China's Hu Jintao on Africa tour

At the beginning I did not clearly see China's connection to Darfur crisis, but now seems to be clicking. The oil, junk products from China are making China without Africa a mission impossible. China is killing us and it is surely killing our economy, industries, our products, market, our brain, our people and is indeed dumping the future of African economy in big trouble. Not only that, the guy is selling us all the weapons we need so we can kill each other like flies. “He is playing the only good guy for Africa” while the return of his investment materializes enormously. The guy is now paying visits to Africa like he grew up in Kenya or Shinyanga. This is his third visit since he took office. He will soon be going to Africa every month as long as his boys continue doing a good job. His interest is on how his economy and how his boys are doing but not how the African poor people are doing. Something must be cooking and paying off big time. Africa is the place to invest and everybody knows that. Man, as I said earlier, Chinese might be worse than the British, French, Portuguese and Germans. What are the African leaders thinking?

China is one of Sudan's major sources of weapons."China has also become a major, and perhaps the largest, supplier of weapons to Sudan, where its sales include fighter aircraft and helicopters, according to analysts". Pictures from BBCNEWS.

While there has been much debate on China's alleged transfer of nuclear or long-range missile technology to countries like Iran, North Korea and Pakistan, little attention has been paid to its routine export of conventional weapons and small arms.

China's Hu Jintao has been the leader of China since 2003. China's exploration in Africa has become so intense that China's ties to Africa have increased. In recent years trade has expanded dramatically between Africa and China. Like during the 1800's industrial revolution China seeks resources to feed its fast growing population, economy and markets for its exports.

China's economy is growing so fast along with its population. Who knows, China might be one of the supper powers in the world. Like missionaries, Arabs, traders, and explorers of the 15th century, Chinese are found all over the world; Manzese, Kariakoo Shimo la Udongo and every where else. This time Chinese are aggressively looking for place to live, work, raw material but not slaves or spreading gospel. Let us not forget the fact that Chinese can work day and night but Africans are not accustomed to work at night. Guess who will take all the contracts and work to deliver deadlines on time: the Chinese! Correct.

Chinese are now spotted in Africa selling every kind of manufactured goods from china in every street like the so called Machinga in Tanzania. If the Chinese can do what the mahinga does, are they really investors or survivors like the machinga themselves? Are these colonizers? I don't think so. These are poor Chinese trying to make it like anybody else who wants to make it away from home.

Some critics think China is colonizing Africa especially the Western and Europe. I think this is China's turn to explore and populate the world like what the Westerners did during their turn. Africa should be worried but not the Westerners and the Europeans. Both Europe and the West have controlled the world economy since the partition of Africa in 1885. The fear that China is taking over the world economy is growing and it should not be a concern to westerners. The Western or Europeans did their good share of both destruction and construction. However, I am very skeptical with this China's political and economic ties as well. I think that History keeps repeating itself and history has provided more destructive impacts to Africa than constructive ones. As I promised to keep an eye on Kikwete and the economy of Tanzania I will at the same time watch China's ties to Africa.

Like most countries, China consumes oil. Africa supplies one third of China's oil. Before Hu Jintao left for his tour to Africa this week, announced $3billion in preferential loans and more aid over the next three years for Africa. It sounds like a big push if at all it benefits Africa’s local businesses. How are the interest rates on these loans? The Chinese economists know better not to lose than gain from each dime invested.

Apart from oil, China seeks market share for all its products including cheap goods that threaten local industries and local market. Is China really playing a good guy for Africa? Africa is desperate for investors but how far these investors can go and who really benefits the most. This remains a tough question but time will tell.

There is no enough evidence yet but China has been selling weapons to African countries like Zimbabwe. Well, look at Zimbabwe now. What is going on? Is Mugabe the only guy behind Zimbabwe poor economy?

Other than Cameroon, Mr Hu's tour will also take him to Liberia, Zambia, Namibia, Mozambique and Seychelles.

