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Friday, November 27, 2020

An economic strategy for The Gambia?

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 By Sanjay G Reddy

I was privileged recently to spend a little time in The Gambia, whose people recently overthrew a megalomaniacal, authoritarian and in many respects vicious President, Yahya Jammeh, in an extraordinary democratic moment, due to their courage and the timely supportive action of other countries in West Africa (and very little if at all due to support from major powers, apart from their role in placing some effective limits on prior abuses and eventually supporting a Security Council resolution that helped to legitimise the Ecowas action).

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I was able to observe a moving event in which members of the country’s diaspora, from Alaska to Taiwan and from Cape Verde to Sweden, most of whom were active in opposition (and quite a number of whom were highly educated professionals successful in the countries to which they have departed) assembled to meet the new President and to express their pleasure at the New Gambia as well as their sincere hopes for the future. Conversations with ordinary Gambians reveal general relief and enormous optimism.

Arguably, the current juncture provides the first opportunity since the country’s independence in 1965 for a broad ranging public conversation on the ends and means of development.

On the agenda of the new and widely welcomed government are now not only the restoration of the rule of law and democratic institutions, but addressing economic and social concerns long severely neglected. Gambians had been among those who are crossing the Mediterranean to Europe, in the hope of a better life, in large numbers relative to their small population. Many concerns including a population in poor health and insufficiently educated, an undiversified economy vulnerable to downturns in demand for its few exports and unable to generate sufficient employment, especially for youth, must be urgently addressed.

The smallness of the country makes it difficult to pursue many strategies available to larger countries, such as those which might accord a driving role to domestic demand (which presumes that the national economy can provide the scale and diversification required for such an approach).
Break the chains of imperialism? Rouse the people to revolution? One wishes it were so simple. The responsible economic analyst must provide prescriptions relevant in the here and now, while not losing track of the broader questions and ultimate concerns. International and national realities – financial, technical, political and social – must all be faced, even as one dreams a dream.

Fostering a dynamic and inclusive market economy, able to weather the unforgiving storm of the global economy, even while combatting its constraints and attacking its limitations, is the most proximately realisable utopia.

 

The dominant approach to economic management for The Gambia and countries like it, coming from the World Bank, IMF and Western governments (who tend to speak more or less in unison on such issues) emphasises ‘sound’ macroeconomic management, interpreted in terms of maintaining manageable debt, low inflation, a realistic exchange rate conducive to avoiding sustained external deficits, and a climate for doing business that is attractive for investors.

This is not always wrong, but it is very frequently wholly inadequate. The focus on these priorities reflects the thinking and interests of external institutions, and in particular the perceived desirability of a reliably pro-business (and in particular pro-foreign investor) economic environment.

It is based on the idea that such conditions, perhaps complemented by some investment in human capabilities and administrative reforms, are sufficient to jump-start economic growth, as the country specialises in the areas in which it has a comparative advantage. This worldview leads to a concern with lowering costs rather more than it does with raising productivity. Most importantly, it does not directly consider what is needed for the incremental structural transformation of an economy.

Those countries that have successfully developed in any sense have generally pursued a more active strategy. A program of action focused on a country’s own development goals must therefore extend beyond providing economic stability and an institutional and policy environment attractive to business, whether foreign or domestic. In the present delicate transitional situation of The Gambia, sensitivity to a broader range of issues – economic, social and political – as well as a long-term orientation that is strategic, is needed.

(For purposes of this discussion I shall take as given the colonially derived borders of The Gambia, despite the reasons for thinking that it is an important part of the reason for the country’s woes. The maxim that one might adopt is that the borders may not be abolished but that they can be made less relevant).

One contrast between the different views on economic policy is expressed at the level of high theory by the orthodox view that it can be dangerous and costly for any government to attempt to intercede in ways that aid particular industries, as this involves forms of prognostication of which it is not capable – picking winners. However, this criticism fails to recognise that interventions can be of very different kinds, and that they do not have to involve costly subsidies – which may be infeasible quite apart from their being ill-advised.

They can involve helping to remove infrastructural obstacles (such as in power, storage or transportation), changing trade or tax policies so as to lower the costs of producing or procuring specific inputs, steps to enhance skill development and dissemination of technical knowledge, improving marketing or distribution, organising industry, workers and civil society to share information or overhead costs better and otherwise solve problems, and many other actions.

Some of these measures can be undertaken even by governments with limited capabilities, on the basis of a specific analysis of what is needed combined with a realistic assessment of what it is capable of doing. The idea of growth diagnostics that has been advocated in recent years is in this spirit, as it recognises that there may be structural obstacles to be identified and removed in order to bring about higher levels of economic growth.

A part of the theoretical grounding for such an approach within the framework of standard economics is the theory of the second best, which clarifies why impediments to the functioning of markets or states that cannot be directly negated might have their adverse effects diminished by introducing other measures, but noting that the right actions can only be identified through a contextually sensitive study of the various impediments that are present. These impediments may exist either in the national economy or in the world economy and may affect the ability to realize a higher national income presently to enter onto a higher growth path.

A set of economic policies and actions that best serve the country’s development must at a minimum sustain livelihoods and generate employment, raise incomes and relieve the country’s foreign exchange constraint (The Gambia is perennially aid dependent and accordingly constrained).

