Rich and Poor Nations : Stemming the Widening Gulf

Published on 11th December 2012

Value addition to coffee can enrich Africa
The wealth gap between developing and developed countries went from 3 to 1 to 72 to 1 in 1992. The million dollar question is, why is the situation getting dire and hopeless in the wake of globalization that promises to give economic sustainability to both Developed and Developing Countries? Today we have several well educated Africans in Academia, technologists, technocrats, scientists, IT personnel, several University professors and good Universities in Africa and yet, ironically, the situation is getting out of hand. Something should be very wrong!

While a lot of attention and concern of the ever worsening disparity is been felt worldwide, African countries should not expect a reduction in the gap between the Developed and Developing countries to be handed to them on a silver platter; rather they should implement measures to supplement efforts being made to reduce the impact on this intriguing phenomenon by playing a key role via initiating value addition and the processing of primary goods (natural resources/commodity goods) before being sold on the local or international market. There is also the need to shift from subsistence farming to commercial/mechanized farming. Research and other studies have indicated that national wealth creation in contemporary economic growth/food security is not tenable with the continued practice of subsistence farming (which appears to be the mainstay of most African Economies) in Africa.

Adding value to primary goods will not only create wealth and jobs, but it will also boost indigenous technology, boost the award of patents to African inventors, Universities and those in Research and Development, raise the standard of living of Africans, enhance the flow of more foreign exchange and help to reduce the widening gap between Developed and Developing countries. It is a fact that any time raw materials are shipped out, it creates jobs in foreign countries at the expense of African Countries. Why can’t African countries process raw materials locally from low tech goods to high tech goods before they are sold on the international market, to reap the full benefits of globalization? Technological engineering efficiency and economic efficiency should be the norm to pave the way for competitively priced higher value added goods from African Nations in global trading.

The governments in Africa and for that matter the Developing World should also embark on an agrarian revolution with the introduction of mechanization and the adoption of good agricultural practices. African Countries should shift their focus on an overwhelming percentage of GDP emanating from the Primary Sector to the Secondary and Tertiary Sectors respectively. Agriculture should entirely be based on R&D and further be implemented through cooperation between farmers and researchers. Research results should move with speed to the field for trials and implementation, and problems arising in the field should be directed promptly to scientists for solutions. This will also entail Research establishments having consistent close contacts with the Food and Agriculture Organization (FAO). It is absolutely prudent for Developing Economies to venture into bio-technology, drip irrigation, the cultivation of drought resistant crops like sorghum and millet and the sustained use of treated industrial wastewater for agriculture especially in arid and semi-arid regions in Developing Countries to ensure food security sustainability.

To permanently arrest the endemic drought induced famine situations and ensure a lasting food security in Developing Countries, the governments, scientists, stakeholders and technologists should design pre-emptive measures to forestall such calamities that had brought starvation, death, malnutrition and untold hardships to millions through reforestation, soil conservation and water harvesting technologies. Drought is predictable and these measures are feasible and can be implemented. The constraints on the availability of arable land, the acute water shortages and the endemic threat of food insecurity have necessitated venturing and investing into methodologies that rely less on nature and the minimization of water usage in the cultivation of crops which are also geared towards making efficient use of the limited water resources in arid and semi-arid areas in the Developing World. A case in point is the inevitable situation and events leading to the worst 2011 famine to be encountered in the Horn of Africa in 60 years.

Such technologies and methodologies that exist and have been used successfully in Israel, the US and other nations globally can be used to fend off hunger and improve the standard of living in Developing Countries. These technologies include: Drip Irrigation, Buried Irrigation, Spray Irrigation, Sprinkler Irrigation and the usage of Greenhouses to cultivate crops year round in the middle of the desert. To ensure food security, economic growth and sustainability of livelihood, Israel has been able to pump water from the Sea of Galilee in the far north to the rain starved central part of Israel to boost agricultural production.

The feasibility of these processes and advances have been proven successful by nations like Israel, the United States in their application to marketable products, ranging from genetically-engineered seeds and bio-pesticides to light-degradable plastics and computerized irrigation/fertilization systems. Still on arid and semi-arid regions, the search for water saving techniques should spur the development of many types of computerized controlled irrigation systems, including the drip Irrigation methodology which essentially directs water flow and nutrients straight at the root zones of plants, so that smaller amounts of water can be used efficiently for crop cultivation. Once mechanization is introduced in agriculture, it will release labor from the Primary Sector into the Secondary and Tertiary Sectors through division of labor and specialization.

