In the wake of the Wall Street debacle, several expert fora continue to follow one after the other in apparent competition, with no specific way forward.In a BBC debate during the last World Economic Forum meeting in Davos, Guyanese President aptly remarked that ‘…thank God it’s happening in the developed world, we would be receiving countless lectures had this been in the developing world’…. But the lectures are coming, the latest being by the IMF in Tanzania for Finance Ministers and Central Bank Governors. As expected, it brought together the usual suspects and the usual recommendations…’improved seeds and ferttiliser for poor farmers’… Chapter closed.
Yet for Africa, there has never been a better opportunity than now. Time to look the ‘lecturers’ in the eyes and tell them: your prescriptions have not worked for you, they will not work for us! The developed world is moving towards autarky and protectionism, even against members of their club. Phrases like ‘buy american’, ‘jobs back to France’…. ‘British jobs for British citizens’…are commonplace; Switzerland is reviewing its policy of free European labour movement into the country. As Prof. Kevin Gallagher states, what is happening tantamounts to deregulation in the developing world and protectionism in the developed world
(The Guardian, 8.12.2008).
At the core of this globalisation hype in East Africa, is ‘attracting foreign investors’. But are we short of home-grown investors? Ugandan economist, Prof. Ddumba-Ssentamu asserts that ‘development cannot be implanted from outside… forces outside the economy can stimulate and facilitate the indigenous forces, but cannot maintain it…there must emerge a group of business ,administrative ,and political leaders who can be depended upon to maintain the momentum of development by constant innovation’(Ddumba-Ssentamu 2004).
He is talking to our investment authorities: focus home, instead of spending time, energy and money on ‘trade missions’, ‘exhibitions’, spiced by the occasional ‘Afro-this, Afro-that’, summits, by heads of state.
Small markets, trade liberalisation…
Another key tenet of the globalisation school is that our markets are small, so we need to ‘go global’. But how small are our markets? On the morrow of Uganda’s Tri-Star flagging off the first consignment of locally made garments to the USA under the AGOA arrangement, The New Vision’s caricaturist, MR RAS, summed it up in his characteristic satire: a truckload of brand new garments leaving Uganda for the USA, meets another truckload of discarded garments from the USA entering Uganda!!.
A visit to the major markets in our capitals, Owino, Gikomba, Naybugogo, Nyakabiga, Kakriakoo, will vindicate Mr Ras.
Our markets are too small for our home grown products, but are large enough for discarded garments, shoes, domestic electricals, electronics and cutlery; factory rejects and counterfeits, real garbage heap material.
The story in the supermarkets and grocery stores isn’t any different: chemical concentrates going for processed foods and drinks. By 1992, data with the then PTA Bank showed that the region could meet 80% of its needs through intra-regional trade. What happened to this market potential? Have we fully exhausted this, before seeking ‘global’ markets whose terms and conditions of access end in favor of the developed world and to our detriment?
Yet historically, as Cambridge Prof. Ha-Joon Chang argues, …‘virtually all of today’s developed countries actively used interventionist trade and industrial policies aimed at promoting, not simply ‘protecting’ infant industries during their catch-up periods…the current orthodoxy advocating free trade and laissez-faire policies seems at odds with historical experience, and the developed countries that propagate such a view seem to be ‘kicking away the ladder’ that they used in order to climb up to where they are’..(Chang 2003).
The Role of the State
Umblically linked with globalisation is liberalisation: ‘..private sector-led, export-oriented growth’. Typical Washington Consensus prescription, minimizing (nay, negating) the role of the state in economic development. But at what stage in MDC economic evolution did the role of the state get minimal? Prof. Reinert’s work on the historical role of the state in the economies of the current developed world is very instructive. He is corroborated by Prof Chang’s assertion that the state has historically facilitated and coerced entrepreneurs into the right business. The current wave of active state intervention in key sectors in the developed world vindicates these two sages: the US multi-billion bail-outs, total ownership of AIG, Germany take-over of GM’s subsidiary Adam Opel; UK government takes over Northern Rock Bank…
The Way Forward:
What then is the way forward for East Africa? Time to rethink our development path as a region; review the current policies which still make us export-oriented and vulnerable: common tourist destination, common visa service … against such shocks as Kenya’s tourism sector down by 30%; horticultural and floricultural enterprises going under, . Immediate actions:
1. Declare 2010-2020 East Africa’s Industrialisation Decade, with policies and strategies similar to those employed by the developed world during their ‘catch-up periods’. Go beyond ‘summit themes’, and define what industrialisation path we are taking, given our levels of technology and resource endowment? Industrialisation occurs at different levels namely Resource-based (RB); Light Technology (LT); Medium Technology (MT) and High Technology (HT). All these are possible in EAC in varying degrees.
2. Fast-track the incorporation of the East African Development Corporation, owned only and fully by the five EAC states. This will be a holding company, with the mandate to champion industrialisation in the region, in close concert with the EADB.
3. Identification of key sectors in the region for state priority investment through EADC, in majority shareholding with local industrialists, institutions, individuals and foreign capital.
4. Zoning of the investment projects throughout the Community, guided by the respective levels industrial development, natural resource base, labour and skills.
5. Adopt community-wide policies and strategies on local capital mobilization, especially for infrastructure development. This will reduce and eventually eliminate foreign dependence and vulnerability.
It is only with an employed, well-paid, East African population, that we can support our service sector, which cannot develop in the absence of a meaningful of level of industrialisation. It is a post-industrial, logical consequence of ‘hard’ industrialisation in integrated economies. In the LDCs where it is promoted as a foreign export with minimum internal linkages, it has not escaped such shocks as we are witnessing in the tourism and floricultural sectors in East Africa.
The author is a partner at Peers Consult Ltd and a graduate student of Development Economics at Uganda Martyrs University, Kampala.