Olu AjakaiyeAfrican Centre for Shared Development Capacity

Building, Ibadan NigeriaPresentation at 1st International Conference on

African Development Issues, Covenant University, Ota. May 5-6, 2014

Public-Private Interface for Shared Development in Africa

OutlineIntroductionConceptual Issues

Shared DevelopmentPublic-Private Interface

State Intervention for Shared DevelopmentInstitutional Arrangement for Public-Private

interface for Shared DevelopmentFeatures of Public-Private Interface in Three

Archetype Developing EconomiesImperatives of Public-Private Interface for

Shared Development in AfricaConclusions

IntroductionAll Economies are mixed and degree of mixture

depends on level of devt and societal disposition to dominance of public or private agents in control of national resources

Primary Goal of State: to secure maximum welfare of the social aggregate that created the state and over which it is authorized to exercise control; State is agent and people are the principals.

Means of satisfying the central goal of the state consist of interwoven institutions and instruments

Public sector resource allocation decisions have implications for resource allocation in the private sector and vice versa calling for public-private interface to ensure complementarity

Introduction ctdAchievements of East Asian countries have

demonstrated efficacy of public-private interface in securing complementarity between public and private sector agents and the resulting rapid economic growth, structural transformation and technological progress, i.e., economic development

Comparative studies begin by stating that Africa and East Asian countries have similar initial conditions at independence but Africa failed to make similar progress instead continues to suffer from serious development deficits

Recent events in Africa call for urgent and serious efforts by all stakeholders to support the process of shared devt as continuing development deficit in Africa can detract from well being of all;

All can also benefit from prosperous Africa as is the case with China

Conceptualizing Shared Economic DevelopmentShared Economic Development encompasses sustained:

rapid economic growth and structural transformation;improvements in the capability and well-being of humans to

contribute to the development process; growing opportunities for humans to contribute to the

development process and also benefit from the proceeds of development regardless of their circumstances (Ajakaiye and Jerome, 2011).

Shared economic development process guarantees broad based non-discriminatory participation in the development process and equitable and non-discriminatory access to the benefits of development.

To bring about shared development, the state should be able to combine all institutions and instruments pragmatically, dynamically and judiciously to generate opportunities for productive participation of all strata of society in the development process regardless of their personal, social or locational circumstances; and, provide development reinforcing social protection programmes.

Conceptualizing Public-Private Interface for Shared Development

Public-private interface can be conceived as the rules, organization and social norms that facilitate coordination of the actions of public and private agents and organizations working together in pursuit of shared development goals.

Perhaps the first person to point at the efficacy of public-private interface in advancing economic development is Kaplan (1972) saying “In the United States, corporations and government generally each work in their separate spheres. In Japan, outsiders at least seem to be dealing with something that popularly has come to be called, "Japan, Incorporated."

 

Conceptualizing Public-Private Interface for Shared DevelopmentAccording to Kaplan (1972):

Japanese businessmen take it for granted that there will be a continuous dialogue between business leaders and government officials, and that neither will make major policy decisions or undertake major projects without consulting each other.

Japanese business as a whole does not object to its government's active involvement in business matters.

Japanese business accepts, though perhaps more reluctantly as time goes on, the government's leadership role.

Japanese Government did not hesitate to encourage the development of industry by any means including building, owning, and operating new types of factories to demonstrate to would-be industrialists what needed to be done.

Japanese business community looked to the government for financial and other forms of assistance.

State Intervention for Shared Development Broadly, three possible modes of state intervention

aimed at enhancing development can be identified. First, Govt deliberate utilization of public sector

resources to execute social overhead capital (SOC) projects in areas necessary to create enabling environment for all economic agents to operate optimally - economic infrastructure; social infrastructure

Second, Govt participation in directly productive activities through SOEs to get things started in developing countries (Kaplan, 1972); to get things going; to prevent things from falling apart even in developed countries while taking steps to actively seek private sector participation and eventual takeover of such activities at the earliest possible opportunity.

State Intervention for Shared Development Third, govt intervention can be in the form of

designing appropriate policy packages to facilitate, stimulate, and direct private economic activities in order to promote a harmonious relationship between the desires of the private businesses and households and the development goals of society, i.e., government, through its policies, is a promoter and stabilizer

These three interventions are the imperatives of the primary role of the state in securing and sustaining shared development by making deliberate judicious, pragmatic dynamic and contextually relevant combinations of the aforementioned institutions and instruments.

State Intervention for Shared Development A common feature of public-private interface is

that the specific actions in each of these three modes of state intervention are the products of the consensus reached through a process of intensive formal and informal consultations, discussions and interactions among the socio-economic groups in an atmosphere of mutual trust, respect and sincerity of purpose.

