Normas de conducta para prevenir conflictos de intereses y mecanismos para hacer efectivo su cumplimiento

Dirk Hansohm

Abstract

Namibia has a rich resource endowment and a high per capita income. However, poverty and inequality are top world wide. This presents a formidable challenge to policy-makers. The Namibian government addresses them through its First National Development Plan (GRN/NPC 1995). While its priorities – growth, employment, overcoming of poverty and inequality – are adequate, they do not address fully the real choices, and there is a lively and controversial discussion within Namibia on these.

This paper gives an overview of economic development in Namibia since independence. The situation in 1990 is compared with the present state. On this basis three central choices for development are discussed: the degree of international integration versus higher emphasis on ‘self-sufficiency,’ the role of the public versus private sectors, and the scope for rural versus urban development. Each section sets out the theoretical discussion on these choices, recaps the Namibian situation and discussion, and provides conclusions for a Namibian balance between the choices. The conclusion draws together the results of the three sections and comes up with arguments concerning the three issues relevant for a strategy of sustainable development in Namibia.

1

Introduction: Options of Economic Development in

Namibia

Namibia is a country with a rich resource endowment and a high per capita income, but also very high poverty and inequality. The central challenge of policy-makers is to transform the country from a state both of poverty/inequality and of dependence on exports of raw materials, to one of higher widespread welfare and a diversified economy.

The Namibian government has set itself four central development objectives:

• reviving and sustaining economic growth;

• creating employment;

• reducing inequalities;

• eradicating poverty.

It is recognised that achieving growth is a central (though not sufficient) condition to achieve the other three objectives. The current First National Development Plan (GRN/NPC 1995) aims at achieving an average growth rate of GDP of 5% per year.

While many observers have criticised this objective as being too ambitious and unrealistic, it can be argued that such a growth rate is both necessary in order to attain significant progress on the other objectives and also possible – in light of the low economic base Namibia starts off with – on the condition that appropriate policies are implemented.

Which are the strategic choices to be made to achieve the development objectives? In the process of developing an energy policy for Namibia, a group of around 40 key Namibian decision-makers representing the spectrum of the Namibian society were brought together in a series of workshops to think about Namibia’s future. Because investments in energy have a long-term character, the range of possible developments over the next decades has to be known. The exercise came up with four scenarios of Namibia’s development over the next 30 years (see Figure 1). These scenarios present what is believed to be reasonably possible (rather than what the decision-makers would like the future to look like), without attaching any degree of probability on any of the scenarios. Neither are changes in developments over time discussed. This is a useful abstraction in order to highlight features of the choices. However, in reality, at least some of the scenarios do not seem to be sustainable over a longer period.

Degree of International Integration Character of Namibian Development Public, rural and distributed Private, urban and concentrated High Low African tiger

Fat cat Stray cat

Angolan Catalyst

Figure 1. Scenarios of Namibian development.

The key differences between the scenarios are in three dimensions:

• whether they are primarily driven by the private or the public sector;

• developments implying concentration on urban areas as well as in terms of income

versus developments, giving more attention to the rural areas and more equal income distribution;

The first two dimensions move in parallel, i.e. those scenarios implying higher concentration were private driven and vice versa. Thus, these can be shown in one dimension (horizontal), while the third dimension is shown in the vertical axis.

The three dimensions reflect crucial choices discussed in the Namibian society. This paper does not go into the discussion of the political economy of the four scenarios. Rather, these serve to illustrate the point that Namibia’s future is quite open. The process of scenario-thinking also showed a high degree of uncertainty among policy- makers about the cost and benefits as well as sustainability of different paths.

This paper aims to contribute some thoughts based on international experiences to inform this discussion. Before discussing the three choices, the next section provides an overview of Namibian development since independence.

2

The Record of Economic Development of Independent

Namibia

At independence, Namibia started off with incomes much higher than the average sub- Saharan African country (four times as high in 1994), but with an entrenched extreme inequality and poverty. Further important characteristics were the dependence on resource exports (minerals, beef, fish), and an extreme high economic integration with South Africa.

