23 March 2010
By: Salim Salihu Muhammed
Over the years, government
had embarked on several economic reforms aimed at
bettering the lives of its citizenry; promising
fulfilment of human needs for peace and security,
clean air and water, food, shelter, education, arts,
culture, and useful and satisfying employment;
maintenance of ecological integrity through
careful stewardship, rehabilitation, reduction in
wastes and protection of diverse and important natural
species and systems; provision for
self-determination through public involvement in
the definition and development of local solutions to
environmental and development problems; and,
achievement of equity with the fairest possible
sharing of limited resources among contemporaries and
between our generation and that of our descendants.
Almost all of these reforms or policies failed to live
up to its projections; the remains are abandoned
strategic projects that could eliminate the
unemployment quagmire the nation is experiencing
today. However, Nigeria’s failure to turn around the
economy is not in the policies, but rather in its
inability to find one right way out of the million
wrong ways it has consistently followed in achieving a
plausible quest for an economic reform that could
stand out as a reference to other nations.
Perhaps, one good solution
to Nigeria’s economic problems could be a
rendezvous of an effective research and
feasibility studies on countries with a functional and
effective economic reform; a consideration of
China whose export
rate is growing at an annual rate of 40% may serve a
worthy step towards making the country one of the top
20 economies by 2020. One may want to ask why China is
growing so fast: The reality is that China’s
experiment with market reform has propelled her into
the top 10 trading nations in the world. Over the past
two decades, China has achieved the fastest economic
growth of any national economy. If that growth
continues, China could become the world’s largest
economy during the first half of the 21st
century. The World Bank estimates that by 2020 China
could be the world second largest exporter and
importer and its consumers may have a
purchasing power larger than all of
Europe’s. She is becoming the biggest economy in the
planet with a population whose main objective in life
is to become prosperous.
China is passing through
massive transformation; from a command to a market
economy, from an economy based on agriculture to one
based on manufacturing and services, from one with
high fertility and low longevity to one faced with
Organization for Economic Co-operation and Development
(OECD) style low fertility and high longevity, and
from an economy that was almost totally closed to one
that, today, even before her accession to the
World Trade Organization (WTO), is much
more open than most countries at the same level of
income. This vast movement of transformation started
on a very simple principle frequently stated by
Deng Xiaoping: “Poverty is not
socialism”. Prosperity was the new face of
the socialism according to Deng Xiaoping’s famous
dictum: to get rich is glorious. In the past socialism
used to mean government planning, for the new China,
it means common prosperity.
China offers Nigeria a
unique opportunity to explore the causal relationships
among economic, institutional, political, and social
forces in an important transforming economy. In
China’s economic transition, important structural
changes are occurring at the state and firm levels,
and these changes have radical implications for the
structure of economic and social life in China.
Gradualism and stability were the
foundations of the Chinese reform and continue to be
so for the present leadership of the country. For the
Chinese leaders, economic reform has priority over
political reform. They acknowledge that it would be
impossible to accomplish anything in an environment of
political unrest. The premature introduction of
markets where there was neither a culture nor the
institutions for dealing with them can have
catastrophic effects. And from the results obtained,
we can consider the Chinese as one of the most
outstanding social transformations in human history,
all this within a long period of stable and peaceful
social environment, except for the
Tiananmen Square
demonstrations in June, 1989.
Some analyst, including the
Libyan leader, Gadaffi, had attributed the failure of
a good economic transformation of Nigeria to enormity
and diversity. However, if we must admit to these
insinuations on a developing nation with well over 150
million people, we must consider the enormity of the
task facing China. Some figures can give a glimpse of
the burden of the scale. The country has a total
population of circa 1,300 million people distributed
among 23 provinces (24 with
Taiwan), 4 autonomous regions, 4 municipalities
plus Hong Kong and
Macau; 18 of those provinces have a population between
90 and 35 millions and they could be considered big
countries in their own. China has more cities of 1
million-plus population than the rest of the world
combined. Among China’s state-owned enterprises there
are 500 that employ more than 100,000 people, and her
economy must create 10 million to 15 million new jobs
every year. Nigeria had failed to make provision for
its ever growing population over the last three
decades in terms job creation, health services, and
other social security that contribute to a nation’s
growth.