Lessons also have to be drawn from the endemic occurrences of drought induced famine globally. According to a United Nations reporter, 2.4 million people were in dire need of relief food in the Horn of Africa and this figure could spiral out of control to 3.5 million if immediate action was not taken to forestall the calamity (Daily Nation, 2011). Developing and Developed Countries will have to live with changes in the weather supposedly caused by global warming by embracing measures such as water harvesting techniques and methodologies like the construction of dams, the digging of boreholes as showcased by the tapping of subterranean brackish water by Israel from the Negev desert, the construction of channels and the channeling of excess rain water into man-made tanks for agricultural usage during the dry spells, the planting of more trees and the shunning of deforestation, practicing drip irrigation techniques that target the root zones of plants which have been practiced successfully in arid and semi arid regions of the world by for example Israel and the US, recognizing the importance of terracing, furrows and ridges methodologies in arid and semi arid farming, implementing measures to ensure a drastic reduction in the emission of deadly gases from global industrialization, and using more environmentally friendly renewable energy sources in a green industrial revolution in Developing and Developed countries and observing to the letter the Kyoto Protocol as regards the mitigation of emissions.

Further, universities should train graduates who will come out as technocrats, business entrepreneurs, geologists, technologists, researchers, scientists, environmentalists, industrialists and other professionals that will act as a catalyst to the Value Addition Industry. That is the skills to be acquired by these graduates from Developing Countries should be in tune with both contemporary industrial and requisite developmental manpower skill requirements and needs of the country. The dynamics in the interplay of demand and supply in the labor market have to be taken into cognizance in the determination of the quality, quantity, depth and appropriateness of university and professional education in Developing countries. In order to boost innovations and technology, the governments should set up funds that will finance research and new inventions that will cater for the rapid development of their countries. At least 2 percent of the national GDP should be allocated towards vibrant R&D Programs. This process will boost rapid growth levels in Developing Countries’ share of the number of patents, peer-reviewed scientific publications and technology exports. This technological drive will enhance the rapid acceleration of inflows of foreign direct investment (FDI) which is one of the main channels of technology transfers.

Developing countries should take a fresh look at embracing the concept of developmental state which has been successful not only in South East Asia as showcased by the Asian Tiger and Tiger Cub states but also in South America by Chile, Ireland in Europe and Africa with Mauritius and Botswana being pioneers on the African continent. A distinction needs to be made here and that is: in states that were late to industrialize, the state itself led the industrialization drive, that is, it took on developmental functions. A case in point, the United States is a good example of a state in which the regulatory orientation predominates, whereas Japan is a good example of a state in which the developmental orientation predominates. These two differing orientations toward private economic activities, the regulatory orientation and the developmental orientation, produced two different kinds of business-government relationships. Some of the best prospects for economic growth in the last few decades have been found in East and Southeast Asia where the State itself led the industrialization drive. As a consequence of this approach China, South Korea, Japan, Thailand, Taiwan, Vietnam, Malaysia, Singapore, the Philippines, and Indonesia are developing at high to moderate levels. Thailand, for example, has grown at double-digit rates most years since the early 1980s. China has been the world leader in economic growth since 2001. It is estimated that it took England around 60 years to double its economy when the Industrial Revolution began. It took the United States around 50 years to double its economy during the American economic take-off in the late nineteenth century. Several East and Southeast Asian countries and other Developmental Countries globally today (case in point Botswana and Mauritius in Africa) have been doubling their economies every 10 years (Wikipedia.org, 2011).

Developing Countries should concentrate on efforts not only to add value to primary goods before their sale on the International market but also strive to achieve a Balance of Trade surplus in International trade which arises when the value of exports exceeds the value of imports. The implication of this is very paramount when it comes to national wealth creation since by this process the domestic economy will be receiving a net inflow of payments from the foreign sector. Essentially more payments coming in than going out would mean the domestic economy will have not only more income coming in but also an enhanced standard of living for Developing countries. Conversely the vice versa- Balance of Trade deficit where the value of imports exceeds the value of exports will not only bring fewer income into the domestic economy but it could greatly hamper the standard of living and the creation of national wealth. The Developmental States of South East Asia, Africa, South America and Europe would not have achieved their current phenomenal economic growths without consistent balance of Trade surpluses. Same rule applies to countries like China, the United States and Japan.

Attempts should be made by all players in global trading to reduce or eradicate protectionism since the benefits of free trade outweigh benefits associated with protectionism.

Executive Secretary Abdoulie Janneh, commenting on a recent survey released by the United Nations Economic Commission for Africa (UNECA) on the topic “A technological resurgence: Africa in the global flow of technology” on January 21, 2011 stressed the need to prioritize technology development and transfer through four core areas, including the promotion of university-industry-government partnership, where existing research centers can be used to acquire, adapt and diffuse emerging technology and serve as technology incubators. The study also recommends the strategic use of government contracts to encourage technology upgrading of domestic firms and joint ventures with foreign suppliers; promotion of industrial alliances to enable African or other firms in Developing Economies to access emerging and existing knowledge and skills at home and abroad; and entry into international research and development agreements between African and other Developing Countries and leading technology-exporting countries.