What is the motive behind china’s Hu Jintao’s interests to poor African people? I will be watching you Hu Jintao.

Agriculture Sector in Tanzania

The failure of agriculture production is not only due to climate factor. According to president Nyerere it is principally a problem of implementation. However, critics argue that in fact, just like any other Tanzanian economic sectors, the deterioration is caused by government’s basic economic strategy. Early in 1975, Tanzanian started to reform its economic policy gradually, which is known as the Dar es Salaam Spring.
In my view, the misfortune that Tanzanian had to experience was another historical experimentation for a non democratic socialism. The goal for Nyerere was to make a poor nation economically independent with an equalitarian society, unfortunately, just like any other social experiments, it became another big failure. In this essay, I am going to briefly analyze the issues that in my view could be considered as the major causes, and then I will examine the economic policy and practice of Tanzania with three different economic theories.

Historical Cause
Tanzania was once a colony to Germany; at that period, German intensified the Sisal corps production which is only good for industrial use as raw material. After the W.W.I, Tanzania became a British mandate, technically it means that Tanzanian could become an independent sovereignty at any time. Unlike Kenya, British did not invest on the infrastructure which is the basic economic foundation of the country. The simple fact is that roads connect people is obvious. Without it, people of rural world could not do commerce between them and could hardly get to go to Dar-es-Salaam, mwanza, Arusha and so forth. From a political perspective, this factor undermined the Tanzanian farmers to become unified as a single political unity or interest group. Later this factor became the key cause for the failure of Tanzanian economy, not because the road scarcity but because of its consequences.

Well, some have argued that Tanzanian government implemented consciously harmful policy toward agrarian world because the decision making in the government is uniquely composed by urban elite who favored industrial development which takes place in the urban area, because that is where they live. I personally disagree with these critics on this matter. President Nyerere's socialistic ideology was thought to be the right way to improve agriculture in Tanzania. The country had just became independent and her economy was at its infant stage. Socialism (Ujamaa) helped bring Tanzanians together but slowed down agricultural developement and the economy as a whole. Moreover, Ujamaa embraced subsistence farming which was poorly funded, uorganized farmers and depended on raifalls. No raifall no farming and famine comes.

As farmers are unorganized; therefore, they are not recognized by the urban elite. The fact is Tanzanian elite unlike in the case of Kenya, they do not have personal economic interest in agriculture activities; consequently they become insensitive to rural problems. As the result, because the poor profit and discriminatory policy, farmers lost the interest on large production, and engenders a situation of “Administratively Generated Rent” as the result. It means due to government policy, foodstuff becomes a scarcity, a large gap exists between official price and black market price, and urban people have to buy the food on the black market pay the higher price because the government’s food could not suffice .

Unlike in Kenya who has the system of Mixed Farm, farming industry in Tanzania at the time of independence was poorly developed. De facto Tanzanian farms were small of size, production was not so intensified, badly concentrated between them and cities. Nevertheless, Tanzania is a large African nation, at the period it had a relatively small population, hence rural people had no problem with scarcity of land or job, and agriculture provides 80% of employment (same as for today). In sum, Tanzanian agriculture sector at the time of independence was the core of nation’s economy, although it was not as advanced as the Kenyan one, but it was increasing, healthy and earning foreign currency.

