Presentation to the seminar on Agricultural Transformation in Rwanda hosted by MINAGRI Kigali 31 January 2013
Economic transformation and agriculture: Southeast Asian experiences David Henley Leiden University Ahmad Helmy Fuady Indonesian Institute of Sciences (LIPI) www.institutions-africa.org
Overview
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Mass poverty reduc/on in Southeast Asia, 1963‐2008 propor/on of popula/on falling under na/onal poverty lines
Thailand
1963: 57 per cent
1981: 24 per cent
Malaysia
1970: 49 per cent
1984: 18 per cent
Indonesia
1970: 60 per cent
1984: 22 per cent
Vietnam
1993: 58 per cent
2008: 14 per cent
Sources: Jonathan Rigg, Southeast Asia: the human landscape of modernization and development (London: Routledge, 2003), p. 99; Harold Crouch, Government and society in Malaysia (Ithaca: Cornell University Press, 1996), p. 189; BPS-Statistics Indonesia, Bappenas, and UNDP, National human development report 2004: the economics of democracy (Jakarta, 2004), p. 13; www.worldbank.org.vn
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Southeast Asia and Sub-Saharan Africa before 1960: colonial rule; agrarian economies with primary product exports since 1960: corruption and weak institutions
The challenge of economic transformation
Nigeria and Indonesia oil giants
Uganda and Cambodia post-conflict countries
Tanzania and Vietnam post-socialist countries
Kenya and Malaysia politically stable open economies www.institutions-africa.org
Three preconditions for sustained growth with mass poverty reduction in Malaysia since 1958, Indonesia since 1967, and Vietnam since 1986 1) Macroeconomic stability low inflation, little currency overvaluation 2) Economic freedom for farmers and entrepreneurs 3) Pro-poor public spending on agriculture, public services, and rural infrastructure www.institutions-africa.org
The Alliance Government [has] decided to give top priority to the task of improving the lot of the rural inhabitants. [...] The aim [...] will be to provide a sound economic foundation for peasant agriculture, to ensure that the man on the land receives the full reward for his work [...]. In order that the aim may be achieved in the shortest possible time, it is the intention of the Government to marshall all available resources, and to deploy them with such determination and energy as were used to free the country from the menace of Communist terrorism. Tun Abdul Razak, 1959 www.institutions-africa.org
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Sources: General Statistical Office, 2000, Statistical data of Vietnam; Agriculture, forestry and fishery 1975-2000 ([Hanoi:] Statistical Publishing House), p. 190; Kenneth B. Young, Eric J. Wailes, Gail L. Cramer, and Nguyen Tri Khiem, 2002, Vietnam's rice economy: developments and prospects (Fayetteville: Arkansas Agricultural Experiment Station [Research Report 968]), p.9 www.institutions-africa.org
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Sustained growth begins 1967
Indonesia: GDP per capita (constant 2000 US$) 1960-2005
Indonesia: manufactures exports (% of merchandise exports) 1960-2005
Export industrialization begins 1982 www.institutions-africa.org
Indonesia: percentage of population in poverty (according to national poverty line), 1970-1996
Mass poverty reduction begins 1970 (at the latest)
Export industrialization begins 1982
1970: estimate
1976-1996: survey results
Source: BPS-Statistics Indonesia, Bappenas, and UNDP, National human development report 2004; The economics of democracy: financing human development in Indonesia (Jakarta, 2004), p.13 www.institutions-africa.org
Widjojo Nitisastro (1927-2012) Chairman, National Planning Agency (Bappenas), 1967-1983
Of key importance to poverty reduction in the 1970s and early 1980s was the high rate of growth in the agricultural sector, on which most of the population and the poor depended. [...] The sources of rapid growth in rice production have been a combination of the rapid spread of irrigation, the provision of key inputs, and the spread of high-yielding varieties. At the same time, investment in rural infrastructure, as well as price policy, public procurement, and price stabilization, increased the level and stability of the prices received by the farmer. from Widjojo Nitisastro, 1995, 'Reduction of poverty: the Indonesian experience', in James M. Boughton and K. Sarwar Lateef (eds), Fifty years after Bretton Woods: the future of the IMF and the World Bank; Proceedings of a conference held in Madrid, Spain, September 29-30, 1994, pp. 176-82. Washington: International Monetary Fund.
