Wednesday, June 16, 2010

WB on Africa's successes

The World Bank's Kenyan report is out. It cheers that Kenya's economy is recovering from the global recession. They expect growth of about 4 percent this year and nearly 5 percent next year. However, they are concerned that growth is not more widespread throughout economic sectors (mostly non-tradable services) and they really want investments to be made to improve Mombasa's port which slows trade.

The Bank also cheers successes from government getting out of the way:
The best example is Ghana’s cocoa sector, which was destroyed by the hyperinflation and overvalued exchange rate in the early 1980s. When the exchange rate regime was liberalized and the economy stabilized, cocoa exports boomed (and continue to grow). Similar examples include Rwanda’s coffee sector and Kenya’s fertilizer use. Africa’s mobile phone revolution, too, is an example of the government’s stepping out of the way—in this case by deregulating the telecommunications sector—and letting the private sector jump in.
Getting involved where it needed to:
The example of Mali’s mangoes is a beautiful illustration of how, when governments intervene to provide genuine public goods—and only those goods—the private sector can spur growth and poverty reduction. In Lesotho’s textile industry and Rwanda’s gorilla tourism case, too, the government stepped in to provide just the enabling factors for take off.
And giving "smart" subsidies:
In the case of NERICA (New Rice for Africa) or the KickStart pump, the government went beyond providing an initial subsidy. They continuously consulted with farmers about the design of the new technology (in the case of NERICA) and how to market it (in the case of KickStart). They were able to avoid the fate of other subsidy programs that simply provided the subsidy without paying any attention to the beneficiaries’ knowledge or preferences.
I find it interesting that both the market and the government are cheered throughout while also discussing the failures of each. "In fact, what distinguishes these successes from similar efforts that didn't succeed is that they emerged from a domestic consensus or idea within the countries."

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