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China/Africa: Development Lessons, 1
AfricaFocus Bulletin
Aug 29, 2011 (110829)
(Reposted from sources cited below)
Editor's Note
"A consensus is building, in both private and official
appraisals, and in OECD as well as emerging market
countries, that Africa will be the next big emerging
region. It is well-placed to benefit from the new sources
of demand, investment and technology in the multipolar
global economy; poverty is declining on the whole; the
HIV/AIDS challenge is now being kept in check in most
countries; the trajectory of progress towards the
Millennium Development Goals (MDGs) has been striking on
some fronts, and there is still the possibility of reaching
the targets by 2015 in many countries." - China-DAC Study
Group
While the rising economic involvement of China in Africa
has drawn wide attention in recent years, there has been
significantly less attention to the impact of the Chinese
model in thinking about development strategies in Africa. A
new joint report from the International Poverty Reduction
Center in China (IPRCC) and the Development Assistance
Committee (DAC)of the Organisation for Economic Cooperation
and Development, made up of the developed
countries, is an index of the growing impact of such
reflection.
The report excludes issues on which significant
disagreement would be likely, such as the roles of
democratic institutions and civil society. And it only
touches briefly on "serious economic, social and
environmental costs" in China. But the extent of consensus
emerging from the study process is notable, and a clear
contrast with the free-market "Washington consensus" that
dominated "donor" involvement in Africa in earlier decades.
This AfricaFocus Bulletin contains extensive excerpts from
the first half of the report, summarizing the Chinese
experience Excerpts from the second half of the report,
which focuses on development strategies in Africa, are
available on the web at
http://www.africafocus.org/docs11/ch-af1108b.php
The full report, as well as additional background on the
China-DAC Study Group, is available on http://www.iprcc.org
or http://www.oecd.org/dac/cdsg
For a previous AfricaFocus Bulletin on the emerging
consensus about the need for a developmental state, see
http://www.africafocus.org/docs11/eca1103.php
For previous AfricaFocus Bulletins on economic issues, see
http://www.africafocus.org/econexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++
Economic Transformation and Poverty Reduction - How It
Happened in China, Helping It Happen in Africa
The China-DAC Study Group
Development Co-operation Directorate
Organisation for Economic Co-operation and Development 24-
Aug-2011
DCD(2011)4
Full text available as pdf at:
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DCD(2011)4&docLanguage=En
China-DAC Study Group information is available at:
http://www.iprcc.org or http://www.oecd.org/dac/cdsg
Contact: Michael Laird - Tel: + 33 (0)1 45 24 90 33 - Email:
michael.laird@oecd.org
Overview
The experiences and lessons from China's economic
transformation and poverty reduction have been attracting
much interest from both African countries and the
international development community. To respond to this
interest for the exchange of perspectives and experience,
the China-DAC Study Group was jointly set up by the
International Poverty Reduction Center in China (IPRCC) and
OECD's Development Assistance Committee (DAC). The Study
Group is supported by leading Chinese development research
institutions, several DAC members and observers and African
experts and institutions.
Through a series of international conferences involving
over 500 participants from China, Africa and the donor
community, the China-DAC Study Group has, since 2009,
focused this exchange and learning on four important topics
related to promoting growth and reducing poverty: i)
development partnerships; ii) agriculture, food security
and rural development; iii) infrastructure; and iv) the
enabling environment for enterprise development.
Specifically, these events focussed on two themes:
- China's experience of economic growth and poverty
reduction, including the contribution of international
assistance, and its relevance for other developing
countries, particularly in Africa.
- China's economic co-operation with Africa and the lessons
that China and DAC Members can share with each other to
increase the collective impact of foreign aid on reducing
poverty in Africa.
This note summarises the main lessons learnt through this
dialogue on each of these themes.
The essential findings are:
- China's experience shows, again, that rapid economic and
social development in poor countries can happen, in a
context of globalisation, when strong development-oriented
leadership emerges, focused on development performance
rather than on entrenched policies and interests. In such a
context, the articulation of a national project for
economic transformation within a generation, motivates and
activates people across the country in a new national
consensus.
- As in the case of China's economic transformation,
international assistance can support and speed up Africa's
transformation and poverty reduction process, when
conceived and designed in this transformation framework.
