Monday, May 26, 2014

Southeast Asia economic growth model relevant for Africa


Nigeria rebased its national accounts and doubled the size if its economy. With a GDP of $510 billion Nigeria soared past South Africa, which has a per capita GDP that is nearly three times larger. Similarly, Ghana rebased its national accounts in 2010 and expanded its GDP by 60 percent.
But Boko Haram rained on Nigeria’s parade, bringing into sharp focus the paralyzing incapacity of the Nigerian state. Moreover, GDP size is just a meaningless statistic for a vast majority of Nigerians when the country ranks 153 out of 187 in the United Nation’s Human Development Index. Youth unemployment has reached crisis proportion. In March, a stampede among jobseekers taking recruitment test at a stadium in Abuja left many dead and scores injured.
Following the example Ghana and Nigeria, Kenya plans to rebase its national accounts. It is important to rebase national accounts regularly to reflect the evolving structure of the economy. Although rebasing Kenya’s accounts could make it a middle-income economy, life for ordinary Kenyans will not get better merely because ours is a $50 billion economy. Despite having much lower GDP, Tanzania and Uganda have a lower proportion of their citizens living below the poverty line.
Achieving durable and equitable economic growth is the most urgent social and political challenge facing Africa today. Sub Saharan Africa is consistently the least successful region of the developing world when it comes to harnessing economic growth for poverty reduction. In contrast, rapid aggregate GDP growth in Southeast Asian has been accompanied by impressive poverty reduction. For instance, according to data published by UNDP 60 percent of Indonesia’s population lived below the poverty line in 1970. Today, according to government statistics, only 12 percent of Indonesians live below the poverty line.
The development trajectory of many Asian countries is viewed as a success, whereas that of many sub-Saharan African countries is considered a failure. But Africans are becoming increasingly impatient with the fact while GDP growth is soaring poverty remains unyielding. I have argued in this column before that Africa’s economies are growing on quick sand because we have not laid the foundation for inclusive, transformational and durable economic growth.
In his opening remarks at the, 50th Annual General Meeting of the African Development Bank Donald Kebaruka observed that Africa must advance beyond preening itself on high GDP growth and focus on economic transformation. Speaking at the same meeting World Bank Vice President Makhtar Diop observed that such annual meetings should be used for reflection on what must be done for the continent’s true emergence, with Africa’s people benefiting from shared growth.
Like Africa, most of Southeast Asian countries have a colonial history, during which period subsistence agriculture and export of raw commodities were the mainstay of the economy. I think we have much to learn from Southeast Asian countries. We have much to learn not just from their recent economic growth buttressed by rapid industrialization but also from the policy choices that caused their economic growth trajectory to diverge radically from Africa’s starting from the late 1970s.
A recent policy brief, Policy for development in Africa: Learning from Southeast Asia, published by Africa Power and Politics in collaboration with Tracking Development argues that while immensely critical, sound macro-economic management is not sufficient to deliver inclusive and transformative economic growth. The authors of the policy brief observe that inclusive growth and poverty alleviation depends on adoption of pro-poor policies and public investment aimed at agriculture and rural development, which raise the productivity and profitability of smallholder agriculture.
Smallholder agriculture supports the livelihoods of 80 percent of the Africa’s population, provides employment for about 75 percent of Africa’s largely rural population. Africa’s economies are not firing on the vital cylinder, small-scale agriculture. Limited public investment exacerbates rural poverty, food insecurity and inequality. Africa’s ubiquitous poverty and the stagnation of rural economies are easily explicable when you take into account the dire state of agriculture.
Africa’s soaring growth failed to lift millions out of poverty. The economic growth trajectory of Southeast Asia offers vital lessons for Africa. To achieve economic growth that drives industrialization and massive poverty reduction Africa must build vibrant rural economies through large public investment in smallholder agriculture. A Vibrant agriculture-led rural economy will reduce rural poverty, undergird political stability, encourage private saving and investment, stimulate domestic markets, and provide cheap, reliable food supply for urban-based industrial workers. 

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