Government Policy

The malaise in Tanzania has evoked a voluminous academic commentary. Most of Africanist argue that the causes of its failure are both internal and external; it is a response that; however, in my view lacks academic credibility for the reason that such answer could be used at any circumstance and apply to any issue. I am very interested with the explanation of Uma Lele (1984: 160) who suggests that external influence such as the drought of 1973-74, the break up of East African Community in 1977, the war with neighboring Uganda in 1979, two oil crisis of 1973 and 1979 had indeed contribute to the failure of Tanzanian economy. But, she argues, it is also necessary to “blame on failure of the government’s own economic policy”, because Tanzania is one of the largest African recipients of foreign aid, it received $2.7 billion from 1971-81. Therefore it exceeds the external factor cost. Lofchie (1988: 148) exemplifies that the nature of failure is a result of long series of harmful policy, a social political dilemma between concentration of capital and redistribution of wealth. As a matter of fact, external factor must to be considered with attention, but I believe internal cause should be studied with even closer consideration. The fact is the socialist Tanzanian government opposed to any substantial admixture of capitalist practices in the Tanzanian economic development, it was against the use of market incentive system as means to excite agriculture production or any other mercantile sectors, such policy also discouraged foreign investments. Overall, it eliminated the possibility of to use market competition as stimulus of economic growth.
Observers who are sympathetic to Tanzanian socialism generally seek to blame on the external economic effect in order to exonerate Nyerere’s socialist policies, which are in my own perception the ultra cause of economic failure. Other academics argue that if the export volume of agriculture corps remains the same during the 70’s, Tanzania would not have to face to such economic catastrophe. As a developing country, Tanzania needs foreign currency badly, but if the export volume of crops fall, and at the same time major import goods price such as for oil, and expenditure increases, it is normal that the government went bankrupt financially an faced balance of payments crisis during the early 1980’s.

Ujamaa Villages

Tanzanian government attempted to implement a nationwide system of collectivized agriculture. Due to geographical problem, Nyerere thought by putting peasants to live together they would benefice fully the social infrastructure such as school or clinic, another goal for the latter was to see the agriculture production increases subsequently. Ujamaa is the word in Swahili to describe such village. The technique of Ujamaa is to replace individual farms with a network of village communities in which land should be collectively held and production collectively organized. In the analysis of Arkadie ( 6), the project of Ujamaa was:
To transform the pattern of rural settlement by congregating the rural population with previously had been resident predominantly on dispersed family smallholding – in nucleated villages of sufficient size to be efficient units for the delivery of services.
Of cause, no one, especially for the peasantry would like to give up their traditional habitat, the resistance of villagers was common, both in terms of to give up the farms and to move. The villagization became even more intense after 1969 (during the period of second Five Year Plan). In two occasions, because the policy was so unpopular that Tanzanian government had to use military force, it happened in the region of Dodoma and Kokuma. According to Lofchie (1988: 153) before the collectivization, merely 5% of rural population lived in villages, but by the end of 1975 Ujamaa policy had forced more than 60% of rural population to live in settled villages.
After different academic researches, the collectivization policy contributed directly to Tanzanian agriculture crisis of 1974-75. For instance, the marked agriculture production in the 1970’s differs extraordinarily with the previous decades, thought, the population growth was about 2.5%, but the 6% growth realized in agriculture sector from 1950’s and 60’s indicates without doubt that it was increasing. But in contrast, during the 70’s different export corps are either decreased or stagnated. Worth, according to Lele (1984:166) during the 1980’s export volumes were less than half those of 1970. She argues that if the export volumes had been maintained as the 1970’s, the balance of payments crisis clearly would not as this bad.
On the other hand, in my view, if the industrial sectors had performed as great as Julius Nyerere had expected, although the food production decreased, the financial crisis could not happen either. Therefore, the poor economic performance including agriculture and industrial sector was the result of policy implemented by the socialist government.