Economic Transformation and Poverty Reduction
Economic transformation is the process in which a poor,
rural-based country becomes a middle-income country with a
rising share of industry and services in gross domestic
product (GDP) and employment. Productivity and income per
capita and job creation grow fast. In this process,
agricultural productivity rises, while labour moves from
farms to towns and cities, and there is a demographic
transition as birth rates fall. The economy becomes
involved in global supply chains in ways that generate
continuous learning by doing and up-grading of enterpriselevel
capacities (i.e .dynamic capacity development). A
supportive, developmental state provides vision, planning,
budgeting, co-ordination and the means for participatory
national engagement. Infrastructure investment and
institutional development are dynamic elements of economic
transformation.
What is so striking in the last sixty years is that the
transformation process can change poor developing countries
into prosperous countries in only a few decades, with a
dramatic fall in poverty rates. China stands out as a
notable and recent example.
China's growth and poverty reduction process over the last
thirty years
Agricultural reform and development initiated China's
growth path and provided the foundation for a wider
urbanisation/export-oriented growth process. A villagebased
experiment with changing land tenure arrangements for
families provided a critical new incentive for production,
and when quickly replicated across China, generated a major
increase in food supplies and incomes. Backed up by public
investment in rural infrastructure, enterprise and
technological improvements, the rural surpluses generated
by small farms became the basis for a whole system of
national economic development through the transfer of
capital and labour to towns and cities from an increasingly
diversified and productive agricultural sector.
An early experiment with a special economic zone (SEZ) in
Shenzen opened the way for a supply chain-based model of
industrial learning, which was also replicated in other
SEZs and various other industrial clusters and networks.
Progressive liberalisation of the domestic market with
extensive privatisation, created a highly competitive
enterprise-based economy with extensive regional and
national transport linkages. The Chinese authorities
actively sought international aid and investment as a
supplement to national resources, not as a major on-going
financing stream. They saw and managed foreign aid and
investment as a means to acquire know-how and management
skills to speed up the modernisation of Chinese
agriculture, industry and infrastructure. China joined the
WTO through a process that generated wide discussion and
learning in China about engagement in the global economy.
Bilateral and multilateral donors have provided
considerable expertise, knowledge and training, bringing in
world-class analytical methods for public management and
economic development, including poverty reduction.
The state and provincial and city authorities have been
active supporters of enterprise development through the
provision of infrastructure, often on a cost-recovery
basis, and the expansion of the science and technology
base. The institutional infrastructures for higher
education, including management training, were developed at
scale. The enterprise sector has flourished in this
context, with fast learning processes from engagement in
international supply chains and joint ventures with foreign
investors as well as major programmes for Chinese graduate
scholarships abroad and schemes to attract back Chinese
expatriates and engage eminent international experts. Close
and forward-looking interaction between state authorities
and enterprises has been an integral part of the growth
model.
The private sector has been substantially developed and has
become now the dominant source of employment (over 90%) and
income (over 70% of GDP). Although there are still a
significant number of large state enterprises and the
financial sector is dominated by state banks and other
institutions, they are market oriented often with extensive
external business linkages, including in Africa. (The
Industrial and Commercial Bank of China - the ICBC - owns
20% of the Standard Bank in South Africa).
The immense transformation process over the last 30 years
has not been accomplished without serious economic, social
and environmental costs: structural economic imbalances, a
rural-urban divide, land rights issues, internal migration
stresses, natural resource degradation associated with
intensive farming and social disparities across China, with
a high degree of income inequality, including the
persistence of extreme poverty which still affects over 170
million people. As described below, these challenges are
now the focus of attention of the Chinese authorities.
Dynamic capacity development
China's experience shows again, that rapid economic and
social development in poor countries can happen, in a
context of globalisation, when strong development–oriented
leadership emerges, focused on development performance
rather than on entrenched policies and interests. In such a
context the articulation of a national project for economic
transformation within a generation, motivates and activates
people across the nation in a new national consensus.
Interacting with the rich sources of ideas and global
knowledge available through flows of trade, investment, aid
and people, such a project releases human energy and
productivity, generating dynamic and diversified
capacities, and creating a modern, enterprise economy that
integrates the nation and links into regional and global
economic dynamics.
Transformation experiences are not uniform. They are highly
contextual and diverse. But they all consist of a dynamic
learning process, starting from the initial conditions of
each country and then progressively and pragmatically
building on existing strengths. The on-going process of
learning and dynamic capacity development soon begins to
change the economic and life possibilities for millions of
citizens, with multiplying centres of initiative and
enterprise. The growing range of emerging economies today,
including China, India and Brazil, each provide different
variations of this basic underlying process.
