The Sector Perspective
Sector expertise ... specialization
Sector expertise is very important. Each sector uses a range of technologies that
require considerable knowledge, training and experience to use well. All
products and services should be accessible everywhere they are needed.
Expertise in any sector should be accessible if needed. However, in the poor
“south” only a limited amount of sector expertise is available, and a lot of things
that ought to be easy to do never get done. From a community perspective there
needs to be the sector expertise that is needed to improve the community. There
are many sectors that might be needed ... very much depending on the nature of
the community and what the community wants to make as a priority.
Hundreds of sectors and sub-sectors
There are hundreds of sectors and sub-sectors. Many organizations that have
been associated with international relief and development are organized along
sector lines and have a single sector focus which is good for the organization
and has been welcomed by donors and governments ... but a poor use of
resources for successful sustainable development.
Most governments have ministries that are responsible for sectors: Ministry of
Education, Ministry of Health, Ministry of Transport, etc.
The United Nations has established a range of organizations to focus on
different sectors: FAO for agriculture and fisheries, WHO for health and
UNICEF that has a focus on children's health, UNIDO for the industrial sector
and UNESCO for education, science and culture. There are hundreds of UN
agencies and offices with focus on specific parts of the global economy and
society.
Each sector has its own technologies and best practices. But in the developing
“south” the success of one sector is often constrained by the limits of some other
sector. This argues, therefore, for a relief and development approach that ensure
that there is a multi-sector involvement. There is little consensus about what is
the best approach to making relief and development more effective and getting
more rapid progress.
A sector is not tied to any location, though what is best in a sector can change
from place to place. My experience has been that single sector intervention in
almost any community is likely to fail, simply because critical constraints are
being addressed. One sector can improve, but all the other constraints remain in
place. Nothing is optimum until all the constraints have been addressed.
Overview listing of main sectors
This is perhaps not a complete list of sectors, but it is enough to give an idea of
how many sectors are involved in making society work in a reasonable manner.
The relief and development sector will succeed when all the sectors are able to
function appropriately in any place in the world. The following list is in
alphabetical order.
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Sector
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Note
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Academic sector
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Potentially a source of a lot of knowledge, but
much of the work is academic without being
valuable.
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Agriculture sector.
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Not widely acknowledged any more, but a key
driver of prosperity in the “north” and very
efficient. In the “south” in contrast, too much of
agriculture remains little better than subsistence.
Banking and finance sector. Hugely profitable, but services essential to the
“south” are not available because the profits not
big enough.
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Construction sector.
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Local construction companies ought to be a driver
of local economic performance, but they are often
displaced by foreign contractors. Quality needs to
be professionally controlled.
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Education sector.
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The education sector is critical to the future
performance of the economy, but badly
underfunded and good education is far from
being accessible to all.
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Employment or jobs.
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Create employment and jobs, and a lot of relief
and development problems go away. This ought
to be a major priority.
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Energy sector.
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The supply of energy to the “south” is poor and a
constraint, while raw energy sources in the
“south” are tremendously rich and exploited
almost totally for foreign benefit and some small
local elite.
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Enterprise sector.
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A simple way to describe the private for profit
organizations that can be the driver of sustainable
socio-economic progress.
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Financial Sector
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The financial sector is an important driver of economic performance. It has been the dominant force in decision making related to the allocation of resources for many decades.
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Fisheries sector.
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A potentially valuable sector in the “south”, but
often the bulk of the value is exported by
commercial fisheries agreements that are bad for
the “south”
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Governance and administration sector.
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This ought to be facilitating socio-economic
progress, but too much is constraining progress.
Not enough accounting and accountability.
Health sector. The health sector is critical to the health of the
population, and seriously underfunded in the face
of some pandemic health issues.
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Housing sector.
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Housing is a sector that can be a useful driver of
economic progress. There is a big need for
affordable housing, especially in urban areas.
Infrastructure sector. Getting infrastructure upgraded can be a driver of
the economy, but only if it is done with some
understanding of the dynamics of development
and the damage caused by economic distortion.
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International trade sector.
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There needs to be a lot more of fair (equitable)
trade than merely free trade.
Legal and justice sector. Too often underfunded and unable to function
well. Not well integrated with traditional systems
of justice.
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Luxury sector.
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This sector has a high profit derived from the
huge disposable income of people with great
wealth. Mainly involved with obscenely expensive
baubles and toys.
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Manufacturing sector.
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The sector can be a valuable part of the economic
mix. It is not going to be success except in places
that commit to an efficient economic environment.
