Africa & East Asia: The Imitation Game

comments 0

Comment

share

Share

4

Rate

Shrey Goyal's picture

The economic performance of East Asian countries from the 1960s to the 1990s was  so  exceptional that  it’s generally called the  “East  Asian  Miracle”, while in the same years,  African  countries  experienced  a  period  characterized  by  an  astonishing lack  of  growth(Presbitero, 2013).

The economic successes of the "Asian Tigers" have thus led to comprehensive investigations into how rapid growth can be replicated, while the previous decade has seen Africa's overall growth rates quietly approach those of Asia. In fact, Africa is projected to have the world's fastest growing economy of any continent over these five years (French, 2012). Ergo, the average African economy will outpace its Asian counterpart, a point made by The Economist (“Africa’s impressive growth,” 2011) calling the place “A Hopeful Continent”, in a deadpan contrast to their own narrative from a decade earlier (“The Hopeless Continent”).

Nonetheless, Africa remains a mixed bag. As Joseph Stiglitz pointed out in a 2013 op-ed, agriculture, on which so many of the continent’s poor depend, has not been doing well, and even countries that have put their macroeconomic house in order and made progress in governance have found it difficult to attract investment.

So, is Africa really the new East Asia?

An Economic Déjà vu?

It is undeniable that Africa’s leaders, remarkably eager to learn from narratives of success, have been looking east. Rwandan President Paul Kagame hopes to transform the economy into the “Singapore of Central Africa.” (Aidoo, 2012) Meanwhile, "If you give me 10 years, I will give you South Korea," proclaims a Kenyan technocrat, and their Ethiopian counterpart ambitiously remarks, "We are 20 years behind China." (Fourie, 2011)

Many Africans view East Asia's development experiences as more replicable than those of the west, which seem slow, remote and academic by comparison. This is only but natural as citizens and policymakers have seen, in their own lifetimes, countries such as China and Singapore "come of age" in a hostile international environment.

The aspirations also make sense to many economists. Development policies aiming to create an environment for rapid economic growth often rely on the "demographic dividend," which explained the economic successes of the Asian Tigers. This concept is now creating a sense of optimism for improving the economic well-being of Africa (Gribble & Bremner, 2012).

To elucidate further, most population projections put Africa at two billion people in 2040, with the share of 12-24 year-olds growing from 18 to 28%, a cohort in decline for every other region of the world (Henson, 2013). In East Asia, harnessing the demographic dividend propelled and transformed the economy in a historically short time. If sub-Saharan Africa were to go through a similar economic miracle, the region could add as much as $500 billion its economies every year for as many as 30 years (Osotimehin, 2015).

The observation is hardly novel. In 1996, World Bank economists were discussing how Africa could learn from East Asia's policies, based on the fact that Africa's factor endowments and economic structures were quite similar to those found in Southeast Asia in the 1960s (Harrold, Jayawickrama, & Bhattasali, 1996).

Africa’s famous resource-richness is also a somewhat helpful factor, even though the biggest drivers are actually far more encouraging for its future: wholesale and retail commerce, transportation, telecommunications, and manufacturing. By 2030, consumer spending is expected to explode from $680 billion in 2008 to $2.2 trillion, and Africa already has more middle class consumers than India, which has a larger population. (French, 2012)

Africa is thus seen as an untapped version of Asia, and this is true across industries, as reflected in Marriott’s decision to buy 10,000 hotels in the continent at one go in 2013 (Touryalai, 2013). A study of publicly traded African companies found that their annual return on capital averaged 65% higher than those of similar firms in China, India, Vietnam, or Indonesia, and foreign multinationals like Unilever, Nestlé, and Swissport International report some of their highest growth in Africa. (“Africa Is Becoming the New China and India,” 2010)

While as much as one-third of East Asia’s economic “miracle” is attributed to demographic change, it is interesting that the ratio of working-age people to dependents, on the rise in Africa, is about to fall in Eastern Asia (Bloom & Canning, 2011). In the face of a shrinking labour supply, sluggish growth, and excess industrial capacity and savings, China is massively increasing its trade and investment ties with Africa, with bilateral trade going into hundreds of billions of USD. China’s FDI in Africa is also growing, with Chinese firms looking to gain an international foothold and outsource labour-intensive manufacturing (Johnston, 2015). With rising wages and appreciating exchange rate in China, Africa even has a chance of capturing a fraction of its manufacturing muscle(Stiglitz, 2013).

But does a demographic dividend automatically result from a large population of young people without the needed population, social, and economic policies?

Demography is not Destiny

If Asia is to be the guide for Africa’s economic miracle, then the former’s foundations of a strong state and supporting institutions must be made a reality for the latter, still encumbered with significant structural weaknesses and rampant corruption (Aidoo, 2012).

Nations earning a demographic dividend have invested in human capital, implemented sound economic and governance policies, and sustained the political commitment necessary to make the most of the opportunity. Replicating this is a challenge as even other Asian countries have not been able to do so successfully (Gribble & Bremner, 2012). In fact, in countries with sparse resources and inadequate policies, population growth could lead to economic decline and social misery (Bloom & Canning, 2011).

And as we celebrate the similarities in the narratives, let us not forget the differences.

There is a huge heterogeneity in Africa, making replication much more difficult. For example, South Korea is a relatively homogeneous society, and thus its politics is less factionalised and fosters greater capacity for political consensus-building on policy issues. Most African countries, in contrast, host diverse ethnic and religious factions vying for influence (Mwenda, 2012).

