21
Apr
09

Question for Presidents Obama, Hu Jintao and or Pratibha Patil ?


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The challenge:

In order to make Africa the best place to be, we still have some homework to do and therefore I am hoping soon to see your questions for those leaders of nations that will impact the African economies probably most, appear on this blog or you can join my discussion board on facebook under the same title, Africa the place to be.

Here is a statement that may be provocative but hopefully will stir up some discussion:

The Global economic crisis according to some, is the result of the imbalance between Capital and Labor, or if you wish company profit ratios and employee wages. Companies have over-invested and wage increases have not followed accordingly and therefore demand fell short on the supply. Governments wanted to portray economic growth at all cost and found Housing as a target to fill the gap of demand, accepting unsustainable debt levels. The US and the UK copied the mistakes that Japan made earlier and after more than two decades is still trying to recover from.Once the housing bubble burst, we found ourselves where we are today.

Now some also say that Companies have been given too much freedom to outsource labor to low cost countries like China and India as part of free trade and globalization without any oversight. Free trade is seen as part of the problem since the lost purchasing power in the developed world is not compensated by the gained purchasing power in the developing countries where companies have outsourced to.

Early in the crisis President Obama’s administration made some maybe premature statements about “Buy USA made products” and the media picked this up as a possible new wave of protectionism. If the developed countries were to embrace protectionism I am concerned that this will worsen the chances for the developing countries on top of all the other effects that this part of the world will have to deal with as a result of economic imbalance between the haves and the have-not. Global warming effects will hit Africa probably more than any other region while those who contribute to the global warming are outside Africa to mention just another challenge we put on the overloaded shoulders of Africans.

Over 1.7 million Australian jobs  are directly or indirectly connected to exports according to the  Asia Pacific Economic Cooperation (APEC)

fta_factsheet_web_map21

The picture illustrates Australia’s top 10 agriculture export destinations.

In Africa on average Agriculture contributes to more than 85 % of the economic output but exports are still marginal compared to the big players.

How many millions of people in Africa would be able to make a living if their agricultural products could reach overseas markets ? What effect would this additional supply have on the current food prices that clearly indicate the shortage in supply with a world population that is still growing too fast.  So finding additional supply resources in agriculture should not be considered a threat to any current suppliers who cannot cope with the demand anyways.

I still am convinced that free trade and free market access is the only incentive to create a higher value chain otherwise Africa will remain condemned to export raw materials and will never be able to develop industries and services.  Cacao Farmers in Ghana pay 8% duties exporting raw cacao beans, and would have to pay 38% duties if exporting cacao powder. Not a great incentive considering cost of freight and all other competitive disadvantages that the farmers in Ghana have to face ?

fta1

Today US labor is outsourced to China, after finding an even cheaper labor force then in India. As you can see from the illustration of the US Department of Labor, free trade agreements are in place with labor provisions but the current picture does not yet include such provisions with China nor with India.

The African leaders who today have found China as a willing investor,  in my view, should also insist in agreements that provide for a fair deal. South Africa has seen a surge in unemployment as a result of cheap Chinese products being dumped on their markets. Dealing with the World Bank and IMF has never been easy for African leaders. The offers coming from China may be very tempting but like always one should be on alert if cheap and easy money is offered as to what the conditions are and how this will ultimately affect people.

Hopefully we will have pictures where the leaders of the developed world will shake hands with the leaders of Africa, like in the above case between the US and Korean presidents at the G20 in April,  to try and reach free trade agreements with proper labor provisions providing a fair deal for every world citizen.

So who wants to give his or her thoughts on how to handle this issue and what would be the best  question to Mr. Obama, Hu Jintao or Prahib Patil ?

Feel free to comment this blog or to participate in the discussing board on facebook at:

http://www.facebook.com/topic.php?topic=7963&post=30586&uid=87956082428#/topic.php?uid=87956082428&topic=7963

© Desi Lopez Fafié


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12 Responses to “Question for Presidents Obama, Hu Jintao and or Pratibha Patil ?”


  1. April 21, 2009 at 1:34 am

    Hi nice blog 🙂 I can see a lot of effort has been put in.

  2. April 21, 2009 at 6:53 am

    I love this blog!

  3. April 22, 2009 at 11:37 am

    Love this blog I’ll be back when I have more time.

  4. 4 Stéphane Rousset
    May 19, 2009 at 8:58 pm

    Ms. Pratibha Patil,
    Mr. Hu Jintao,
    Mr. Obama,

    In your vision of the world in 2030

    * what role would you like African countries to play in the world?

    * what would you like African countries to bring to your country?