What has been achieved since independence in 1990? As Figure 2 shows, compared both to its past (the pre-independence decade) and the SSA average, Namibia’s record is impressive. However, in terms of per capita growth (which is the variable we have to look at), we see that what has been achieved in economic growth has been cancelled out by population growth of the same rate (see Figure 3). In other words, there has been no improvement of welfare in real terms.

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 1980-90 1990-95 Namibia sub-Saharan Africa

Figure 2. Average annual growth rates in Namibia and sub-Saharan Africa, 1980-1990 and 1990-1995. Source: World Bank (1997).

Figure 3. GDP development, 1990-1998. Source: NEPRU (1998:5).

At present, there is little evidence to indicate how the distribution of welfare has changed, how inequality and poverty have developed since independence (Hansohm and Presland 1998; Schade et al. 1997). However, as Figure 3 shows, the scope for improvements has been too limited to achieve substantial progress. Development history shows that sustainable improvements of poverty and inequality can only be achieved in the context of growth.

Figure 4 shows the structural changes the Namibian economy has undergone since the beginning of the 1980s. The figure shows clearly that both the agricultural and the mineral sector faced a secular decline (based on stagnating gross output). Unfortunately there are no comparable figures on the development of employment, but Figure 5 shows that in 1993 still half of the population worked in agriculture. This constant relationship between output and employment in agriculture reflects the fragile character and low growth potential of this sector, due to a large degree to the aridity and low quality of soils. The mineral sector is in its mature stage – resources exploited are increasingly marginal and high cost.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Other

Finance, real estate, business services Government Manufacturing Fishing Mining Agriculture

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Agric u lt ure & Fi sh e ri e s M ining & Quarry ing M a nuf a c turing Elec tr ic it y , Gas Co n s tr u c ti o n T rade, H o te ls , M o to r repairs T rans port and Co mmu n ica ti o n F inanc e/ Es ta te Serv ic es sector e m ploy m e nt

Figure 5. Sectoral distribution of employment in Namibia (1993/94). Source: MLHRD (1994).

Growing sectors are fishing, manufacturing, finance, and, largest of all, government. The manufacturing sector is growing and slowly diversifying, but is presently largely based on meat and fish processing. The expanding financial sector is important to underpin the economic diversification. The expansion of government, however, which is financed by an increasing tax burden as well as by rising debt, is not sustainable.

3

Three Central Choices for Strategies of Sustainable

Development

The scenarios for Namibia’s future (Figure 1) indicate three central choices for development, which are in the following discussed in turn.

3.1 International and regional integration versus economic

self-sufficiency

Today there is wide agreement that market-oriented, liberalised approaches to development are superior to inward-looking, import-substituting approaches. However, there is some uncertainty about the distributional impacts of trade liberalisation, and especially the impacts on the poor (e.g. Woodward 1996). Furthermore, the present economic crisis in East Asia is interpreted by some as an indication for the necessity to question the received wisdom of outward-oriented development strategy, which is largely empirically based on the so far successful East Asian model. In Africa, there are voices which question the appropriateness of the outward-oriented model to Africa because of the different situation on the world market and the less favourable starting position of Africa. It is feared that a rapid liberalisation might lead to de- industrialisation. Most observers estimate that the overall welfare impacts of the Uruguay Round leading to the establishment of the World Trade Organisation for Africa as a whole will be negative (e.g. Goldin and van der Mensbrugghe 1995), due to the

weak industrial structures, unintegrated markets and weak supply responses). However, this assessment is not universal (e.g. Francois et al. 1995).

How is the Namibian situation? As Figure 6 shows, the development after independence does not show increasing openness (measured as percentage of foreign trade of GDP) – if anything, the contrary.

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1991 1992 1993 1994 1995 1996 year N $ m illion X+M GDP

Figure 6. Namibia’s foreign trade (exports [X] and imports [M]) and GDP (N$ million, current prices, 1991-1996). Sources: Bank of Namibia (1996), and unpublished data from the Bank of Namibia.

The export structure has also not changed to any substantial degree (Figure 7). The traditional resource exports (diamonds and other minerals, fish, beef, fruit) dominate. Manufactured exports, while increasing over some years, returned to the initial low level later. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1990 1991 1992 1993 1994 1995 1996 other commodities manufactured products food and live animals other mining products diamonds

Figure 7. Namibia’s export structure (% of major groups, 1990-1996). Source: WTO (1998:10).

