By Bernard Bwoni
“Can’t you find better ways of making
your money than importing water? Can you justifiably boast that you have made
it, when you have just made money from importing water?” he asked. “My heart
bleeds when I go through national statistics because what we are spending on
imports could have been channelled towards the local industry’s recovery process.”
“As long as we export raw materials we will never be a rich country. We will
forever be a developing country. When you are a net exporter of raw materials
all the time, as a country we are specialising in being poor,” These were
substance-abundant words from one of the ‘Real Best Ministers’ in government to
date, Minister of Finance Patrick Chinamasa. This is can only be described as
progressive and forms the nucleus of the ‘Buy Zimbabwe Culture’ that has the potential
to propel this country to its overdue and inevitable economic transformation.
The
competiveness of the local manufacturing sector in Zimbabwe has been diminishing
in the face of stiff competition from cheaper imports from much larger manufacturers
from South Africa and from the Far East who benefit from economies of scale. What
Minister Chinamasa is alluding to is the fact that
this unfortunate trend of over-reliance on imports will lead to under-utilisation
of local capacity, lead to even more unemployment, fiscal challenges and
Zimbabwe will not get the opportunity to realise its full manufacturing
potential. It is regrettable that Minister Chinamasa is reluctant to intervene
legislatively to stop imports. Minister
Chinamasa let me take you back to 1776 when Adam Smith, in his ‘Wealth of the Nations’, advised the Americans
not to “artificially promote manufacturing industry and argued that any attempt
to stop the importation of European manufactures would obstruct instead of
promoting real wealth and greatness”. The Americans however did not listen to Adam
Smith’s advice but rather to their then Treasury Secretary Alexander Hamilton
who argued that American industries were still in their infancy and as such
could not be expected to compete against the mature industries in the more advanced
economies without an initial period of deliberate government promotion and
protection. And the America we see today owes its economic and political glory
and dominance to the economic policies of Hamilton.
The value of protecting infant
industries has been vigorously defended since the 18th century by economists
such as Alexander Hamilton in 1791 for the USA trade policy. Zimbabwe’s manufacturing sector is emerging from over decade of a
downturn and
thus unrealistic to expect it to compete against the
mature industries in the more advanced regional and advanced international economies
without an initial period of deliberate government promotion and protection. The
country’s manufacturing sector is in a dire state due to in-need-of-revamp
infrastructure as well as shortage of capital, electricity and water. Most
companies are operating at very low capacity due to the effects of the economic
sanctions placed against Zimbabwe. The key is for local textile manufacturers
to focus on competiveness as the ultimate long-term objective but government
needs to initially offer the sector a period infant industry protection as they
build up their competiveness. There is no competitiveness build on fragile
foundations.
It is important to make a strong argument that premature trade
liberalisation has been a failure and characterised by negative economic growth
in per-capita terms and collapse of manufacturing with our domestic production
swamped by cheap imports as capacity utilisation has dropped to low levels. With
very few exceptions, tariff cuts and other measures of trade liberalisation
have not brought about the anticipated economic growth and, in a lot of cases,
have in fact brought economic collapse. Free trade is one of those theories
that is logically consistent with itself but not in the real world as it has
not been universally linked to subsequent economic growth. This is evidenced by
the economic chaos unleashed by the structural adjustment programmes of the
early 1990s in Zimbabwe and other developing countries. Without some sort of
infant industry protection the economy will have little hope of diversifying
through industrialisation and accelerating growth on a sustainable basis.
Zimbabwe’s manufacturing sector, in this early stage of revival, would benefit
from this critical period of protection to enable it to maintain output and
employment and this will subsequently spearhead economic growth. Minister
Chinamasa has those keys just like Alexandra Hamilton and it is up to him to
unlock this potential by locking away the threat that is liberalisation.
bernardbwoni.blogspot.com
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