    * what would you like your country to bring to African countries?

    * what are you concretely going to do to make it happen?

    • May 19, 2009 at 9:18 pm

      Great stuff Stephane, I will include this on my group on Facebook if you are ok with it, and invite you to assist the discussion I am having there as well. Hope all is well, ciao Desi

  5. 6 Mark
    May 19, 2009 at 9:12 pm

    Desi, great article and good to read your views. This is what we need to see more; people who care enough to make an effort. I’ve been ‘out of africa’ for some years now, but it still hurts to see what keeps happening.

    Keep it going.

    Mark

    • May 19, 2009 at 9:16 pm

      Hey Mark, thanks for the encouragement. As you may have noticed I am passionate about Africa, so stay tuned for more. Hope you are well and the new challenges are meeting your expectations, ciao Desi

  6. 8 Yasar Yilmaz
    May 20, 2009 at 6:05 pm

    Desi, great stuff, enjoyed reading it thoroughly…I think Stephane has asked the highest yield questions, therefore I would like to squeeze in some thoughts for further exploration.

    I know that amidst the times of surging food prices, bunch of the wealthiest GCC countries have invested in land in various African countries (they acquired the land, yet I really did not dig deeper in this to understand the exact setup). An example would be Ethiopia and Sudan where Saudi bought farming land (others are UAE, Qatar as I know). I am curious as to how such initiatives will impact Africa as it looks like a niche market for African countries to leverage. Some benefits would be room for new labor, utilization of unused or underused land, increasing contribution to GDP overall… However, there are also Apac countries (and my home country Turkey as well) where, I have to say they are in a way competing against Africa as these countries are doing the same as well. I am also curious as to how the big corporations are regarding these (ie. Cargill) initiatives. Is there an invisible hand there for stopping Africa from enhancing its capacity utilization ratios?…well I don’t know. But considering the abnormal increase in food prices (esp in countries where you don’t have high agricultural output like the Middle East), one cannot worry about market manipulations and long-term oriented games being played on Africa yet again because like you have mentioned, Africa has huge potential, but it had always been potential energy but not kinetic 🙂

    ***check out (there are many articles on the web as well): http://www.gulfbase.com/site/interface/NewsArchiveDetails.aspx?n=85018

    http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2009/April/business_April711.xml&section=business&col=

    My other point in relation to the above would be maybe to incentivize Africa for gov level cooperation for agricultural boost, rather than letting Africa produce on its own. This might help as the wealthier nations can bring in funds for more advanced technologies to cultivate land and increase efficiency. Some kind of a program with APAC/EU countries could prove beneficial, at gov level or at multinational companies level (though when there is private stake in something, I always feel like one has to be aware of intricacies that may arise).

    There are countries that are and will be desparate for food and Africa can benefit from early cooperation. Not sure how IMF and World Bank will help. Esp IMF never considers micro implications, but stays at macro economics levels.

    China has a low cost labor not because they are extremely productive, but because they are so many, and quality has always been a point for constant criticism. Africa has the land. If cost of transportaion is high, then let the other countries use the land produce and transport back to wherever they want. They key is actually, would US want to be part of this agressively?

  7. May 20, 2009 at 8:32 pm

    Yasar,

    thanks for your comments and thoughts on the topic and for adding a few more angles to this discussion.
    My point was to illustrate that Africa could cater for the shortfall in food supply without becoming a threat to existing producers.
    If Demand exceeds Supply as is the case, prices will continue to go up and those who already struggle to feed families will find it increasingly difficult to do so.

    I strongly belief that here lies a great opportunity for Africa to become part of the solution rather than of the problem.

    Providing market access is a key condition.

    Micro Financing can help in the short term to boost output, but given that the world population is still growing too fast, more durable and sustainable models need to be put in place, not just to work the land, but also to deal with cost of logistics specially for the large number of land locked countries in Africa.

    The impact of global warming will add to the cost of production in Africa and ultimately I feel that those who contribute to this effect should also contribute to fix the cost impact it presents for the poorest in the world and are only victims of global warming and its effects.

    Leaving things to governments or waiting for the large institutions like the World Bank has shown over the last 50 years of aid not to yield the results that everybody would like to see or at least not fast enough.

    Private sector involvement is needed and many companies that have made the first step into investing in Africa have enjoyed good returns in the cases that they came properly prepared.

    The Fact that China is now taking a serious look at Africa has two effects as I described. The positive is that China and the US are both competing for energy resources and China’s presence will keep the US on their toes and present as well in Africa.