Arusha Declaration: Between 1967 and 1975

In February 1967, president Nyerere declared in Arusha that Tanzania is a socialist country, his policy will pursuit the realization of self-reliance and egalitarian society (Arkadie: 1995). From 1961 to 65, politically Tanzania enjoyed a period of Open Society, with a multiparty and free civil association system. People are free to elected local officials and join any political association they want. However, due to the economic policy of that time, which was the USSR style of Central Planning system and Import Substituting Industrialization, the political environment changed gradually.
Like any other Third World countries of that period, Tanzanian leaders are looking for an economic development model that promises to promote a fast industrialization, which believed wrongly as the key to economic success. After 40 years of socialism, Soviet launched Sputnik, it demonstrates the successfulness of Russian economic model. Hence, the socialite Central Economic Planning, which opposes to the free market system was the one preferred by most new leaders of Third World. However, the Central Planning System, regardless five years or seven years plan has an objective to achieve. In order to realize the objective, it can not allow any different voices to challenge the plan. Therefore, to ensure the process, it requires as in Russia an authoritarian government. Nyerere as the result declared in Arusha that for the well being of the people, Tanzania is a socialist country, and embrace one party state system.
Tanzanian version of socialism development was an unbridled program of state regulation and control (Lofchie: 1988). It was accompanied by implacable governmental opposition to any substantial admixture of capitalist practices in the nation’s development and; therefore, refused to use the Free Market Incentives as a means of improving agriculture and industrial growth. Capitalism was considered as imperialism and profit seeking was evil doing. The socialism of Julius Nyerere carries out three major policies that caused the economic failure. 1. overvaluation of currency, 2. suppression of agriculture price 3. the determination of to pursuit ISI.

Overvaluation of Shilling

In 1967, Tanzanian government creates Tanzanian shilling, it was an over valuated one. The purpose to over valuate the currency is to allow the government to import foreign good, such as technology, at a cheaper price. The state also control the banking system, so the government could decide to which economic sector the loan will be provide, and at what interest rate, such practices are known as mandatory interest rates and guaranteed Letters of Credit. The overvaluation of currency significantly reduced the real producer price received by Tanzanian farmers because they are paid with the local money. But the profit they received are calculated with the official exchange rate between the U.S dollar and shilling; therefore, they received fewer shilling as by comparing with the shilling of real free market exchange rate. At the same time it also means that the food produced in Tanzania is much more expensive than the free market price, consequently it is more interesting to buy the food from international market, and the Tanzanian government encouraged such practice because it believes that by allowing food to be imported, it reduces the internal food price (World Bank: 1981), and provides cheaper and more food for urban population.

Suppression of Agriculture Price

The state establishes Marketing Board, which controls the buying and selling of all agriculture products. This system permits the government to setup a purchase price which does not reflect the real market price. Hence the government can offers to the urban people low cost food and at the meantime makes further profit on the export oriented corps such as coffee. The profit made with the Marketing Board in theory will go to finance the growing urban industries and other social expenditure such as school and clinics. The idea sounds excellent, but technically, the government made a mistake. The members of the Marketing Board were chosen by the government, not by the farmers like in Kenya, those officials represent; therefore, the interest of government not farmers. In addition because members are not elected by the farmers, they are insensitive to their issues. In contrast, in the neighboring Kenya, the members of Marketing Board are farmer elite elected by farmers, they are responsible to their constituency, and therefore farmers’ economist interest is protected.
In Tanzania, government legally controls prices for basic foodstuffs; Nyerere argues that by doing so, people’s interest is been protected. For the farmers, regardless the price of international market they will always receive the same tariff for their products, and for urban population, food will always be cheap. Hence, the government monopolized the buying of crops nationwide, the prices are fixed at below real market price, and agriculture producers could not negotiate the price with the government officials. When the cost of local food becomes too high, subsidies are provided to the urban people by selling the import food at below landed coast. Yet, the fact is in addition of import food and international aide, urban people still do not have enough food!
The socialist government’s strategy was a to be self sufficient; however, ironically it could not even maintain a normal ability of food production. The collectivization policy in the agrarian world was to promote a social equality among farmers; hence, larger farmers were called as “Kulaks” or exploiters, and had land confiscated. If to produce more food is; therefore, an act of capitalism and subject to punition, no farmer is willing to produce any extra food. This is the reason of way Tanzania experienced food crisis and had to import food from international market, which exhausts its currency reserve.

I am still working on this section, PLEASE STAY TUNED

India Industrial Output Rebounds

Manufacturing has helped to drive the economyIndustrial production in India grew at its fastest annual rate in more than a decade in November, spurred by capital and consumer goods, figures show. India's industrial production, including output from factories and mines, rose 14.4% year-on-year, the Commerce and Industry Minister said. November's rise came as the government revised October's annual growth figure downwards to 4.4% from 6.2%.
Analysts say November's figures make an interest rate rise more likely.

