Monday January 28, 2013

Reviving economic planning in Africa

Global Trends
By MARTIN KHOR

After decades suffering from bad advice that led to the state having little role in the economy, African countries are reviving national planning and development strategies.

FOR many years after independence, developing countries made use of development planning as a major tool to get their economies going.

But this stopped in the 1980s and 1990s for many countries, especially in Africa, that fell under the influence of the International Monetary Fund and the World Bank. Under their structural adjustment programme, planning or any kind of development strategy involving a leading role of the state was taboo.

As a result, many African countries fell behind in their economic growth and social development. Governments gave up planning, withdrew their leading role in the economy, cut jobs, gave up on subsidies and other methods of helping local firms and farmers. The new order was to privatise, liberalise imports and rely on foreign investments for growth.

For two decades or more, most African economies suffered from economic stagnation, while continuing to be mired in debt. The agricultural sector, that had been thriving in many countries, dwindled and many local industries were shut or reduced in the face of competition from cheaper imports.

This contrasted with East and South-East Asian countries, which had higher growth spurred on by an overall development strategy, with five-year plans and sectoral policies in industry, agriculture and selected services.

In some areas, especially in social services, utilities, infrastructure and strategic industries, the government retained ownership or high equity share. In other sectors it encouraged the development of local companies through subsidies, credit, sales promotion and sectoral road maps.

Today in Africa, there is a nascent revival of development planning and a growing role for the state in the economy, partly because of the lessons learnt from Asia.

This revival was the theme of a conference which I attended last week in Dakar, Senegal, to celebrate the 50th anniversary of the founding of the African Institute for Economic Development and Planning (IDEP), a United Nations organisation linked to the UN Economic Commission for Africa (ECA).

Regional leaders of Africa were present, as well as some Ministers and high-level economic officials of some 30 countries. All of them showed keen interest in learning the lessons of development policy and a revival of planning and a leadership role of the state.

The UN undersecretary-general and new head of the ECA, Carlos Lopes, gave an impressive overview of the ups and downs of planning in Africa.

In the 1960s, 32 African countries had planning and state-led economies, but planning was abolished in the 1980s and 1990s under structural adjustment programmes.

The many years of these policies and the limits of market fundamentalism have prompted renewed interest in planning, said Lopes. Many African countries are now developing plans and national development strategies, with targets for growth, jobs, and structural transformation and with a mix of the state and market, public and private sectors and long-term vision of ownership by Africans.

The ECA, which is the UN’s main organisation in the region, is itself supporting governments to revive planning and formulate development strategies.

“Failing to plan means planning to fail,” said Lopes.

Planning works if done well and implemented, he added, citing the successes and lessons of Europe, Brazil, China and other East Asian countries.

IDEP director Adebayo Olukoshi said that in the last five years, over 30 African countries adopted new long-term visions and three to five year plans. Institutions for planning that were dismantled are being re-built.

“Africa has entered a new season of planning and long-term development thinking.”

In my speech, I highlighted various elements of development strategies in East Asia, that had guided the region’s growth. These include five year plans, economic transformation programmes (like the one in Malaysia), trade and industrial policy, promotion of local companies and farmers, the use of government procurement, and the new hybrid forms of government-linked enterprises combining some state ownership with increasingly commercialised operations.

The conference saw many Ministers or director-generals of finance and planning reflecting on the state of development strategies in their countries. Most had a common story, starting with the closing down or marginalisation of planning functions in the government as structural adjustment took its toll, with the state withdrawing its role in economic and social affairs.

The common story continued to the present more optimistic phase, with a few countries like Zimbabwe recently succeeding in reviving planning, and several others relating the difficulties and complexities of getting it going again.

“The planning capacity is lost. We must re-establish the capacities,” said one director-general. Others spoke of the need to overcome conflicts between different Ministries, especially the Finance Ministry and the Ministry of economy and planning, and to reduce reliance on the “external agenda” of donors and foreign financial institutions.

“Without vision and commitment by the political leadership, nothing in planning will work”, was the summing up of another top bureaucrat.

The IDEC conference marked a stage in Africa’s development story. It seemed to me that the region has been suffering a long period of bad advice from international financial institutions, with loss of its capacity to develop its own economic strategies and development plans, and that a revival of long-term thinking and medium term strategies is now taking place. But it will still be a long road from this nascent revival to successful implementation.

News

Monday January 28, 2013

Reviving economic planning in Africa

Global TrendsBy MARTIN KHOR

Global Trends
By MARTIN KHOR