Friday, May 29, 2009
RSM Ashvir Yafunguliwa
Mr. Omary Khama, the Secretary of the Minister of Finance and Economic Affairs is officiating the activities of RSM Ashvir International in Tanzania, a tax auditing company
Thursday, May 28, 2009
Bank of Tanzania and Interest Rates on Loans
By Geoffrey Kabakaki
This week the Governor of BOT revealed that his bank cannot influence the rates of interest that are charged by commercial banks on loans they give to their clients. Further his revealed that 36 commercial banks operating in Tanzania are well capitalized, and that they credit worth, in terms of capitalisation they are 16.2 percent above the international standard of 10 percent. He also revealed that these banks are able to meet customers demands for 45.5 percent as compared to 20 percent which is an international standard. He revealed this information when he was addressing the Parliamentary Committee on Finance and Economic Affairs.
But what really a country like Tanzania can do to make commercial banks reduce interest rates? and what are the costs to the economy by the persistent high interest rates of commercial banks in Tanzania?
For sure BOT must do something on interest rates charged by commercial banks in order to stimulate borrowings and rise consumption for the benefits of economic growth, although it is also true that many Tanzanians are not credi worth but this should not be entertained!. The interest rates spread to commercial banks is very high, this could be related to lack of competition in the banking sector which in a way has resulted into the formation of a cartel at the expense of consumers and the economy. BOT should do a research on this matter and also BOT should review probably its lending and borrowing interactions with banks, what rates of interest is BOT charging to commercial banks?
If BOT interest to commercial banks is also high, it should be upon BOT to reduce that interest in order to allow banks also reduce the interest they charge to their customers. This means that, it is not necessarily true that BOT can do nothing on interest rates charged by commercial banks on their customers, BOT can intervein by reducing the interest rates is charging while lending and borrowing to commercial banks! and commercial banks can replicate this to the credits they are providing to customers.
High interest rates on loans mean that fewer people will borrow money for investment activities and those who will borrow will get little profits or fail to make any profits. The implication of this is little economic activities in terms of investements, little income to the people, hence little consumption of goods and service. The end results will be a vicious cycle with persistent economic activity stagnation, poverty and small scale of industrial and agricultural growth in the country. Every country economic policy cannot succeed unless the banking sector is functioning properly, by functioning properly means providnig credits to people for investment purposes, that is why USA and Britain when the banking sector crushed Governments immediately provide money to the banks. This is not that government like banks owners, no, Governments want banks to continue giving money in term of credits to people in order to make investments!
Based on the above analysis the issue of high interest rates and credit worthness that deter Tanzanians from borrowing money for investment purpose is a very serious matter that should be addressed!
The data that Govonor has provided to the Parliamentary Committee show that commercial banks are keeping a lot of money at their disposal, this is hardly a good information because they keep money at the cost of the Tanzania economy. This money is supposed by in investments creating jobs and income to people.
What is your views on this matter, should commercial banks continue charging high interest rates on loans? is it wise that BOT can not do something?
Sunday, May 24, 2009
POLICY OPTIONS FOR FDIs ATTRACTION AVAILABLE TO AFRICAN COUNTRIES
By Geoffrey Kabakaki
WORLD TOP 20 - FDI INFLOWS, 2001 – 2011 AVERAGE
(BILLIONS US DOLLARS AND PERCENTAGE)
Economy Value Rank Share in World Total
USA 251 1 17
Economy Value Rank Share in World Total
USA 251 1 17
UK 113 2 8
China 87 3 6
France 78 4 5
Belgium 72 5 5
Germany 66 6 4
Canada 63 7 4
Hong Kong, China 48 8 3
Spain 45 9 3
Italy 42 10 3
Netherlands 39 11 3
Australia 38 12 3
Russia 31 13 2
Brazil 28 14 2
Singapore 27 15 2
Sweden 26 16 2
Mexico 23 17 2
China 87 3 6
France 78 4 5
Belgium 72 5 5
Germany 66 6 4
Canada 63 7 4
Hong Kong, China 48 8 3
Spain 45 9 3
Italy 42 10 3
Netherlands 39 11 3
Australia 38 12 3
Russia 31 13 2
Brazil 28 14 2
Singapore 27 15 2
Sweden 26 16 2
Mexico 23 17 2
India 20 18 1
Ireland 20 19 1
Turkey 20 20 1
Ireland 20 19 1
Turkey 20 20 1
source: Kekic and Sauvant, Op, Cit, P.9
The data provided above prove the views that much of the FDIs are based on north north flow and that only few countries from the South really participate FDI game. Also the data provide valuable information to Africa, that the continent has to do more if it wants to attract meaningful FDIs.
Available FDIs information indicates that much of the investments attracted in Africa are resource seeking investment, seeking minerals, oil and gas. It is unfortunate that such investments do not have the required backwards and forwards linkages to the rest of the economy. In order to get the benefits of FDIs countries should be able to attract FDIs in the manufacturing sectors, which is considered to have backwards and forwards linkages to the rest of the economy. African countries have not been able to attract FDIs in manufacturing sectors, this in one way or another calls for the review of the current FDIs attract policy in Africa to address at least two important issues:
(a) address measures necessary for attraction of FDIs in manufacturing sector or
(b) make resource seeking FDIs integrate with local economy, so reformulate the current FDIs policies to include measures that will make resources seeking FDIs in mineral and oil be responsive or rather be integrating with the local economy in terms of providing backwards and forwards linkages in the economy. This could be possible if the current FDIs policies are reformulated to address issues relating to mining sub-contractors and other supply chains issues to mining MNEs.
What then are the determinants for FDIs flow, which African government should take into account in order to increase their global share of FDIs?
The decision of MNEs to relocate depend on several factors, the key ones are listed below
1. Regulatory Framework: many FDIs prefer relocation into countries where regulatory framwork is a bit similar to their home country, that regulatory framework that are pro-investors in contents.
2. Investment Promotion: the existence of investment promotion agency that are pro-active in facilitating FDI and providing after establishment services. This is crucial because many FDIs do not know the investment environment where they put their money, so the availability of active agency is crucial in providing pre-establishment assistence and post-establishment services.
3. Economic factors: MNEs location decision finally depend on economic factors; these economic factors can be categorized as follows:
(a) Locational resources and assets - here consideration is given to quality of labour, nature of physical infrastructure; the availability of natural resources; the level of technological systems and the domestic enterprise base.
(b)Market variable - consideration is given to economic growth and per capital income, the size of the host country market for goods and services, access to regional and global markets, country-specific consumer preferences and the structure of the host country market.
(c) Efficiency considerations include the cost of resources and other inputs such as transport and communication costs, energy cost and availability and membership in a regional integration agreement.
If social and political factors affect the decision of MNEs and FDIs flow, they do so in the context of a host of several determinant mentioned above.
Next time I will discuss the reasons why Africa is not participating in the Global Value Chain of MNEs that has helped countries in East Asian to achieve economic growth, and I will also discuss the policy options available to Africa in order to participate in the Chain.
Wednesday, May 20, 2009
Tuesday, May 19, 2009
Can African Governments Afford the Cost of Biofuels
Recently investors have been seeking land in African continent for the purpose of investing into biofuel and ethanal production particularly from sugar cane, maize and jetrofa, good stories have been coming from Mozambique for the success of such investment. There is no doubt that biofuel especially ethanol from sugar cane in Brazil has been one of the main stimulus of Brazil economic growth and suceess in this decade. USA is also investing in biofuel and ethanol as one of its strategies to fight GHG emission, in the face of climate change.