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Military and security sector.
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More sunlight is needed in connection with
military equipment and supplies and how they are
used.
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Mining sector.
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A sector that ought to produce huge value for the
“south”, but it needs work to allow it to achieve
value for the “south”
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Natural resources sector.
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Natural resources of all sorts are abundant in the
“south” but not exploited much for the benefit of
the “south” but mainly for the benefit of foreign
investors and their foreign staff.
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Productive sector.
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These sectors include mining, manufacturing,
agriculture, fisheries, etc. that make things needed
for society locally or internationally.
Professional sector. The professional sector is not central to relief and
development efforts, yet it is one of the key ways
that an economy becomes self-sufficient.
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Public sector, private sector.
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If it is government it is the public sector, if it is
not, it is the private sector. The private sector has both 'for-profit' and 'not-for-profit' segments with very different goals and operations.
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Relief and development sector.
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A shorthand to cover all the activities of the
official relief and development organizations,
governments, NGOs, etc. that work on disaster
relief and socio-economic progress.
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Retail sector.
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Look at the retail sector and a lot can be learned
about the state of socio-economic progress.
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Social sectors.
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These sectors include health, education, etc. that
are needed to improve the status of the
population.
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Telecom sector.
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The telecom sector has evolved a lot in the recent
years, and change continues. Getting relief and
development friendly telecom is critical to success.
Tourism sector. Tourism has great potential for the “south” but it
needs management and development of
destinations.
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Transport sector.
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Transport is part of the infrastructure that is in
great disrepair in the “south” and costly to the
society.
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Wholesale and distribution sector.
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Wholesale and distribution is highly efficient in the “north” and a tremendous constraint in the “south”.
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Multi-sector mix
A community needs a multi-sector mix. This mix of sectors is important. People
have said over and over again that they will not work in remote rural areas
because something they need is not available. It can be health services, or
schooling or the social situation ... but it emphasizes starkly the importance of
the totality of sector and function in order to have success.
Linkages between sectors
Development succeeds when all the key linkages are in place. It is possible to
understand the failure of development through an understanding of inter-sector
linkages. This program has been designed to take advantage of the potential of
the economy with the appropriate linkages in place. There are therefore
initiatives in a variety of sectors, short term, medium term and long term, and
through a variety of implementing mechanisms.
When I was first engaged to work in relief and development planning I worked
with “projects” and I worked with “sectors”. With relief and development
results so bad, it is clear that not just one but many things needs to be fixed, that
a single sector approach to project design is insufficient. Even if a single sector
project is well designed, a project needs performance in many other sectors in
order to be successful.
Multi-Sector Linkage
My own experience operating in the “south” showed me very tangibly
how much inter-sectoral dependence there is.
In the “north”, when something goes wrong, the solution is easy. Use
the telephone to call up a supplier, pay money and almost instantly get
the goods or services. Someone operating fishing trawlers in the USA
could get all the maintenance needed simply by telephoning. Spare parts
are easy to get, and do not have to be sourced from half way round the
world.
I did not realize how much this is taken for granted until I became
involved with running fishing trawlers based around the world in the
“south” ... in Africa, the Middle East and Latin America ... and
frequently a long way from the big cities. We needed to be able to do
everything for ourselves. We had water wells for water, electric
generators for electricity, maintenance technicians and spare parts for
everything electronic or mechanical, and took care of absolutely
everything ourselves. When a trawler needed maintenance, we did it all
ourselves.
But while our main operations were the fisheries sector, keeping
ourselves operating required support from every other sector.
The following table sets out the main sector initiatives that are included in the
program for implementation through the government and the private sector.