The groups encompass politicians (especially those in power), bureaucrats, business leaders, leadership of labour unions, academics, journalists and a host of non-governmental organizations and civil society organizations from various sections of society. (Natsuda, 2008:12; Schenider, 2010)

Institutional Arrangements for Public-Private Interface

The primary purpose of building and sustaining consensus between public and private agents is solve the problem of information asymmetry in policy making

Functionally, there could be deliberative, consultative, implementation and oversight councils or combinations thereof.

Deliberative councils discus policy options, set policy direction or make specific policy recommendation to executing agencies. Such councils are quite common in Asia and is the most comprehensive form of interface.

Consultative councils are forums where government representatives present policy proposals or decisions to the council for feedback and suggestions.

Executive and implementation councils decide on the specifics of how broad policy guidelines are to be implemented.

Oversight councils monitor results and performance of private and public sector agents in fulfilling set policy goal..

Institutional Arrangements for Public-Private InterfaceThese councils are typically configured in a cascading

manner. There is, usually, a central coordinating council and sectoral and sub-sectoral councils at central and regional levels in federations

From institutional perspective, public-private interface facilitates interaction among public and private agents in pursuit of shared development goals.

Public-private interface as an institution should evolve as development progresses - the structure, scope and contents of public-private interface should change to take advantage of the changing strengths, weaknesses and circumstances of the interacting agents.

For example, the structure, scope and content of public-private interface in Japan during the 1950s and 1960s are quite different from what we have today. The same is true of South Korea and Malaysia

Institutional Arrangements for Public-Private InterfaceKey drivers of institutional change from the point of

view of public-private interface include changes in the capability and sophistication of private agents and, relatedly, their readiness/willingness to assume greater responsibilities in the tasks of enhancing development; and changes in the constellation of interest of agents.

In Japan, for example, the institutional architecture of the public-private interface has changed from the dominance of Ministry of Trade and Industry (MITI) which held sway during the early stages of Japanese development to one where agencies such as JICA, JBIC, NEXI and JODC now play significant roles as Japan Incorporated goes regional (Natsuda, 2009).

Institutional Arrangements for Public-Private InterfaceIn South Korea, contents of public-private interface

which was characterized by extensive technical and large scale preferential financial support and controls by the state to operators in specific industries in the early stages of development are gradually giving way as the private sector organizations have become so strong as to raise capital from international market ( Chang and Evans, 2005).

The Korean middle class had challenged the policy of ‘buy Korea’, called for liberalizing imports.

Government of Korea responded with institutional reforms that appeared to be anti-developmental state in outlook.

However, govt swift reactivation of the developmentalist devises during the Asian financial crisis of 1997 that had been jettisoned just a couple of years earlier is characteristic of institutional changes as the circumstanced change.

Features of PPI in 3 Archetype Developing EconomiesPublic private interface for shared development in

Africa should take account of the structure of the economy, the modes of state intervention in the economy and the scope/function of the institutional arrangement for public private interface.

For this purpose we:Consider features of public-private interface in three

archetype economies based on the dominance of primary, secondary and tertiary production activities;

propose the institutional arrangements likely to enhance effective public-private interface in each of the three archetypal economies;

Propose the modes of state intervention likely to address the structural and institutional impediments to effective public-private interface.

Features of Public-Private Interface in Three Archetype EconomiesAgents/ Groups

Primary Production Dominant Economy

Public Sector Agents Passive; heavy reliance on assistance from Devt Partners in development policy making activities

Local Modern Private Sector Agents

Passive: too few in number, weak or non-existent Bus. Interest Organization

Peasants and Informal Service Sector Agents

Disconnected: very large number, weak or non-existent Bus. Interest Organization

Labour Unions Passive: State sector membership dominanceCSO, NGOs Passive: Few in number and Weak organizationsPPI Framework Primarily ConsultativeMode of State Intervention

Comprehensive SOC, active SOE, comprehensive Enabling /prom. policies

Features of Public-Private Interface in Three Archetype EconomiesAgents/ Groups

Secondary Production Dominant Economy

Public Sector Agents Active; considerable reliance on devt partners in development policymaking activities

Local Modern Private Sector Agents

Active: large and increasing membership, strong Bus. Interest Org

Peasants and Informal Service Sector Agents

Active indirectly: Through linkages/networking with growing modern sector agents

Labour Unions Active: Increasing number of non-state sector membership

CSO, NGOs Active: large in number and strong organizationsPPI Framework Largely Consultative high risk of captureMode of State Intervention

Comprehensive SOC, dynamic SOE, comprehensive enabling/promotional policies

Features of Public-Private Interface in Three Archetype EconomiesAgents/ Groups

Tertiary Production Dominant Economy

Public Sector Agents

Very Active: limited or non-existent assistance from devt partners in development policymaking activities

