Move on the Tirai Bamboo nation: Any lessons for other laggards? Muyanja Ssenyonga

It was some five or so years ago, when the honorable Dosen of mine, basking in a wealth of knowledge and accomplishment declare in a succinct sort of way, that, what Negara Bamboo is doing is “jual diri”. This was in reference to the openness to foreign investment that was in high gear then and according to most reliable statistics sees no signs of abating. It was inexcusable for a country to open its door so open to foreigners, who as the knowledgeable Pak Dosen admonished, have their interests, which in most cases are not those of the host, China in that case. The fury was also obvious as if China was his second second country either by admiration or history, moist likely both. Having commuted from lecture room to lecture room, as he is wont on a normal working day, he was apparently in mood to castigate the policy followed by Deng Xiao ping. Was he bought? Is anything wrong with his wits to do such a thing? Words can hardly describe the stern face my honorable was wearing that day. Yet despite such remonstrations, you can hardly imagine the surprise I got recently when the same person, gave an assignment to one of his classes, to write about the measures China has taken to make it a favorite for foreign direct investment, which Indonesia has not done!   Surely, that is an about turn all right, if ever there was one! It is really difficult for an individual however well meaning his intentions are to even attempt to read another’ mind, which is not what am about to do here, knowing the implications thereof. It is really mind boggling to change ones attitude from castigation to caressing; even in such times when the sight of more remunerative opportunities many an opportunist to switch sides in accordance with their evaluation of which side brings in more material rewards than the other!

Taking a bird eye’s view, the lessons the 1.3 billion-population nation has for many of us in the developing world are numerous.

It is buzzword to economists, yet the real meaning to it has been given another dimension by the developments in China- taking risk at a time when most are wary brings in even more than higher return.  Being an avowed communist state one would have thought China would prefer pursuing populist policies like entrenching state control in economic activities, tightening its stranglehold on the development heights of the economy by widening the already bloated civil officialdom through a cacophony of rules and regulations. State control in politics, as the parlance goes, would have been expected to be reflected in its economic policies: no individual ownership of property, which would rule out Entrepreneurship, innovation, venture capital, and obviously foreign investment. State control over the main resource land would have been de jure. Yet what does China do despite a lot of criticism from a variety of sources at the time: carry out economic reforms, which got in top gear in late 1970s, affecting agriculture and landownership to begin with. Land ownership was also enfranchised as it were, which increased farmers’ incentives   to produce, as some output became a bonus because of going beyond the state-set targets. The bottom line of this was food self-sufficiency, which many a developing nation today have fought so hard to achieve to no avail.

Reforms were introduced in education, which among other things encouraged the teaching on English at even lower levels. The importance of this was to create a workforce that is literate in English, which is not only the language of business but technology as well. One of the factors that Companies that relocate from other developing countries such as Mexico to China give as their reasons is not only cheap wages, but also hardworking and educated work force. It is such a workforce that has attracted many companies not only to  locate their production plants in China with  also their research facilities putting China in the prime position as third only to  USA and Russia win terms of number of researchers. So as more production units locate in China, many of the products we buy are going to have a Chinese touch as it were. Which makes the current economic growth sustainable. Another vital leaf to borrow from China, which is no longer possible given the changed times of today thanks to the onset of WTO regime, was the form in which investment was allowed in China.  Rapid relegation of the state from direct involvement in economic activities would have led to such cataclysm, the magnitude of which events in Russia under Yelsin would perhaps have appeared more like a cocktail party than social convulsion. Initially China held its cards well, knowing well that there is no producer of a good or service in the world who does not eye the 1.3 billion people market with   esteem, so tough terms were set for investing in China. As most economic activities were under state control, investors were obliged to set up joint ventures with domestic companies. So initial investment was in forms of joint ventures. The results, technology transfer was faster, moreover willingly which made industrial espionage unnecessary. Eventually with tighter competition from other potential Investment nations, China gave in to 100 percent ownership, which increased the flood of investors into the nation making it number one as the most favorite destination of FDI the world over.  It should be remembered investment initially was on China’s terms because companies feared the prospect of being late comers in the boom, that China was expected to produce in the long term!

An equally important, but often ignored factor is China’s decision to keep its renmimbi out of speculators’ hand by simply not making it convertible and having grip on its rate with other currencies. Thus, despite its contribution to world trade today, Chinese currency is not quoted on money markets because it is not traded. The decision has sheltered the Chinese economy from fluctuations that convertible currencies cause. Perhaps, it was the underlying reason that drove Mahathir to reduce the availability of Ringgit in foreign hands as one of the measures taken to put brakes to the then raging 1997 economic crisis. Criticisms are still being vented, but Aim assuring you that many investors are attracted to the China economy, by among others, the stability of its currency. Currency stability is good for making projections, evaluations of loss and gain, which is indeed what businesses are there for, aren’t they? Moreover, the Renmimbi is not only inconvertible, but it is also according to critics) deliberately undervalued to increase the competitiveness of goods produced in China compared to those produced in other countries. Of course the arguments are made with the tongue under cheek because, it is not only Chinese companies that benefit but also any company that has production operations in the China and sells goods abroad, what a strategy!  Add on that the still tight control on working conditions; successful family planning campaigns, which many decried as inhuman at their heights;  anticorruption campaigns, despite statements that decry such efforts as leaving large fish intact;  and national unity and security, all good for business. Of course, China like other developing nations wants to share its place in the sun, which can only be done by investing in huge populist programs like space program, which has left neighboring Japan, wondering whether its stance in that area was still tenable considering developments across the sea. Yet it is not Japanese but also USA policy makers who are forced with the unenviable prospect of allowing another nation in the ranks of not only OECD but also this time unlike with the case of Japan, a formidable competitor in the consumables but also breathing in their faces with sophisticated weaponry! An achievement they have ironically helped her attain!

Thus, despite worries of more than 170 million ‘roving’ unemployed people in China, increasing income disparity between the Coastal East and South and inland, rural and urban, China has a lot to offer. Yet it is doubtable whether achievements made by China can be emulated. The changed economic conditions today do not auger well for emulation of what China has done, which is good news for her, her reign will stay long. It is not easy for companies to agree to transfer their technology in such a way to a country with a smaller potential market than China for example. Its position on the Security Council accords her the position to offer political concessions to the authorities in the international economic community. This is trump card that China ha splayed and will continue to do so, much to the progress of her people and the have-nots of the world.     .