On side of the story which is not told in Africa, is the associated costs of this investment!. For sure data of Government financing in both Brazil and USA towards the investment in this sector is alarming. This is what makes me wonder given the nature of Government finances in African countries. The Brazilian Government annual subsidy to biofuel(ethanol) production is in terms of billions of dollors, the subsidy given by the USA Government is more than ten folds to those of Brazil!. Therefore for this sector to be successful and produce oil that is affordable, African Government will have to subsidy the sector to the same tune to USA and Brazilian counterparts. But now where is this money from?. my worry is that apart from causing food scarcity in the continent, this investment could result into even drying up needed resources for medicines, education and water to Africans!
Someone will have to pay this cheque for the biofuel investment in Africa! I hope the cheque will not be at the sidewalk, because someone will have picked it already! amazing
On side of the story which is not told in Africa, is the associated costs of this investment!. For sure data of Government financing in both Brazil and USA towards the investment in this sector is alarming. This is what makes me wonder given the nature of Government finances in African countries. The Brazilian Government annual subsidy to biofuel(ethanol) production is in terms of billions of dollors, the subsidy given by the USA Government is more than ten folds to those of Brazil!. Therefore for this sector to be successful and produce oil that is affordable, African Government will have to subsidy the sector to the same tune to USA and Brazilian counterparts. But now where is this money from?. my worry is that apart from causing food scarcity in the continent, this investment could result into even drying up needed resources for medicines, education and water to Africans!
Someone will have to pay this cheque for the biofuel investment in Africa! I hope the cheque will not be at the sidewalk, because someone will have picked it already! amazing
Monday, May 18, 2009
Copy Right Registration of Mt. Kilimanjaro the Only Thing Kenyans Can Understand
Kinachotakiwa sio kulalamika bali kuchukua hatua haraka ambazo tumechelewa kuchukua. Hatua za kuchukua na za kitaalamu ni kwa Mamlaka inayohusika kuwekea Copy Right Mlima wa Kilimanjaro, pia wasiishie hapo wawekee copy right na jina na picha za Baba wa Taifa.Baada ya kuchukua hatua hizi Kenya ni wajanja hawezi kufanya wanayofanya sasa maana watajua kuwa watalipa gharama za kufanya hivyo.
Ebu angalia nchi kama Afrika ya Kusini kwa kujua manufaa ya jina na picha ya Mzee Mandela tayati wameisha viwekea copy right, na hii ndio dawa ya wenzetu. Ni kuchua hatua za kisheria, nimeona Dr Livingstone anasema kwenda mahakamani huko tutashindwa maana hatuna copy right ya mlima wetu, hivyo ni lazima tuuwekee copy right na vivutio vingine muhimu tuvifanyie hivyo
Friday, May 15, 2009
Imports Can Be as Useful to Developing Countries as Exports Are
PAUL KRUGMAN, who won last year’s Nobel prize in economics for his work on trade, wrote in 1993: “What a country really gains from trade is the ability to import things it wants. Exports are not an objective in and of themselves; the need to export is a burden that a country must bear because its import suppliers are crass enough to demand payment.”
This view does not dominate the public debate. Most are thrilled by the idea of export growth, but cower at the prospect of more imports. Such prejudice certainly prevailed in India in 1991, when the IMF foisted tariff cuts on the economy as one of the conditions attached to a $2.5 billion bail-out package. Pessimists fretted that a flood of imports would destroy Indian industry.
For a group of American economists, however, that sudden trade liberalisation has provided an unusually clear lens through which to study the way that commerce affects the economy. This is precisely because it was externally imposed. That the government had to hew to the IMF’s diktats and slash tariffs across the board gave industries little scope to jockey for exemptions. This made the researchers confident that tariff cuts, and not differences in industries’ ability to lobby the government, were responsible for changes in India’s trade patterns after liberalisation.
As part of those reforms, India slashed tariffs on imports from an average of 90% in 1991 to 30% in 1997. Not surprisingly, imports doubled in value over this period. But the effects on Indian manufacturing were not what the prophets of doom had predicted: output grew by over 50% in that time. And by looking carefully at what was imported and what it was used to make, the researchers found that cheaper and more accessible imports gave a big boost to India’s domestic industrial growth in the 1990s.
This was because the tariff cuts meant more than Indian consumers being able to satisfy their cravings for imported chocolate. It gave Indian manufacturers access to a variety of intermediate and capital goods which had earlier been too expensive. The rise in imports of intermediate goods was much higher, at 227%, than the 90% growth in consumer-goods imports in the 13 years to 2000.
Theory suggests several ways in which greater access to imports can improve domestic manufacturing. First, cheaper imports may allow firms to produce existing goods using the same inputs as before, but at a lower cost. They could also open up new ways of producing existing goods, and even allow entirely new goods to be made. All this seemed to hold in India. For example, its prolific film industry had continued to make some black-and-white films into the 1970s, in part because of the difficulty of importing enough supplies of colour film. But proving whether the theory applies in practice requires more detailed data, not just about how much firms produced but what they produced, and how all this changed over time.
Most attempts at addressing these questions have foundered because such information is not available. But with India, the researchers were helped, perversely enough, by highly restrictive industrial policies that the country had introduced in the 1950s. These included rules that required companies to report to the authorities every little tweak to their product mix—a burden for firms, but a gold mine for researchers. Happily, the economists found that the data backed up the theory: lower import tariffs did lead to an expansion in product variety through access to new inputs. They found that about 66% of the growth in India’s imports of intermediate goods after liberalisation came from goods the country had simply not bought when its trade regime was more restrictive. These new inputs caused the price of intermediate goods to fall by 4.7% per year after 1989. And detailed data linking inputs to final goods showed that the imports led to an explosion in the variety of products made by Indian manufacturers; the average firm made 1.4 products before liberalisation, but by 2003, this had increased to 2.3. The increases in variety were largest for industries where the input tariffs were cut most, and these industries also saw increased spending on research and development. Overall, the new products that Indian companies introduced were responsible for 25% of the growth in the country’s manufacturing output between 1991 and 1997.
Slash and churn
But one aspect of India’s experience after trade liberalisation did not conform to what the researchers had expected. Normally, as new products are introduced, some older ones stop being made. This “churn” in the market is part of what makes people uncomfortable about lower trade barriers, because it may cause difficult adjustments for some workers or companies. But the Indian variant of creative destruction seemed unusually benign. The researchers found that firms rarely dropped products. One reason for this may be the diversity of India’s economy: there is always a segment lower down the economic pecking order which is happy to buy products that richer consumers scoff at.
This may be unique to countries like India where many levels of development co-exist. But Penny Goldberg, one of the authors, thinks that the methods used in the studies on India can be applied to many other countries where trade has been similarly liberalised and which have good data on firms, such as Colombia and Indonesia. She notes that one of her co-authors, Amit Khandelwal, visited a Coca-Cola bottling plant in China, and noticed that all the machinery was either Japanese or German. China, of course, is known as a big exporter. But it may never have achieved this success without access to a range of imports.
This view does not dominate the public debate. Most are thrilled by the idea of export growth, but cower at the prospect of more imports. Such prejudice certainly prevailed in India in 1991, when the IMF foisted tariff cuts on the economy as one of the conditions attached to a $2.5 billion bail-out package. Pessimists fretted that a flood of imports would destroy Indian industry.
For a group of American economists, however, that sudden trade liberalisation has provided an unusually clear lens through which to study the way that commerce affects the economy. This is precisely because it was externally imposed. That the government had to hew to the IMF’s diktats and slash tariffs across the board gave industries little scope to jockey for exemptions. This made the researchers confident that tariff cuts, and not differences in industries’ ability to lobby the government, were responsible for changes in India’s trade patterns after liberalisation.