There is no single "East Asian model" or a distinct "East Asian path" either. While the Philippines, Thailand and the Republic of Korea all had about the same total population and GDP per capita in 1950, because of South Korea’s investments in education, health and voluntary family planning, it’s GDP grew about 2,200% by 2008, while Thailand’s grew 970%, and the Philippines’ grew only 170% (Osotimehin, 2015).

National governments with youth bulges have a need to implement policies that create opportunities for young people to contribute significantly to society. Any gains made must result in inclusive, equitable growth that benefits everyone. This means protecting the rights of women and girls and promoting participation and inclusion. This is also evident from Japan’s development strategy stressing education, equality, and land reform, factors even more important today in Africa (Stiglitz, 2013).

The success of the new sustainable development goals depend on whether young people see themselves as shaping the future. Good governance and long-term economic policies, such as job creation, openness to trade, and access to credit, are just as important as better education and health care.

And the continent has huge strides to cover. As noted by WHO, African health systems stand in the way of addressing the health needs of the public (World Health Organization Regional Office for Africa, 2006). Even once country-appropriate health, education, and economic policies are in place, the implementation of those policies needs to be flexible (Henson, 2013).

Another vital element in Africa’s future that chimes with the Asian experience is industrialization, which requires efficient and ultimately well-maintained infrastructure (Aidoo, 2012). African governments need to undertake industrial policies to help restructure their economies, and have to think carefully about their dynamic comparative advantages.  

Achieving the enviable growth patterns of some Asian economies will also require the strengthening of intra-regional trade, which has been a challenge for Africa (Aidoo, 2012; Chaponnière & Lautier, 2014).

Conclusion

There is no “silver bullet” package of policies that guarantees a dividend, but basic socio-economic indicators and supportive policies – alongside youth bulge – have correlated with achieving the dividend in Asia. While we don't know if Africa is the new East Asia, it certainly can be.

Adapting foreign models to local social, historical and cultural realities is essential. The fact that the east Asian model is so attractive to many African countries is bound to have profound implications for development practitioners. What is clear is that East Asia followed a markedly different course from that recommended by the neo-liberal “Washington Consensus,” which should be the way to go for Africa (Stiglitz, 2013).

African nations need to look not just outside but also within, at their own economic and developmental histories, and reflect on these successes and failures, and on what they mean for their own development strategies. They are clearly in a better position to achieve and maintain economic growth than at any time in their post-independent histories, and there is no doubt that Africa has the potential required to harness the demographic dividend.

References: 

Africa Is Becoming the New China and India. (2010, February 18). Newsweek. Retrieved from http://www.newsweek.com/africa-becoming-new-china-and-india-75109

Africa’s impressive growth. (2011, January 6). The Economist. Retrieved from http://www.economist.com/blogs/dailychart/2011/01/daily_chart

Aidoo, R. (2012, April 6). Is Africa the Next Asia? Retrieved May 28, 2015, from http://thediplomat.com/2012/04/is-africa-the-next-asia/

Bloom, D. E., & Canning, D. (2011). Demographics And Development Policy. Development Outreach, 13(1), 77–81. http://doi.org/10.1596/1020-797X_13_1_77

Chaponnière, J. R., & Lautier, M. (2014). Regional Integration in South-East Asia : Lessons for the Southern Mediterranean Countries (Economic Brief). African Development Bank.

Fourie, E. (2011, September 28). Africa looks to learn from east Asia’s development experiences | Elsje Fourie. Retrieved May 28, 2015, from http://www.theguardian.com/global-development/poverty-matters/2011/sep/2...

French, H. W. (2012, May 21). The Next Asia Is Africa: Inside the Continent’s Rapid Economic Growth. Retrieved from http://www.theatlantic.com/international/archive/2012/05/the-next-asia-i...

Gribble, J. N., & Bremner, J. (2012). Achieving a Demographic Dividend. Population Bulletin, 67(2).

Harrold, P., Jayawickrama, M., & Bhattasali, D. (1996). Practical Lessons for Africa from East Asia in Industrial and Trade Policies. The World Bank. Retrieved from http://elibrary.worldbank.org/doi/book/10.1596/0-8213-3484-0

Henson, L. (2013, November 14). Achieving the Demographic Dividend in Africa: Lessons From East Asia. Retrieved from http://www.newsecuritybeat.org/2013/11/achieving-demographic-dividend-af...

Johnston, L. (2015, February 7). China’s road to growth in Africa. Retrieved from http://www.eastasiaforum.org/2015/02/07/chinas-road-to-growth-in-africa/

Mwenda, A. M. (2012, April 28). Africa versus East Asia. Retrieved from http://www.independent.co.ug/the-last-word/the-last-word/5667-africa-ver...

Osotimehin, B. (2015, January 5). What can Africa learn from East Asia’s boom? Retrieved from https://agenda.weforum.org/2015/01/what-can-africa-learn-from-east-asias...

Presbitero, A. (2013). East Asia and Africa growth experience: why divergence? Retrieved from http://utenti.dea.univpm.it/presbitero/Sviluppo/EA-SSA.pdf

Stiglitz, J. E. (2013, June 3). East Asia’s Lessons for Africa. Retrieved May 28, 2015, from http://www.project-syndicate.org/commentary/east-asia-s-lessons-for-afri...

Touryalai, H. (2013, November 8). Africa The New Asia? Marriott Buying 10K Hotel Rooms To Become Continent’s Largest Player. Retrieved May 28, 2015, from http://www.forbes.com/sites/halahtouryalai/2013/11/07/marriott-bets-big-...

World Health Organization Regional Office for Africa. (2006). The health of the people: The African regional health report. World Health Organization. Retrieved from https://books.google.co.in/books?hl=en&lr=&id=HeB0Du6Pf4YC&oi=fnd&pg=PR9...