GREG MILLS and NICK SEGAL

PICK up an English-language newspaper in Vietnam and several pages will include detailed listings of the scale and type of foreign direct investment by country and sector. There are also lists of possible private sector investment schemes in public infrastructure projects.

Vietnam remains a single-party, Communist Party-dominated state. But, through its economic policy, its “collective leadership” is little different from that of the capitalist Singapore. The common threads? There are several, but there are three to highlight here.

One is that both governments have been driven by the imperative of raising the living standards of the whole population. And the populace has evidently been willing to forego some of its rights to help make it happen.

The second is that these two Asian governments, among others, have focused as much on the effective implementation of policy as on its formulation. Consequently, they have paid intensive attention to building the institutions essential to the efficient functioning of a competitive state and to the delivery of quality services to its people.

Third, the two governments have been geared towards the needs of the private sector, since 1965 in the case of Singapore and since 1986 in that of Vietnam. The underpinning philosophy has been, within a framework of state-led economic development, to attract private (mostly foreign) investment and to liberate entrepreneurship through private ownership. This combination has resulted in sustained economic growth, the precondition for social development and for individual prosperity. The private sector has been the engine of growth, and has been recognized as such by government and wider society.

Hanoi put dogma aside in the interests of its 85-million people. After unification in 1976, Soviet-style policies were economically disastrous, leading to hyperinflation, high unemployment and worsening poverty. Ten years later, a deliberate change in land ownership enabled Vietnam to turn around from a rice importer to exporter. This, along with a commitment to attract foreign direct investment, has seen the country enjoy 20 years of nearly 8% average annual growth, lifting 50-million people out of poverty.

Can SA be as pragmatic and professional?

Doubtful, at present. Despite the many engagements between the powers that be in government, the ruling party and the business sector, there remains a high degree of economic illiteracy in forming public policy.

In the absence of an endowment of oil or other natural resources, a country’s growth is dependent on the competitiveness of its foreign trading commercial sector, and this in turn is dependent on the competitiveness of its human capital, its physical infrastructure, its regulatory environment and so on.

Our government has seemingly yet to appreciate that if it wishes to enhance the material wellbeing of its people it has to give pri-macy to investing in our productive capacity, including creating the space and enabling conditions for the private sector to play its full role. It includes, too, ensuring effective government, at all levels. But there is scant sign of such economic realism. The preoccupation in SA’s government seems to be with policy co-ordination and with the creation of a “planning commission”. How such a commission will address the systemic problems of government dysfunctionality, and whether it will exert any influence on the prevailing flawed economic philosophy, is far from evident.

We must recognize that the economic pragmatism that pervades east Asia is now less likely elsewhere, as a result of the global economic crisis. Publicly, the left has no need to hide its glee at the effective nationalization of major US and UK financial institutions.

Amid the schadenfreude expressed at economic woes elsewhere, it is forgotten that the US economy is the world’s largest. We should not forget that east Asians have been the beneficiaries of around 5% per capita annual growth for four decades. Only a fool wouldn’t take that any day compared with Africa’s past four years of 5% growth.

No doubt the years of global economic recovery will be difficult. Aspects of the capitalist model will change. Among emerging markets, there will need to be a greater focus on developing domestic markets rather than only on export-led growth.

But it would be self-defeating to dismiss the model which brought such prosperity to developing and developed economies alike over several decades — in which the private sector has been the engine of growth. If we are to prosper, SA’s economic policy leaders, in both the government and business sectors, must recognise the centrality of this assertion.

  Dr Mills heads the Brenthurst Foundation. Dr Segal is an independent consultant.

Home | Contact us | Links | Archives | Search