Ethiopia and Foreign Agricultural Investment

Globalization has indeed changed the ways things are done. Nowadays, countries no longer need to set aside lands within their borders for agricultural purposes so as to feed their population. They can lease large plots of fertile land in another country for such purposes and this is what some countries like Ethiopia has exploited to get foreign direct investment (FDI). Ironically, despite being the “food-producers” for the world, Ethiopians are among the world’s most malnourished people. To make matters worse, many Ethiopians have been displaced as their villages lie in areas leased out to these foreign firms. Does it mean that Ethiopia should abandon this strategy of getting FDI?

Not necessarily because it is a good strategy in general. The devil lies in the details. With a couple of twists and improvements, this strategy can potentially aid the growth of its economy. For example, the Ethiopian authorities can demand that these foreign firms bear the costs of the displacements. With a bit of negotiating skills, they can get these firms to build new villages complete with basic facilities such as schools and medical centres. They can also persuade the firms to hire the locals to work in their farms. In response to the claims that foods are not reaching the Ethiopians, the authorities can work out some mutually beneficial agreements where the Ethiopians get access to food grown in their country and the firms do not incur any losses.

There are other countless possibilities to turn this strategy into one that is more inclusive towards the Ethiopian society. What we see now is the results of Ethiopian authorities who are not assertive enough to fight for the rights of their citizens, not a fundamental flaw in the strategy.

Journey to the West: Afghan Immigrants in Greece

To outsiders who learned about the predicament of Afghan immigrants in Greece from documentaries, it is an anti-climactic end to arduous and dangerous journeys that span thousands of kilometers. Many leave their hometowns in search of better lives for them and their families only to find that the “promised land” of Europe is not what they have envisioned in their minds. In an attempt to conserve their savings, many stay in rooms of 10-20 people each when they are originally built to accommodate less than 5 people. Many are unable to find jobs and as their hard-earned savings dwindle, begin to sleep along pedestrian walkways. This is of course besides the issue that many are subjected to discriminatory treatments by the Greeks, who quite rightfully argue that these immigrants are creating social problems in their cities. The question is considering the close tribal relationships among these immigrants, why is it that their predicaments have not slowed down the desire to make the journey to the west?

One possibility is that these immigrants who managed to enter Greece have not been entirely honest with their families and friends back in Afghanistan. I recalled an immigrant interviewed for a documentary who said that he had been sleeping on the streets but was reluctant to tell his family the truth because he was ashamed to do so. To give the impression that he had made it, he actually sent a photo of himself with a luxury car which he claimed was his.

Even if one is to be honest to his family back in Afghanistan, one wonders if it will lead would-be immigrants to think twice before making the journey. After all, the living conditions at home are so dire that one considers it unfathomable that wealthy Europe can be any worse. Rational thinking probably lead to them thinking that life will be better and in a worst-case scenario, cannot be worse. Unless the situation in Afghanistan improves dramatically, the uncertainty in Europe ironically seems to give better odds than staying put at home.

Between Removal of Tariff Barriers and Improvements in Trade Facilitation

Both removal of tariff barriers and improvements in trade facilitation have been promoted as ways to boost trade between countries. At first glance, they appear to have more or less similar impact on a particular country, regardless of whether it is a developed or developing country. After all, removal of import tax by its partner is likely to make its export more competitive relative to domestic products whether it is a developed or developing country. The same can be said with regards to improvements in trade facilitation. It is challenging to argue that they have little impact on say the developing country.

However, there is a possibility that removal of tariff barriers is likely to benefit developing countries more than developed countries and vice versa in the case of improvements in trade facilitation. The developed countries arguably have more efficient production capabilities than the developing countries. It is thus highly likely that their products remain competitive even without removal of tariff barriers by their partners, notably the developing countries. On the other hand, the less efficient production capabilities of the developing countries necessarily mean that they have to rely on removal of tariff barriers to make their products competitive relative to others.

Moving on to improvements in trade facilitation, we have to understand the motivation of each. In the case of developed countries, improvements means better infrastructure and hence better market access. Essentially, improvements in trade facilitation by their partners increase the size of the potential market. On the contrary, companies in the developing countries that are interested in exporting their products would have selected suitable locations to site their facilities ex-ante. In other words, although improvements in trade facilitation have positive impact in general, they are unlikely to be relevant to these companies. Critics may argue that better infrastructure also mean better market access for the domestic companies but considering that infrastructure development has been rather slow or non-existent until recently, there is definitely a possibility that these companies have developed indigenous mechanisms that are not reliant on better infrastructure to improve their market access.

Presented with the above, one wonders if this could be the main reason why developed countries have been stronger advocates of improvements in trade facilitation as compared to their developing peers.

