Dr Francesca Beausang, MSc in Development Studies alum and host at the Pharo Foundation’s Afri-CAN podcast, talks to ID’s Professor James Putzel and Bethel Tsegaye, the CEO of Pharo Ventures Ethiopia, to discuss whether there are any lessons for Africa from the development experience of East Asia. Watch or listen to the interview here.
A unique opportunity for reflection
How often does one get to have a publicly broadcasted conversation with one’s adulated university professor, with the benefit of 30 years of life experience? That’s what happened to me, a Development Studies Institute alumnus from 1996-97 and currently global director of communications and partnerships at Pharo Foundation. As the host of Pharo Foundation’s Afri-CAN podcast, I invited James Putzel, Professor of Development Studies at the LSE’s International Development Department, and Bethel Tsegaye, the CEO of Pharo Ventures Ethiopia, to discuss whether there are any lessons for Africa from the development experience of East Asia. I was incredibly curious to see whether there had been a change in James’ interpretation of the developmental state (or mine). It turned out that the 30 years of history that we had lived through had only solidified our views. Below I describe the main points of the discussion.
The East Asian developmental state model
South Korea and Taiwan achieved economic development in the space of 20 years and their economic trajectories were often referred to as the East Asian miracle. What was it that allowed these economies to leapfrog to the status of developed countries and technological innovators in such a short period? Some have argued that the authoritarian nature of the early developmental state (though South Korea and Taiwan eventually became democracies) was one of its necessary conditions, but there have been cases of developmental states elsewhere that began as democracies, such as Botswana. Rather, James emphasized that it was the relationship between the state and the private sector that was unique and he reminded us of the term of ‘embedded autonomy’ which was coined by Peter Evans, to describe the way that East Asian states met regularly with business, giving it direction to produce for export markets. It also provided subsidies, finance and protection, subject to business performing in export markets, but conversely, it withdrew support in the event of underperformance. At the same time, the state had to demonstrate its commitment to development and maintain its legitimacy with private actors, by demonstrating the extent of its own performance through the delivery of economic growth. And so the power configuration known as the East Asian developmental state was born.
Africa’s quasi-developmental states
Africa has had its own experiments with what I would call ‘quasi-developmental’ states. Bethel highlighted that Ethiopia had features of the developmental state between 2010-19, with a focus on infrastructure development. The idea was for the state to provide basic infrastructure through roads related to urban centers, access to schools and health centers, which would allow the private sector to ‘plug and play’. However, her view was that there was not enough state support for private actors, given currency restrictions and unfavorable tax policies, which did not allow the private sector to create the jobs that would power a development miracle. She also explained that currently, another developmental state experiment of sorts is underway in the form of Ethiopia’s home-grown economic development policy, which puts the private sector at the center of growth. However, she felt that there was still room for improvement around innovation: she highlighted the lack of a ‘national sandbox’ for innovative projects that provides the private sector with protection from the government, in the way that it occurred in East Asia. Beyond Ethiopia, James mentioned the cases of Botswana, Rwanda and Nigeria. Botswana discovered diamonds after independence and managed to use them for further processing and for the financing of infrastructure. In Rwanda after the genocide, there has also been a genuine case of ‘embedded autonomy’, resulting in the introduction of new technologies in agriculture and particularly coffee, an investment in the infrastructure that could get the coffee to market, and entry into the automobile assembly sector. In the case of Nigeria, the authorities have contributed to the emergence of a diversified economy, with Dangote Industries mirroring the South Korean chaebol, in their diversification from cement into infrastructure, automotive, and all the way to the first oil refinery of the country. In all the case of all these countries, it could be argued that the makings of a developmental state are there, but perhaps what needs to be strengthened is the credibility of the authorities’ commitment to development.
The challenge of replicability
The replicability of the original East Asian model is somewhat limited now by the return of protectionist forces in the US, which places constraints on the export-oriented strategies that were championed by the East Asian states. Bethel noted that this was indeed the case, but that protectionism was forcing Africans to trade amongst themselves, and she saw this as an area with great potential. Pharo Ventures in particular is in a position to fully take advantage of this opportunity, especially in healthcare services, because of its operations across East Africa.
Africa’s unique development path
Ultimately, while an awareness of what has been tried before can be the first step of the innovation process, James noted that ‘if one takes the view that the East Asian experience is just one instance of accelerated growth and human development, it cannot be seen as a template’. I certainly came away from the episode thinking that Africa needs to find its own path to development because 1)it faces a different global context than East Asia in the 1970ies; 2)the private sector has developed in some cases in spite of the state and in the face of specific and sizable obstacles. In particular, Bethel highlighted that in Africa 1)value chains are fragmented, which forces corporates to integrate into their value chain and move beyond what their business is focused on, resulting in a higher cost of doing business; 2)the cost and availability of capital are high.
The role of public and private sectors
James noted that there has not been a development experience where the state has not worked with the private sector, ever since the UK’s own industrial revolution, because development requires public and private action. At the same time, if the current global environment and the demise of foreign aid complicate the development outlook of many African countries, the dominant role of Africa’s private sector in driving self-reliant development becomes all the more important. That is certainly the bet that we are taking at Pharo Foundation, where our Pharo Ventures social enterprises create African jobs with the promise of a self-perpetuating and self-reliant development model for Africa. Perhaps this is Africa’s real opportunity, above and beyond the mimicry of other development experiences.
Please listen to the full discussion on Pharo Foundation’s Afri-CAN podcast.
The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.
Featured image credit: Addis Ababa, Ethiopia. Via african-renaissance.com.