As part of those reforms, India slashed tariffs on imports from an average of 90% in 1991 to 30% in 1997. Not surprisingly, imports doubled in value over this period. But the effects on Indian manufacturing were not what the prophets of doom had predicted: output grew by over 50% in that time. And by looking carefully at what was imported and what it was used to make, the researchers found that cheaper and more accessible imports gave a big boost to India’s domestic industrial growth in the 1990s.
This was because the tariff cuts meant more than Indian consumers being able to satisfy their cravings for imported chocolate. It gave Indian manufacturers access to a variety of intermediate and capital goods which had earlier been too expensive. The rise in imports of intermediate goods was much higher, at 227%, than the 90% growth in consumer-goods imports in the 13 years to 2000.
Theory suggests several ways in which greater access to imports can improve domestic manufacturing. First, cheaper imports may allow firms to produce existing goods using the same inputs as before, but at a lower cost. They could also open up new ways of producing existing goods, and even allow entirely new goods to be made. All this seemed to hold in India. For example, its prolific film industry had continued to make some black-and-white films into the 1970s, in part because of the difficulty of importing enough supplies of colour film. But proving whether the theory applies in practice requires more detailed data, not just about how much firms produced but what they produced, and how all this changed over time.
Most attempts at addressing these questions have foundered because such information is not available. But with India, the researchers were helped, perversely enough, by highly restrictive industrial policies that the country had introduced in the 1950s. These included rules that required companies to report to the authorities every little tweak to their product mix—a burden for firms, but a gold mine for researchers. Happily, the economists found that the data backed up the theory: lower import tariffs did lead to an expansion in product variety through access to new inputs. They found that about 66% of the growth in India’s imports of intermediate goods after liberalisation came from goods the country had simply not bought when its trade regime was more restrictive. These new inputs caused the price of intermediate goods to fall by 4.7% per year after 1989. And detailed data linking inputs to final goods showed that the imports led to an explosion in the variety of products made by Indian manufacturers; the average firm made 1.4 products before liberalisation, but by 2003, this had increased to 2.3. The increases in variety were largest for industries where the input tariffs were cut most, and these industries also saw increased spending on research and development. Overall, the new products that Indian companies introduced were responsible for 25% of the growth in the country’s manufacturing output between 1991 and 1997.
Slash and churn
But one aspect of India’s experience after trade liberalisation did not conform to what the researchers had expected. Normally, as new products are introduced, some older ones stop being made. This “churn” in the market is part of what makes people uncomfortable about lower trade barriers, because it may cause difficult adjustments for some workers or companies. But the Indian variant of creative destruction seemed unusually benign. The researchers found that firms rarely dropped products. One reason for this may be the diversity of India’s economy: there is always a segment lower down the economic pecking order which is happy to buy products that richer consumers scoff at.
This may be unique to countries like India where many levels of development co-exist. But Penny Goldberg, one of the authors, thinks that the methods used in the studies on India can be applied to many other countries where trade has been similarly liberalised and which have good data on firms, such as Colombia and Indonesia. She notes that one of her co-authors, Amit Khandelwal, visited a Coca-Cola bottling plant in China, and noticed that all the machinery was either Japanese or German. China, of course, is known as a big exporter. But it may never have achieved this success without access to a range of imports.
Governors: EA Economies now Suffering Second, Third Round Effects of Global Crunch
By Adam Ihucha
15th May 2009
East African central bank governors have changed tune on the impact of the global financial meltdown, now admitting that the threat to the region's economy was real and severe.
The latest turn of events comes as the five EAC partner states' central bank governors backtracked from their long-held optimistic view that their countries' economies were cushioned against the ravages of the financial crisis.
The banking regulators now admit that while the first round effects of the global financial crunch had minimum impact on their national economies, repercussions of the second and third rounds posed significant risks to their ailing economies.
In their just-ended meeting in Kigali, Rwanda, the five governors acknowledged that the region was currently facing the worst decline in export demand, a slowdown in foreign direct investment (FDI), external remittances and a decline in foreign aid to governments.
“Our economies are currently suffering from second and third round effects of the global financial crisis,” read a joint communiqué issued shortly after their meeting of the EAC Monetary Affairs Committee (MAC).
The governors underscored the need to strengthen financial sector surveillance with a view to unlocking information content of the off-balance sheet transactions in monetary and financial analyses.
They also recommended stress testing, critical monitoring of financial stability indicators, and the design of a regional institutional monitoring mechanism to facilitate generation of early warning indicators.
The crucial talks were hosted by National Bank of Rwanda and chaired by the bank's governor, François Kanimba.
They were attended by Prof. Njuguna Ndung'u, governor of the Central Bank of Kenya; Prof. Emmanuel Tumusiime-Mutebile, governor of the Bank of Uganda; Prof. Benno Ndulu, governor of the Bank of Tanzania and Gaspard Sindayigaya, governor of the Bank of Burundi.
The meeting was also attended by EAC Secretary General Juma Mwapachu.
MAC is East African Community's committee tasked with laying the foundation for a monetary union in East Africa.
SOURCE: THE GUARDIAN
15th May 2009
East African central bank governors have changed tune on the impact of the global financial meltdown, now admitting that the threat to the region's economy was real and severe.
The latest turn of events comes as the five EAC partner states' central bank governors backtracked from their long-held optimistic view that their countries' economies were cushioned against the ravages of the financial crisis.
The banking regulators now admit that while the first round effects of the global financial crunch had minimum impact on their national economies, repercussions of the second and third rounds posed significant risks to their ailing economies.
In their just-ended meeting in Kigali, Rwanda, the five governors acknowledged that the region was currently facing the worst decline in export demand, a slowdown in foreign direct investment (FDI), external remittances and a decline in foreign aid to governments.
“Our economies are currently suffering from second and third round effects of the global financial crisis,” read a joint communiqué issued shortly after their meeting of the EAC Monetary Affairs Committee (MAC).
The governors underscored the need to strengthen financial sector surveillance with a view to unlocking information content of the off-balance sheet transactions in monetary and financial analyses.
They also recommended stress testing, critical monitoring of financial stability indicators, and the design of a regional institutional monitoring mechanism to facilitate generation of early warning indicators.
The crucial talks were hosted by National Bank of Rwanda and chaired by the bank's governor, François Kanimba.
They were attended by Prof. Njuguna Ndung'u, governor of the Central Bank of Kenya; Prof. Emmanuel Tumusiime-Mutebile, governor of the Bank of Uganda; Prof. Benno Ndulu, governor of the Bank of Tanzania and Gaspard Sindayigaya, governor of the Bank of Burundi.
The meeting was also attended by EAC Secretary General Juma Mwapachu.
MAC is East African Community's committee tasked with laying the foundation for a monetary union in East Africa.
SOURCE: THE GUARDIAN
Wednesday, May 13, 2009
Africa Has to Find Its Own Road to Prosperity
Africa has to find its own road to prosperity
By Paul Kagame
Published: May 7 2009 in FT
At recent meetings of the Group of 20 and the International Monetary Fund, world leaders have gathered to discuss the global economic crisis. Unfortunately, it seems that many still believe they can solve the problems of the poor with sentimentality and promises of massive infusions of aid, which often do not materialise. We who live in, and lead, the world’s poorest nations are convinced that the leaders of the rich world and multilateral institutions have a heart for the poor. But they also need to have a mind for the poor.
