Competition is very effective in improving technical parameters of production, making firms be responsive to restructuring outdated operations, introduce new product lines cutting waste, and search for new markets. It greatly promotes industrial transformation. An entrepreneurial class with an ability to mobilize resources in the face of market opportunities must exist, especially in the industrial sector. Access to skilled human resources, physical infrastructure, supplier networks, and technology are also required

A competitive environment has three major elements:

a.between domestic exporters and foreign exporters in the international markets
b.between domestic producers and foreign exporters to the domestic market, and
c. among domestic producers;

Industrial restructuring effectively makes an economy acquire the following:

a.new skills and expertise;
b.retraining of displaced workers;
c.reorganization of management;
d.work force displacement;
e.technology adaptation;

Industrial restructuring is expected to lead to the identification of the following issues:

a.associated adjustment costs;
b.facilitating the process of industrial restructuring; and
c.feedback at all levels

For developing countries to lift themselves from the burden of poverty in the long run, they must answer several questions:

a.What are the requirements for government policy on technological advancement and institutions to be effective?
b.can potential exporters mobilize investment finance in low income countries to break into new geographic and product markets?
c.What is the role of formal financial institutions and what can be done by specialized microfinance schemes?
d.In what order do we prioritize the gaps found in credit markets for venture capital, working capital, investment?
e.How can investors mobilize investment finance in low income countries to break into new markets?

The core of the development process consists of the structural transformation of economies from: rural to urban; agriculture to industry to services; production for household consumption to production for markets and largely domestic trade to a higher ratio of foreign trade.

Policies for managing structural changes that provide benchmarks against which issues related to their transformation are necessary. Export prospects, foreign capital inflows and transfer of technology are important external factors that influence the development process. The role of such factors requires flexible responses. Sound management systems ensure a sustainable current account position, a reduced rate of inflation and a manageable level of foreign debt.

India and the Republic of Korea provide extreme examples.  India has a highly complex and bureaucratic import licensing system and an equally complex system of export incentives. The major policy instrument is import entitlement for exporters in the form of import licenses which provide a subsidy to exporters. A new set of distortions in the export sector has resulted, with subsidized import intensive exports being encouraged at the expense of high domestic value added exports. India provides a good example of one policy induced distortion requiring another. Import substitution and export promotion policies were pursued without reference to economic costs.

The Korean case of export promotion initially adopted import substitution policies but promoted exports by pursuing "neutral" and "extended neutral status" policies for exports. Neutral status means a set of arrangements that will enable exports to compete with foreign exports in world markets on favorably with regard to undistorted markets and policies. Extended neutral status is a situation in which the level of exports incentives is .as high as the level of incentives for import substitution.

Policies that favor anti-export bias of the import substitution regime can be harmonized with   access to imported Inputs, credit and factors of production at economic prices. The Korean export-led growth strategy of automatic and transparent policies for assisting exports in an otherwise import substituting regime has been very effective.

Setting up a culture of export orientation by insisting on a massive restructuring of the manufacturing sector in countries adopting import substituting strategies lead to:

a. shorter product life cycles and cost reduction,
b. capital intensive technological breakthroughs in agriculture, electronics, footwear, clothing
c. change in consumer tastes
d. new products associated with changes in technology, design and production processes,

In the absence of or failure, socio economic growth and development become subject to foreign and intrusive solutions as prescribed by the so-celled development partners. These come with rigid restrictive conditionality’s that have been argued to harm the recipient nation than intended. Such case is the conditions created by the IMF and World Bank as part of the basic requirements for its SAPs policies of the last decade.

These conditions have been labeled the Washington consensus.

a. cutting social expenditure(austerity),
b. focusing economic output on direct export and resource extraction,
c. devaluation of currencies,
d. trade liberalization and lifting import and export restrictions,
e. supplementing direct investments with the opening of domestic stock markets,
f. balancing budgets and not overspending,
g. removing price controls and state subsidies,
h. privatization or divestiture of all or part of state-owned enterprises,
i. enhancing the rights of foreign investors vis-s-vis national laws,
j. improving governance and fighting corruption.

Is it possible for Kenya and by extension Africa to diversify from the dependence on a single commodity, reduce macroeconomic volatility and achieve economic prosperity?

The answer lies in how it manages these other factors: investor and consumer confidence, education, security, inflation, exchange rates and general asset price shocks. Most are difficult for policymakers to directly influence, even though they are set economic growth and development goals that are measurable, monitorable, and  critical to a sustainable economy. Policymakers must guide long-term, sustainable growth and help ensure stability and a high standard of living.

By Solomon Martin Omutsani
Department of Business Administration
University College Jubail
Saudi Arabia.