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The Many Lessons That Zimbabwe Can Learn From Singapore’s Economic Success

Political risk can be measured in terms of the political stability of a country, their willingness to honour their contracts, debts and to maintain a hospitable climate By Clemence Mupfunya What are the factors that saw an island city-state in the southeast of Asia transform from a developing state to a developed country and from it - to be the most competitive economy in roughly one generation period of time? There are several factors that justify the skyrocketing developments of Singapore economy. From several of those, there are three major factors which are; Firstly, strategic location of the island. Secondly, the friendly policies adopted by the government in regard to foreign investments, and last but not least, the most important one an efficient and honest government. From these three reasons, only one is actually a real competitive advantage. In fact, in terms of location, Zimbabwe is at the heart of the SADC region but has failed to fully utilise such a favourable position as a landlocked country. Being a landlocked country has an advantage as it provides room for natural tariff barrier that protects the country from cheap imports.

Political risk can be measured in terms of the political stability of a country, their willingness to honour their contracts, debts and to maintain a hospitable climate

 

By Clemence Mupfunya

 

What are the factors that saw an island city-state in the southeast of Asia transform from a developing state to a developed country and from it – to be the most competitive economy in roughly one generation period of time?

There are several factors that justify the skyrocketing developments of Singapore economy. From several of those, there are three major factors which are; Firstly, strategic location of the island.

Secondly, the friendly policies adopted by the government in regard to foreign investments, and last but not least, the most important one an efficient and honest government.

From these three reasons, only one is actually a real competitive advantage. In fact, in terms of location, Zimbabwe is at the heart of the SADC region but has failed to fully utilise such a favourable position as a landlocked country.

Being a landlocked country has an advantage as it provides room for natural tariff barrier that protects the country from cheap imports. The fact that Singapore was able to control 40% of maritime trade is not a cause of its success, but rather a consequence. It’s because Singapore is good for business that ships sail there.

Also, being friendly with foreign investors is the policy of other economies that despite their efforts, failed to have as many friends as Singapore. We are left with one choice true key of Singapore’s economic success lies in its efficient and honest government.

According to the article – the form of government might not have impact on economic growth. That is to say, there is no solid economic evidence to believe that authoritarian governments are less effective in promoting growth economically than liberal governments.

What actually matters is not the form of the government, but rather the stability that both governments are able to provide.

The history of Singapore is a clear example of the close link between economic growth and political stability. After independence of Singapore in 1965, the first Prime Minister Lee Kuan Yew was able to give the new born Republic of Singapore the stability needed in 1969.

The city-island’s stability comes from the fact that its legal system was clear, secure, and efficient. In legal terms, this implies that the consequences attached to the laws are predictable for everyone (clear), also the law does not constantly change but it is rather reliable (secure) and it is enforced all the time (efficient).

These three key elements generate the required stability that attract investors. Indeed, investors are by their own nature risk-averse. They don’t like when the rules of the game are unclear, mutable, and enforced depending on the discretion of someone.

However, there must be an additional reason that has been neglected so far. If what stands above is true and we claim it is, it is still not the complete picture of Singapore’s success.

Other countries have a well-enforced law systems but, despite doing well, they do not rank first in the IMD world competitiveness ranking.

To clearly understand the success of Singapore, we can refer to a metaphor taken from horse racing. In horse racing, the expression win by a nose means that in case of two or more close competitors that are very likely, the winner is the one that has his horse put its nose first.

Then the great question is, what is the nose of Singapore to economic success?

Well to understand it, we should refer to another ranking: the PISA worldwide ranking that assesses the education system of different countries. Singapore is the First.

The nose for Singapore is its education system and its contribution to economic growth. Education contribution is double-folded; on one hand, education provides skilled workers with higher marginal productivity of labour which have an impact on Gross Domestic Product (GDP).

Also, as Lucas (1988) pointed out; education provides positive externalities. A positive externality is a benefit that a party has or enjoy without paying for it.

Singapore has greatly invested in education. It put effort to increase the prestige of teaching, recruited teachers from the top 5% graduates in a system that is highly centralised and trained teachers in order to secure quality control on education.
Obviously, this could not have been done without a well-established government.

A government that can guarantee security, avoid by all means corruption and enforce the law.

However, a well-established, law-enforcing government alone cannot guarantee success, not up to the one “earned” by Singapore. The government should also be benevolent in recognizing what stands at the heart of the success for an island without raw materials that can count only on its own and that, it is the true spell of magic that relies upon being behind Singapore success.

It can be seen that Singapore has been winning the race for foreign capital, but how does a city-state become a prime investment destination in the southeast region of Asia. Singapore’s policies both local and foreign have been crafted and more importantly enforced with investors’ well-being in mind.

When companies or individuals think of investing in a foreign economy two risks are taken into account, which are; the economic risk and political risk.

The political risk can be measured in terms of the political stability of a country, their willingness to honour their contracts, debts, and to maintain a hospitable climate for foreign direct investment.

In a survey done by World Bank investors reported that giving top priority to the following elements when assessing an investment targeting is important, a legal framework defining investor’s rights and obligations and secondly, payments discipline and enforcement on the other hand, the economic risk involves for example, the country’s ability to pay back its debts.

A country with a strong economy and financially healthy should provide more reliable investments than a country with weak finances or an unsound economy.

Therefore, this article suggest that Zimbabwe needs to establish what I can call Zimbabwe Economic Development Board (ZEDB). This will be an independent board that will lead Zimbabwean’s industrialisation.

This board will need to create industrial parks, industrial estates. The board will focus on attracting labour intensive industries to solve high unemployment in the country and provides ready-built standards factories to facilitate speedy set-up for companies. The major focus of this board will be to eradicate unemployment and attract foreign investment.

With progress the ZEDB will shift from labour to modern industrial economy based on science, technology, skills and knowledge. More of this board by economist C. Mupfunya.

With the apparent failure in recent years of Keynesian economic policies in developing economies, it is becoming increasingly fashionable to advocate a return to the ideology of classical economics which is free market system as a way to economic growth and development.

This 19th-century ideology incorporates such notions as the invisible hand, as the best allocator of resources, and unbridled competition as the means to efficient production. Government intervention in the African continent economy is frowned upon as inefficient, costly and a threat to the personal liberties of individuals and society worse still as creeping socialism.

 

Economist Clemence Mupfunya is a correspondent for The Sunday Express. He writes in his personal capacity. Contact him at (27) 67 208 2236.

 

 

 

 

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