Dambisa Moyo’s controversial book, Dead Aid, has given us an accurate evaluation of the aid culture today. The cycle of aid and poverty is durable: as long as poor nations are focused on receiving aid they will not work to improve their economies. Some of Ms Moyo’s prescriptions, such as ending all aid within five years, are aggressive. But I always thought this was the discussion we should be having: when to end aid and how best to end it.
By Paul Kagame
Published: May 7 2009 in FT
At recent meetings of the Group of 20 and the International Monetary Fund, world leaders have gathered to discuss the global economic crisis. Unfortunately, it seems that many still believe they can solve the problems of the poor with sentimentality and promises of massive infusions of aid, which often do not materialise. We who live in, and lead, the world’s poorest nations are convinced that the leaders of the rich world and multilateral institutions have a heart for the poor. But they also need to have a mind for the poor.
Dambisa Moyo’s controversial book, Dead Aid, has given us an accurate evaluation of the aid culture today. The cycle of aid and poverty is durable: as long as poor nations are focused on receiving aid they will not work to improve their economies. Some of Ms Moyo’s prescriptions, such as ending all aid within five years, are aggressive. But I always thought this was the discussion we should be having: when to end aid and how best to end it.
Tuesday, May 12, 2009
Emerging Markets and the Credit Crunch; Whom Can We Rely On?
Poor countries are not fretting about the boundaries between state and market. Instead, they are debating whether to rely on domestic or foreign demand
A STRIKING feature of the worldwide economic crash is what hasn’t happened. While rich countries agonise about whether Anglo-Saxon capitalism should be replaced by the French version (and the French flirt with revolutionary socialism), emerging markets have stayed angst-free. Arvind Subramanian, an Indian economist, says there has been “no serious questioning of the role of the market.”
A STRIKING feature of the worldwide economic crash is what hasn’t happened. While rich countries agonise about whether Anglo-Saxon capitalism should be replaced by the French version (and the French flirt with revolutionary socialism), emerging markets have stayed angst-free. Arvind Subramanian, an Indian economist, says there has been “no serious questioning of the role of the market.”
That may sound like an exaggeration. As in rich countries, the state’s role in many poor ones has increased as a result of the recent global meltdown. China’s 4 trillion yuan ($587 billion) stimulus package last year will benefit state-owned enterprises. Its sovereign-wealth funds have been buying stakes in publicly-traded companies and (as in America and Europe) state subsidies have been flowing to loss-making industries, such as carmakers.
In India, critics of liberalisation have gained ammunition. They have long cautioned against giving foreign banks freer rein or allowing pension funds to invest more money in stockmarkets, leading one prominent magazine to ask, “did the left save India?” Some economists called the central bank timid last year for resisting attempts to let international capital flows dictate the value of the rupee. It now feels vindicated. Depositors have also been shifting away from private banks—former stars of the new Indian economy—towards once-unfashionable state-owned ones. While private banks retrench, state ones are expanding their lending vigorously.
Yet such state intervention is driven not by ideology but, mostly, by pragmatism. In China the Adam Smith-toting prime minister, Wen Jiabao, argues that his country “would rather speed up reforms” to combat the crisis and should “give full play to market forces in allocating resources”. Whereas American and European countries have re-regulated business, China, set on meeting its 8% growth target, has continued to liberalise. This year, for example, it removed some barriers that curbed the yuan’s use in international trade.
Few if any serious attempts have been made to restore state ownership. When Embraer, a formerly state-owned aircraft manufacturer in Brazil, laid off thousands of workers, unions demanded its renationalisation—in vain.
In other words, emerging markets have adopted different policies, as well as ignoring the rich world’s philosophical agonising. But why?
The first reason is that the global crisis originated in America and Europe and inflicted itself on the rest of the world. So emerging-market governments see little reason for painful self-examination in response to other people’s problems. Moreover, the largest emerging markets are beginning to see hints of recovery. China’s output was 6% higher in the first quarter of this year than it had been in the same period in 2008. Chinese and Indian manufacturing output rose in April, pushing Asian stockmarkets up sharply. Though these are merely short-term gains, they are enough to deflect navel-gazing for the moment.
Second, in many emerging markets, the state is fairly large already, especially in banking. The current demarcation between state and market commands broad public support and the main issue, as Mr Subramanian puts it, “is how to continue reducing [the state’s] role in a gradual and pragmatic manner.” So even if the demarcation line shifts statewards in rich countries, emerging markets are well beyond that point already, and see little advantage in moving the line any farther.
Tricks of the trades
Yet the global crisis has provoked anguished disagreement about an equally fundamental matter: how much to rely on exports and how much on domestic demand. At this month’s annual meeting of the Asian Development Bank, minister after minister said countries should rely more on each other and less on selling to America. Thirteen Asian countries also agreed to create a $120 billion fund—part of a nine-year-old system of swap agreements called the Chiang Mai initiative—from which they can (in theory) draw when financial pressures become acute.
How this would work in practice is uncertain. But the impetus behind it is clear: pooling risk expresses Asian fellow feeling and common Asian caution about both the International Monetary Fund and further fallout from America’s crisis. Emerging countries concluded from the financial crises of the 1990s that they could not rely on fickle foreign capital. Now the collapse of international trade is causing them to wonder whether they can rely on fickle foreign customers.
Central Banks must Target More Than Just Inflation
Central Banks must target more than just inflation
Did inflation targeting fail? Central banks have mostly escaped blame for the occurence of
economic crisis. Do they deserve to do so?
Did inflation targeting fail? Central banks have mostly escaped blame for the occurence of
economic crisis. Do they deserve to do so?
Sunday, May 10, 2009
Saturday, May 9, 2009
Europe's Economies, A New Pecking Order
May 7th 2009
From The Economist print edition
There has been a change in Europe’s balance of economic power; but don’t expect it to last for long
AFP
FOR years leaders in continental Europe have been told by the Americans, the British and even this newspaper that their economies are sclerotic, overregulated and too state-dominated, and that to prosper in true Anglo-Saxon style they need a dose of free-market reform. But the global economic meltdown has given them the satisfying triple whammy of exposing the risks in deregulation, giving the state a more important role and (best of all) laying low les Anglo-Saxons.
At the April G20 summit in London, France’s Nicolas Sarkozy and Germany’s Angela Merkel stood shoulder-to-shoulder to insist pointedly that this recession was not of their making. Ms Merkel has never been a particular fan of Wall Street. But the rhetorical lead has been grabbed by Mr Sarkozy. The man who once wanted to make Paris more like London now declares laissez-faire a broken system. Jean-Baptiste Colbert once again reigns in Paris. Rather than challenge dirigisme, the British and Americans are busy following it: Gordon Brown is ushering in new financial rules and higher taxes, and Barack Obama is suggesting that America could copy some things from France, to the consternation of his more conservative countrymen. Indeed, a new European pecking order has emerged, with statist France on top, corporatist Germany in the middle and poor old liberal Britain floored.
It is easy to dismiss this as political opportunism. But behind it sits a big debate not only about the direction of the European Union, the world’s biggest economic unit, but also about what sort of economy works best in the modern world. Thirty years after Thatcherism began to work its cruel magic in Britain (see article), continental Europe still tends to favour a larger state, higher taxes, heavier regulation of product and labour markets and a more generous social safety-net than freer-market sorts like the Iron Lady would tolerate. So what is the evidence for the continental model being better?
The continental countries certainly have not escaped the recession: France may be doing a bit better than the world’s other big rich economies this year, but Germany, dragged down by its exporting industries, is doing significantly worse. Yet Mr Obama is right to admit that in some ways continental Europe has coped well. Tough job-protection laws have slowed the rise in unemployment. Generous welfare states have protected those who are always the first to suffer in a downturn from an immediate sharp drop in their incomes and acted as part of the “automatic stabilisers” that expand budget deficits when consumer spending shrinks. In Britain, and to an even greater extent in America, people have felt more exposed.