India and International Aid

A couple of weeks ago, I found out that India has established its own international aid agency. While this shows a country that is rising and ready to do more globally, I can’t help but to pour cold water into this perception. India is a developing country where a large percentage of its population still live below the poverty line. Wander around the big cities and you will see slums as well as how the dwellers make ends meet. Travel to the countryside and you will see many villages whose Gram Panchayat are not carrying out their duties and roads which are supposed to be repaired but for some reasons have been left as they are among others. If you have the time to have conversations with the villagers, you will realize that they have long lost trust in their government. So if India really has the capability to help others, why not help its own people?

Resources and politics appear to be the two main culprits. Its fast-growing economy means that it is likely to need more resources. In this aspect, India seems to have picked up the strategy of China, its neighbour or some would say rival. The Chinese has built excellent relationships with its African counterparts. In return for access to their wealthy resources, the Chinese has promised infrastructure development. Through its newly established aid agency, I believe India hopes to replicate China’s success in courting the Africans. Additionally, in an ever-integrated world where many issues are discussed at global forums, India may hope to gain supporters for its agenda.

In its pursuit for “bigger” reasons which I have to acknowledge are valid, the Indian Government appear to have forgotten the welfare of its own people, the very people who put them into power. The two things are not mutually exclusive. There are definitely ways to achieve both and I think India should seriously explore such options.

Trade Liberalization in Asia

Asia has been rather active to the call of trade liberalization. Numerous trade agreements at bilateral as well as regional levels have been signed to the point that Asia is perhaps the reason “noodle-bowl syndrome” was coined. Moving on, what should Asian Leaders focus on? Here’s my take:

1. Look at realizing the full potential of existing trade agreements rather than signing more. Many of the trade agreements are very heavy on removal of tariff barriers. Perhaps, they should now work on removing non-tariff barriers and improving trade facilitation.
2. Engage the private sectors more because ultimately, these are the end-users of the agreements. Many of the small and medium enterprises (SMEs) appear to be in the dark of how they can utilize and benefit from these agreements.
3. Resolve the “noodle-bowl syndrome”. This will result in more efficient utilization of the trade agreements. Additionally, this is perhaps a bottom-up approach to getting a consensus at the international level.

Rising Inequality = Social Unrest?

Rising inequality is often attributed to the many social unrests that China has to tackle recently. But is this the only reason for the spike of social unrests?

Could the increase simply be due to a more open government that is willing to share news of ongoing unrests? Or rather, due to more areas in China being more accessible to foreign journalists?

Could it also be due to people that are more aware of their rights as citizens? Or simply as an act to reject the current norms of interactions between the government and its people?

Have We Arrived?

Despite the debt issues that continue to plague both US and Europe, Asia has pretty much rebounded to the point that many are experiencing overheating economy and high inflation. Presented with this stark difference, many people have made statements, which basically say that US and Europe no longer power the global economy. But are these statements entirely true?

I think as much as Asian leaders and people hope to be less reliant on US and Europe, we have to admit that our economies are still very much export-dependent. Although there is no doubt that the stimulus put in place after the 2008 crisis as well as policies designed to boost domestic demand play a part in the rebound, recovery in US and Europe also do so. If we look at the “Factory Asia” phenomenon whereby many Asian countries send parts to China for final assembly before products are being sent to the end markets, we will find that there is a 3-month lag in China’s imports from rest of Asia and US’ imports from China right around the time when Asia started to rebound. What this tells us is that once positive signs were observed in US, someone presumably called their suppliers in China to make orders. China then imported the necessary parts from the rest of Asia, assembled the products over a 3-month period and then sent them over to the US.

From this perspective, these statements do not fully reflect the reality on the ground and although we are moving towards such an environment, we have not arrived.

Freedom and Growth

The long-running downturn in the Western world and the resilient Asian economies, many of which are nominally democratic have inadvertently churned out the idea of political freedom or economic growth. This is most definitely a very foreign concept in the minds of many people in the West. Indeed, for decades and even centuries, the West has showed us that the two can co-exist and in fact, quite possibly complement each other. There is no doubt that we should not play down Asia’s achievement but is it too soon or is it even right to make political freedom and economic growth mutually exclusive?

At the heart of this idea is the belief that something productive would have been achieved as opposed to time wasted in endless negotiations among politicians in a democracy. Of course, here I am assuming a situation where no single party hold a majority in a parliament and a consensus among the relevant players need to be reached. A very recent example is perhaps the current impasse in US about raising the debt ceiling. Going by the argument and the potential impact that a default may have on the global economy as a whole, would the US have been better off if it abandons democracy altogether?

I think we need to take a step back and ask ourselves what democracy is all about. No doubt economic growth is important but in our quest for this growth, we seem to have been blinded and forgotten what democracy is all about to the extent that we made the two mutually exclusive. It is about collective decision-making. It is about taking into consideration the views of different people, different segments of the society. Surely, it does not imply that it impedes economic growth at any point in time. In fact, inclusivity could have resulted in a more balanced growth. Afterall, who are we to judge that our decisions are the best for the nation? Or superior over the others?

Even if at the end of the day, political freedom and economic growth are indeed mutually exclusive, in reaching a consensus, isn’t it worthwhile to sacrifice a bit of economic growth?