Harish Menon, an economist with ING Vysya Bank said the figures were better than expected and "make the chances of a rate hike increase definitely" this is according to BBC.
Capital goods - which include machines, equipment and factories - saw a 25.3% year-on-year rise in November. "Clearly the manufacturing sector's strength has rebounded after the aberration of October," said Shubhada Rao, chief economist of Yes Bank.
Manufacturing production, which accounts for some 75% of industrial output, was just under 16% higher in November compared with a year earlier. Industrial production represents about a quarter of India's economic growth.

Like India, Tanzania has greater chance to make fully use of any kind of maunufacturing to help drive the economy. How much investment is directed toward this sector? I am looking into this as my research continues. Our country has focused on other things other than manufacturing industry giving foreign goods more market share. As of now, China and India are importing almost every kind of good to Tanzania. Is that to say Tanzania has no industries that can produce most consumer goods? Is this a good thing or another disaster of our time? Stay tuned and if you think otherwise, drop a line or so.
Thanks.

Source: BBCNEWS.

CITIGROUP TO PUMB MONEY IN AFRICA

CITIGROUP has decided to pumb money is the economy of Tanzania. This will have a great impact in the economy and we look forward to better Tanzania's economy. Please read bellow as according to BBC, you will learn more about CITIGROUP.

"Citigroup is the largest bank in the United StatesUS bank Citigroup has teamed up with private equity group CDC to invest at least $200m (£102m) in Africa.
Citigroup will invest $100m in its first African private equity fund.
The UK government-owned CDC group, formally called the Commonwealth Development Corporation, will match this amount.
The fund will provide opportunities for Africa's infrastructure, telecoms, manufacturing and energy industries, the CDC said.
"We believe that profitable investments in such areas are fundamental to creating wealth and alleviating poverty in growing economies," said CDC chief executive Richard Laing.
The investment brings CDC's total funds dedicated to Africa to more than $830m."

Source: http://news.bbc.co.uk/2/hi/business/6262905.stm

DEVELOPING COUNTRIES GOING HI-TECH

Poor nations push investment boom
By Steve Schifferes BBC News economics reporter