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Indonesia 'The agricultural sector [...] is the central arena in which all efforts are concentrated and results expected. [...] Agricultural development increases the earnings of the majority of the Indonesian people and thus increases national income. [...] The development of the agricultural sector is expected to open up growth possibilities in other sectors so that an opportunity will be created to combat the backwardness of the Indonesian economy on many fronts.' First Five-Year Development Plan, 1969-74
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Developmental ambitions (Indonesia) Subroto Minister of Energy and Natural Resources, 1978-87 'Seventy percent of Indonesians live in rural areas and most of them are farmers. So, if we want to improve Indonesians’ income, we should start from the seventy percent in the rural areas.' (interview, 21/08/2008)
Ali Wardhana Minister of Finance, 1967-1983 'The investment cost for industrialization was considered too high. With a limited budget, it was better to invest in agriculture, which was cheaper and could reach a larger population.' (interview, 29/11/2008) www.institutions-africa.org
Nigeria 'An economy that is not diversified is especially vulnerable to changing economic situations. This is so whether the economy is dominated by agriculture or by oil production. It is, therefore, intended under the next Plan to achieve greater diversification by a rapid expansion and broadening of industrial activities in the economy. It is expected that [...] value added in industry will be more than doubled during the plan period.' Third National Development Plan, 1975-80
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Developmental ambitions (Nigeria) Philip Asiodu (a 'Super Permanent Secretary', 1966-1975) 'We had to prioritize, where we were, up to the 1960s, very much dependent on export of primary raw agricultural materials, cocoa as cocoa, groundnuts as groundnuts, palm oil as palm oil, palm kernel as palm kernel. No transformation, no value added. [‌] We were really concerned with value added. [‌ All] the planning we did, was to allow us to begin to produce value added, manufactured exports.' (Interview, 08/06/2009, regarding the preparation of the 2nd National Development Plan, 1970-74). www.institutions-africa.org
Propor/on of na/onal development budget allocated to agriculture, 1960‐1985 (per cent)
Indonesia
Nigeria
National Overall Development Plan, 1961-69 (pre-New Order)
10.5 National Development Plan, 1962-68
13.6
First Five-Year Development Plan, 1969-74
30.1 Second National Development Plan, 1970-74
12.9
Second Five-Year Development Plan, 1974-79
19.1 Third National Development Plan, 1975-80
6.0
Third Five-Year Development Plan, 1979-84
14.0 Fourth National Development Plan, 1981-85
12.6
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Composition of total public spending, 1980 and 2005 (%)
Africa
Asia
1980
2005
1980
2005
Agriculture
6.4
5.0
14.9
6.5
Education
12.2
17.9
13.8
17.9
Health
3.7
6.5
5.3
5.4
Transport and communication
6.3
3.7
11.7
4.5
Social security
5.7
5.6
1.9
8.7
Defense
14.6
8.1
17.6
7.9
Other
51.0
53.1
34.8
49.1
Source: Shenggen Fan (ed.), Public expenditures,growth, and poverty: lessons from developing countries (Baltimore: Johns Hopkins University Press, 2008), p. 25 www.institutions-africa.org
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Underlying principles of successful development strategy 1) scale: mass outreach 2) urgency: direct impact 3) expediency: ends above means in sum: increase the earning power of as many people as possible, as quickly as possible www.institutions-africa.org
Contrasting concepts of development Southeast Asia
Sub-Saharan Africa
incremental (but potentially rapid)
transformative
poor people become richer
poor countries acquire things rich ones have (technologies, industries, goods, rights, institutions)
growth
modernization
productivity
education
inclusive
elitist
oriented toward undesired starting point of development: mass poverty
oriented toward desired end point of development: industrial or postindustrial modernity
concerned with establishing immediate priorities
concerned with making comprehensive plans www.institutions-africa.org
Communism as a stimulus for developmentalism • Malayan Emergency 1948-1960 • Indonesian Communist Party contends strongly for power by (mostly) nonviolent means, 1955-1965 • Thailand: armed communist insurgency, 1959-1983 • Vietnam: Doi Moi (renovation) policy heralds market reforms, 1986
'If stomachs are full people do not turn to communism.' Air Chief Marshal Dawee Chulasupp, Deputy Prime Minister of Thailand, December 1966, quoted in Chris John Dixon, 1999, The Thai economy: uneven development and internationalisation, p.85
Two types of successful developmental state 1. the counter-revolutionary state (Malaysia, Thailand, Indonesia) 2. the liberalizing postrevolutionary state (Vietnam) www.institutions-africa.org
My life among the farmers of Kemusuk during the difficult times of the nineteen-twenties had aroused in me a distinct feeling of sympathy for them. This feeling was nourished not only by my constant contacts with the farmers, but also by the knowledge and experience that I'd gained from the guidance of Pak Prawirowiharjo, the agricultural officer. I often went with my uncle on his inspection rounds and learned from him not only about the theory of agriculture but also about the practical aspects of farming. Suharto (1921-2008), president of Indonesia 1967-1998 Soeharto, My thoughts, words and deeds: an autobiography as told to G. Dwipayana and Ramadhan K.H. (1991), p. 10 As the stocky Olusegun grew up, his parents became increasingly concerned about his future. His father wanted his children to escape the drudgery that was peasant farming in Africa. Many Egbas had long realized the increasing relevance of Western education [...]. With it, the toil was less, the financial rewards were more, and opportunities were at the beck and call [...] On their way home from the farm one day, Obasanjo said to his son: "Olu, is it this toilsome farming you would want to continue with in life?" [...] "Would you like to learn a trade?" [...] "Yes." "What trade?" "Motor mechanic." [...] "You would not want to go to school?," his father asked. Olusegun Obasanjo (1937-), president of Nigeria 1976-1979 and 1999-2007 Onukaba Adinoyi Ojo, In the eyes of time: a biography of Olusegun Obasanjo (1997), pp. 35-36
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Nairobi in 1963
HISTORICAL ORIGINS OF IDEOLOGICAL DIVERGENCE? Dualis7c development in Africa
Nairobi in 1900
• sharp urban‐rural an7thesis • colonial experience involves sharp break with the past • experience of economic modernity 7ed up with European domina7on and cultural transforma7on (educa7on, religion, language) • elites alienated from masses www.institutions-africa.org
What is to be done? 1.  Draw the attention of African decision-makers to the real reasons for Asian developmental success 2.  Recognize and support developmentalist tendencies and potentials in Africa according to developing country models, not developed country models
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