Local Modern Private Sector Agents

Very Active: Very large membership, very strong Bus Interest Org

Peasants and Informal Service Sector Agents

Very Active directly and indirectly: Transformed to formality through upgrading/stronger linkages/networking with modern sector agents

Labour Unions Very Active: No-state Sector membership dominanceCSO, NGOs Very Active: Very large in number and very strong

organizationsPPI Framework functional comprehensive deliberation councilMode of State Intervention

Comprehensive SOC, Selective SOE Comprehensive enabling/promotional policies

Imperatives of PPI for Shared Development in Africa From the perspective of PPI, the challenge in Africa, revolves around

identifying the appropriate institutional arrangements and modes of intervention by the African states that will ensure that growth, structural transformation and generation of large scale decent jobs go hand in hand in order to deliver shared development.

Meanwhile, the development experiences of the East Asian economies that have successfully and systematically combined growth with structural transformation between 1950s and now suggests that their success rests squarely on: Political commitment of the leadership to maximizing welfare of the

people; Creation and maintenance of a competent and highly motivated

largely Weberian bureaucracy with appropriate autonomy and embeddedness

Strategic and pragmatic state intervention aimed at investing in people, science and technology; investing in social, institutional and economic infrastructure and efficiently and effectively nurturing, supporting and promoting development of

world class indigenous private sector operators, organizations and institutions able and ready to partner with their foreign counterparts to their mutual benefits and complementary to national development agenda

Imperatives of PPI for Shared Development in AfricaA cooperative, complementary and collaborative public-

private interface and avoidance of adversarial relationship among public and private agents

A new emerging cooperative, complementary and collaborative regional public-private interface and avoidance of adversarial relationship between MNCs and host governments as is the case between Japan and Southeast Asian countries See Natsuda (2008)

A realization that the pragmatic choice is not between the state and market but between different combinations of public and private institutions by the state in delivering sustainable and equitable development to the social aggregate that created the state.

Avoidance of capture and rent seeking behavior as well as readiness to adjust policies quickly once credible and convincing evidence shows that certain strategies and policies are no longer applicable in light of emerging circumstances.

Imperatives of PPI for Shared Development in AfricaDrawing lessons from the experience from Asia, the

following imperatives should be instrumental in public-private interface for shared development in Africa. political leadership committed to development of the

people transparently, effectively and equitably. Sustenance and deepening of democratic institutions that

build consensus around development policies and hence depersonalizes development agenda thereby ensuring continuity of development policies and programmes.

Re-building capability of the African state which had been severely degraded under SAP and the enduring minimalist state.

Restoration of the Weberian bureaucracy with adequate autonomy.

Imperatives of PPI for Shared Development in AfricaAvoidance of adversarial relationship among the

agents, be it private business, labour unions, CSOs or NGOs.

The political and public office holders should be ready to provide leadership and build a rolling consensus around policies and programmes aimed at advancing the wellbeing of the people.

The political and public office holders should avoid imperialism in pursuit of development agenda in order to avoid dangers of discontinuity to the detriment of all.

Every agent should subscribe to the view that the society is a corporate entity jointly owned by all and for which all must work in concert in pursuit of shared shared development in an environment of mutual trust, respect and sincerity of purpose.

Imperatives of PPI for Shared Development in AfricaDevelopment partners should emulate the

role Japan is playing in Asia and:channel their development assistance to

projects that will increase competitiveness of recipient nations;

encourage their MNCs to actively seek out and support local industrialists to become part of regional production networks;

supplement intervention efforts of aid recipient government by providing financial assistance through preferential export financing

ConclusionsUnder the rubrics of these imperatives while avoiding the

one-size fits all syndrome, leadership of each African country should:promote effective and dynamic participation of all relevant

segments of society in public-private interface consistent with the prevailing context and realities of the country

Actively nurture and promote local entrepreneurs capable of taking over and efficiently operating the SOEs at the shortest

possible time, partnering with their foreign counterparts to the mutual benefits of

both parties and consistent with national development aspirations and

eventually becoming lead firms in the relevant value chain/industrydesign and modify the institutional framework most suitable

for effective public-private interface as development progresses and as the circumstances change

determine and effectively undertake the most suitable combinations of the modes of state intervention as development progresses and as circumstances change in consultation with relevant stakeholder groups/agents/actors

ConclusionsActively explore and promote the development of

regional production networks similar to what is obtaining between Japan and several Southeast Asian countries

Seek support of development partners for projects that will improve the competitiveness of their economies

Actively enter into effective bilateral and multilateral economic relationships/partnerships and attract FDIs and MNCs whose operations and business models explicitly provide support for and promote partnerships with local industrialists so they (local industrialists) can quickly: become part of the global production networks, move up the value chain andeventually become cooperating and collaborating lead firms in

the global production/supply networks of the relevant industries

Thanks for your kind attention