In addition to economic considerations, there may of course also be ecological, social, cultural or political concerns which enter both into the description of the objectives and the constraints. A programme of inclusive growth and development, for instance, might aim not only to achieve sustainable growth but to ensure its adequate distribution across income groups, social groups and regions. Considerations of diverse kinds ought to be integrated into any strategy from the first, as early choices carry consequences as to what will be possible later. A democratic pathway to development requires public discussion and support for the choices made, in order to inform, justify and implement them.
A conversation among Gambians on a development strategy for the country might reflect on the following possible proposals for a realistic development strategy:

Identify and develop opportunities, remove obstacles
What do Gambians wish for their country in ten, fifteen, twenty-five or fifty years? What is the programme of action needed to get there? Can The Gambia build new areas of specialisation, and not merely further extend existing ones (traditional agricultural exports such as groundnuts, and tourism)?

Are there areas of economic activity that are potentially remunerative for the country which can be further developed in the short and intermediate term (floriculture, fruits, medicinal herbs and plants, business process outsourcing, e.g. medical transcription or other niche internet dependent service exports for which the English language, the time zone and sufficiently educated workers are an advantage)?

If so, what is the potential role of Gambian government, domestic or foreign businesses, producer or worker cooperatives, or others working together in identifying and providing a spur for such activities, in providing technical knowledge or in certifying quality?

What are the factors that make Gambian activities in certain areas uncompetitive and to what extent can these be addressed through specific actions? (Consider the possibility that high power costs might be diminished by better inducements for solar power – the costs of which have greatly fallen in recent years – or other measures). Very deliberately scanning the field of opportunities nationally and globally is necessary. This process can start immediately, but will require the aid of collaborators outside government and perhaps outside the country.

Taking an inventory of national capabilities, some of which may be hidden (e.g. in the substantial Gambian diaspora, small in absolute number but a large resource for the country) is another necessary early step. How will future steps build on earlier ones? Can The Gambia link its strategy to existing areas of robust economic growth in the region and globally (for example, what possibilities exist for taking advantage of linkages to Senegal or other countries in the specific industries in which they have been experiencing robust economic growth)? What obstacles must be removed in order to do so?

How should the economic strategy reflect main goals such as increasing youth employment? Crucially, what are areas of tax revenue that can be progressively increased? Taxes, if raised, should be clearly tied, through political commitments if not administrative earmarking, to productivity enhancing investments in physical and social infrastructure.

As noted already, costs are not as important an obstacle to investment, foreign and domestic, as is low productivity, which can be improved through appropriate public and private investments, with public investment playing a leading role. A close tie between tax revenues and sensible investments can therefore create a virtuous circle. How should a broad-based educational strategy seek to provide the profile of human capabilities that most conduces to the self-realisation of citizens as well as the development of a productive, sustainable, economy? What weaknesses in the educational infrastructure, both in terms of quality and quantity, must be attacked in order to do so? What about health and social services? With limited natural resources, The Gambia must urgently invest in people as its ultimate resource.

Relatedly, what are the demographic opportunities and obstacles that are likely to present themselves? An irony of modern demography, reflected in the Gambia, is that high fertility rates and the associated boom in the number of youth reflect poor health and educational outcomes rather than good ones. Addressing people’s needs better can therefore both directly and indirectly relieve developmental constraints. What about the relation between city and country? The country has been experiencing rapid unbanisation, with rapid growth in a single ‘primal’ city concentrated along the coast, also the resource that draws international tourists. As in many other countries, this is a consequence of push from rural areas as well as pull from urban areas, as inattention to sustaining productive agrarian livelihoods or decentralising high quality social services has changed the calculation as to where to live.
In each and every area, comprehensive scrutiny of the limitations and possibilities is needed in order to create an integrated development strategy.

Although the question is vulgar, one must still ask, in the media-driven world of today, what is The Gambia’s country brand? (This can be different for different purposes, e.g. for attracting investors and tourists) How will it be publicised consistently and powerfully? How will the country’s self-presentation to foreign investors, development bankers, aid donors or others reflect its economic goals and priorities and its consolidation of democracy?

Employ mutual advantage to advantage
How can the government find strategic partners who will help the country to develop needed competences? Private companies can play this role but so can international organisations and national counterparts, once strategic thrust areas have been identified. Some dialogue with the partners may be necessary to identify what these are (for instance in the case of entirely new export activities, for which reliable demanders are needed). Government can help to develop production of certain goods and services on a national scale to make them more viable than they otherwise would be.

Some social goals may be of special interest to foreign partners (e.g. youth employment for European partners concerned about migration) who should be asked to support specific aspects of the policy regime (e.g. tax credits, wage subsidies or other economic inducements for firms hiring youth, vocational training, and aid for small business development). Foundations and policy organisations specifically concerned with particular strategic priorities can be invited to advise and participate. The government must take a strategic approach to identifying and inviting partners to work with it in high priority areas that it itself defines.

 

Crucially, how can the relationship with Senegal be revisited to create new opportunities for both countries (e.g. by improving infrastructural links between Senegal’s volatile Casamance region and the rest of the country, while also enhancing trade links with the Gambia? The elimination of administrative impediments and the improvement of the infrastructure for everyday commerce as well as other forms of practical collaboration – put on the shelf due to the poor relationship between the previous government and Senegal – is an historical goal that should be again pursued with urgency, taking advantage of the good feeling that has followed Ecowas’s initiative to support democracy in The Gambia.

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