It is critical for stakeholders and the governments in Developing Countries to acknowledge that the transformation can only be successful in an atmosphere of transparency, probity, accountability, morality, integrity and good governance. Finally the creation of economic wealth in the three sectors, Primary, Secondary and Tertiary in Developing Countries should co-exist with a balanced environment. A balanced environment can be attained through a process known as “mitigation” in climate change jargon. This process will usher in low carbon economies based on a much more efficient use of energy and raw materials in the Developing World. Further, this will mean the provision of decent jobs, with high labor productivity but also with high eco-efficiency and low emissions, which hold the promise to provide good conditions and incomes, and will be essential for growth and help to protect the climate. Such “green jobs” already exist and some have shown spectacular growth (ILO.ORG, 2007).

The review of climate change by former World Bank Chief Economist Nicholas Stern has concluded that mitigation is technically possible. The review also concludes that the cost of stabilizing emissions at safe levels today is rather modest and in any case far lower than the cost of inaction; meaning the opportunity cost will far exceed the cost of taking decisive corrective action today. Based on sectoral analysis of statistical data on GDP in the economies of Developing and Developed Countries (CIA WORLD FACT BOOK, 2011) it is logical to conclude that there is a correlation existing between the sectoral distribution pattern (of labor/GDP and overall GDP creation) in the economy where a slimmer labor force/smaller GDP in the Primary Sector and the subsequent increase in the labor force and GDP creation with progression from the Secondary to the Tertiary Sector resulted in phenomenal cumulative GDP rates per nation. It is for this reason that Developing Countries are encouraged to not only have more diversified economies but also encourage commercial/mechanized farming as against subsistence farming, introduce technology into farming while strictly adhering to Technological Engineering Efficiency and Economic Efficiency in all sectors, and recognizing the significance of the processing of (primary products) raw materials into Higher-valued-added products (from low-tech goods to high-tech goods). Having export diversified economies is significant because market conditions that cause one sector to perform well (like crude oil production in the Primary Sector) may cause another sector to perform poorly or vice versa. Hence, global economic shocks can easily be absorbed by diversified economies while simultaneously creating more national wealth. Further, the success story of High performing Asian economies that experienced substantial increases in exports, and specifically exports of manufactured goods, and high growth rates of their GDP over many decades has prompted many analysts to view export development and diversification as the new engine of growth. In the light of the experience of successful exporting countries, there is a growing consensus in economic literature that outward-oriented policies combined with selective market friendly interventions can help countries grow more, and reap the benefits of trade liberalization.

There is also a growing consensus that patterns of economic development is associated with structural change in exports and increased export diversification. In virtually all regions of the world, the patterns of trade have changed from primary exports to manufactured exports of labor intensive types and subsequently to more resource Intensive manufactures, but Africa is one of the rare regions where exports remain predominantly of primary nature. There is, therefore the urgent need for a paradigm shift in Africa and all other Developing Nations yet to join the bandwagon.

My urgent call for value addition methodologies and export diversification as the mainstay of African economies is simple and practical. Take a look at the advantages associated with them: value addition creates jobs and it could be the foundation for the cottage industry in Africa and the developing world, a reliable source for foreign exchange, the enhancement of indigenous technology and specialization, has the potential to reduce unemployment through its inherent “multiplier effect”, export diversification also will ensure that African countries have a more diversified economy (no country in the world will like to place all its eggs in one basket). Further, value addition negates the perishability of primary goods (commodity goods) through processing and finally valued added goods value more on the International market than raw materials. Countries like Thailand, Malaysia and other developmental states which less than half a century were classified as developing countries with most African countries, chalked their rapid economic growth through the processing of natural resources into higher value added products. Further, value addition enhances food security and also offers numerous opportunities for livelihood sustainability. A word of caution, for this process to be successful it has to occur in an atmosphere of transparency, probity, accountability, fairness, morality and integrity.

When this transformation is properly undertaken in the absence of other derailing factors like civil wars, drought, political instability, corruption, tribalism, coup d’états, greed, pest infestation, floods, nepotism, protectionism and bad governance, Developing Countries will not only start creating national wealth but will also improve and strengthen indigenous technology.

In conclusion the economic salvation, bridging the gap between poor countries and rich countries, the achievement of autarky and the issue of food security in regards to Developing Economies hinge squarely on efficiently and effectively exploiting the parameters bestowed upon them by their various economies in the Primary, Secondary and Tertiary Sectors; and also giving Developing Countries or later developers, the leeway and the ultimate responsibility to chart their countries’ developmental trajectories, which leave room for diverse developmental paths

By Emmanuel Botchwey
ebotc@netzero.net

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