxy from these institutions that have persistently advocated, amongst
> others things, privatization of state-owned enterprises, free trade,
> intellectual property rights protection and deregulation of foreign direct
> investment (FDI) as requirements for developing countries to grow and
> develop. This policy prescription was what John Williamson coined the
> “Washington Consensus”. This neo-liberal ideology is reflected in the
> policies of the Bretton Woods Institutions: the IMF, the World Bank and the
> World Trade Organization (WTO). Specifically, both the IMF and the World
> Bank condition their offer of assistance to developing countries on the
> strict adherence to the Washington Consensus policies. The Consensus had
> continued to be under severe criticism because the performances of
> countries that adopted its doctrine, especially in Sub-Saharan Africa,
> Latin America and the former Soviet bloc showed that it had failed to
> deliver sustained growth as promised by its promoters.
> The remarkable economic growth of China in the past 30 years, with the
> country having declined to adopt the original and extended framework of the
> 2 | P a g e
> Washington Consensus, has raised further doubt on the unassailability of
> its capabilities. The significant economic miracle of China which has been
> described as the “Beijing Consensus” by Joshua Cooper Ramo, represents a
> symbol of China‟s success and a challenge to the Washington consensus
> normative power. The Beijing consensus is enshrined in three principles of
> innovation, Chaos management promotion and theory of self-determination.
> These tenets are embedded in the policies of China that features
> incremental reform, innovation and experimentation, export-led growth,
> state capitalism and authoritarianism. Though the Beijing consensus had
> recorded remarkable success, it has, however, been argued, that it might
> not be sustainable in the long-run because it maintains large state-owned
> sectors and authoritarianism, which runs contrary to people‟s aspirations,
> as the series of revolutions in the North African countries have shown
> (Williamson, 2012).
> In addition, a historical review of how the advanced countries de3veloped
> shows that they did not adopt policies that they are recommending for the
> developing countries. As pointed out by Ha-Joon Chang (2003), some of the
> policies that the Bretton Wood institutions kick against today, were the
> very policies they adopted for their development. For example, the WTO
> currently opposes the use of export subsidy and protection of infant
> industry, whereas the United Kingdom and the United States embraced these
> policies in their early stages of development. There is therefore, the need
> for pragmatic policies and institutions that best suit the developmental
> stages and realities of developing countries in order to achieve
> sustainable and fast growth, and for the benefits of developed countries in
> the long-run (Ha-Joon, 2003).
> Against the apparent failure of the Washington Consensus as applied in
> developing countries, and the possibility of the un-sustainability of the
> Beijing consensus in the long-run, there must be a paradigm shift in
> Africa‟s development strategy for sustainable economic development. The new
> 3 | P a g e
> approach should identify development paths that focus on a pragmatic
> commitment to progressive change as a possible alternative to the current
> development strategy. The question remains whether Africa can leverage on
> its potentials of huge natural resources, regional market size and human
> resources to formulate a radical development strategy that fit its
> realities and cultures without adopting the tenets of the Washington and
> the Beijing consensus.
> The objective of this paper is to present my views on this contentious
> issue. Following this introduction, section 2 explains the Washington and
> the Beijing Consensus‟ developmental ideologies and some related trade
> theories. Section 3 reviews the consensus‟ and development in African
> economies; Section 4 discusses the lessons from the growth strategies by
> China and India. Section 5 highlights a new development strategy for Africa
> while section 6 reviews Nigeria‟s recent developmental approach. Section 7
> addresses some likely challenges to the new paradigm and section 8
> concludes the paper.