    China’s activities in Africa could improve if knowledge sharing and competency transfer would become an integrated part of their approach.
    Today too many projects are not just financed, but also managed and executed by Chinese workers. Once the projects are completed everybody leaves and the local communities at times have no means nor know how to keep some of the projects going.
    Therefore the short term offer may look tempting but in the long run a more self sustaining model is what Africa needs to insist in getting.

    I have used the examples of China and the US since those who follow the news on Africa are familiar with these two large players activities in Africa.
    Other players are starting to look at Africa as a potential investment market like you mentioned in the case of the Middle Eastern Countries.

    I think that it is great to have as many investors coming to Africa as possible from every part of the world.

    Europe has old ties with the continent but to me it is not always clear if the old European players are really that keen in seeing Africa prosper.
    They are keen in keeping their old investments alive, without a doubt.

    With new players from different parts of the world hopefully African nations will have more choice to select who to work with and agree on more balanced rules of engagement and conditions for cooperation

  8. May 21, 2009 at 6:34 pm

    Great Blog Desi,
    it is my first time I’m visiting your blog in wordpress after the Africa the place to be blogspot.
    In fact, I have some questions in mind that I want to know too:

    What may interest those top word leader over Africa?
    a. getting their own profits? (Money)
    b. Control of the world? (the influence in UN)
    c. or just helping because of humanity, as it should be.

    I’m not politician, but over 20 years of living experience in Africa, I realize that where there are Petrol, Gold or Diamond in African Continent, they always on WAR. Who’s responsible of it? Who’s the one influenced the war?

  9. May 22, 2009 at 11:21 am

    Dear Jack,

    I think, with you, a lot of people would like to see the world leaders to tell us what they really want, but if politicians would do this I am afraid their life expectancy would dramatically shorten.

    There are many examples in history of politicians that did stand up and speak their minds and answered honestly and ended up a victim of conspiracies against them by those who were trying to defend their vested interests.

    Your point is absolutely valid. Most wars if not all, have always been driven by economic gains as the true motive. Lots of pretexts have been used to cover for it but at the end of the day, the bottom line has been greed.

    Energy shortages, workforce protection, shareholder’s investments are some of today’s hot topics that ultimately drive the agenda’s of the politicians.

    There is no need to become overly protective if we would cut the greedy part out of the equation. The problem is that people are never satisfied, they always want more and this results ultimately in conflict.

    Ricardo made it clear hundreds of years ago that economies would be better of if each would specialize in areas that would use the available resources that were spread around the world leading to a win win situation for everybody.
    What Ricardo or anybody for that matter could not and cannot factor in is the amount of greed that drives every reasonable solution of the road.

    This is why I prefer to see the private sector to outweigh the public sector so that on a case by case basis two parties can decide to agree on what terms they want to work together and ensure a win win for both.

    I am not propagating anarchy, because we need a framework for all to work within to protect the weakest in the society, which is where the public sector has one of its roles to play for instance.
    The challenge for the public sector and for those in power is to find a right balance.

    If we lose sight of the balance we end up in a credit crunch as we are living these days.

    So maybe the question that summarize your above three questions can be:

    Dear world leader, what is an acceptable balance for you in sharing markets and employment between yourselves and the developing world ?

    Not sure again if this question would receive an honest answer either though, but we have to keep asking these kind of questions.
    The day we don’t ask questions anymore would mean it is time for all of us to go home and retire permanently from the world.

    Thanks for sharing your concerns,

    Desi

  10. June 1, 2009 at 5:27 pm

    Dear Desi,

    Thanks for your support to help reshape the image of my continent as a place to be!
    I have really enjoyed every bit of information in this blog.

    To add some comments to your quote below:
    “Providing market access is a key condition.”
    “… we need a framework for all to work within to protect the weakest in the society….”

    I think fairness has always remained the issue. How fair is trade when a nation’s own global trading policies together with international corporations’ desire to increase their profits result in manipulated international trade pacts and agreements, so that they are most favourable for themselves? How free and fair is the free market? Why do the poor get poorer and the rich get richer?

    A lot of overbearing regulations can give too much power to a few, and potentially corrupt ruling regime and prevent innovative ideas from flourishing. It can perhaps be an obstacle for a foreign nation to invest in an African country due to those conditions and regulations which increase costs.

    However, too much deregulation can lead to corporations being able to undermine basic social and human rights as well as lead to environmental damage, often without accountability. IMF imposed structural adjustment and their pushes for deregulation have also led to further poverty in some countries. There is already a growing fair trade movement around the world, where local producers are able to fairly trade their products. However, it isn’t always easy to maintain that when globalization, in its current form, does not seem to favour those who want trade to be fair.

    Thanks.

    Harry


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