Developing countries are attracting hi-tech investment
There has been growing evidence of a shift in global business power, with foreign investment from developing countries now a major factor in the world economy.
In its latest report, the United Nations Conference on Trade and Development (Unctad) has confirmed the trend that has prompted speculation of billion dollar takeovers in Europe by firms including Indian steelmaker Tata.
According to Unctad, foreign direct investment from developing countries and transition economies, such as Russia and the former Soviet Union, rose 5% to $133bn (£70bn) in 2005 - with more and more firms in developing nations flexing their muscles and investing overseas.
The rise of transnational companies from developing economies is part of a profound shift in the world economy
Unctad World Investment Report
And it's not just one-way traffic.
Foreign investment is also flowing into developing countries, with $335bn - about one-third of the total - moving into poorer nations, far more than is provided by official aid flows.
Unctad estimates that investment to developing countries has nearly doubled in two years, from $175bn in 2003.
The boom is being fed by rapid economic growth, especially in China and India, high prices for raw materials, and the increasing liberalisation of the economy in many developing countries, which has made investment easier, it said.
As a result, it has been a bumper year for foreign investment, which has now recovered sharply from the slowdown which began in 2001.
Total FDI flows rose 29% to $916bn, driven by cross-border mergers in rich countries, Unctad said.
Highly concentrated
Overall, companies in developing countries now own $1.4 trillion in assets abroad, up from just $148bn in 1990.
EMERGING MARKET INVESTORS
Hong Kong: $470bn
British Virgin Islands $123bn
Russian Federation: $120bn
Singapore: $110bn
Taiwan: $97bn
Brazil: $71bn
China: $46bn
Malaysia: $44bn
South Africa: $38bn
Korea: $34bn
Total stock of FDI, 2005. Source: Unctad
These assets are highly concentrated, with just a few third world countries and a few companies owning a large percentage of these assets.
The biggest share is held by China, which accounts for one-third of the total.
Off-shore financial centres like the British Virgin Islands and Singapore are also important investors.
But there has been a sharp rise in overseas investment by countries rich in natural resources, such as Russia and South Africa, Unctad said.
Russia, for example, has invested widely in South-East Europe and the former Commonwealth of Independent States (CIS) members, not only in oil, gas and metals mining, but also in telecoms.
And direct investment doubled from oil-exporting states in West Asia such as Kuwait, Saudi Arabia and the UAE to $16bn in 2005, compared with $7bn in 2004.
However, the overall pattern over the past decade has the rise of Asia as a source of investment, overtaking Latin America, which has suffered a series of economic crises.
Sectors and companies
Developing countries have been increasing their investment in the service sector rather than manufacturing or primary production like mining or oil extraction, Unctad said.
These include projects in real estate, telecommunications and financial services.
In terms of manufacturing, the most important sectors are electronics, minerals, and rubber and plastics.
And much of developing country foreign direct investment goes to other countries in the same region, with the inter-relationships strongest in Asia.
Africa is growing in importance, Unctad said, and in terms of proportion of investment, 28% of its FDI comes from developing countries, twice the world average.
DEVELOPING COUNTRY FIRMS (ranked by foreign assets)
Hutchison Whampoa: $67bn
Petronas: $22bn
Singtel: $18bn
Samsung: $14bn
CITEC: $14bn
Cemex: $13bn
LG Electronics: $10bn
China Ocean Shipping: $9bn
Petroleos de Venezuela: $8bn
Jardin Matheson: $7bn
Developing country firms, ranked by foreign assets, 2004 Source: Unctad
These trends can also been seen by looking at the biggest companies in the developing world in terms of foreign assets.
Out of the top 100 leading firms in emerging markets, 35 are from China or Hong Kong, and 15 from Taiwan, Unctad said.
Among the leading outward investors are the Malaysian and Venezuelan oil companies, two Korean electronics companies, and Singapore's leading telecoms company.
However, four of the top 10 are Chinese-owned, including Hutchison Whampoa (which also has large telecoms interests), Jardine Matheson, CITEC and China Ocean Shipping.
Overall, the top 50 developing country transnational companies own $1.1 trillion in assets (of which $336bn are overseas), employ 3.3 million people, and have sales $738bn per year.
Inward flows
The flow of money to developing countries has also been increasing, with large transnational corporations increasingly finding them attractive investment destinations.
Again, such flows have been concentrated in a few countries and a few regions, with Asia receiving the bulk of foreign direct investment.
China continued to be the largest recipient of FDI, with $72bn in 2005, followed by Hong Kong with $36bn and Singapore with $20bn.
The top five developing countries (which also include Mexico and Brazil) accounted for nearly half of all foreign investment.
But there was strong growth in investment flows to South Asia, with a rise of 21% to India, 50% to Bangladesh, and 95% to Pakistan.
The Asian region was also attracting an increasing proportion of hi-tech and service sector investments.
Africa also had a proportionately large increase in investment, with $31bn invested in 2005, compared with $17bn the previous year, driven by higher commodity and oil prices.
But Africa still represented only 3% of the world total of foreign direct investment, Unctad said.
This is a problem for the world economy, whose development has still proven to be highly uneven, even though companies from the south have tended to invest more in developing countries.
However, as the Unctad report notes, "the rise of transnational companies from developing economies is part of a profound shift in the world economy."
In other words, rich countries are facing a shrinking share of global growth, trade and investment, while the rising economic power of Asia is now the central fact in the world political economy.
Source: http://news.bbc.co.uk/2/hi/business/6054866.stm