> 2.0 The Washington and Beijing Consensus’: Developmental Ideologies
>  The Washington Consensus
> The phrase Washington Consensus was first coined by John Williamson in
> 1989 in his work where he showed the inadequacy of Latin American reforms
> and identified areas that needed further improvement. It simply expressed
> the widely held view in Washington and by international development
> institutions that there is a path that developing countries‟ economic
> reforms should follow to absorb aid efficiently. The Washington consensus
> contains ten rules namely, fiscal discipline, tax reform, re-ordering
> public expenditure priorities, competitive exchange rate, privatization,
> trade liberalization, liberalizing interest rates, deregulation,
> liberalizing of inward FDI and property rights. These rules mirrored the
> tenets of liberal market-oriented capitalism and policies of the then
> Ronald Reagan and Margaret Thatcher governments which, were strong
> promoters of capitalism and neo-liberal ideology. Neo-liberal ideology
> derived its tenets from
> 4 | P a g e
> the work of 18th century Economist, Adam Smith, who advocated free trade
> among nations as a way of promoting global growth. The policy prescriptions
> of conditioning aid and compelling developing countries to open their
> capital accounts and promote unhindered movement of portfolio investment
> across international borders by the IMF and World Bank have close
> similarities to the tenets of the Washington consensus.
>  Beijing Consensus
> The Beijing consensus emanated from the published work of Joshua Cooper
> Ramo in 2004, where he described the social and economic transformation of
> China as the new physics of power and development. Transformation under the
> consensus was embedded in three principles namely Innovation, promoting
> works through Chaos management and self-determination (Kennedy, 2008). By
> the first component, China‟s economic success was rooted in constant
> innovations that improved its total factor productivity, while the second
> represents China‟s quest for economic development which was not limited to
> growth but equitable distribution of wealth. The third component symbolizes
> the ability of China to chart and maintain her developmental polices as a
> model for other countries to follow and emulate (Kennedy, 2008). Therefore,
> the term Beijing consensus was the sum of the five pillars of the economic
> policies of China over the years which included incremental reform,
> innovation and experimentation, export-led growth, state capitalism and
> authoritarianism (Williamson, 2010). The next sub-section briefly examines
> some related theories of trade from which neo-liberal ideology derived its
> tenets.
> 2.1 Trade Theories
> Free trade originated from the traditional theory of comparative advantage
> which asserts that nations tend to gain from trade if they specialize in
> the export of commodities they can produce at the cheapest cost. The
> benefits from trade arise among unequal trading countries because of
> differences in comparative
> 5 | P a g e
> advantage. An extension of the theory of free trade is the neo-classical
> factor endowment trade theory, propounded by Eli Hecksher and Bertil Ohlin-
> Swedish economists. The theory postulates that, under the assumptions of
> equal factor prices and equal technological possibilities, a country with
> relatively cheap labour enjoys relative cost and price advantages over
> nations with relatively high labour cost in producing labour-intensive
> goods, the converse holds for a country that enjoys relatively cheap
> capital. Therefore, developing countries should specialise in the
> production of labour-intensive products, and export the surplus in return
> for import of capital-intensive products from developed countries. The
> basic conclusions from these theories were that, countries stand to gain
> from free trade and that output increases in a free trade environment,
> Furthermore, identical technology in a free market equalises factor prices
> across participating nations and free trade increases the share of national
> income accruing to labour. Finally, free capital flow and human resources
> benefit nations (Todaro and Smith, 2009). The Washington consensus derived
> its tenets from these neo-classical ideologies. However, some of these
> neo-classical ideologies have been challenged by the new development
> thinking in the light of the reality in the contemporary world, especially
> in developing countries.
> 3.0 The Consensus’ and Development in African Countries
> 3.1 Implications of the Consensus’ for Development in Africa
> Although, most African Countries have continued to apply the principles of
> both consensuses in their economic policies, the road to development
> remains bleak with very little consideration for their growth potentials.
> According to Manuel (2003), one of the most important drawbacks of the
> Washington Consensus was that, while it provided a good mixture of reforms
> to stabilize an economy and encouraged private sector activities, it did
> very little to help resolve structural and institutional constraints on
> growth. He noted that part of Africa‟s growth problems were the incentives
> and disincentives embedded in the global
> 6 | P a g e
> environment, which had reduced the continent to mere exporter of primary
> commodities.
> The continent‟s economic growth has been grossly inhibited by a global
> trade system inimical to the full exploitation of its comparative
> advantage. Furthermore, limited market access for low-cost textiles,
> cotton, and agricultural products and competition from heavily subsidized
> exports from industrialized economies has effectively prevented growth
> (Manual, 2003). Thus, unable to produce capital intensive goods, African
> countries have been reduced to net importers of finished products. Hence,
> for African economies to achieve their growth potentials, they should be
> able to utilize their export earnings to broaden their production base and
> productivity.