The downturn has also confirmed that the continental model has some strengths. France has a comparatively efficient public sector, thanks in part to years of investment in better roads, more high-speed trains, nuclear energy and even the restoration of old cathedrals (see article). Nor is it just a matter of pumping in ever more taxpayers’ cash. By any measure France’s health system delivers better value for money than America’s costlier one. Germany has not just looked after its public finances more prudently than others; its export-driven model has forced its companies to hold down costs, making them competitive not only in Europe but also globally. By design as well as luck, much of continental Europe avoided the debt-fuelled housing bubbles that popped spectacularly in Britain and America (though Spain did not, see article).
But will it last? The strengths that have made parts of continental Europe relatively resilient in recession could quickly emerge as weaknesses in a recovery. For there is a price to pay for more security and greater job protection: a slowness to adjust and innovate that means, in the long run, less growth. The rules against firing that stave off sharp rises in unemployment may mean that fewer jobs are created in new industries. Those generous welfare states that preserve people’s incomes tend to blunt incentives to take new work. That large state, which helps to sustain demand in hard times, becomes a drag on dynamic new firms when growth resumes. The latest forecasts are that the United States and Britain could rebound from recession faster than most of continental Europe.
Individual countries have specific failings of their own. Even if it did everything else right, Germany’s overreliance on exports at the expense of consumer spending has proved a grave weakness in a downturn (see article); its banks also look weak. The rate of youth unemployment in France is over 20% and it can be twice as high in the notorious banlieues where Muslim populations are concentrated. Italy and Spain have seen sharp rises in unit labour costs and their labour-productivity growth has stalled or gone into reverse. It may not be long before the fickle Mr Sarkozy is re-reading his Adam Smith. Not what you aim for, but how you do it
If there is to be an argument about which model is best, then this newspaper stands firmly on the side of the liberal Anglo-Saxon model—not least because it leaves more power in the hands of individuals rather than the state. But the truth is that the governments on both sides of the intellectual divide could go a long way to making their models work better, without changing their underlying beliefs.
On the continental side, there is nothing especially socially cohesive about labour laws that favour insiders over outsiders, or rules that make the costs of starting a business excessive. Even Colbert might admit that Europe’s tax burdens are too onerous today, particularly since they are likely to have to rise in the future to meet the looming cost of the continent’s rapidly ageing populations.
For the liberals, even if the cycle swings back in their direction, the financial crisis and the recession have shown up defects in the way they too implemented their model. Getting regulation right matters as much as freeing up markets; an efficient public sector may count as much as an efficient private one; public investment in transport, schools and health care, done well, can pay dividends. The pecking order may change, but pragmatism and efficiency will always count.
From The Economist print edition
There has been a change in Europe’s balance of economic power; but don’t expect it to last for long
AFP
FOR years leaders in continental Europe have been told by the Americans, the British and even this newspaper that their economies are sclerotic, overregulated and too state-dominated, and that to prosper in true Anglo-Saxon style they need a dose of free-market reform. But the global economic meltdown has given them the satisfying triple whammy of exposing the risks in deregulation, giving the state a more important role and (best of all) laying low les Anglo-Saxons.
At the April G20 summit in London, France’s Nicolas Sarkozy and Germany’s Angela Merkel stood shoulder-to-shoulder to insist pointedly that this recession was not of their making. Ms Merkel has never been a particular fan of Wall Street. But the rhetorical lead has been grabbed by Mr Sarkozy. The man who once wanted to make Paris more like London now declares laissez-faire a broken system. Jean-Baptiste Colbert once again reigns in Paris. Rather than challenge dirigisme, the British and Americans are busy following it: Gordon Brown is ushering in new financial rules and higher taxes, and Barack Obama is suggesting that America could copy some things from France, to the consternation of his more conservative countrymen. Indeed, a new European pecking order has emerged, with statist France on top, corporatist Germany in the middle and poor old liberal Britain floored.
It is easy to dismiss this as political opportunism. But behind it sits a big debate not only about the direction of the European Union, the world’s biggest economic unit, but also about what sort of economy works best in the modern world. Thirty years after Thatcherism began to work its cruel magic in Britain (see article), continental Europe still tends to favour a larger state, higher taxes, heavier regulation of product and labour markets and a more generous social safety-net than freer-market sorts like the Iron Lady would tolerate. So what is the evidence for the continental model being better?
The continental countries certainly have not escaped the recession: France may be doing a bit better than the world’s other big rich economies this year, but Germany, dragged down by its exporting industries, is doing significantly worse. Yet Mr Obama is right to admit that in some ways continental Europe has coped well. Tough job-protection laws have slowed the rise in unemployment. Generous welfare states have protected those who are always the first to suffer in a downturn from an immediate sharp drop in their incomes and acted as part of the “automatic stabilisers” that expand budget deficits when consumer spending shrinks. In Britain, and to an even greater extent in America, people have felt more exposed.
The downturn has also confirmed that the continental model has some strengths. France has a comparatively efficient public sector, thanks in part to years of investment in better roads, more high-speed trains, nuclear energy and even the restoration of old cathedrals (see article). Nor is it just a matter of pumping in ever more taxpayers’ cash. By any measure France’s health system delivers better value for money than America’s costlier one. Germany has not just looked after its public finances more prudently than others; its export-driven model has forced its companies to hold down costs, making them competitive not only in Europe but also globally. By design as well as luck, much of continental Europe avoided the debt-fuelled housing bubbles that popped spectacularly in Britain and America (though Spain did not, see article).
But will it last? The strengths that have made parts of continental Europe relatively resilient in recession could quickly emerge as weaknesses in a recovery. For there is a price to pay for more security and greater job protection: a slowness to adjust and innovate that means, in the long run, less growth. The rules against firing that stave off sharp rises in unemployment may mean that fewer jobs are created in new industries. Those generous welfare states that preserve people’s incomes tend to blunt incentives to take new work. That large state, which helps to sustain demand in hard times, becomes a drag on dynamic new firms when growth resumes. The latest forecasts are that the United States and Britain could rebound from recession faster than most of continental Europe.
Individual countries have specific failings of their own. Even if it did everything else right, Germany’s overreliance on exports at the expense of consumer spending has proved a grave weakness in a downturn (see article); its banks also look weak. The rate of youth unemployment in France is over 20% and it can be twice as high in the notorious banlieues where Muslim populations are concentrated. Italy and Spain have seen sharp rises in unit labour costs and their labour-productivity growth has stalled or gone into reverse. It may not be long before the fickle Mr Sarkozy is re-reading his Adam Smith. Not what you aim for, but how you do it
If there is to be an argument about which model is best, then this newspaper stands firmly on the side of the liberal Anglo-Saxon model—not least because it leaves more power in the hands of individuals rather than the state. But the truth is that the governments on both sides of the intellectual divide could go a long way to making their models work better, without changing their underlying beliefs.
On the continental side, there is nothing especially socially cohesive about labour laws that favour insiders over outsiders, or rules that make the costs of starting a business excessive. Even Colbert might admit that Europe’s tax burdens are too onerous today, particularly since they are likely to have to rise in the future to meet the looming cost of the continent’s rapidly ageing populations.
For the liberals, even if the cycle swings back in their direction, the financial crisis and the recession have shown up defects in the way they too implemented their model. Getting regulation right matters as much as freeing up markets; an efficient public sector may count as much as an efficient private one; public investment in transport, schools and health care, done well, can pay dividends. The pecking order may change, but pragmatism and efficiency will always count.
