Transcript #7
Mr. Sumi: Thank you, Mr. Chakramon. Does anybody else want to make an intervention at this moment? Can we move to the open discussion? Okay, there are so many hands. Yes, your Excellency, first. Could you identify yourself first for the audience and also indicate which speaker you want to address your question to?
Mr. Patrick Ashly: My name is Patrick Ashly. I am the Minister of Economic Infrastructure from Cote d'Ivoire, West Africa. First of all, I would like to thank you very much, the government of Japan, for organizing such a talk with such brilliant people. You never get the experience to meet all of them at the same time, so thank you very much to Japan and thank you very much for your very brilliant speeches.
I would like especially to thank the panelists because they gave us Africans a dream, and you cannot achieve anything without starting with a dream. I particularly appreciate what Mr. Xian Zhu said when he said, "It is never too late," which means there is always time to do something when you want to do it the right way. So, thank you very much, all of you.
I have one question deriving from what you have said and the dream that you have helped us on, which is: how do we get out of the prison where we are? There is one point that Professor Sachs forgot when he was talking about the catastrophe that we have in African countries, which is debt. The debt issues. We have malaria, we have AIDS, and we have the debt issue, which is a very key issue. And then you have the prisons with the IMF program and the World Bank, you now, PRSB issues, where we tied up our foot and toes and hands, everything. I am fortunate to be a Stanford graduate, that is nice. I am a minister in my country and I am thinking about all these things, but at the end of the day I am just stuck there at the same point. So, my question, Professor Sachs, is how do we get out of this prison?
The second question is about Japan. I was, a couple of months ago, at the TICAD process meeting in Japan and I am afraid that so far, from Africa, what we are seeing is the shift toward poverty reduction, poverty alleviation-this is the main concern. We do not see anything about helping through growth, and that is what we have been talking about and I think Professor Ohno was really clear about, which is that, yes, we need to go through poverty reduction and all that but we have to start to think about growth. As far as my thinking is concerned, I share many of the views that have been developed here, but the key one is human development and human capacity. That is right. Professor Chakramon spoke about capital, that the need in Africa was capital, but I do not really think so. You can bring and flow in as much capital as you want; if you do not have the right people thinking the right strategy, being able to do the right thing, it is just money wasted. We have seen that for the past 50 years. We do not want to do it again.
So, human development, training, and education. Infrastructure; I am the Minister of Infrastructure. Professor Sachs was talking about urban people in coastal parts of the country. I have a free-zone project, a very fantastic one, and I am there. But the project is not profitable enough for private people to bring money in. They want a really good financial rate of return immediately. The World Bank, African Development Bank, and bilateral agencies are not interested in the project because they say it is not a poverty alleviation project. So we are just there stuck in the middle of nowhere. So how do we get out of that? I think that, Professor Ohno, your advice to the Japanese government is the right one: let us just start with something that talks about growth, and if there are a couple of countries to be selected in Africa, C'ote d'Ivoire is a candidate. Thank you very much.
Mr. Sumi: Okay. Professor Sachs, would you like to respond to the first very general question?
Mr. Sachs: Yes, I think you found your own way out of the prison, actually, which is to get METI involved with you and get more eyes on the process, because truly, you are right, the IMF-World Bank process has not worked for 20 years. It is stuck. The only good thing is that they know it now. The record is terrible. It did not produce growth, it did not produce results, so they are open. What I would suggest to you strongly, Mr. Minister, is first to come up with your program, not with Washington around, but to come up with your strategy for export-led growth and foreign direct investment. I would say when I spoke about human investment, I am talking also at the basic level keeping people alive, fighting the AIDS epidemic, malaria, as well as making sure that there is universal education.
I am in favor of a very aggressive strategy on the debt myself. I have recommended it many times successfully. I have recommended-this is always misunderstood when I say this-but I have recommended unilateral default many times, which has worked but only when countries were showing 'here is our strategy, here is why we need to do this to get out of the trap and you have not helped us out of the trap up until now,' whether the "you" is the IMF, the World Bank, the United States government, France, or whoever the "you" happens to be. So I would put them on the defensive, because we need to go beyond words to get real results. I would be happy to hear if you could make Abidjan really a center for investment. It is a beautiful city, but it has got to really work. What works in Penang or what works in Shanghai or what works in Hong Kong: boy, the logistics work like nothing else. It is efficient, you get in and out of the port, the tax people do not harass you, you are absolutely physically secure and the power does not go out three times a day so you can actually run the factory. Now, if you can do all of that, Abidjan is actually a wonderful place because it is closer to Europe than Shanghai, it is closer than Bangkok. You have a tremendous shipping advantage that they can never take away from you. But you probably are going to have to have a tantrum in between all of this. You are going to have to tell the IMF and the World Bank: 'Back off, we are doing it this way.'
