- Laura Wallace
- Published Date:
- May 1997
Thank you, Mr. Nellis, for your informative speech. I would like to comment by drawing on my own experiences in Nairobi, Kenya, from 1988 to 1992, and in Johannesburg, South Africa, since 1994.
While I was in Kenya, I tried to grant Japanese overseas development assistance (ODA) to textile manufacturers (parastatals) that the government wanted to privatize, but in the end, this was not possible. I realized that what the textile parastatals really needed to do was to first reform their management and financial position to improve productivity—using Japanese ODA funds—and only then to proceed with privatization.
We should ask why the necessity of privatization of parastatals exists. As I understand it, the motivations are, first, to reduce government budget deficits, and second, to give economic incentives to the private sector to boost efficiency.
But how quickly should countries move on this front? My conclusion regarding sub-Saharan African countries is that rapid privatization will not produce the desired good results but instead only pose further difficulties for the business sector. In other words, I think countries should concentrate on adopting projects to solve many problems—such as the need for good business sense and a profit-minded approach—which should be implemented gradually over several years. Countries should also spend 50-100 years establishing sound economic fundamentals before embarking on privatizations.
Imagine a country with a GNP per capita of $100 and another country with a GNP per capita of $500 or more. You can easily see that there are big differences in what they should do over the next five years.
Countries with a GNP per capita of less than $500 should use overseas ODA funds to gradually improve their economic situation. Initial steps could involve improving telecommunications, railways, roads, airports, and seaport systems. In Asia, the Japanese government and the private sector successfully adopted such a step-by-step process, with the private sector only introducing their investment and finance once the economy had sharply improved, that is, reached a GNP per capita exceeding $500.
Next, think about the type of country that would have a GNP per capita of $500. From our experience, this type of country would be on the road to a stable political situation, together with gradual achievements in the areas of freedom and democracy. It would also be making progress in fiscal and monetary policy, especially in curbing foreign exchange and interest rate controls—moves that are critical for future successful privatizations. During this stage, management and technical staff should be trained, and competitive products introduced into the international market. After experiencing such progress—and only then—should a country consider privatizations, a further step in the maturing process.
How should the African countries best utilize Japanese ODA? My experience of eight years in Africa and a long time in the private sector suggests that what these countries need is water supply projects for health and irrigation reasons, road construction to assist economic activities, and education to improve management and technical skills. In these areas, the government and the private sector should cooperate with each other on every possible occasion.
We, together with the African people, should not insist on privatization as the sole solution. Rather, we should look for alternative ways and means to create an African paradise in the 21st century, the hope of our next generation.