Thursday, May 7, 2009
South Africa's Response to the Economic Crisis
South Africa’s response to the crisis
The South African government, taking into consideration the impact of the global economic crisis on the local economy, decided that an effective response is required. The “Framework for South Africa’s Response to the International Economic Crisis” was released in February 2009 with the main purpose to contextualise the strategies and plans of the country as a response to the international economic crisis.
The report proposes a plethora of interventions to “fight” against the crisis. The key directions are going to be:
1) Increase of investment in public infrastructure;
2) Macroeconomic policies to limit the impact of the recession;
3) Industrial and trade policy measures in order to improve the competitiveness and performance of key industries such as mining industries;
4) Employment measures both in the public and private sectors to avoid further retrenchments;
5) Development of social plans;
6) Global coordination; and
7) Social partnerships (i.e. banking regulations).
It will be interesting to observe the implementation of these interventions and assess the impact thereof on the South African economy
Source: Afrinem Newsletter April 20, 2009
The South African government, taking into consideration the impact of the global economic crisis on the local economy, decided that an effective response is required. The “Framework for South Africa’s Response to the International Economic Crisis” was released in February 2009 with the main purpose to contextualise the strategies and plans of the country as a response to the international economic crisis.
The report proposes a plethora of interventions to “fight” against the crisis. The key directions are going to be:
1) Increase of investment in public infrastructure;
2) Macroeconomic policies to limit the impact of the recession;
3) Industrial and trade policy measures in order to improve the competitiveness and performance of key industries such as mining industries;
4) Employment measures both in the public and private sectors to avoid further retrenchments;
5) Development of social plans;
6) Global coordination; and
7) Social partnerships (i.e. banking regulations).
It will be interesting to observe the implementation of these interventions and assess the impact thereof on the South African economy
Source: Afrinem Newsletter April 20, 2009
Tool Kits for Policy Formulation
The theoretical tool kits for policy formulation process is based on the following key steps, although many governments do not follow them, and there are reasons for that:
step1: Look at reality, and identify issues
step 2: Define the policy objectives
step 3: Choose the right instruments (typically one for each objective)
step 4: Establish appropriate institutions
step 5: Overcome political opposition to policy reforn
step 6: Monitor and evaluate
But now why many governments do not follow the tool kit why formulating economic policies ?
step1: Look at reality, and identify issues
step 2: Define the policy objectives
step 3: Choose the right instruments (typically one for each objective)
step 4: Establish appropriate institutions
step 5: Overcome political opposition to policy reforn
step 6: Monitor and evaluate
But now why many governments do not follow the tool kit why formulating economic policies ?
Wednesday, May 6, 2009
Africa in the Global Crisis & Trade Dis-Order: Transatlatic Policy Options, Regional Integration and Opportunities for Business Leadership event
On behalf of The Evian Group and the German Marshall Fund of the United States, I am pleased to invite you to the Africa in the Global Crisis & Trade Dis-Order: Transatlantic Policy Options, Regional Integration and Opportunities for Business Leadership event, which will take place at IMD, Lausanne, Switzerland, May 31-June 02, 2009.
Please find the current programme by following the link http://www.eviangroup.org/m/1739.pdf
Please register as soon as possible for this event by using the following registration link http://www.imd.ch/eviangroup/GMF09_PS
If you have any questions, feel free to contact Carine Julen (carine.julen@imd.ch).
Dr Jean-Pierre Lehmann
Professor of International Political Economy
Founding Director, The Evian GroupIMD,
Box 915, 1001-Lausanne, Switzerland
Tel: +41-21-618-0348 - Fax:+41-21-618-0619
e-mail: lehmann@imd.ch
The Evian Group
Tel: +41 21 618 05 51 Fax: +41 21 618 06 19
IMD - The Evian GroupCh. de Bellerive 23, P.O. Box 915CH - 1001 Lausanne, Switzerlandhttp://www.eviangroup.org/
Fellow Africans let us attend this workshop in mass, we should not continue to let others determine our destine!
Tuesday, May 5, 2009
Tanzania Reaffirms her Positive Policy Toward Agriculture
Tanzania Government has reaffirmed her commitment to persue a positive policy towards agricultre, this was revealled by the Prime Minister Mizengo Pindi last week while touring Songea region. While addressing Songea residents, the Prime Minster reiterated his directives to Municipal and District Directors in country to direct resources towards purchasing tractors instead of luxury vehicles.
In this respect, Tanzania should study and make a lesson from the agricultural policy persued by the European after the second world war. Europe was in high shortage of food after the war, and in many parts of Europe food was rationed to people. In order to be self satisfactory in food production, the Europeans undertook two policy measures, namely
1. Ensured the market for the farmers that whaterver they produce will be purchased
2. Ensured stability of price of the agricultural products produced by farmers
These policies and others diversified risks embeded in agriculture through assuring the farmers that these risks will be taken by the Governments, the results were spectacular development and high productivity in the agricultural sector in Europe.
Surely Tanzania should make a reason out of Europe agriculture policy because the policy of getting more tractors and fertiliser utilisation will result into mass production of agricultural products like maize. If measures are not taken by Tanzania Government to ensure market and price stability to farmers, the results could be diverstating. If in one season farmers' produce will not be purchased or if price will be lpersistent ower prices for their produce next season no one will ever invest in more production.
Please comments are invited, what Tanzania should do as a precautionary measure?
In this respect, Tanzania should study and make a lesson from the agricultural policy persued by the European after the second world war. Europe was in high shortage of food after the war, and in many parts of Europe food was rationed to people. In order to be self satisfactory in food production, the Europeans undertook two policy measures, namely
1. Ensured the market for the farmers that whaterver they produce will be purchased
2. Ensured stability of price of the agricultural products produced by farmers
These policies and others diversified risks embeded in agriculture through assuring the farmers that these risks will be taken by the Governments, the results were spectacular development and high productivity in the agricultural sector in Europe.
Surely Tanzania should make a reason out of Europe agriculture policy because the policy of getting more tractors and fertiliser utilisation will result into mass production of agricultural products like maize. If measures are not taken by Tanzania Government to ensure market and price stability to farmers, the results could be diverstating. If in one season farmers' produce will not be purchased or if price will be lpersistent ower prices for their produce next season no one will ever invest in more production.
Please comments are invited, what Tanzania should do as a precautionary measure?
Monday, May 4, 2009
The G20 Summit - What to Make of it?
Posted by Fredrik Erixon
I have not made up my mind yet what to think about the result of the G20 summit. True, it was a great photo-op, but I think there were some good news coming from London late last week. However, they were few, wildly exaggerated and had been in the making for quite some time. But my feeling of goodwill has perhaps more to do with the fact that all the naïve, hyperbole beliefs in G20 global economic governance fell flat on the ground. We did not see anything of “global fiscal stimulus co-ordination” or global attempts at “fixing the banks”. Nor did they G20 leaders claim they had built a new Bretton Woods structure or “civilized the raw nature of capitalism”, which was president Sarkozy’s ambition for the summit. In contrast to this positive account stands the failed effort to do anything meaningful on emerging protectionism and trade policy.