The China-DAC Study Group found that economic
transformation and its dramatic impact in reducing poverty
became a recurring theme in each of its events. Dynamic
capacity development was an explicit topic in the event on
Enterprise Development. The implications of this approach
are reflected in the lessons detailed below.
Economic transformation is possible in Africa within a
generation
A consensus is building, in both private and official
appraisals, and in OECD as well as emerging market
countries, that Africa will be the next big emerging
region. It is well-placed to benefit from the new sources
of demand, investment and technology in the multipolar
global economy; poverty is declining on the whole; the
HIV/AIDS challenge is now being kept in check in most
countries; the trajectory of progress towards the
Millennium Development Goals (MDGs) has been striking on
some fronts, and there is still the possibility of reaching
the targets by 2015 in many countries.
Governance trends have been positive, though not
universally. Breaking out of recurring situations of
fragility remains a frontier for those countries where the
transition from a patrimonial state to a capable state is
still work in progress. A national economic transformation
project may in fact provide the way forward in such cases
as a rallying point for a new national consensus.
Overall, this last decade has been the best for Africa
since independence, and Africa is enjoying one of the
highest economic growth rates in the world, projected to
reach 5% in 2011, up from 4.7% in 2010 after a quick
rebound from the global recession of 2009. Recent debt
relief initiatives have markedly reduced debt burdens and
improved creditworthiness.
Employment growth remains constrained by a still narrow
export and production base. But with population in subSaharan
Africa projected to rise to 963 million in 2015, up
from 517 million in 1990, there is a promising market with
dynamic human capital. A new middle class is rising. The
potential for fast growth and structural transformation is
thus enormous and in a world where ideas and organisation
are the key drivers of growth, Africa could see very fast
progress towards middle-income status and large-scale
poverty reduction in the coming decades.
The transformation process in Africa could even be faster
than elsewhere, given the possibilities for global economic
structural change and technological leapfrogging.
Affordable tablet devices for web connection coupled with
the undersea fibre-optic cables now in place, small-scale
solar technologies, and nanotechnologies for, inter alia,
plant breeding; such technological advances are of huge
relevance to the particular geography of the African
continent and can transform development prospects on many
fronts, economic, social and political. Another new 21st
century phenomenon is the scope for interaction with the
range of newly emerging countries, including China, India,
Brazil and others, that are creating the new, multipolar
world economy of today, further enriching the flow of ideas
and knowledge from which African countries can draw.
Thinking in terms of a transformation paradigm itself
changes the way in which a country sees itself, and is
perceived.
The China-DAC Study Group, with strong involvement of
African officials and experts, has been assessing how
economic transformation in Africa can happen, against the
background of the Chinese experience, and how collective
aid efforts can help in the wider transformation process.
What makes rapid transformation processes possible?
Development as a learning process.
The common features of
the transformation process are deeply connected to the
fundamental sources of economic growth – ideas, innovation
and organisation. This is what is replicable with
development-oriented leadership. And these sources of
growth are becoming more powerful than ever as knowledge
accumulates and disseminates faster than ever before in
history, as China's record shows.
A dynamic learning process takes hold in a country via
interactions with new ideas, products and organisational
models that are increasingly abundant in the multipolar,
connected, global economy of the 21st century. Business
models that are found to work locally, become widely
replicated and then progressively improved, in an
endogenous process of continual upgrading, across the
economy - agriculture, industry, infrastructure and
services.
The state shapes the overall economic policy framework and
the human and institutional incentives and capacities to
absorb and spread ideas and organisational processes. That
generates an expanding, entrepreneurial enterprise sector,
in the formal economy, able to participate in competitive
local, regional and global value chains. The state plays an
active role in supplying "hard" and "soft" infrastructure
at each stage, generating large externalities which are
essential to the growth process. Rising employment and
incomes stimulate the local economy and create new jobs.
Poverty rates begin to fall dramatically. Intensive
feedback mechanisms between the state and the enterprise
sector identify what is working and what needs corrective
action. Performance, rather than established interests,
becomes the reference point for policymaking. The state
invests attention and resources in entrepreneurship and
innovation, which are undersupplied in a poor economy.
Economic and social change becomes transformational rather
than incremental.