The high country concentration remained as well (Table 1). Trade is concentrated in SACU, but that within the whole Southern African sub-region (SADC) remains unimportant (only 12% of SADC’s trade is intra-regional). This is partly due to a great number of remaining trade barriers within the region, but mainly to the similar resource endowment and limited production structure of all countries (with the exception of South Africa).

Table 1. Direction of trade, 1993 (N$ million, % of total). Source: Bank of Namibia, quoted by Donovan (1996:20).

Country Imports % Exports %

South Africa 3383 87.1 1153 27.4 European Union 194 5.0 2167 51.4 United Kingdom 20 0.5 1450 34.4 Spain 32 0.8 258 6.1 Germany 100 2.6 140 3.3 Belgium 2 0.1 232 5.5 France 40 1.0 87 2.0 Japan 3 0.1 411 9.7 Ivory Coast 129 3.3 70 1.7 United States 46 1.2 51 1.2 Switzerland 7 0.2 74 1.8 Other 121 3.1 287 6.8

Namibia is highly economically integrated with South Africa and Botswana, Lesotho, and Swaziland through the Southern African Customs Union and the Common Monetary Area (without Botswana). Further, Namibia is a member of the Southern African Development Community and the Common Market of Eastern and Southern Africa. It is also part of the Cross-Border Initiative. Furthermore, there are a number of bilateral trade agreements planned. In existence presently is a scheme with Zimbabwe. Parallel to these regional initiatives Namibia is also committed generally to an open and outward-oriented economic strategy. It is one of the founding members of the WTO and as such committed itself to a process of comprehensive trade liberalisation.

However, these agreements are not only overlapping and partly undermining each other, their value is also disputed in public discussion and their future is regarded uncertain (see Figure 1). The old integration schemes of SACU and CMA are highly suspicious because of their colonial origin. While the impact of SACU is in fact double- sided, the benefits of CMA are overwhelming. SADC is seen more positively, although it has still a long way to go to become an integrated economic region. International integration is seen by many as a threat, rather than as an opportunity. Economic welfare in the future is by many equated with independence – from South Africa – rather than with further integration. In this mood, notions of self-sufficiency are popular (see Box 1 and Box 2).

Box 1. Self-sufficiency in food for Namibia? Source: MAWRD (1997).

The terms ‘food self-sufficiency’ and ‘food security’ are often misunderstood. The state of food

security is attained when all members of a nation’s population are sufficiently well fed for them

to be able to lead a healthy and active life. Self-sufficiency in food is reached when a nation produces enough for its population and does not need import. Normally, food self-sufficiency refers to self-sufficiency in the area of staple food grains, rather than complete self-sufficiency – no country is self-sufficient in all foods.

Namibia is far from being self-sufficient of food: between 50% and 80% of its grain requirement are imported every year. However, it is not advisable to strive for food self- sufficiency in grains for two reasons. First, due to Namibia’s ready access to the world grain market and its neighbourhood to South Africa, one of the world’s largest maize producers, there is no danger that Namibia will be unable to import food. Second, production costs of grain are significantly higher in Namibia. The investment necessary would be in excess of N$ 1.3 billion. Experience also has shown that irrigation schemes producing cereal crops have so far been unable to meet even their operating costs. This means that achieving self-sufficiency in grain would imply lower income for Namibia than if grain would be imported.

However, food security of households does not depend directly on the nation’s income. People are food insecure when they have insufficient income, and the principal way to overcome poverty is the creation of employment opportunities. Furthermore, cheap food prices are essential for poverty reduction. In sum, for the case of Namibia we can conclude that self- sufficiency in grain would not have a direct positive impact on the attainment of food security. On the contrary, it appears to make this more difficult.

Box 2. Energy security or energy self-sufficiency for Namibia?

Namibia’s economy and its energy sector are integrated into the Southern African region and with global trade. The country imports all of its oil products and about two-thirds of its electricity. The future pattern of foreign trade in energy depends on availability and price of different energy supply sources as well as investment decisions on potential new hydro-electric schemes (Epupa) and gas fields (Kudu).

