Prospects and Challenges for Poverty Reduction And

Prospects and Challenges for Poverty Reduction and

Economic Development in Sierra Leone

What Can We Learn from The

“East Asian Miracle”?

By Sheka Bangura

A Paper Submitted in Contribution to

The Sierra Leone Conference on Development and Transformation, January 2012

Abstract

This paper is a contribution to the ongoing discourse and search for strategic options to transform Sierra Leone’s economy from the perspective of successes recorded by the East Asian (EA) countries since the 1960s. The development models pursued by the EA region have been exemplary and highly recommended for replication in other parts of the developing world. As diverse as Sub-Saharan Africa in culture, ethnicity and other socio-political variables, many of the economies in East Asia have mimicked each other in registering positive growth in the last 50 to 60 years. To define the research question, the paper starts with a reflection on Sierra Leone’s economy and initial conditions at independence relative to EA economies at the time. Secondary data have been utilized, coupled with a thorough literature review and drawing on the perspectives of fellow students and academics at the Ritsumeikan Asia Pacific University in Japan. A key lesson drawn from the East Asian success is that Sierra Leone has to get its political economy right as it forges ahead with its transformation ambitions—it needs a committed leadership;a substantive partnership between the political class, the bureaucrats and the corporate sector; and an effective rule of law. It also needs to overhaul the entire educational system to effectively increase the knowledge-base of the country, in order to absorb the technology needed to advance industrially. The economy can effectively be stabilized and insulated from shocks when it is diversified—focusing on exports of value-added products, emphasizing the development of SMEs; and reducing dependency on primary exports including minerals which are vulnerable to international commodity price fluctuation. A strong policy is needed to control population growth in the process. The paper notes that Sierra Leone has great prospects and there is high likelihood that it can catchup with sustained commitment from government.

Keywords: growth, transformation, political economy, knowledge, technology

I. Introduction

There is promising glow on the horizon for Sierra Leone with the ongoing transformative strides to pursue a desired trajectory for the advancement of the country. The challengesahead are enormous but not insuperable. It requires a strategic and sustained focus that is guaranteed through continued development dialogueand securing the voluntary commitment of all citizens, including those in the diaspora. The literature is largely unanimous on the need for Africa to replicate lessons from the globally celebrated East-Asiansuccesses. The velocity with which several EA economies transformed from poor and low income status into becoming enviable player on the global economic scene has earned this regionthe “miracle” adjective. Their economic boom is noted to have significantly defied theoretical orthodoxies of neoclassical economic liberalism and extreme command economic devises which intensely competed to influence global policies in post-second world war era. Multitudes of perspectives and academic works have emerged to explain the underlying factor to this exemplary performance with a view to advising other regions,likeSub-Saharan Africa, to follow suit.“It is estimated that it took England around 60 years to double its economy when the Industrial Revolution began. It took the United States around 50 years to double its economy during the American economic take-off in the late nineteenth century. Several East and Southeast Asian countries today have been doubling their economies every 10 years” (Kristof and Sheryl 2000). In the early 1950s, Singapore, South Korea and Hong Kong toiled below a per capita GDP of less than US$100 (Mengistu 2009:37). By 2004,these countries had reached a per capita GDP of US$ 26,000, US$14,000 and US$24,000 from a low of US$516, US$106 and US$678in 1965 respectively. The per capita income of the next growth tier, Indonesia, Thailand, Malaysia and China, also impressively grew fromUS$55[1], US$138, US$333 and US$97, to US$1,100, US$2,400, US$4,800, and US$1,500respectively[2].In 1995, Singapore’s per capita GDP had increased by more than 240 fold, surpassing Britain’s US$19,700 (Ghani and Lockhart 2008:36). Indonesia and Thailand were noted as two of the world’s poorest countries in the 1960s, each recording poverty incidence of 60 percent. Before the financial crisis of 1997, Indonesia had reduced poverty to less than 10 percent(Robilliard et al 2001:1), its growth averaging 12 percent over the period 1968-1996. Poverty in Thailand had gone down to about 15 percent by 2004, reported to have had one of the best record for reducing poverty in the world (Nabi and Shivakumer 2001; UNDP 1999; World Bank 2000). Japan’s exemplary role in boosting the EA economies as leader has been subject to exclusive research. It is widely analyzed within the framework of the flying geese model of Kaname Akamatsu(Furuoka 2005 and Mengistu 2009)—Japan plays the leading goose role, lifting up the second-tier geese, Korea, Taiwan, Hong Kong and Singapore (the four Asian tigers), and later the third-tier geese, Indonesia, Thailand and Malaysia, in the Association of the East Asian Nations (ASEAN), and China from north and northeast of Asia[3].Much of the investment and technology in the East and Southeast Asia came from Japan before the west became interested in the region. The objective of this paper is to review the success story of the East Asian economies since the 1950s and 60s, with a view to determining what lessons can be learned in light of the ongoing discourse and search for strategic options for the transformation of Sierra Leone’s economy. The EA countries reviewed are: Singapore, Hong Kong, Taiwan, South Korea, Malaysia, Thailand, Indonesia, and Japan. The challengesthese economies encountered at the height of their growth are highlighted, includingstrategies put in place to overcome them. Given the range of issues leading to their success, it is beyond the scope of this paper to touch on all. A select few deemed highly criticalto the transformation of Sierra Leone are focused on, with special emphasison governance of development. The paper utilizes secondary data on Asia and Sierra Leone, coupled with a thorough literature review and perspectives of colleague students and academics at the Ritsumeikan Asia Pacific University in Japan[4]. The rest of the paper is organized as follows. Toward defining the main research question and identifying critical gaps in Sierra Leone’s development, Section 2 compares thecountry’s socioeconomy withthat of East Asiaat independence in the early 1960s. It examines the development dynamics of the former and the latter to date. It highlights what the East Asian “miracle” really is. Section 3 tries to answer the questions: “why the EA miracle?” and“what underpins it for the attention of Sierra Leone?”Section 4 briefly reviews Sierra Leone’s development prospects and strides since the end of its civil war, weighed against key lessons from the management of the East Asian economies. It indentifies gaps and challenges, and suggests key development areas to focus onmoving ahead. Section 5 concludes.