> The primary commodities that are sources of export earnings have become
> highly susceptible to price volatility and adverse shifts in the terms of
> trade. Price volatility has not only resulted from adverse weather
> conditions and other supply shocks, but also from the secular decline in
> real prices caused by structural oversupply in commodity markets from
> output in the advanced economies (Kahl, 2004). Furthermore, the lack of
> support for price stabilization through commodity agreements by the
> international community hinders favourable pricing.
> While the World Bank and IMF are constantly discouraging the use of
> subsidies in African countries in line with one of the tenets of the
> Washington Consensus, the developed countries have continued to use
> subsidies to stabilize their economy, particularly in critical sectors such
> as the agricultural sector. For instance, the 2002 cotton subsidies to the
> US and EU producers distorted world prices with the adverse loss in revenue
> to Africa being more than the total Highly Indebted Poor Countries (HIPC)
> debt relief initiative during the period. Such occurrences have the
> potential of further building-up external debt stock due to the fiscal
> 7 | P a g e
> insolvency that could arise from limited export revenue and declining
> terms of trade.
> Manuel (2003) argued that the reliance on a single commodity export partly
> reflects inadequate external incentives to diversify production.
> Consequently, the Washington Consensus tenet of broadening the tax base and
> lowering marginal tax rates would continue to be extremely difficult to
> achieve in Africa due to the massive dependence on a single source of tax
> revenue.
> Trade liberalization as required by the Washington Consensus further
> compounded Africa‟s problems as African countries have been unable to
> develop efficient and low cost industries that could compete favourably in
> the global market. Thus, while many countries outside Africa have been able
> to liberalize foreign trade to increase their share of global trade, Africa
> had witnessed declining terms of trade with adverse effects on export
> revenue and real exchange rate.
> Although, the Washington Consensus could be said to have improved
> macroeconomic stability in Sub-Sahara Africa (SSA), it had not facilitated
> the solution to development in Africa and developing countries in general.
> This observation was supported by Woo (2004), who elucidated that although
> Indonesia, Korea and Thailand implemented the Washington Consensus type of
> policies to counter the Asian financial crisis, they suffered deeper output
> losses for a longer period than Malaysia, which adopted capital controls
> instead.
> The ability of the Beijing Consensus to ensure sustainable economic
> development in Africa is also in doubt. Williamson (2012) argues that the
> Beijing Consensus could best be described as protecting China‟s
> “self-interest” rather than a genuine concern for Africa‟s developmental
> needs. For instance, Chinese loans and grants to Africa were closely linked
> with trade and investments in Chinese commodities. In 2004, the Chinese
> government granted
> 8 | P a g e
> Angola long-term non-concessional loan of US$2 billion on the condition
> that 70 per cent of the total loan contracts would be awarded to Chinese
> companies. The loan was also conditioned on the fact that China would
> import 10,000 barrels of crude per day from Angola throughout the loan
> tenure. The terms of the loan clearly showed that it was not designed to
> have meaningful impact on the citizens and poverty alleviation through
> domestic job creation. To support the notion that Beijing consensus is more
> of “self-interest”, Lammers (2007) noted that, the Chinese development
> assistance and soft loans to Africa had given China the opportunity to
> explore Africa‟s oil-fields as experienced in Angola and Sudan. So also
> were access to fishing waters in Sierra-Leone and Gabon, and agricultural
> land in Zambia and Zimbabwe.
> 3.2 The Performance of African Economies under the Consensuses
> Available statistics revealed that Africa had largely under-performed when
> compared to other developing regions. Economic growth in Sub-Saharan Africa
> (SSA) had been low; with an average real gross domestic product (GDP)
> growth rate of 2.6 per cent in the 1980‟s compared to 6.7 per cent in
> developing Asia over the same period. The global oil price shocks that
> occurred in the early 1980s worsened the economic performance in most
> African economies and led to the adoption of economic measures in the
> spirit of the Washington consensus. Noteworthy, is the Structural
> Adjustment Program (SAP) with key policy measures designed to achieve
> economic stabilization and enhance efficiency in resource allocation mainly
> through economic restructuring and macroeconomic balance. During this
> period, the growth rate of SSA declined precipitously from 2.3 per cent in
> 1985 to 0.8 per cent in 1986, whereas Developing Asia recorded a growth
> rate of 6.1 per cent in 1986.