Mr. Ashly: How?
Mr. Sachs: No, it is possible. But you have to have also a president that will back you up completely and coherently. I do not know whether that is the case or not. But that is vital. Because you have to be able to articulate, 'we are not doing it to steal our own money, we are not doing it because we cannot follow any rules, we are doing it because we have a clearer conception than you do of what is needed.' Give me a call. I would be happy to have a tantrum for you. But truly you need to articulate the strategy, and truly I must emphasize that is why I am so eager for the government of Japan to get involved, or Singapore, or places that really do it, where it is not some checklist off of a Bretton Woods Institution policy sheet. But the bottom line is: how many industries did you actually get in? How much investment? You do need investment. Of course you need the people, but you really need the investment.
One other thing I would say about training and capacity building: I personally do not like capacity building projects; I like learning by doing. If you want to train people to do industrial development, have industrial development there and they will learn along the way. So I would not separate out a capacity-building project, I would make an export zone project and people will learn in the process of making the export zone function. I would send them to Malaysia, I would send them to Shanghai, I would send them to Japan to METI, and that is where they will learn. Not that they are in a classroom, they are in the real world. And you are telling them: make the zone work, get investments in there.
Then the investors are going to tell you finally: "Look, why should we come to Cote d'Ivoire? We can go to Tunis, we can go here, we can go there, we can go to Shanghai, we can go to Honduras, we can go to Mexico with NAFTA. We need a ten-year tax holiday." And then the World Bank is going to say, 'Oh, no, that's impossible,' and that is when you have to tell them: 'Out of the country, sorry. We need industry and you have not brought us industry yet.' And they will stay. They will say, 'Oh, okay, okay.' But you are going to have to tell them that the real world demands real incentives, not some made-up thing in a textbook by my students who do not know how to attract industry.
So you are going to have to tell them. And, as I say, give me call.
Mr. Ashly: Thank you.
Mr. Sumi: Thank you. Yes, sir?
Mr. Malatsi: Thank you very much. Let me add my weight also to the appreciation made to the Japanese government and the institutions you have made available. Yesterday, I asked the question, I would just want to briefly repeat it to learn from your history in a very clear, simple, straightforward exercise so that we can flexibly adapt it in our situation.
My name is Malatsi. I am wearing many caps. I am from South Africa. One cap which I am tempted to say is as Minister-in-waiting for Economic Affairs and Development Planning of this country. There are three things which I would like to find out from the panelists. The first one is whether you are recording all this so that we can get the proceedings later, because we are not going to able to write everything which you are putting across. That is a request at the same time.
The second question is that in the presentations, with the exception of one or two, rural development has not been adequately emphasized save the issue of agro-based industries and what goes with it, and the infrastructure for Africa particularly is an issue in terms of vastness. If we are going to be adapting the model which you are putting across, then I want to find out what we could do very quickly, not waiting for 20 years, as has been put across in terms of China-and I am hoping to get more lessons from that-but now. Why? Because there are over 800 million people in Africa.
We are attempting to put together the African Union. We attempted that in the OAU in 1963. It has not functioned adequately. The policies which we are attempting to do with various successes and various failures-more failures than successes-are human resource development as well as what we are talking about, capitalization. There are thousands of well-trained Africans in America, in Europe, in other places. One of the reasons is because they have not had the opportunities and facilities to apply their knowledge here, and their training, in places like Stanford in the United States and other universities, is not necessarily able to be applied here because the conditions and circumstances are not necessarily the same. So what do you then do in the shortest time possible to address economic development? I want to emphasize, maybe contrary to what has been said, the need for planning. I am saying so deliberately because Japan planned from the 1860s. Even after the Second World War, albeit with the assistance of the Marshall Plan, they planned. West Germany and the Marshall Plan, with their whole market destroyed, they planned. They did not have the whole market forces operating there, but they had targets that they were able to say, 'we are going to do this, within this timeframe, and these are the issues we are going do.'
In Africa, we are shying away from planning. Maybe because of the plague which was suffered by the Soviet Union and others and so forth, it was decided that this was not going to do good. We do not have to throw the child out with the bath water, but we have to do things so we are in the position to say 'we are moving on.' From the Chinese experience we are most interested in this, because even today it is not "an adulterated capitalist foreign market system." There are still, from what we hear, a social and socialist element in it and yet it is so successful. I would like to know what you have done in order to succeed so quickly.