II. Sierra Leone and East Asia Since the 1960s

Was There A Comparison at Independence?

At the fall of colonial rules in the 1950s and 1960s, “the level of economic development in most of Sub-Saharan Africa (SSA) was fairly comparable with that of East Asia. In fact, in the 1960s, much of the expectation was for SSA to perform better than East Asia because of its large endowments of natural resources. As a matter of fact, in the early 1970s, many countries in Africa could point to significant progress in initiating a process of economic and social development” (Mengistu 2009:1). Sierra Leone was among African countries of great expectations, with US$151per capita GDP (in 1965) exceeding that of Indonesia (US$55)[5], Thailand(US$138), China (US$97), and South Korea (US$106).Sierra Leone maintained positive growth for most of the 1960s, hovering around 3.8 percent[6]during the period 1961-69, and higher than the growth rate of Indonesian and China at 3.7and 3 percentrespectively[7]. Sierra Leone shares common geographic and climatic characteristics with a lot of East Asian countries most of which are located on islands and coastlines, while some are largely tropical. Sierra Leone has about 400 kilometers of coastline, giving it both bountiful marine resources and attractive tourist potential, followed by low-lying mangrove swamps, rain-forested plains and farmland, as you may find in some EA countries. The capital Freetown sits on a coastal peninsula, situated next to the world's third largest natural harbor, this prime location historically making Sierra Leone the center of trade and administration in Britishcolonial rule in West Africa[8].While East Asia is generally reported as having little natural resources at time of independence, mainly depending on the talents of their people, Sierra Leone had a great advantage with vast mineral wealth ranging from diamond, gold, bauxite, to iron ore. Her natural resource endowment was compared only to three countries in the EA region: Indonesia, Malaysia and Thailand. Ironically, these three mineral rich Asian countries were the latecomers (second-tier geese) in the EA industrial advancement. Although not comparable by any means to a number of countries in East Asia in terms of education, especiallyJapan[9], Sierra Leone had a promising beginning in this direction, compared to countries like Indonesia,where the colonial administration restricted expansion of education[10]. Established in 1827, Sierra Leone’s Fourah Bay College was the first university college in West Africa, and was historically one of the centers for African scholars of law, medicine, and education. Unlike Sierra Leone at independence, a pool of countries in East Asia fought wars or underwent more strenuous circumstances for independence. Countries such as Singapore, Indonesia, South Korea, and Taiwan, even Japan after the second world war, had more rugged beginning than a number of African countries in the last 60 years. Singapore, for instance, was not deemed a viable independent state from the British in 1963. As an island without any natural resources, with population largely comprising indentured Chinese and Indian Labourers and Malays, the country was circumstantially accepted into the Federation of Malaysia in 1963,but to be kicked out two years later, to humble her into accepting less favorable terms of membership in the Malaysia Union (Ghani and Lockhart 2008:36). Singapore did not enjoy stability even from within, given communist activist movement in post-independence era. Coupled with endemic corruption at low ebb of economic development, Singapore’s odds were tremendous with an improbable chance of survival (ibid). This island country had severe housing shortages and a poor infrastructure, high criminality and unemployment, racial riots, and communist