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Thursday, 10 April 2008

Economic Empowerment...

Interesting to read Citizens Economic Empowerment Commission (CEEC) Commissioner's views on empowerment and FDI:

"Our country exports a number of raw materials that are processed in the developed countries and re-exported back to Zambia as finished goods at exorbitant prices. When we increase the skill levels of labour, we will be increasing value added activities and providing employment opportunities to our own people....."
Of course the problem (and the solution) is much more complicated than Mr Chipungu asserts. The underlying problem is that spillovers from new FDI to domestic firms are not inevitable. The right conditions need to exist for them to occur. A reason why I remain unconvinced by the new Zambian Shenzhen . The problem in Zambia is that we have focused simply on attracting FDI. So Mr Chipungu has a tough task, made even harder by the existing empirical consensus that it is difficult for emerging economies, like Zambia, to extract potential benefits of spillovers when a large technological gap exists between domestic and FDI firms. Its therefore imperative that Mr Chipungu pushes government to place FDI policy within a broader economic policy context. The CEEC should ensure that government takes forward the necessary steps to invest in basic infrastructure, education and training, and above all encourage Zambian firms to invest in technological development. These policies will do a great deal in increasing Zambian firms technological capability, and hence make it easier for the nation to benefit from spillovers.

7 comments:

  1. Our country exports a number of raw materials that are processed in the developed countries and re-exported back to Zambia as finished goods at exorbitant prices.

    I didn't know Zambians consumed that much copperwire !

    Just kidding !

    More seriously, those statements are always problematic because it sort of implies a direct relationship between the two, which is not the case.

    I agree with you on the rest though. I'll add that there's a diversification element. Not all FDI is equal. A chinese manufacture generates more spillover than a mine.

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  2. "I'll add that there's a diversification element. Not all FDI is equal. A chinese manufacture generates more spillover than a mine."

    Agreed. Depending on what the Chinese are manufacturing.

    Reaching back to the discussion we had on http://zambian-economist.blogspot.com/2008/04/staying-on-top.html , it would suggest that perhaps the CEEC should recognise these limitations and focus on how to make sure people are empowered through agriculture.

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  3. There should be ways of fitting FDI into a much more integrated economy of Zambian suppliers and markets.

    Also, there should be a way to buy out the foreign company along the way. Joint Ventures would be the only way to go, so there is a shared ownership of the foreign company's operations.

    For instance, if someone wanted to take the gemstone industry, the mines should be Zambian, the facetters should be Zambians working in a Zambian-Foreign joint venture that focuses on mentoring and technology transfer, with Zambian fashion houses and a marketing/sales company. The country should benefit all the way up the chain.

    In other words, there would be ways of setting up technologically advanced Zambian industries.

    FDI as it has been applied now is nothing like that. Right now, Zambia is simply being exploited as a source for low priced raw materials and cheap labour. And professor Chirwa's description of 'casualisation' was far more informative than years of reading The Post. I don't think anyone has yet elaborated on what 'casualisation' actually means in real terms (i.e., all employees are temps on 6-month contracts), although the term has been mentioned in passing over and over again.

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  4. MrK,

    "Also, there should be a way to buy out the foreign company along the way. Joint Ventures would be the only way to go, so there is a shared ownership of the foreign company's operations"

    Is your view that empowerment should be about redistribution or simply enabling indigenous Zambians to better themselves?

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  5. What I think is that the Zambian economy should be Zambian owned.

    I also object to the redistribution of wealth among politicians (farms, businesses, etc.).

    What I am looking forward to, is a situation where there are owner-managers, rather than a simple redistribution of shareownership.

    The unfortunate thing, as was seen in former communist countries like Yugoslavia and the Soviet Union, is that the people who are most well positioned to benefit from the new economy, are the old political (communist) party elite.

    I think that should be remedied to the greatest extent possible, because I have little interest in simply relabeling the old elite into a new elite. However, to an extent it is also inevitable, because the people with the best education and the most accumulated wealth are the best situated to take advantage of any new developments.

    However, it is essential that the possibility of wealth accumulation (whether that is higher education, starting a business or farm, etc.) is available throughout society.

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  6. The unfortunate thing, as was seen in former communist countries like Yugoslavia and the Soviet Union, is that the people who are most well positioned to benefit from the new economy, are the old political (communist) party elite.

    This is not exactly true. I mean, yes the communist aparatchiks got some of the cake but most of it went to a young generation with a better understanding of finance, management and stuff who were actually the only one able to spot and understand new opportunities. Some were lower-rank members of the old elite but many were not at all.

    The intresting thing is when you say there should be a way to buy out the foreign owned companies along the way. Will it be voluntary ? Will it be done by the State ? By the private individuals ? If not mandated, who gets the ownership ?
    That's often the weakness of redistribution plans, as Zimbabwe showed. Part or all of the redistributed land/shares/companies goes to the wrong people for the wrong reasons and mostly because those wrong people were in charge of doing the redistribution.

    ReplyDelete
  7. The unfortunate thing, as was seen in former communist countries like Yugoslavia and the Soviet Union, is that the people who are most well positioned to benefit from the new economy, are the old political (communist) party elite.

    This is not exactly true. I mean, yes the communist aparatchiks got some of the cake but most of it went to a young generation with a better understanding of finance, management and stuff who were actually the only one able to spot and understand new opportunities. Some were lower-rank members of the old elite but many were not at all.

    The intresting thing is when you say there should be a way to buy out the foreign owned companies along the way. Will it be voluntary ? Will it be done by the State ? By the private individuals ? If not mandated, who gets the ownership ?
    That's often the weakness of redistribution plans, as Zimbabwe showed. Part or all of the redistributed land/shares/companies goes to the wrong people for the wrong reasons and mostly because those wrong people were in charge of doing the redistribution.

    ReplyDelete

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