I think it is important that the IMF has been promised more resources. There are quite a number of emerging markets on the brink of defaults – for the banks or the country as a whole – and there is practically no other alternative available than to bail them out. I have been critical of the use of the bailout instrument in the recent past, and remains so today. But at a time of worldwide financial crisis you can’t just bailout banks in the advanced economies and leave the financial system in emerging markets to collapse. The bailout instruments need to be reformed, but such reforms must come after broader and deeper reforms of the financial system which makes the banks truly private entities or public utilities. In the current regulatory system, you don’t have any other alternative than to bail out financial firms. Beefing up the resources of the IMF was important in that regard: financial markets do not have to take positions accounting for emerging market collapses just because the only kid on the block who could bail them out doesn’t have the resources to do it. Current IMF resources – around 250 bn USD – are tied up in recent bailouts; the new money (probably less than what the G20 communiqué says) will give the IMF some new room for action. This new discretion (especially the new allocation of SDR drawing rights) must, however, be monitored closely by outside parties. The IMF is sometimes all too happy to issue credit (it would not exist if it did not lend money to countries). With a French interventionist at the helm of the Fund, and with bailout-Larry in the White House, there is an even stronger case for close monitoring to ensure the IMF is not using the new support for excessive interventions and lending.
The G20 language on protectionism and trade is appalling. The G20 could have made a significant effort to prevent emerging protectionism from escalating; there is a clear danger that protectionism will increase as the global economy continues to deteriorate (although at a slower pace than in Q4 and Q1) and as the fiscal expansion have little effect. Remember, the most appalling bailouts of automotive firms have so far not been taken. But the G20 only did a few lip-service statements about the need to keep markets open and avoid protectionism. They did not specify what this means (can WTO authorized protectionism be imposed?) and this is probably not an unintended mistake. If governments were really, really serious about avoiding protectionism, commitments would have been more precise and there would have been a process to ensure compliance. Now the communiqué only causes confusion and will not prevent any country from imposing new protectionist policies.
I have not made up my mind yet what to think about the result of the G20 summit. True, it was a great photo-op, but I think there were some good news coming from London late last week. However, they were few, wildly exaggerated and had been in the making for quite some time. But my feeling of goodwill has perhaps more to do with the fact that all the naïve, hyperbole beliefs in G20 global economic governance fell flat on the ground. We did not see anything of “global fiscal stimulus co-ordination” or global attempts at “fixing the banks”. Nor did they G20 leaders claim they had built a new Bretton Woods structure or “civilized the raw nature of capitalism”, which was president Sarkozy’s ambition for the summit. In contrast to this positive account stands the failed effort to do anything meaningful on emerging protectionism and trade policy.
I think it is important that the IMF has been promised more resources. There are quite a number of emerging markets on the brink of defaults – for the banks or the country as a whole – and there is practically no other alternative available than to bail them out. I have been critical of the use of the bailout instrument in the recent past, and remains so today. But at a time of worldwide financial crisis you can’t just bailout banks in the advanced economies and leave the financial system in emerging markets to collapse. The bailout instruments need to be reformed, but such reforms must come after broader and deeper reforms of the financial system which makes the banks truly private entities or public utilities. In the current regulatory system, you don’t have any other alternative than to bail out financial firms. Beefing up the resources of the IMF was important in that regard: financial markets do not have to take positions accounting for emerging market collapses just because the only kid on the block who could bail them out doesn’t have the resources to do it. Current IMF resources – around 250 bn USD – are tied up in recent bailouts; the new money (probably less than what the G20 communiqué says) will give the IMF some new room for action. This new discretion (especially the new allocation of SDR drawing rights) must, however, be monitored closely by outside parties. The IMF is sometimes all too happy to issue credit (it would not exist if it did not lend money to countries). With a French interventionist at the helm of the Fund, and with bailout-Larry in the White House, there is an even stronger case for close monitoring to ensure the IMF is not using the new support for excessive interventions and lending.
The G20 language on protectionism and trade is appalling. The G20 could have made a significant effort to prevent emerging protectionism from escalating; there is a clear danger that protectionism will increase as the global economy continues to deteriorate (although at a slower pace than in Q4 and Q1) and as the fiscal expansion have little effect. Remember, the most appalling bailouts of automotive firms have so far not been taken. But the G20 only did a few lip-service statements about the need to keep markets open and avoid protectionism. They did not specify what this means (can WTO authorized protectionism be imposed?) and this is probably not an unintended mistake. If governments were really, really serious about avoiding protectionism, commitments would have been more precise and there would have been a process to ensure compliance. Now the communiqué only causes confusion and will not prevent any country from imposing new protectionist policies.
Qoute of the Day
"The Doha Negotiations are taking much more time to be concluded bacause developing countries are no longer ignorant"
by Prof. Bernard O'Connor
by Prof. Bernard O'Connor
Sunday, May 3, 2009
African Agriculture can only be Revamped Through Government Interventions
African economic importance in the World is declining year after year, the 2008 World Trade Report published annually by WTO shows that African share in the world trade is well below 1% if South Africa and Egypt are not included. Number of factors can explained this state of affairs, the most compelling reasons among others is that for the past 15 years most African countries neglected investment in agricultural sector while implementing policies introduced by the IMF and WB. Since most of its export are agricultural products, the none investment into the sector meant declining exports performance and poor earnings to Africans, leading to increased poverty in the continent.
The other factors relates to agricultural policies being pursued by developed countries which tend to suppress prices of agricultural products and deny market access. The policies relating to domestic support to farmers in the west and non tariff barriers (NTB) in terms of SPS, TBT and other standards and regulations directly and indirectly deny market access to products originating to developing countries especially African countries where producers are not linked to western countries cartels( Chain of Supermarkets in Europe and American selling agricultural produces).
Of course the lack of investment in the agricultural productivity and infrastructure led to a decline in productive capacity and innovations in many African countries. It is now time for African countries to revamp the situation by investing in agricultural research and development in order to catch up. The investment in agriculture should not be left to private sectors if we want really to get immediate impacts and results. Because of its complexities, agriculture encompases many risks which private investors would like to avoid!
The other factors relates to agricultural policies being pursued by developed countries which tend to suppress prices of agricultural products and deny market access. The policies relating to domestic support to farmers in the west and non tariff barriers (NTB) in terms of SPS, TBT and other standards and regulations directly and indirectly deny market access to products originating to developing countries especially African countries where producers are not linked to western countries cartels( Chain of Supermarkets in Europe and American selling agricultural produces).
Of course the lack of investment in the agricultural productivity and infrastructure led to a decline in productive capacity and innovations in many African countries. It is now time for African countries to revamp the situation by investing in agricultural research and development in order to catch up. The investment in agriculture should not be left to private sectors if we want really to get immediate impacts and results. Because of its complexities, agriculture encompases many risks which private investors would like to avoid!
What should be the right policy interventions to revamp agriculture in Africa? What is your views?
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African Students in Bern Organized a May Day Party to Engage the World
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View of the phots of the events belowSaturday, May 2, 2009
How Governments in Developing Countries can Tackle the Third Wave of Global Financial Crisis
Developing countries have started to be hit by the third wave of economic crisis as many experts expected. Tanzania particularly has seen her revenue sharply dropping and reports are out that she is seeking financial assistence to IMF, the Tanzania President Jakaya Kikwete during his May Day Speech revealed that Tanzania has lost 255 billion shillings in revenue and that the figure is expected to raise 488 billion by the end of the year because of the global economic crisis.
Technically the financial crisis is going to hit developing countries through two channels, namely Trade Channel and Finance Channel. Trade channel, as demand for consumption in developed countries has dropped this will affect exports mainly from developing countries which supply products that are elasticity sensitive. High income earners in developed countries already have their expenditure on luxury items like jewery reduced. This will reduced/decreased exports earnings of low income countries, and therefore affect Governments abilities in providing social services like medicines, schools and improving social infrastructure. It is important during this hard times, Governments in developing countries take immediate measures to invest in social infrastructures that are accessible to lower income earners in these countries. The measures taken by the Government of Tanzania by abolishing importation of luxury cars and seminars are good examples of pro-poor measures. The money to be saved will be invested in agriculture and according the information revealled by the Prime Minister Mizengwe Pinda, other saved money from vihicles are diverted to buying hospital ambulances, to improve health services provision to rural areas.
