Some steps towards the Malawi we want
Malawi’s
economy at present is between a 100 to 200 (or more years) behind many African
countries and indeed behind advanced countries of Europe and North America. A
simple economic growth calculation reveals that, to move from the current Gross
National Income of circa $389 per capita to US$1037 per capita threshold for
being categorized as a lower middle income country, and assuming the current 5%
average growth rates of incomes per
capita, it will take Malawi at least 63 years. Similarly, under the same
assumptions, it will take Malawi, 111 years, 165 years, 188 years and 306 years
to reach levels of per capita incomes enjoyed by Ghana, Namibia, Botswana, and
Germany respectively. This is unacceptable and we must collectively reduce
these ginormous time gaps in less than two decades by doing business
differently, or we will perish.
The
encouraging news is that while the task before us appear daunting and extremely
challenging, it is doable. At around 1931, seeing the inevitability of World War
II with 10 years, the then Secretary General of the Communist Party, Joseph
Stalin mobilized his supporters and workers to rally behind Russia’s ambitious
goal of industrialisation and the radical policy changes that were to follow.
Not surprisingly, at the end of the World War II, Russia emerged as one of the
undoubted super powers- as the war found its industries modernized, its people
energized, and the political machinery, stronger than in the years immediately
after Lenin.
Although
our situation in Malawi may appear different from that of Russia at the time in
that we are not preparing for an actual war for dominance, there are
similarities. The underlying basis include the backwardness of the economy,
untold poverty and suffering of people and a lack of solid leadership and
vision to reclaim the Malawian dream for a larger portion of the post 1994
period.
The
recent upheaval in leadership machinery of the nation provides renewed hope
that Malawi can rise again. It has been a long struggle to reach here with a
great deal of momentous milestones, casualties, and sacrifices among the
poorest many and a broad spectrum of players. To reclaim the Malawian dream
however will require political seriousness, meticulous planning,
implementation, mutual accountability and a general buy-in of programs from the
governed.
To be
able to significantly change peoples’ lives, our economy must grow at least 7%
and preferably at least 9% or more per annum for at least two decades. As you
may guess, this is not a trivial ambition, but we can draw some lessons from
recent international experiences and combine that with our understanding of
economic growth processes to arrive at what may be a feasible optimal point for
us. For example while China has done well recently and is emerging as a super
power, not everything that China does can be replicated by any other country
due to obvious size reasons.
On the
other hand, South Korea, Ghana, Malaysia, Singapore, Ethiopia, Rwanda, and
other emerging economies may offer further valuable lessons. South Korean
economy evolved gallantly from a real GNP per capita of US$87 in 1962 to US$1481
in 1980 and stands at US$33000. One obvious observation over that period is
that such growth was paralleled by conspicuous industrial transformation and
change with the share of primary products dwindling significantly.
Role of government
In general, this new government must play a
significant role in planning the economy and ensure growth with equity. It
should ensure that it takes well thought-out speedy and bold decisions when it
matters. Since internal trade is key, it
should consider strengthening or developing at least one big conglomerate to
help with structured international trade. ADMARC as well as Press Corporation
PLC are examples of important starting points.
Export orientation
This new Malawi must actually, and not just
rhetorically, focus on export orientation. Trade policy must actively promote diversified
exports with a rapid shift towards high growth products, minerals and tourism. Industrial policy should reflect the emphasis
on export orientation and must see strategic firms receiving support in a
strategic way, to lead the export-led industrialization. Disorganized exports
lead to a massive corrosion of incomes and undermine growth. Government has a
role to ensure this happens, working hand in hand with the private sector,
while making sure that intervention is measured and efficient rather than
suppressive. Policies should intelligently favour openness.
Industrial transformation
The many income and livelihoods aspirations cannot
be achieved without a deliberate effort to industrialize. We should implement
our industrial policies to the final end. Where the trade and industrial
policies are not in harmony and are wobbly, let us fix those to ensure that
strides in one sector benefit other sectors. We should support construction, services
industry, manufacturing, mining massively while ensuring that the education
delivered is tailored for that purpose. The banking sector reforms should seek
to support industrialization rather than suppress it, while agriculture is, in
most cases a conditio sine qua non at
the early stages of this economic transformation.
While the law of comparative advantage may lure us
into focusing on labour intensive industries alone, we must aim to build a
diversified industrial base and economy so that we are no vulnerable to
negative changes in international demand and supply for our key exports. Malaysia,
South Korea and some emerging offer interesting insights into the importance or
ignorability of the law of comparative advantage. The guide should not be comparative advantage
alone but strategic importance as well.
Education,
Health, Technological progress
Education,
Health, Technical progress are all key as a productive labor force is a healthy
labour force, while education is obviously critical for driving the needed
innovation in technology and entrepreneurship needed for the transformation.
Land reforms, industrial and
trade policies
Land
is a key ingredient for economic growth alongside human and other forms of
capital besides technical progress. We
need to protect land for the poor while availing it for key activities needed
for industrial transformation. While criss-crossing Lilongwe rural last year, I
was shocked at how much land expropriation/grab by elites is taking place.
Growing up in the rural areas of Lilongwe, the concept of permanent land sale
to those outside lineages was an anathema. Land in one village could not even be sold permanently to a person in a neighbouring village, and if this happened, it was more likely to lead to a future inter village strife later, because permanent sale permanently takes away ndunda from the lineage, which was unacceptable. This essentially removes the indigenes/lineage members from active and profitable participation in industrial transformation.
Government must review land laws, make it illegal to encourage destitute land
sales and review transactions that have taken place post 2004 involving rural
people. Where there is skewed land ownership, redistribution should start and
where there is absentee land ownership by elites, the same should be eliminated
in order to improve total factor productivity while empowering rural people.
Macroeconomic stability
Obviously a stable macroeconomic environment is
important for the much needed foreign and domestic investments and ensures incomes
are not eaten away by inflation. It is also important to ensure that exchange
rates are stable, interest rate are supportive of private business development
and industrial transformation and there is no wanton printing of money.
Political leadership and
Stability
In general political stability and leadership are
overarching parameters for economic transformation. As a rule, leadership should
ensure the vision is not lost or betrayed by deploying capable personnel who
share the political vision and have technical expertise to transform the vision
into reality. To do so, human capital
and how it is deployed is important. If the implementers of the vision doubt
the vision or are negatively non-neutral, they will stand in the way of
transformation. At all levels, leadership is instrumental.
In any case let us benchmark ourselves against successful
countries and let us actively and meticulously learn from them to ensure we are
not lured away from being authors of our destiny.
The views expressed herein as well as all
errors are the author's own and don’t represent any other person's(natural or juristic) views.
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