African institutions are paying much attention now to how
to foster the developmental state in Africa. This was the
central theme of the Annual Joint AU/UNECA Meeting of
African Ministers of Finance, which produced a set of
recommendations for fostering the developmental state in
Africa. The latest joint Annual Report of the African Union
and the UN Economic Commission for Africa provides a
comprehensive prospectus for how developmental states could
lead the economic transformation process in Africa. The
African Centre for Economic Transformation, based in Accra,
is conducting case studies of African countries using the
transformation lens and will publish an annual African
Transformation Report from 2012.
References
[see full report]
Key Elements of China's Experience
The following are the fundamental elements in China's
success in massively reducing poverty and creating a
middle-income country and will continue to underlie China's
on-going efforts to address the many remaining challenges
that China has identified for its development, adjustment
and social well-being.
The responsible development-oriented state
Making economic transformation the central guiding
objective of government, as China did in the late 1970s,
with its reform and opening up policies:
- Provides a basis for wide consensus and participation
across society in a national project.
- Drives pragmatic, evidence-based policy making and close
on-going review of performance.
- Makes performance in terms of growth and poverty
reduction the test for policies and resource allocation.
- Strengthens learning and innovation.
- Exercises discipline on the efficiency and effectiveness
of both government and enterprises.
- Puts a high priority on policymaking capacity and
investment in research and extension capacities in
universities and institutes and linking them to ministries
and the decision and implementation processes.
- Encourages the emergence of a well-educated professional
middle class and attracts talented people to return home to
work for their countries.
Self-reliance and ownership
Self-reliance has been a fundamental principle of Chinese
strategy. This principle is imbedded deeply in China's
strong ownership of its own development path while
absorbing knowledge from a wide range of external actors,
including investors and experts, and engaging with
bilateral and multilateral policy processes:
- China has been developing its medium and long-term
development strategies in relation to on-going changes in
the national and global context and uses its Five-Year Plan
instrument to implement those strategies with adjusted
policy interventions.
- External support, such as foreign investment and aid, is
incorporated within those strategies and policies, which
makes this external support more effective.
- Policy development and technical capacities have always
been central policy concerns, providing a basis for
monitoring and accountability systems at both the central
and local government levels.
Performance-based public management and decentralisation
Development-oriented leadership required a high quality
public management corps for policy formation and
implementation at central and local levels:
- Selection procedures for civil service and political
office were reformed to require educational attainment,
hands-on experience and proven individual performance.
- The central planning system was replaced by a market
oriented planning system.
- Significant decentralisation generated bottom-up
initiatives that were widely replicated.
- Development competition between cities and towns fostered
increased growth and poverty reduction.
- Taxation system reform reinforced local revenues and
budgets.
Policy research capacities and innovation systems
The transformation process is intensive in on-going policy
testing and adaptation based on evidence. China has created
an extensive set of institutional capacities in the hard
and soft sciences to enable the analysis of performance,
problems and solutions. The experiment-evaluate-scale up
success principle is widely applied and rapidly
implemented. This has demanded the expansion of higher
education and the development of research institutions
linked to policy decision making and implementation. World
expertise has been sought and attracted through incentive
schemes, international partnerships and often via aid
programmes.
Feedback mechanisms for identifying and addressing
challenges
China's impressive transformation has also generated
stresses and imbalances both internally and externally, as
noted above. These major challenges are identified and
addressed in the new five-year plan which includes policy
actions aimed at:
- Focussing more on the quality of growth and improving the
functioning of accountability systems.
- Tackling income and regional disparities, including
rural/urban income and equity issues.
- Raising domestic consumption and reducing reliance on
external demand.
- Repairing environmental damage, including farmland
degradation, and managing urbanisation.
- Eliminating extreme poverty through targeted measures for
the still large numbers of very poor people.
Responsible development-oriented government remains
essential in a more diverse and complex economy and
society:
- With the challenges of becoming a high-income country and
an active part of the global governance system, China's
policy review and adjustment processes, informed by
feedback mechanisms and global change, are more important
than ever, both domestically and internationally.
(continued in second part at
http://www.africafocus.org/docs11/ch-af1108b.php
AfricaFocus Bulletin is an independent electronic
publication providing reposted commentary and analysis on
African issues, with a particular focus on U.S. and
international policies. AfricaFocus Bulletin is edited by
William Minter.
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