China’s economic reform
started in 1979 with a combination of regulation by
plans and regulation by the market, to be followed
latter by the implementation of the
socialist market economy: reform of
agriculture, finance, taxation, pricing,
industrialization and foreign trade. As a result of
these reforms, there have been important changes in
the state-firm relationship at the three levels:
economic responsibility has been pushed down the
hierarchy, administrative offices have become more
economically oriented, and firms have independent
budgets and self-responsibility policies. Managers are
more responsible now for the economic health of the
organizations over which they preside. However, the
relatively easier reforms have now been completed. As
did China, it would be expected that Nigeria may
consider a socialist approach to economic reform while
engaging a
free market economy;
an economic system in which individuals, rather than
government, make the majority of decisions regarding
economic activities and transactions. Individuals are
free to make economic decisions concerning their
employment, how to use or accumulate capital, what
expenditures to make, and whether to use their
resources now or to save them for later consumption.
This complex administrative
system of government organizations was set in place to
mobilize firms and the individuals within them around
directives issued from the central government. This
system was an administrative decentralized governance
structure that allowed the central government to
promulgate policies down the hierarchy of government
jurisdiction, relaying on local government offices to
mobilize organizations and thereby people. The result
of these policies was a “nested hierarchy” of
government organizations spread throughout the
country, each with jurisdiction over a smaller sector
of the population. It is a dispersed bureaucratic
system in which individuals hold immense capacity to
circumvent formal regulations. The political center
does not control the system throughout and there is
significant deviation from central policy across
bureaucracies and at the local level. In some sense,
real politics in China is local politics. It is at the
local level that problems have to be solved concerning
economic policy and social equity.
Although the results of
strategic economic policies are not void of
uncertainties, success are not heavily guaranteed by
countries who attained an economic triumph during
their reform processes, as it was in USSR’s rapid
industrialization in the
Soviet Union.
Nigeria’s quest of improving her power supply to 6000
MW was over guaranteed till its eventual failure.
Impressive as China’s strengths are, they do not
guarantee success. Much will depend on the ability and
resolve of the authorities to maintain momentum of
reforms.
A key component for the
success of the
Chinese economic reform
is the restructuring of the banking and financial
sector. Like the current reform in Nigeria, China
experienced similar setbacks in the 80s. China’s
financial reform was not really thought of as a part
of economic reform. However, in the mid-90s reformers
recognized the need for the overhaul of the sector and
the necessity of cleaning up the banks’ bad debts.
This was given extra urgency, first by the
Asian Financial Crisis and then by the
impending WTO entry. With the main role of
state banks to feed the State Owned
Enterprises (SOEs) sector, they built up a huge
portfolio of
non-performing loans.
China set in motion a series of reforms designed to
free the state banks from local politics, to allow the
Central Bank to play more of a regulatory role, and to
get the non-performing loans off the books of the
banking system.
In 1994, China’s banking
system was divided into three types of banks:
commercial banks, policy banks and
cooperative banks, with a limited but
increasing role for
private banks.
The four major banks remained under the authority of
the state but were given greater capacity to make
loans on a commercial basis. These four banks (the
Industrial and Commercial Bank, the
Bank of China, the
China Construction Bank, and the
Agricultural Bank of China) account for
up to 70 per cent of the domestic banking business and
they employ together with the Bank of China a total of
1,760,000 people. The
Agricultural Bank of China
alone has 510,000 employees which makes it the biggest
company in the world in number of employees.
Capital markets still
remain small, the banks being the main source of
financing in China. In 1998, with the onset of the
Asian Financial Crisis, the reformers were able to
push ahead with
financial sector reform.
First, the reorganization of the branches of the
People’s Bank of China along regional lines to reduce
political interference by powerful provincial party
chiefs in lending decisions. Another measure was to
move the non-performing loans off the books of the
four major commercial banks and to recapitalize them.
Asset Management Companies were created
and the capital is provided by the Ministry of
Finance. The AMCs are to acquire at face value loans
from SOEs. The AMCs were expected to recover those
loans through debt-for-equity swaps. This may appear
as a perfect coincidence; however, the attainment of
Nigeria’s economic reform has less to do with politics
and aggression of the opposition and more of a solid
and lucid financial sector.
More market does not mean
less government. It means different government.
Government energies need to shift away from direct
involvement in productive activities and toward two
areas in particular: first, more spending on such
priority areas as education, health care, agricultural
research, infrastructure development, environmental
protection, and support for the disadvantaged groups
in society; second, the development of transparent and
participatory institutions that promote the rule of
law, and a stable economic environment. As Nigeria’s
reform moves to the next stage and integrates further
into the world economy, there will be significant
losers, including workers and institutions, but still
many questions remain open for the Nigerian leaders,
one of which is: what are the underlying indices and
macroeconomic framework that could ensure a true and
transparent economic reform that would list the
country among 20 top economies by the year 2020?
Salim Salihu Muhammed
salimmed16@yahoo.com
Jemaá Street, Romi North,
Kaduna South,
Kaduna State. Comments 💬 التعليقات |