> In the 1990‟s, the economic performance of SSA declined further to an
> average of 2.4 per cent, while that of Developing Asia improved to 7.4 per
> cent. Although, the performance of SSA strengthened in the 2000‟s,
> Developing Asia
> 9 | P a g e
> continued to outperform SSA. Thus, in 2011, Developing Asia growth rate
> stood at 8.2 per cent, while that of SSA was 5.2 per cent.
>  Inflation Rate
> The consumer price inflation of SSA had been within tolerable limits and
> relatively stable compared to the episodes of unprecedented high inflation
> rates in three-digit experienced in Latin America and the Caribbean region,
> between 1983 and 1994. This arose from severe debt crisis, excessive import
> dependency, increased international commodity prices and structural
> bottlenecks. For SSA, the highest inflation rate recorded was 46.1 per cent
> in 1994, induced by agricultural supply shocks and inflation inertia. The
> inflationary pressure had since reversed as the consumer price inflation
> declined from an average of 24.4 per cent in the 1990‟s to 10.3 per cent in
> 2000-2009. However, SSA inflation rates had consistently remained above
> world inflation rate since 1991.
>  Investment Flows
> The foreign direct investment boom that began in the early 1990‟s was
> mainly channeled to emerging economies, Developing Asia and Latin
> America/Caribbean economies. In the 1990‟s, FDI (net) in developing Asia
> and Latin America/Caribbean economies stood at US$40.4 billion and US$33.3
> billion, respectively. It was however a modest US$2.5 billion in SSA. The
> share of SSA in global FDI flows fell from an average of 4.0 per cent from
> 1980-1989 to 1.5 per cent in 1990-99 and thereafter rose to 3.4 per cent in
> 2000-2009. In contrast, the share of developing Asia in global FDI flow
> increased steadily, reaching a peak of 28.3 per cent in the period
> 1990-1999. The dismal performance of SSA in attracting FDI had been
> attributed to political and economic instability, corruption and the high
> cost of doing business. Furthermore, the endorsement of Bilateral
> Investment Treaties (BITs), Double Taxation Treaties (DTTs) and the
> 10 | P a g e
> adoption of multilateral agreements under the Multilateral Investment
> Guarantee Agency (MIGA), have yielded minimal improvement in inflow.
> The performance of the region had however, improved modestly in recent
> years, owing largely to the economic reform initiatives to improve the
> investment climate. These included the privatization of state-owned
> enterprises, establishment of export processing zones, improvements in
> infrastructure and review of FDI regulatory frameworks. FDI net flows of
> US$16.9 billion were thus recorded in the period 2000 -2009, this was
> however, lower than the amount recorded in Asia, Latin America and the
> Caribbean economies. On annualized basis, SSA‟s share increased slightly
> from 3.1 per cent in 2010 to 4.0 per cent in 2011.
> 4.0 Lessons from the Growth Strategies by China and India
> A review of the strategies adopted by China and India in achieving their
> impressive growth revealed that both countries insulated their economies
> from international trade through import tariffs, export subsidies, and
> quantitative restrictions, in addition to the provision of subsidies to the
> manufacturing sector. Extensive regulation of economic activities was
> enforced until 1991. State control of the financial sector and financial
> flows was adopted to manage the economy and guide resources to priority
> sectors.
