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Friday, 15 July 2011

What prevents inclusive growth?

IMF's Antoinette Sayeh list of factors that stand in the way of inclusive growth are eerily familiar :
Two factors may have played a role in limiting the benefits of economic growth:
  • In some cases, growth has been concentrated in the natural resource sector. But mining and oil enterprises are capital intensive, meaning they create little domestic employment. They can also be difficult to tax, and only a small share of the profits is retained in the country and used to reduce poverty.
  • The flip side of large natural resource sectors with limited employment opportunities is that the majority of the population in most African countries continues to depend on small-scale or subsistence agriculture. With relatively little investment in public infrastructure in recent decades, and limited access to financing, agricultural productivity has often remained low and households have remained cash poor.

Interestingly among the examples of those following a good path of reform, she includes this : "numerous countries are looking at introducing or changing tax regimes for natural resources to ensure that more profits stay in the country, including Democratic Republic of the Congo, and Liberia. At the same time, countries are putting in place more transparent procedures to manage these resources".  

So the IMF supports the DRC cancelling of mining contracts and putting a better fiscal regime that actually benefits its people by keeping profits in the country. So its just the Zambian people and their government content with the status quo then? For once, let us not blame multilateral institutions for our poverty. Their position can't be more clearer. 

3 comments:

  1. Two factors may have played a role in limiting the benefits of economic growth:

    * In some cases, growth has been concentrated in the natural resource sector. But mining and oil enterprises are capital intensive, meaning they create little domestic employment. They can also be difficult to tax, and only a small share of the profits is retained in the country and used to reduce poverty.

    * The flip side of large natural resource sectors with limited employment opportunities is that the majority of the population in most African countries continues to depend on small-scale or subsistence agriculture. With relatively little investment in public infrastructure in recent decades, and limited access to financing, agricultural productivity has often remained low and households have remained cash poor.


    This is what he spent 4 years of his life studying economics for?

    The factors that have played a role have nothing to do with the fact that the wealth originates in the natural resource sector. Or that mining creates few jobs (58,000 in a workforce of 5.3 million).

    It has everything to do with the fact that the mines no longer belong to the state. He doesn't even take record copper prices into account, let alone the fact that as copper prices rise, more mines open to meet demand, and because more money becomes available for investment.

    However, the ONE factor that is important, is WHO OWNS THE MINES.

    If they were still owned by the Zambian state, there would be no difficulty in taxation. There might be some corruption, but that can be dealt with domestically, without incurring the wrath of the IMF, World Bank, WTO, etc.

    There would be no 'investor flight', or threats of 'investor flight'.

    ReplyDelete
  2. Interestingly among the examples of those following a good path of reform, she includes this : "numerous countries are looking at introducing or changing tax regimes for natural resources to ensure that more profits stay in the country, including Democratic Republic of the Congo, and Liberia. At the same time, countries are putting in place more transparent procedures to manage these resources".

    So the IMF supports the DRC cancelling of mining contracts and putting a better fiscal regime that actually benefits its people by keeping profits in the country. So its just the Zambian people and their government content with the status quo then? For once, let us not blame multilateral institutions for our poverty. Their position can't be more clearer.


    What they say out loud may not be their actions in reality. I would like to now on what side they are involved in the taxation issue in the DRC.

    From her home page:

    Antoinette Monsio Sayeh is Director of the IMF’s African Department. She was formerly Minister of Finance in Liberia and previously worked for the World Bank for 17 years.

    You know this is the SECOND World Bank employee I have come across who is now or is again, the finance minister in an African country.

    Talk about a revolving door. You would think that African economies are actually run by the Bretton Woods institutions. This is why they are in such a poor state.

    Or why at no point ms. Saleh proposes state ownership. Or why Dambisa Moyo never proposed (corporate) taxation as the alternative to her 'Dead Aid'.

    Nigeria's Goodluck Jonathan actually rehired the World Bank's managing director ms. Ngozi Okonjo-Iweala, to be his finance minister. She started her career at the WB, then became finance minister, then became WB MD, and now she's back as finance minister again.

    Nigeria president picks World Bank MD for cabinet
    Tue Jul 5, 2011 4:50pm GMT

    I think Africa is being governed from the World Bank, not from the street. Maybe that is the problem.

    ReplyDelete
  3. what are the major constraint in promoting inclusive growth in africa?

    ReplyDelete

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