uprisings[11]. Singapore, though, had the advantage of being a major regional transport hub and could build on the revenues from that. Turning to Japan, albeit one of the leading global economies today, sixty years ago, it was left in ruins after the second world war. Millions of Japanese were homeless; the economy was shattered, and mass starvation became a threat, coupled with widespread disillusionment with the cultural and social frameworks of prewar and wartime life[12]. Table 1 shows some basic statistics on Sierra Leone and EA countries. It shows population size and world population rank in 1960 and 2011. It shows that, majority of the EA countries were under imperialist regimes as Sierra Leone was, the latter gaining independence before countries like Singapore (1963) and Malaysia (1963). Effectively, Singapore became an independent state in 1965 following the union breakup with Malaysia (1963-1965). In terms of population size (small), coupled with vast mineral resources, Sierra Leone had relative advantage compared toseveral EA countries, its population higher than only Singapore and Hong Kong as city states. If the natural wealth of Sierra Leone were efficiently utilized, the per capita income of the country would have grown much higher, with the potential to become a middle or even high income country. In 1965, the EA region produced the first, fifth and sixth most populous countries in the world with a few natural resources. It still produces the world’s most populous country, alongside the fourthand tenth in rank (Table 1). It was also an advantage, as still is, that Sierra Leone was less dense (population per area of land) than all EA countries under review. However, the percentage increase in density during 1960-2011 is higherin Sierra Leone than most EA countries under review. As in many African societies, several East Asian countries are ethnically diversified as shown in the table, especially for Indonesia and Thailand. Although Chinais highly homogenous with the Han constituting 92 percent of the population, there are about 55 ethnic minority groups in the country. Also, Malaysia has only three main ethnic groups—the Malays, Indians and Chinese—but thereare multitudes of sub-ethnic and linguistic identities ineach group. The same applies to Taiwan, dominated by the Holo (about 70 percent of the total population), but with active minority ethnic groups like the aborigines with several sub-ethnic identities.

Table 1: Some Socio-Demographic Data on Sierra Leone and EA Miracle Country + China

Indicators / Sierra Leone / Indonesia / Thailand / Malaysia / Singapore / Hong Kong / Taiwan / South Korea / Japan / China
Population (mn) (1965) / 2.46 / 104.61 / 31.21 / 9.50 / 1.89 / 3.60 / 12.44 / 28.53 / 98.88 / 715.19
Population (mn) (2011) / 5.36 / 245.61 / 66.72 / 28.73 / 4.74 / 7.12 / 23.07 / 48.75 / 126.48 / 1,336.72
World population rank (1965) / 113 / 5 / 22 / 50 / 123 / 95 / - / 24 / 6 / 1
World population rank (2011) / 112 / 4 / 20 / 42 / 117 / 98 / 50 / 26 / 10 / 1
% Change in population / 118.19 / 134.79 / 113.79 / 202.34 / 151.23 / 97.96 / 85.46 / 70.89 / 27.9 / 86.91
Size (000’ km) / 72.00 / 1919.44 / 513.12 / 330.24 / 0.64 / 1.10 / 32.26 / 99.00 / 378.00 / 9596.96
Pop. Density (1961) / 34.17 / 54.50 / 60.82 / 28.77 / 2953.13 / 3272.73 / 385.62 / 288.18 / 261.59 / 74.52
Population Density (2011) / 74.44 / 127.96 / 130.03 / 87.00 / 7,406.25 / 6,472.73 / 715.13 / 492.42 / 334.60 / 139.29
% change in population density / 117.89 / 134.79 / 113.78 / 202.42 / 150.79 / 97.78 / 85.45 / 70.87 / 27.91 / 86.90
Ethnic group / 16 / 300 / 75 / 3 / 3 / 5 / 4 / - / - / 56[13]
Self-Determination / 1961 / 1950 / - / 1963 / 1963 / 1997 / 1945 / 1945 / - / -
Colonial Master / Britain / Dutch, Japan / - / Britain, Japan / Britain / Britain / Japan / Japan / - / -