> In China, gradual economic reforms were adopted in which government
> promoted synergy between social division of labour and growing national
> market. Through this mechanism, it was easy to harness the expanding
> skilled manpower from massive push for education; the country also adopted
> large social division of labour and favoured foreign capitalists to promote
> national development. China‟s promotion of Township and Village Enterprises
> (TVEs) also aided the country‟s rapid development. This programme was
> introduced between 1978-1983 under Household Responsibility System reform
> where the
> 11 | P a g e
> control over agricultural surpluses was handed over to households and
> communities. The reform was further complemented by fiscal decentralization
> and the use of fiscal residual for bonuses. Fiscal decentralization enabled
> local governments to have autonomy and contribute to national economy
> directly, while fiscal residual bonus rewarded communities according to
> their contribution to the national economy. Through these reforms, TVEs
> became the central strategy to explore entrepreneurship energies in order
> to achieve national developmental objectives. China‟s developmental path
> moved from agriculture into manufacturing, before transiting to the
> services sector. In summary, China‟s policies were embedded in incremental
> reforms, innovations and experimentation, export-led growth, state
> capitalism and authoritarianism.
> The Indian model leaned towards a shift to services sector and ICT, as its
> growth was induced by rapid growth in technological advancement in the
> services sector through the mechanism of free market, education and
> innovation. The country‟s developmental path directly transformed into the
> services sector from the agricultural sector, with the manufacturing sector
> remaining light.
> Commonly, China and India based their industrialization on short-term
> autarky policies involving state control on investments and import quotas
> with rapid swing from agriculture. They ensured that industrial development
> in the private sector were kept within the national plan to prevent the
> diversion of foreign exchange and other investment funds to non-socially
> desirable sectors. Large-scale infrastructural developments were also
> undertaken. Both nations have evidently surpassed the performance of most
> countries that adopted the Washington and Beijing consensus‟ policies.
> This posts the need for a paradigm shift in Africa‟s developmental efforts
> that have not achieved set objectives. Most African countries, including
> Nigeria
> 12 | P a g e
> share certain similarities with the two countries in terms of their large
> population, massive supply of relatively educated and cheap labour, and
> existence of huge domestic markets essential for the attraction of foreign
> investment. For Africa to emerge from the present economic problem there is
> need for development strategies that fit into the unique nature of the
> continent. This requires a clear break from the past and a change in
> vision. In adopting alternative strategies, planners must take cognizance
> of differences in its social-economic and political structures. A wholesome
> adoption of both the Chinese and Indian models is not advisable given that
> the world economy has changed significantly from what it was when these two
> countries adopted their respective models, but beneficial strategies within
> the two models could be adopted. A valuable alternative model for Africa
> therefore must be unique to the nature of its economies.
> 5.0 A New Developmental Strategy for Africa
> Based on the experiences of China and India, and taking cognizance of the
> realities of the African economic setting, there is need to fashion a new
> developmental strategy for Africa. The thrust of such developmental
> strategy must be focused towards harnessing the continent‟s rich natural
> resources, and managing them in such a way as to become a major player in
> the global economy without sacrificing the need for an inclusive
> development. This can be done through government intervention and later
> adoption of free market to promote economic growth. To this end, some of
> the strategies that can kick start Africa‟s economic transformation are
> suggested below:
>  Regional Integration
> Regional integration is indeed the continent‟s biggest challenge, even
> though several countries in Africa belong to one regional grouping or the
> other. Although there has been some achievements across some of these
> groupings
> 13 | P a g e
> such as the free movement of persons and customs union in the Economic
> Community of West African States (ECOWAS), and common currency in the West
> African Economic and Monetary Union (UEMOA), Southern African Development
> Community (SADC), Southern African Customs Union (SACU) and East African
> Community (EAC). These achievements have to be strengthened and replicated
> across Africa to further promote the inter-complementarity of goods, trade
> facilitation and free movements of the factor of production, amongst
> others. The process of integration would also assist in regional
> infrastructure development in critical areas like energy, transport,
> communication/ICT systems, roads and rail transportation. This would reduce
> production costs and increase economic activities across the continent. In
> addition, it would also strengthen Africa‟s political voice, improve
> collective negotiations to achieve more favourable outcomes on the external
> front. Other benefits would include enhanced access to international
> markets and fair price for resource exploitation as well as attracting
> investment flows to the continent.