Among the country’s energy policy goals are security of supply, social upliftment, investment and growth, sustainability, and economic competitiveness and efficiency. The crucial challenge for Namibia’s energy policy is how the country can best achieve its policy goal of energy security and how it could maximise the potential gains from participating in regional co- operation and the global market.

In the presence of a global oil market security in oil and coal supply is easily achieved through diversity of supply and import options, eliminating the need for self-sufficiency. Electricity, however, is not easily or cheaply stored and reliable supply is dependent on secure generation sources and local or bi-national integrated grid networks. The regional electricity market is still very undeveloped.

On this background, a choice has to be made about the appropriate level of local supply versus imports. In the electricity sector this means local development of electricity generation where it is cost competitive and an assessment of the risks in importing competitively priced electricity from neighbouring countries.

The impacts of liberalisation as stipulated by the WTO agreements are uncertain because they depend crucially on the ability of governments to make the most of new opportunities and to enable threatened economic sectors to adjust, and to the same degree on the capacity of the private sector to respond to new opportunities. Further, it is important to note that the results of the Uruguay Round are not equal to total liberalisation. Important limits to market access in industrial countries remain, most importantly higher rates of tariffs for manufactured goods (tariff escalation).

Unfortunately, the discussion on trade liberalisation is dominated by fears about the future, largely due to the influence of organised producer interests, who naturally focus on the threats to their presently sheltered position, which allows them to gain rents. As everywhere, consumer interests are not organised and vocal, not to speak of the future interests of emerging production lines. Table 2 summarises relevant issues to consider when assessing the impacts of global liberalisation.

Table 2. International economic integration (impacts of Uruguay Round). Source: Hansohm (1997).

Benefits/Opportunities Costs/Threats

Impacts on Producers Lower barriers for exports = new market

opportunities

Tariff escalation (disincentive for industrialisation [= lack of liberalisation])

Greater security and predictability of market access

Minimal immediate gains due to composition and present direction

Preferential schemes are heavily hedged, non- contractual

Erosion of preferential access to SACU and EU Time to adjust

Higher efficiency due to competitive pressure Constraint on rent-seeking activities because of constraints on discretionary action

Incentive for food producers Cheaper inputs for producers

Impacts on Consumers

Manufactured goods cheaper Food imports more expensive

Impact on Government Revenues

Taxes on trade are inferior Loss in SACU income

Capacity to address Uruguay Round issues/commitments

Commitments of a developing country (as SACU member)

The table shows that while the impacts on government revenues are negative in the short term (from a development point of view, even these are rather positive), the impacts on consumers are mixed. On the producer level, at least in the longer term, the positive impacts are more numerous and significant than the negative ones.

Important for an overall assessment for the choices on international integration are the following points:

1. Although historically understandable, strategies focusing on economic independence (from South Africa) are costly and lead to less welfare, rather than more. Concepts of ‘self-sufficiency’ do not appear to be sustainable.

2. Regional integration is important to enlarge markets, but mainly to create and sustain an environment of competition and a system of clear and transparent rules, independent from the day-to-day concerns of individual governments.

3. Although they are of ‘colonial’ origin, the existing effective schemes of regional integration (SACU, CMA) should be retained as building blocks for a larger SADC. Experiences in the region and elsewhere have shown how long and difficult a process it is to build economic unions. This suggests that it is not wise to destroy existing bodies in order to start anew.

4. At the same time, for small countries with a specialised resource base, international integration is essential. The WTO establishes a legal system of international trade, which is an important step forward for the small countries, beyond the era of limited, privileged, but uncertain market access. It is not wise to halt or even reverse Namibia’s degree of openness in order first to go for regional integration.

The inward-looking scenarios fat cat and stray cat are not favourable from a development point of view.

3.2 The roles of the private and public sectors

The discussion on the role of the private versus public sectors in development continues to be one of the central controversies in the debate about the recipe for growth and sustainable development. Until the 1970s development theories agreed on the necessity of a central role for the state, based on the experiences of market failures in industrial countries. In the case of developing countries, the case for state intervention seemed to be even stronger because of the challenge of rapid development (e.g. Hirschman 1958; Lewis 1954). In the 1980s the pendulum swung to the other extreme. Strengthened by the disillusioning failures of development, especially in SSA, the paradigms of state failure, market-led, liberalised strategies, if not a radical retreat of the state, became