Source: Author’s Construct

In summary, there have been similarities and dissimilarities between Sierra Leone and EA countries. The dissimilarities define the relative advantages and disadvantages between the former and the latter. In terms of human capital endowment, indeed Japan cannot be compared with a country like Sierra Leone, not even Sierra Leone with Singapore and Korea among others. After the second-world war, Japan still had one of the best literacy rates in the world, both male and female nearing 100 percent in the 1960s[14]. By 1868, its literacy rate (40 percent)had surpassed that of Europe[15]. Having Japan in East Asia has been a fundamental boost to follower countries in the region given Japan’s technological advancement and role on the global development scene. Ithasserved as a positive externality to the rest of the region’s economies[16]. But the argument is that, at independence, Sierra Leone was better placed in some development dimensions than a pool of East Asian countries. It also had a good footing academically within West Africa. The expectation may not (and perhaps should not) have been that Sierra Leone must have caughtup with the Asianeconomies under review. The question is why Sierra Leone has not followed the growth direction of East Asia? In the next section, we would start by highlighting what constitute the East Asian growth miracle.

What is The East Asian Miracle?

Growth and Poverty. These economies transformed in one generation, some in less than a generation, starting from the 1950s and 60s[17]. Excluding Japan from the analysis, Table 2 shows that the rest of the economies under review recorded attractive growth throughout the period 1961-2009, despite telling financial crises in the 1980s in some countries, and the financial crisis of 1997 that swept virtually the entire region[18]. Before the contagion effects of the 1997 crisis, Hong Kong, Malaysia and Thailand’s economies had suffered speculative real estate attacksbetween 1982 and 1988, largely attributed to imprudent conduct of the banking system, which Japan subsequently suffered in the early 90s. However, due to the depth of insulation of these economies from shocks and the high degree ofresponsiveness from their state-of-the art management, growth was maintained at impressive levels (Table 2).

Table 2: GDP Growth Rates for Sierra Leone and EA Economies 1961-2009

Pre-Sierra Leone War / Sierra Leone Wartime Period / Post Sierra Leone War
1961-1969 / 1970-1979 / 1980-1989 / 1990-1999 / 2000-2009
Sierra Leone / 3.79[19] / 2.70 / 1.12 / -4.24 / 9.59
EA Economies / Indonesia / 3.73 / 7.83 / 6.38 / 4.83 / 5.09
Thailand / 7.82 / 7.51 / 7.30 / 5.28 / 4.06
China / 3.01 / 7.44 / 9.75 / 9.99 / 10.29
Korea / 8.26 / 8.28 / 7.67 / 6.26 / 4.40
Hong Kong / 10.39 / 9.62 / 7.42 / 3.59 / 4.19
Taiwan[20] / 11.30 / 9.00 / 8.00 / 6.40 / 3.40
Malaysia / 6.56 / 7.74 / 5.88 / 7.23 / 4.80
Singapore / 9.74 / 9.41 / 7.80 / 7.34 / 5.15

Source: Dowling & Valenzuela (2010); World Bank Development Indicator Database

Let us look, a moment, at Sierra Leone compared toIndonesia, China, Thailand, and Korea. During the period 1961-65, Sierra Leone recorded higher GDP growth than these countries. It remained higher than that of China and Indonesia throughout the 60s.The growth of Thailand and Korea had surpassed Sierra Leone’sbefore the end of the decade. During the ensuing 30 years, starting from 1970, Sierra Leone had been extremely distanced in growth by all four Asian countries (Figure 1). In fact, China’s take-off in the 1960s was jet-like, overtaking not only Sierra Leone, but all other EA economies under review (Table 2 and Figure 1)—China started the least,but ended the highest in GDP growth for the period 1961-2009. The situation for Sierra Leone became worse moving into the 1990s with the civil war (1991-2001), from which the country emerged with an average negative growth of -4.24, registering negative peaks in 1992 (-19 percent) and 1997 (-16.7 percent). The EA countries appear to have had relatively strong population policies as illustrated by graphs in Annex 1 for Indonesia, Thailand, China and Hong Kong, especially for China. Per capita real income growth moved much closely with GDP growth.