>  Investment in Human Capital
> Africa has a young population compared to the ageing societies across the
> world. Skill acquisition is critical to turn this resource into wealth. For
> example, for the manufacturing sector to take off, the new development
> strategy must avoid the current fragmented approach to education which is
> not adapted to the developmental needs of the African economies, hence,
> emphasis should be placed on tailoring education to growth sectors.
> Education and training in cutting edge technologies would enable countries
> to adjust more swiftly to the challenges of globalization as enterprises
> become more flexible and better able to absorb new technologies. As such an
> integrated approach to education would enhance human resources development
> and create sufficient skilled manpower desired for the enhancement of
> industrial production. In particular, acquisition of requisite skills is
> also crucial for the development of Africa‟s
> 14 | P a g e
> informal sector, which account for the lion share of employment. In the
> short-term, technical and vocational skills are critical for building
> agro-allied industries using basic technology.
>  Utilization of Natural Resources for Development
> Aside human resources, the continent should leverage on the vast endowment
> of natural resources like land, water resources, solid minerals, oil and
> gas and renewal energy to launch itself into the next development phase.
> Unproductive practices such as land tenure system must be discarded, while
> property rights, and rule of law must be enforced. Agreements on mining
> rights must ensure fair pricing and sustainability of these natural
> resources.
>  Institution of Good Governance and Zero Tolerance for Corruption
> Institutional development and good governance anchored on the rule of law
> are paramount for sustainable development. Strong political commitment on
> the part of the relevant authorities is also quintessential. Enhancing the
> operation of public enterprises is essential to address corruption and
> improve efficiency. Like China, African countries should encourage the
> adoption of a zero tolerance policy against corruption by instituting
> severe punishment to penalize and control/eliminate corruption.
> 7.0 Some Likely Challenges to the New Paradigm
> In order for Africa to succeed under the proposed new economic development
> paradigm, the continent must cultivate a sense of urgency in overcoming
> some of the likely challenges currently confronting it. These challenges
> include:
> 15 | P a g e
>  Corruption
> The high incidence of corruption constitutes a major challenge to the
> successful implementation of any new development strategies in Africa. The
> effects of corruption are multi-dimensional. Corruption promotes the
> diversion, depletion and misallocation of scarce resources, as well as
> increase in the costs of production of goods and services. It results in
> inefficient state ownership, excessive private accumulation and widening
> inequalities. The lack of transparency and accountability associated with
> corruption prevents public participation in the decision-making process
> thus, limiting positive developmental outcomes. The multiplicity of
> functions and the wanton duplication of agencies in some African countries
> equally promote wastages and inefficiencies in the management of resources.
> Corruption also distorts fiscal discipline and impedes institution of good
> corporate governance practices.
>  Market Access
> Low level of inter-complementarity of African goods limits the ability of
> the continent to support a high level of intra-African trade. This results
> from the production of the same category of goods -primary goods, in
> addition to the fact that they service the same international market. There
> is a strong need therefore for diversification of the production base in
> Africa. Market access is also greatly reduced by the existence of sanitary
> phytosanitory measures conditions under the WTO, which promotes conditions
> that African countries cannot meet. There is need for the revaluation of
> the international trade rules that have limited the bargaining power of the
> continent. Due to the weaknesses of the domestic production base, African
> countries are unable to reciprocate the most favourable nation status in
> countries with which they sign bilateral trade agreements, and also fully
> participate in preferential trade agreements such as the African Growth and
> Opportunity Act (AGOA) and Economic Partnership Agreement (EPA).
> 16 | P a g e
>  Technological Constraints
> The low technology base in Africa is a major constraint to development.
> Old technologies are often deployed with over-reliance on traditional
> methods of production which results in low productivity and competitiveness
> due to the lack of economies of scale. African countries have also been
> unable to develop cutting edge technologies owing to weak research and
> development. This results from poor funding of research institutes and
> science education. There is need therefore for better funding of research
> initiatives in order to stimulate technological advancements.
>  Structural/Institutional Constraints
> The lack of critical infrastructure such as transport and communication
> networks does not support the growth of economic activities in Africa. The
> inadequate supply of electricity, for example, leads to increase in
> production costs thereby rendering products expensive. Most of the existing
> legal infrastructure that is vital for the enforcement of competition laws,
> bankruptcy and other commercial laws are weak and inadequate. Rule of law,
> property rights, among others must therefore be firmly rooted to provide
> the enabling legal environment for Africa‟s development.
