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Tuesday, 3 May 2011

Diversification Misunderstood

Fredrick Mutesa (former UNZA academic) on a strategy for diversification:
"If we have a strategy of diversification that is dependent on external investment, the local people will not benefit much and the local economies will not benefit much. We have seen it in the mining sector (in Zambia) where copper prices are high but the government is getting very little while local suppliers and contractors are getting raw deals...We need a strategy that will embrace local enterprises. We need to look at how we can empower local farmers to expand their production..We need to find ways of how we can help small businesses to expand their businesses.."
A poor and but all too common misunderstanding of diversification. There are many ways in which diversification takes place and the source of investment is not really the problem. What Zambia needs to do is work on attracting the right foreign investment and put in place policies that encourage spillovers from new foreign investment to domestic firms. These spillovers are critical for long-term diversification, but are not inevitable. The right conditions need to exist for them to occur. More discussion of these issues in the monthly essay - Five Questions on Zambia's Diversification

1 comment:

  1. Finally, a post that I agree with! :)



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