Situation: The Republic of Dongo is a country with many of the characteristics of the sub-Saharan African countries - It is landlocked, post-conflict, poor governance under a nominal democracy, resource-rich, infrastructure-poor, a large aid recipient and caught in a poverty trap. How do we define a development plan to take this country out of its situation?
Considering that the Republic of Dongo shares many of the problematic characteristics prevailing in African countries, it is important to target these characteristics to get the development strategy in place. My recommendations for the country in order of priority are:
1. Increase Governance within the country providing real freedoms to the populations in terms of economic freedoms, security, transparency and social freedoms. This is easy to suggest in theory but difficult to implement in practice considering governments lack of interest in changing their behavior. However, international agencies and countries can provide strict measures in this regards when providing support in terms of trade and if required, aid. Governance has to be targeted in the beginning itself because without effective governance, it will be difficult to remove rent seeking activities and allow overall development.
2. Removal of systemic aid. Humanitarian and development specific aid needs to be provided by systemic aid in terms of budgetary requirements needs to be curbed since it will ensure survival of poor governance regimes, rent seeking activities by the talent pool and curbing of basic freedoms. Corruption also becomes systemic and institutional capability is eroded to ensure power remains within a few individuals. Even if in certain cases, aid is required, it should be channelized through NGO’s and or strong international organizations and should be subject to stringent performance measures by the incumbent government.
3. Natural resources should be exploited but the profits generated from them need to go to building tangible and social infrastructure in the country like roads, education, healthcare etc. It is important to ensure the wealth generated from natural resources does not go out of the country but stays inside for the betterment of the country. Also, the profits need to be used for subsidizing other industries in manufacturing and services so that the economy diversifies and is not just reliant on one sector. This will also help the country to cancel out the Dutch disease.
4. Focus on Trade agreements with other countries and developed nations if possible. The developed countries like the US and Europe should try and ensure that agreements like AGOA and EBA are really useful for a country like Dongo since trade can really take a country out of the poverty trap. Dongo will probably need to lobby for such trade with other countries rather than rely on aid. Also, trading with countries it shares its border with will ensure good relations with them and ensures being landlocked doesn’t harm its interests. The country when it starts generating significant profits can also help in infrastructure building in the neighboring countries which will help these countries too.
5. Focus on building a middle class in the country. Once the country has economic freedoms, and people start generating higher incomes by indulging in economic activity, this will lead to higher taxes to the budget and which in turn will lead to higher capital investment leading to economic growth and finally higher incomes. In the beginning, considering that there is really no growth, no savings and no taxes, the investment support can come from institutional agencies like IMF and world bank but instead of giving money to the governments, it needs to be given to NGO’s or it should help the fledgling private sector. Governments can also work on PPP models and capital can be generated by micro-finance. The important thing is to generate this economic cycle and break the poverty trap. Once that happens and a middle class is created, it will demand better governance and freedoms which can lead to significant positive changes in the country.
Note: This is a paper written as a submission for a subject named
Africa - The last Development Frontier, undertaken during the Master's
course. I have posted this answer because i think these solutions are
indicative of the steps that can be undertaken to help Africa as a whole
in coming out of its misery. Furthermore, these solutions can also
apply to some Central Asian and some South Asian countries too.
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