States as competitors

 

When our leaders say that Malawi must graduate from an importing and consuming to a producing and exporting country, other country leaders in the developing world are saying the same thing, some go beyond rhetoric and introduce measures to enable their firms to enter international trade with full blast.

A few days ago, I was given a lift by a Malawian, Mr Z, who recently returned from Kenya where he had been for several years. Unfortunately, I did not ask him what he had been doing there but very soon, we were talking about the unsatisfactory economic condition of Malawi. He asked me why things are not better than they are.

Is Malawi poor because of corruption and theft crystallised in the Cashgate syndrome? Ah, he said, in Kenya, you fined worse bribery and corruption at work. Is it because in Malawi tribalism and regionalism interfere with efficiency in business and public sectors? Oh, no, tribalism is worse in Kenya, someone had told me earlier that certain entertainment resorts are patronised on tribal basis, something that does not happen here.

Despite these handicaps, Kenya is far ahead of Malawi in everything; cultural and economic. Now, its airline has direct connection with New York. Investors are flocking into Kenya on a grand scale. No wonder Kenya’s economy is the biggest in East Africa. Even in Tanzania, big infrastructural changes are taking place such as one does not see here. Why he asked? Where does the buck stop? I hesitated to reply that President Trump of the United States has said the buck stopped where he sat.

Even in the days of laissez faire, governments were giving some support to their industries. Was it not during this period that the German economist Friedlich List coined the phrase “infant industry” which must be shielded from competitors which were well established. In the present global economy, States take a variety of measures to maximise gain from international trade.

Private firms engage in foreign trade to make more profits than they do in the home market alone. States want to maximise the welfare of their people from international trade. If free trade involves them in losses such as unemployment in home industries, they engage in negotiations with other countries for fair in addition to free trade.

The most obvious method governments take to promote the interest of their firms that want to enter foreign markets is to negotiate necessary protocols about that settlement of debts and tariffs. Some succeed in persuading foreign governments to let in import at reduced tariff while they themselves retain the higher tariff. This is what we discover when we read of how the newly-industrialised countries of the Far East achieved their economic miracles. This is exceptional; usually concessions are made by both parties.

To make a firm’s exports competitive, they must be reasonably priced. Governments do give subsidies to export industries in a variety of ways. These industries may access bank loans at a cost than industries which produce exclusively for the home market.

To keep costs of production low, governments manipulate the macro-economics in such a manner that inflation is kept low. A country where inflation is constantly rising will export over-priced goods which will find no buyers abroad.

Malawi seems to be one of the high cost producers in this part of Africa if not in the developing world as a whole. It is sad Malawians have an appetite for imports even for goods that Malawi produces or makes. Indeed, one comes across goods imported from Asian countries costing less than those made locally. What inflates the costs of what Malawians manufacture? Investigation must be made into this.

Governments compete in international trade through budget for research and development. This is the age of skills and knowledge. Nations whose people are highly knowledgeable and skilled do better than those whose people are deficient in these qualities.

More than 20 years have passed since the advent of the multi-party era, we can now justly compare the economic achievements of Kamuzu Banda’s first 20 years and 20 years of the multi-party era. During the Kamuzu era, we could go to bookshops and buy quality newspaper from Britain, United States and sometimes India as well. These days, you hardly come across such magazines. The latest to disappear are the African Business and the New African.

Unless we are kept aware about what is happening in other countries, how can we succeed in the global market? If the authority concerned think making available such magazines and newspapers is a low priority, the sooner they revise this opinion the better for the development of the country. We can realise the uses of our economic backwardness only if we are in touch with the world abroad both by visits and reading matter. Malawi now is like an ostrich that has buried its head in the sand. n

 

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