The involvement of the rural areas, the involvement of the women, the skills training along those lines, and the literacy aspect along those lines. And then the question of access to market: we can do all that you are recommending we do, and then we have no access to markets. Europe is has a very serious blockage, the same thing with America-the subsidies, the billions of dollars which are making it impossible to compete the way you are putting it. When Japan was able to move on, and even the Asian countries, they were not so much constrained in terms of access to markets as Africa is constrained today.
The question which Professor Sachs has raised in terms of the infrastructure of Africa-we can throw our hands up in the air and say, 'we do not have coasts and so forth, and so we cannot succeed.' We need to have a way of addressing that issue. If you take the issue of either electric power, the Republic of Congo, which can electrify with clean energy the whole of Southern Africa that should be one of the considerations. If you are taking solar energy with what we are having, there should be some advantages where the technology you are talking about can be brought to bear so that we are able to advance ourselves. What I am trying to put across is: let us be innovative and practical in terms of assisting Africa, what Africa can do practically in the shortest time possible. Thank you.
Mr. Sumi: Does anybody want to address these excellent points? Yes, Mr. Zhu.
Mr. Zhu: Yes, I just want to try to answer your question about what happened in China's rural areas over the past 20 years. I think that after the failure of central planning in China, it was the consensus in China that we needed to adopt a different strategy, a national growth development strategy different from central planning. We need to have a blueprint to inspire people to make changes. As far as the rural area is concerned, China has much less arable land probably on average in global terms. So, unfortunately, China had a lot of rural labor surplus. Job opportunities were very limited. And then something out of entrepreneurship, amazingly, happened. That is in China what we call the TVE, the Township and Village Enterprises. Basically, these enterprises are very small in scale and initiated on a community basis. They try to produce something simple but that can be supplied to the market based on very inexpensive labor. And then gradually some of them grew into big businesses, competing with the state sector, and so on. But by ten years of development, this sort of enterprise already had one-third if not more of industrial production, thus solving two problems: one, helping the transformation from a rural or agricultural economy into industrialization, and second, creating a lot of jobs. Then these people, after being trained, either became themselves entrepreneurs or they moved into the cities to set up their own businesses. The implications are really significant for the changes in China.
I do not know to what extent this can be applied to African countries, but I think that you have to inspire entrepreneurship. At the same time, when people want to live better and in a different way, when they see opportunities, every government at different levels in China, tries to support, as Professor Jeffrey Sachs said, with tax holidays, with some seed money, innovatively or flexibly, anything to try to get the initiatives flying. At least in China this was a success, and fortunately I also hear that similar things have happened in countries like Vietnam. If you are interested we can try to share the experiences with African countries. Thank you.
Mr. Sachs: Just a very brief comment for South Africa. South Africa is already a manufacturing exporter, although traditionally heavily based on mining. But South Africa is right on the border of being able to be a profitable automobile exporter, and in good years the local companies use the South African production for exports back to Europe, for example. I think South Africa really should have an export campaign for bringing in foreign direct investment for export to the rest of the world.
I worry about the inflexibility of the labor markets here. One of the things that has been characteristic all through East Asia, very much in China, is highly competitive labor markets. That means also being able to compete on the basis of cost. In South Africa, through the consensus wage arrangements with powerful corporatist structures in COSATU and the unions, it has made a rather rigid labor market, or at least to the appearance of the outside world-that may not be true or not fair but that is the sense. One of the key aspects of the export-led growth model has been a very flexible labor market. It is an area where I would look within the South African context. But South Africa, uniquely in Sub-Saharan Africa, has a strong science and technology base from which to propel growth. When I have spoken to President Mbeki about this in the past, he has asked me whether to go with incentives, like the tax holidays and so forth, and I have been very encouraging of that approach.
Mr. Chakramon: Just half a minute. I think that is a one-billion-US-dollar question. It seems to me that things do not turn in favor of Africa as a whole. Two reasons: first, as I mentioned to you earlier, the paradigm shift from the old economy to the new economy. By the time Africa adopts the East-Asian experience, by that time other countries, other regions, will leap forward. Second, what you need, what the whole African continent needs, are three things: First, strong participation, strong cooperation from other regions-Europe, Asia, USA, or whatever. I think you need that, and you cannot just let go of globalization, I think it is impossible now. Second, you need impetus. I do not know what it is but you have to identify it. You need some impetus. There must be something that you can find within the African continent. Third, you would probably need to have what we call an "economic growth pole" to pull, because it is impossible to have every country in this continent grow first, it is impossible. You have to select a certain growth pole area but one that would help each other do networking. I think that would help. I think Africa needs a master plan to develop. Unfortunately, when you implement this development scheme it takes time. But for short-term measures, I think there is something, but you have to identify it. Of course, we can help you identify it together.
