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Building capacity to absorb shock opportunities
2008-02-14 10:53:19
By Editor
Those countries which have historically benefited from the phenomenon of economic booms share one important experience.
The so called sudden and exponential economic growth would often be provoked by an `external economic shock` whose impact on the domestic economy tends to become largely positive over a fairly prolonged period of time.
That is what is seen today in most of the oil exporting countries. Undoubtedly, the global price levels for that commodity are invariably at their highest peak ever in this decade.
However, oil exporting countries which have managed to significantly exploit the opportunity are those which have an established capacity to enhance domestic oil production and effectively supply global markets.
There is evidence that some of those countries have practically amassed immense wealth over the last two years to the point of exporting surplus sovereign-wealth funds to help mend the right now troubled US economy.
Hence, the question of building potential capacities ready for absorbing external booms should ring clear in the ears of national policy makers and implementation agencies.
For instance, God forbid, Kenya`s post election violence has seen its key tourism industry eroded by about ninety per cent, with most of its trade getting diverted to Tanzania.
That is fine, at least from the volume point of handling business, though a second and more powerful challenge is whether we are practically possessing appropriate capacity to absorb this potential trade boom.
At the same time, a number of landlocked countries which once upon a time were using Mombasa port as gate way for their exports and imports are now opting to the use of Dar es Salaam port for similarly security concerns in Kenya.
Unfortunately, Dar port was already pitifully reeling from congestion of containerised cargo before the recent boom. Our recently privatised railways are yet to be upgraded to be able to absorb the extra volume of trade.
In similar ways, we may miss to register any significant gains from the US African Growth Opportunity Act (AGOA), now about to close its doors, though there are guarantees of extension.
AGOA has offered duty free export opportunity to a number of African countries, including Tanzania, to 6,000 products.
Through this window, one would have expected Tanzanian fresh flowers, vegetables and seeds, semi-manufactured goods, gold, semi-processed gemstones and clothing to be massively exported to the US.
Rather unfortunately, this boom opportunity will almost certainly be closed before any significant gains are obtained. Sadly, in 2006, we managed to export to the US under AGOA scheme goods worth USD 34.6m while our comrades in Kenya raked in whopping USD 352.8m. Uganda trailed at USD 21.7m.
For sure, Kenya has outsmarted the rest in the region because it had previously established the necessary industrial, agricultural, transport and communication, as well as strong skill-base -these being the appropriate kind of capacities needed for exploiting the AGOA market as soon as it was unfolded.
Yet we have somewhat started to enhance national productive capacities through such programmes as the Land Bank, Export Processing Zones (EPZs) and the Special Economic Zones (SEZs).
We just need to complete and manage them properly.
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