An Exploration for Adaptation and Benefit Maximisation
By Ernest L. Molua
Globalization is multidimensional, affecting all aspects of life—economic, cultural, environmental, and social—as well as relations between governments and nations on the five continents. Globalization is characterized, in particular, by an intensification of cross-border trade and increased financial and foreign direct investment flows, promoted by rapid liberalization and advances in information technologies. For many countries, this global process has made the pursuit of development and maintenance of internal and external stability very difficult and delicate tasks. On the one hand, globalization holds out to participants the promise of growth in trade and international investment; on the other hand, it heightens the risks of instability and marginalization.
Globalization began gaining momentum in the 1960s when businesses in search of larger markets expanded their reach and interests beyond national borders. Four major developments have defined and strengthened this process:
(i) the expansion of the universe of economic activity beyond the nation-state; (ii) the liberalization of international trade; (iii) the growing importance of international financial flows; and (iv) the growth of information and communication technologies. These developments have almost completely refashioned the world economic system.
2. Impact of Globalization
Although globalization has helped increase growth and wealth in recent years, it has not done so for all continents and all countries. In the least developed countries, and on the African continent in particular, a worsening of existing imbalances has impeded development and aggravated poverty. The marginalization of these countries is reflected in their small share of world trade (barely 2 percent), output (not much higher), and foreign investment (1 percent).
For countries like Cameroon, the situation is exacerbated by unsustainable external debt and by unfulfilled promises of official assistance at a time when the country cannot continue its reforms and development efforts without financial support. Although the countries of the Organization for Economic Cooperation and Development (OECD) have committed the equivalent of 0.7 percent of their GDP to official development assistance, at present, average disbursements to countries like Cameroon are a trickle.
Given these facts, we should examine the different facets of globalization and assess its benefits and risks in light of the recent economic and financial crises that have shaken various parts of the world and diverse economies, from the very rich to the very poor. This approach should improve Cameroon's chances of successfully integrating with the world economy.
Despite a sometimes unfavorable international environment, marked by climatic contraints that have affected northern regions of the country, Cameroon has, on the whole, recorded satisfactory rates of growth in recent years. The country recorded growth of 5 percent or more in 1998, and averaged over 3 percent in the last ten years; and the country is working to improve per capita GNP significantly while controlling inflation. However, this performance has been achieved at the price of costly structural reforms that have often negatively affected the most vulnerable segments of society.
Moreover, Cameroon is still far from reaching its goal of an annual sustained growth rate above 7 percent a year, which is essential if it is to achieve the quality of life of other developing countries. It is not impossible for Cameroon to accomplish this goal, but it can do so only by integrating with the world economy and by accelerating reforms, with two fundamental objectives in mind:
(i) creating the best possible conditions for private investment by promoting greater openness in domestic and foreign trade; and
(ii) making the economy more efficient by redefining the role of the state, reforming the civil service so as to improve the business climate, and introducing a transparent legal and regulatory framework that will encourage private investment. Governments should focus on social development, particularly health and education, to make up the large deficit that the country has in this area.
The financial sector, an essential channel for implementing and ensuring the success of these reforms, must be included in any reform program. The consolidation, restructuring, and modernization of the banking sector and the development of capital markets and financial institutions are both important. However, past experience suggests that, to be successful, reforms must be adapted to each country's specific economic and social characteristics as well as to its priorities and level of development.
3. Role of Development Partners
While Cameroon may bear primary responsibility for achieving the reform and development objectives, international organizations and the international community must support Cameroon's efforts. If the clear desire of our country to pull itself up and become part of the world economy is combined with greater determination on the part of the industrial countries to honor their commitments and open their markets, with the support of regional and international organizations, we will be able to meet the challenges of increasing growth and reducing poverty and thus lay the foundation for political, economic, and social stability.
As a first step, the industrial countries could support Cameroon's efforts by allowing the country's exports free access to their markets, which would enable the heavily indebted countries in particular to better integrate with the global trading system. The abolition of trade barriers, according to some studies, could yield income flows that are three times the amount of the external aid provided to the developing countries. This conclusion leads us to a crucial point about the availability of resources, which have thus far been insufficient for Cameroon and many African countries: relief from the burden of their external debt, through cancellation or rescheduling, would enable these countries to save resources that could be allocated to productive investment, which would generate growth and improve social justice.
These same partners could provide additional support by promoting flows of private capital to Cameroon, especially foreign direct investment (FDI), which instead of generating debt, creates new jobs and often brings new technologies to the country. Indeed, if Cameroon is to raise the level of its technological development, it will need to establish partnerships with the advanced industrial countries in the areas of natural and mineral resources. Through these partnerships, know-how would be transferred from the advanced economies to the country and provide value added that would position the country's products to meet global demand and compete internationally. Finally, Cameroon's partners could provide support by honoring their existing financial commitments to the reduction of poverty.
Which Way Forward?
We must not overlook the efforts of the institutions that safeguard the international monetary and financial system to contain the risks of globalization while improving the living standards of all peoples and increasing their economic opportunities. The overarching objective of these institutions is to achieve sound, sustainable growth without major shocks and, thus, to reduce poverty. The IMF and the World Bank, in particular, must continue to work together to implement a participatory poverty reduction strategy. They must go beyond promoting macroeconomic discipline, liberalization, and limitation of governments' role in the economy to pressing for reforms that will strengthen the institutional environment—particularly the rules of the market, the rule of law, and good governance—so as to achieve a convergence between the legal frameworks and institutions of the developing and industrial countries. International institutions must work together toward the single objective of making globalization a process of integration and not one of exclusion. The recent financial upheavals in Southeast Asia, Latin America, and Russia all illustrate the pressing need to reinforce the consistency between the programs of these different institutions.
Finally, regional integration and increased economic cooperation are also important for ensuring Cameroon's integration with the global economy. Indeed, at a time when globalization is predominant and regional groupings, such as CEMAC and ECOWAS, whether political or economic, are the principal influential forces on the world scene, it is up to Cameroon's leaders to further enhance these mechanisms of integration, in particular by establishing vertical and horizontal links across the continent. Larger free trade zones and joint development projects are two examples.
Regional organizations such as CEMAC and ECOWAS must be viewed as instruments that can facilitate the integration of Cameroon with the regional and world economy by improving Cameroonian producers' access to the regional markets. Cameroon must neither limit itself to protesting nor become protectionist fortresses against globalization, but rather must develop programs and strategies to further consolidate regional cohesion. © The Entrepreneur Newspaper 2009. All Rights Reserved