“…it is not easy to be successful in economic and social matters, as demonstrated by the majority of the world’s countries that fail even to approach development thresholds. In countries that adopt misguided policies year after year, carrying out the changes needed to improve their poor realities is difficult. Many of the policies that they pursue, while appearing on the surface to favor the poor, are in fact based on ideologies, technically ill-conceived, or simply driven more by pressure groups than by the majority.”
– Hernan Buchi Buc, Chile’s Finance Minister, 1985-1989
This week I happened to listen to public radio and was pleasantly surprised that the two legislators who debated the Budget speech at that time, appreciate the economic challenges that we face. They seem to understand that the time for reducing the budget debate to merely agitating for a road or clinic project in one’s constituency, is behind us. Instead, we are at a critical point whereby the priority of the debate should be to chart a path to high economic growth to create jobs and prosperity. This is the path to a successful transformation of the economy to a high income one.
In charting that path, we have to first and foremost, recognise that we are a small economy with a small population. This small population obviously translates to a small domestic market. As if that is not enough, we are landlocked and therefore far away from the leading economies of the world where the bulk of consumption of goods and services takes place.
Based on the foregoing, it follows that Botswana’s economy cannot be transformed into a developed economy through trade restrictive measures whose effect is to insulate our companies from legitimate-as opposed to state-owned- foreign competition. The slew of statutory instruments which have been progressively introduced to protect local producers of vegetables, snacks, school uniform and bottled water run counter to what successful economies did to grow and attain high income status.
The history of shielding local firms from competition by either invoking SACU’s infant industry protection clause or statutory instrument on the control of goods is not new but goes a long way. The current instruments which are being foisted on all of us at the behest of pressure groups are not new. Yet many of the business which enjoyed such protection at the expense of consumers, never became internationally competitive. One recalls such protection being extended to milk and soap industries to cite but a few, and yet none of those became internationally competitive. They either remained “infants” or simply closed shop once protection was lifted. On the other hand consumers paid a high price during the intervening period. To date no one to can point to any benefits to consumers as a result of that protection. Consumers had no choice but to support such uncompetitive business through the force of law.
As a result and in the quest to accelerate growth, we have no other choice but to open our economy to foreign trade. We simply have to be outward oriented, if you like, because by so doing our companies stand to benefit from trade openness.
Many successful economies offer useful lessons on how to transform into developed status. Let’s take the case of Chile. Just like Botswana, it is a small country by international standards. However among the many and deep structural economic reforms which they carried out following the economic disaster that was the Allende rule, was to open their economy to the world. Similarly therefore, we have to ask ourselves whether we are prepared to emulate the Chiles of this world and choose the hard but unpopular road to a developed economy. We have to be prepared and willing to stay the course of trade of trade openness.
