Land of the refloating economy

By Gamal Nkrumah

The international financial crisis that started in Southeast Asia has intensified competitive pressures and sparked off a process of consolidation and protectionism in the North. Meanwhile, widening income disparities between the North and the South have reached alarming dimensions. What can be done? Japanese officials and their African counterparts are the latest contenders trying to come up with some practical answers.

Japan's Association of Africa for Economy and Development (AFRECO), founded in 1969 under the auspices of Japan's Ministry of Foreign affairs, is stepping up its plans to revamp the continent's economies.

Africans expect the Japanese to increase their investment on the continent, which totalled $5 billion in 1996.

One might wonder if Japan is in a position to help when it is itself floundering in the global financial quagmire.

Yet Africa is turning to Japan at a time when Western countries are sceptical about Japan's willingness to apply fiscal stimuli and aggressive monetary expansion to boost domestic consumption. Most countries of the South believe that Japan must act fast to open its markets. Antipathy towards the West in general and disenchantment with the IMF and World Bank in particular, has found a voice in the growing enthusiasm in Africa for Japan. Still, many Africans view Japan as a curious corporate animal, albeit one with no colonial history in Africa. "Japan has the resources... what [the Japanese] need is decision and action," American trade representative Charlene Barshefsky said recently.

The first AFRECO Development Forum, whose major concern is the promotion of regional economic integration in Africa, was held in Tokyo in March and April 1998. "African economic integration is widely seen in Japan as the most important means of enhancing long-term African economic growth," said Safwat Ayub, Egypt's ambassador to Zambia and its representative to the Common Market for Eastern and Southern Africa (COMESA).

AFRECO insists that if African countries had pursued economic integration with the same enthusiasm that they are now displaying for privatisation and economic liberalisation, the continent would have been in better shape than it is today.

Ambassador Ayub, who was asked by the Japanese to present a full report on the AFRECO Development Forum, told Al-Ahram Weekly, "Japanese officials feel that even though the political will and economic need to set up the African Economic Community exist, technical staff in various African countries, sub-regional and regional institutions acutely lack the knowledge and expertise necessary to implement their programmes."

Curiously, few feel that a closer association between Africa and Japan risks dragging the continent further down into the swamp.

Thus many African economists and government officials are heading to Japan next week to attend the Tokyo International Conference on African Development (TICAD). Topping TICAD's agenda will be the creation of an African Training Centre for Regional Integration.

This fresh perspective on African development and enthusiasm for economic integration on the continent sharply contrasts with the attitudes of Western financial institutions. African countries have long complained that a critical examination of the role of the IMF and World Bank is long overdue.

However, the IMF has in turn strongly criticised international lenders for dabbling primarily in risky emerging markets.

So can the Japanese banks that piled into Southeast Asia now turn to Africa? Prudence begins at home. Last month, the new Japanese prime minister, Keizo Obuchi, vowed in his first news conference that he would tackle the country's economic woes "boldly and speedily."

But, what about Japanese development assistance to poorer countries? Japan is the world's second largest economy and by far Asia's biggest. However, given its economic crisis, would there be room for increased Japanese development aid to African, Asian and Latin American countries?

As African officials make preparations for TICAD, their eyes are inevitably turned towards the 78-year-old veteran former Premier Kiichi Miyazawa, now Japan's finance minister. Africans hope that Miyazawa will deal decisively with Japan's recession and bad-loan crisis.

But expectations seem to have been raised too high too soon. Miyazawa, one of the architects of the plan drafted under Hashimoto's premiership to set right the Japanese banking system, cautioned restraint. "The market is cleverer than the government and things can be left to the market," he told reporters in Tokyo last week.

The mass circulation newspaper Yomiuri Shimbum warned of a race against time for Japan's economic survival and gave Miyazawa 100 days to produce "tangible results" and prevent a backlash from markets in Japan and overseas. "Because domestic and overseas markets have high expectations of Miyazawa as the 'last trump card,' a failure on his part to produce tangible results would provoke great disappointment and repercussions, further aggravating the situation," the paper said. Other influential Japanese newspapers were equally blunt. The Asahi Shimbun challenged Japan's ruling Liberal Democratic Party (LDP) to present the nation with a "clear vision of reform."

Today, stabilisation of the financial sector and boosting consumption are the buzz words in Japanese papers. "If the economic crisis allowed to continue unabated for long, Japan itself will collapse," the country's leading economic daily, the Nihon Keizai Shimbun, warned recently. "What [the LDP government] should do now is to refloat the economy, dispose of bad loans and restore confidence in the financial system."

But for Africans and Westerners alike, the big hope is for Japanese leaders to inject money into consumption, which has plummeted since Japan raised its sales tax from three to five per cent in April 1997. All agree that swift action to haul Japan out of recession is necessary.

As for Africa, it is to be hoped that a reversal of the country's economic misfortunes will facilitate Japanese cooperation in reducing the continent's debt burden. Africa currently spends $33 billion on servicing its external debt.

It is also to be hoped that a Japanese revival will lead to greater market access for African exports. But these hopes all depend on a lot of 'ifs'.