Economic History That Africa Must Not Repeat: The Economic Success of the Asian Tigers Is Often Held Up as an Example to Africa, but as Dr Lawrence Akwetey Writes Here, Africa Should Study the History of the near Collapse of the Asian Tigers in 1997 in Order Not to Repeat Their Sad Ordeal

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After the G8 summit in Gleneagles and the deal on debt relief, the question that comes to the fore is whether such promises (sometimes backed by no action) constitute the real panacea for Africa's problems. Is it more aid or trade that Africa really needs?


Debt, aid and trade promises have been made to Africa many times before; in fact, some of the promises remain unfulfilled until they are topped up with yet more promises.

But whether these promises are fulfilled or not, fundamental rudiments of development economics say that until Africa is able to embark on a "staged model of economic development", nothing much will happen to the continent. There are five stages involved in this model which, incidentally, have been used by both Western and East Asian countries to reach where they are today.

The first stage is Foreign Direct Investment (FDI). Traditional African society suffers from a weak capital base and static economy. Tons of aid, debt relief or trade concessions will not provide the needed capital base or scientific approach to production in Africa. There is also insufficient domestic savings from either individuals or governments to undertake the size of infrastructure upgrade and capital formation to make the establishment of modern factories possible.

The only way is for African countries to re-double their efforts in attracting significant FDI. The process is described by development economists as a "Large Scale Internationally Managed Support System" (LSIMSS). This has been hugely successful in Malaysia and Singapore.

This also worked for Western Europe and Japan during the post-war period when $400bn, in today's money, was made available to them under the US-assisted Marshall Aid plan. Why can't the G8 countries do the same for Africa instead of the over-publicised debt relief deal? If it worked for Japan and Western Europe, transforming them into manufacturing giants, why bother using aid or debt relief, which will not help build a single modern manufacturing plant, as a panacea for Africa's economic development woes?

The second stage is "economic take-off". In traditional African society, the pre-conditions for economic take-off require technical application of the sciences (technology and skills). There must also be new political structures (political stability) and good infrastructure to attract FDI in sufficient quantities to enhance economic production.

FDI has enormous potential for helping the accelerated development of various sectors of a country. In Ghana, for example, when the Akosombo Textiles factory was established in the 1960s through FDI, the company built a hospital for both workers and residents of the Akosombo township.

It also improved the existing infrastructure or built new ones altogether--roads, water supply, communication, electricity, etc. It also established social facilities such as golf and sports centres for the community. It even built a football team from scratch, Akotex, which played in the country's premier league, and did very well for many years. Most importantly, the company provided thousands of jobs, paid corporation tax to the government and produced manufactured goods for domestic consumption and export. This is the way, in my opinion, to tackle poverty and economic stagnation in Africa. Imagine if Ghana had 100 more of such FDI projects around the country? This is what Africa needs to substantially reduce poverty--not aid or debt relief.

The third stage is growth. With "take-off", growth becomes a normal condition as the powers of growth strengthen each other. There is higher formation of capital, increasing entrepreneurs' initiatives, and the political constellation is attuned to economic objectives. It surely is better for Africa's economic development than aid or debt relief.

The fourth stage is the "drive to maturity". For this to happen in Africa, it will depend entirely on technological support. …


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