>  Information/Data Constraints
> Many development projects are poorly implemented due to lack of data,
> which often lead to insufficient knowledge on the magnitude developmental
> challenge. The poor data base is largely due to lack of adequate
> infrastructure and skills for data mapping and analysis. There is need to
> focus on addressing these challenges to aid effective policy formulation
> and implementation.
> 17 | P a g e
>  Access to Credit
> Entrepreneurs and investors are exposed to limited credit channels which
> constrains competitive business expansion and productivity growth.
> Increases in foreign capital inflows and developmental aids have reversed
> following the global financial crisis. FDI inflows are relatively low
> making long-term investment difficult. There is need to re-engineer the
> credit market in Africa so that the needs of entrepreneurs can be
> adequately met.
>  Climate Change/Natural Disasters
> The impact of climate change and global warming that mostly emanates from
> the industrialized countries makes Africa vulnerable to counter-productive
> forces. Rising incidence of natural disasters including droughts, floods,
> tropical storms, soil erosion and landslides are major threats to human
> life and property imposing huge social and economic losses. The lack of
> capabilities to accurately predict, monitor and mitigate the above sources
> of environmental degradation has severely constrained development efforts
> in Africa.
>  Trade Retaliation
> Africa‟s attempt to protect infant industries may provoke retaliations
> from trading partners that could further shrink the market for Africa‟s
> exports. Subsidies and fiscal incentives for domestic producers may induce
> tariff changes that could limit trade with other countries. Trade
> retaliation is no doubt a major threat to the new development strategy for
> Africa.
>  Violent Conflicts
> The prevalence of conflicts and social instabilities are among the major
> problems turning African countries into fragile states. The continent has
> the high concentration of the world‟s poorest people with little or no
> social safety nets. Civil unrests, inter-religious and ethnic conflicts are
> prevalent in most of the
> 18 | P a g e
> countries. There are numerous cases of domestic and imported security
> problems as exemplified by the recent war in Libya and the political
> crisis; as well as the terrorist attacks across the continent. The
> inability to resolve conflicts erodes the desired sense of equity,
> fairness, motivation, consensus building, ownership and participation in
> the development process. Poverty and inequality may also pose challenges to
> the new development strategies that require painful sacrifices.
>  Environmental Issues
> Inadequate access to modern and safe energy sources and the excessive use
> of firewood in rural Africa distorts ecological balance and stifle growth.
> Ecological hazards like soil erosion, floods, desertification, ocean/desert
> encroachment and deforestation are among the major development constraints
> in Africa. Poor sanitary conditions, gas flaring/carbon emissions, lack of
> access to safe drinking water, poor quality healthcare and poor nutrition
> all need to be addressed for development to take off.
>  Physical/Human Capital
> Knowledge gaps are prevalent in Africa and are generally known to
> constrain investment growth by diminishing returns to capital. Knowledge is
> a vital input into the production process and can be shared without
> necessarily increasing costs or diminishing the facilitator‟s intellect.
> Investments in human capital are needed for management expertise, product
> and process innovations and overseas marketing channels. Increased
> knowledge can boost productivity with limited amount of resources.
> Knowledge is also essential for capacity building and product development
> and is thus a key catalyst to development.
> 19 | P a g e
> 8.0 Conclusion
> Africa with its huge natural resources, regional market size and human
> resources ought not to be a marginal player in the global economy. Neither
> the Washington Consensus nor the Beijing Consensus can bring about the
> desired change. The implications of the structure of African economies need
> to be critically appraised in order to identify an appropriate African
> Consensus - for its development model. In this regard, a developmental
> strategy for the continent would include a framework that embrace
> competitive regional and international trade, development of critical
> infrastructural, harnessing of the potential of the huge natural resource
> endowment, including abundant labour force and large domestic market.
> 20 | P a g e
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-- 
Yoshie Furuhashi
<http://mrzine.org/>
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