The finance channel will results to reduced credit flow to poor coutries and will cause many projects under implementation to be abandoned because of lack of funds and planned projects to remain in the books. This is because lenders in the north are not able provide credit and banks are survaving on Government bailled out funds which are implicitly imbeded with protectionism with the purpose of safeguarding employment in the north. The will results into massive unemployement in the South, for example the American bail out is containing the buy American clause, meaning that the bail out money are prevented to flow to other economies.
Governments in the South (developing countries) with the little resources at their disposal should be able to prudently invest in public and social infrastructure in order to improve their competitiveness and provide safe nets to pro-poor sectors. Furthermore, investment policies should target investments in sectors that are crisis proof and investment in dynamic products. Dynamic products have been proved also to be crisis proof, that is attract investments in IT and IT parts, compturer parts, investment in call centres and information technology in general.
Other sectors that are crisis proof are investment in services sectors, investment in logistics and overseas call centres.
Technically the financial crisis is going to hit developing countries through two channels, namely Trade Channel and Finance Channel. Trade channel, as demand for consumption in developed countries has dropped this will affect exports mainly from developing countries which supply products that are elasticity sensitive. High income earners in developed countries already have their expenditure on luxury items like jewery reduced. This will reduced/decreased exports earnings of low income countries, and therefore affect Governments abilities in providing social services like medicines, schools and improving social infrastructure. It is important during this hard times, Governments in developing countries take immediate measures to invest in social infrastructures that are accessible to lower income earners in these countries. The measures taken by the Government of Tanzania by abolishing importation of luxury cars and seminars are good examples of pro-poor measures. The money to be saved will be invested in agriculture and according the information revealled by the Prime Minister Mizengwe Pinda, other saved money from vihicles are diverted to buying hospital ambulances, to improve health services provision to rural areas.
The finance channel will results to reduced credit flow to poor coutries and will cause many projects under implementation to be abandoned because of lack of funds and planned projects to remain in the books. This is because lenders in the north are not able provide credit and banks are survaving on Government bailled out funds which are implicitly imbeded with protectionism with the purpose of safeguarding employment in the north. The will results into massive unemployement in the South, for example the American bail out is containing the buy American clause, meaning that the bail out money are prevented to flow to other economies.
Governments in the South (developing countries) with the little resources at their disposal should be able to prudently invest in public and social infrastructure in order to improve their competitiveness and provide safe nets to pro-poor sectors. Furthermore, investment policies should target investments in sectors that are crisis proof and investment in dynamic products. Dynamic products have been proved also to be crisis proof, that is attract investments in IT and IT parts, compturer parts, investment in call centres and information technology in general.
Other sectors that are crisis proof are investment in services sectors, investment in logistics and overseas call centres.
Participating in the Global Crisis Discusions
Mr. Geoffrey Kabakaki and fellows participated in the World Economic Forum at Danvos Swiss among others the current Global economic crisis was discussedSwiss Classic Music during Easter
Prof. Reinhold Friedrich and his classic music bands entertaining during easter celebrations in InterlaakenTrade Policy Tools as are Used in Tanzania
Trade policies come in many varieties. Generally they consist of either taxes or subsidies, quantitative restrictions or encouragements, on either imported or exported goods, services and assets. In this section I want to describe many of the policies that Tanzania have implemented or is implementing. The purpose of this discussion is to raise awareness among scholars of the likely effects of each policy, by defining and describe the use of each policy.
The main trade policy tools are
1. Import Tariffs
2. Import Quotas
3. Voluntary Export Restraints (VERs)
4. Export Taxes
5. Export Subsidies
6. Voluntary Import Expansions
· Other Policies
The main trade policy tools are
1. Import Tariffs
2. Import Quotas
3. Voluntary Export Restraints (VERs)
4. Export Taxes
5. Export Subsidies
6. Voluntary Import Expansions
· Other Policies
Among the above mentioned policy tools import tariffs, export taxes and others trade polices (namely Government procurements, health and safety standards and red-tape barriers) are the ones mainly used and Tanzania economic management. Therefore only through these tools the Government has been able to intervein and moderate the economy. These trade policy tools have positive and negative impacts to the country depending on the nature of intervention.
Import Tariff
Intervention under this tool has been through annual tariff changes by the Government, either by raising import duty or lowering it to some products. Since January 2004 with the coming into force of the EAC Customs Union, this responsibility of altering import duty has been transfered to the EAC Council of Ministers. Essentially at national level, tariff reforms has resulted into reduction of import duty to average of 12% and this among others made prices of imported goods lower so resulting into some consumers welfare effects in the country. A t international level, the lowering of import duty has created what the trade experts call "Water", and this water has made negotiations under WTO difficulty because of water developed countries cannot find new market access opportunities to trade off with developing countries. The water is the result of widening differences between applied tariffs and the bound tariff under WTO. Therefore, all the efforts made by developing countries of restructuring their tariff structure including Tanzania has resulted into their punishment. Developed countries are seeking for new market access opportunity by ignoring the own tariff reduction made because they argue that those restructing were made by developing countries outside multilateral negotiations and that was to their own interests and cannot be counted now.
To be continued -------
WTI Students Vist to Interlaken
World Trade Institute Students visited the annual celebrations of the Classic Music in Interlaken City in Switzerland. From left is Mr Geoffrey Kabakaki ( the first Tanzania even to attend the MILE Program), Mr Rajnish (from India), Prof. Dr. Thomas Cottier (WTI Mangaging Director), Ms Daisy (from China) and Ms Aya (from Egypt).
Tandika in Dar Es Salaam should be an Economic Model of Tanzania
Tandika area is the only place in Tanzania if not in all East African where there existing a concentration of small sized garmets and tailoring activities, which could be raised to acquired the needed economices of scale in the garmet sector in Tanzania. What is needed to be done is for the targeted intervention by introducing modern and coordinated management and linking these small tailors to the textile manufacturers like Karibu, Nida and others.
Tandika has more than 2000 small tailors undertaking tailoring activities saving Dar Es Salaam area, regions and even neighbouring countries like Malawi and Zambia where traders come to Tandika to buy clothes for schools and other purposes. Such a concentration if well managed and linked to textile industries in Dar Es Salaam can be able to increasing garmets and clothes production in Tanzania and even save the USA market under AGOA.
These small entities can be enabled to access loans from the banks in order to increase their capital and be trained to increase standadrs of the clothes they make. Such a concentration was well utilised in Bangaladesh, and now Bangaladesh is leading country in clothes and garmets production among the developing countries.
If this was successful in Bangaladesh why not in Tanzania? and already we have a place to start, which is Tandika. Yes we can let us start!
Tandika has more than 2000 small tailors undertaking tailoring activities saving Dar Es Salaam area, regions and even neighbouring countries like Malawi and Zambia where traders come to Tandika to buy clothes for schools and other purposes. Such a concentration if well managed and linked to textile industries in Dar Es Salaam can be able to increasing garmets and clothes production in Tanzania and even save the USA market under AGOA.
These small entities can be enabled to access loans from the banks in order to increase their capital and be trained to increase standadrs of the clothes they make. Such a concentration was well utilised in Bangaladesh, and now Bangaladesh is leading country in clothes and garmets production among the developing countries.
If this was successful in Bangaladesh why not in Tanzania? and already we have a place to start, which is Tandika. Yes we can let us start!
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