Table: Inter-Sector Linkages
I ... Government and social sectors
Systems and Processes
Training
Organization
Employment
Materials and supplies
Equipment
Financial resources
Know-how
GOVERNMENT AND SOCIAL SECTORS
Administrative capacity x x x x x x x x
Education and Training x x x x x x x x
Health x x x x x x x x
Security, police, judiciary, prisons x x x x x x x x
Food security x x
Economic security x x
Government revenue, public finance x x
Trade and investment environment x x x x x
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Chapter 17 - Sector Perspective
II ... Infrastructure
Systems and Processes
Training
Organization
Employment
Materials and supplies
Equipment
Financial resources
Know-how
INFRASTRUCTURE
Water x x x x x x x x
Roads x x x x x x x x
Cargo and fishing ports x x x x x x x x
Airports x x x x x x x x
Housing x x x x x x x x
De-Mining x x x x x x x x
Energy x x x x x x x x
Environment x x x x x x x x
Communications x x x x x x x x
Banking and financial services x x x x x x x x
Knowledge dimension of development x x x x x x x x
III ... Income generation and employment
Systems and Processes
Training
Organization
Employment
Materials and supplies
Equipment
Financial resources
Know-how
INCOME GENERATION AND EMPLOYMENT
Private professional sector x x x x x x x x
Livestock and range management x x x x x x x x
Crops and other agriculture x x x x x x x x
Fisheries x x x x x x x x
Construction x x x x x x x x
Maintenance workshops x x x x x x x x
Agro-Industry and Manufacturing x x x x x x x x
Minerals and Mining x x x x x x x x
Transport x x x x x x x x
Wholesale trade x x x x x x x x
Services, retail and petty trade x x x x x x x x
Hotels and restaurants x x x x x x x x
Tourism x x x x x x x x
The previous tables show how many sectors and linkages there are.
Because of
complexity in the linkages it is difficult to optimize with formal “planning”. The
process is simply too complex, and the variables too many. The invisible hand of
the market mechanism will make order out of this apparent chaos and
complexity.
Every community in the area knows what it needs to better the
community. This knowledge will drive the process if it is allowed to. The
program has embraced the concept of “participation” because participation
allows families and communities to decide themselves how resources can best
be used.
Different Sector Views
Public and Private Sectors
Private sector
The private sector has proven to be a powerful engine for wealth creation, for
innovation and for economic efficiency. On its own, however, the private sector
can succumb to a culture of greed, arrogance and entitlement.
The private sector and its associated enterprise and “can do” attitude is a critical
element in making relief and development a success. Private enterprise can
organize and run production sectors so that there is the maximum of value
adding ... the public in the broadest sense must see to it that the value adding is
used in a fair, equitable and just manner.
The private sector is everything else ... and especially the corporate for profit
sector, private philanthropic organizations, and not for profit organizations.
Some health and education establishments are in the private sector.
Public sector
The public sector is owned and operated by the government. In many countries
a lot of social services are operated by the government, including education and
health services. In countries embracing socialism, the government also
nationalized major production industries and operated them in the public sector.
Enterprise Sector ... Social Sector
Enterprise sector
The “for profit” organizations are sometimes referred to as the enterprise sector.
These organizations have been vitally important in the “north”, and especially
in the United States, in building wealth. The incentives in the enterprise sector
are all favoring the use of least resources for maximum revenue ... the least cost
most value idea that is essential to economic value creation.
The enterprise sector in the “south” is also very important and accounts for
almost all value adding activity. Because the “south” economies are weak, and
failing, if not failed, the enterprise sector is struggling. Where most of the
financial resources are controlled by government and indirectly by donors and
the international financial community, the enterprise sector is sidelined.
Getting the enterprise sector to grow and be profitable has multiple benefits
including the multiplier impact of more jobs and the impact of tangible value
adding in the community. A healthy enterprise sector attracts other investment,
and encourages other entrepreneurs to become involved.
Social Sector
The social sector comprises everything that is neither a for-profit business nor a government entity.
Employment
Employment ... jobs is a critical component of socio-economic success. More jobs
usually means a more successful economic situation.
Formal and Informal Sectors
Formal Sectors
The formal sector is probably most easily described as everything that is
incorporated or registered, as well as what is in the public sector, the
government organizations, agencies and structures.
The formal sector is, generally speaking, fully monetized and is included in most
of the economic statistics that are compiled. The formal sector has payrolls, pays
taxes, and buys products and services in a regular manner recognized by law.
Formal employment is possible in both the
private and public sector, in the productive sectors and in the social sectors.
Many people only think in terms of the formal sector.
Informal Sector
Jobs can be in both the formal and the informal sector. While most of the higher wage
paying jobs are in the formal sector, there is a lot of employment in the informal sector.
A job is the most value to the economy when the cost to the employer is lower
than the value accruing to the organization, and more valuable again when the
work is of value to society as a whole.
But there is an informal sector as well. In poor parts of the “south” the informal
sector is the only sector that operates ... it is everyone doing just a little to make
the local economy function as best it can. Often the best is not very good. In the
informal sector nothing is incorporated and nothing is registered. There may be
some exchange of cash, but there is also simple barter and the exchange of goods
and services in kind.
In the poor “south” the informal sector can be bigger than the formal sector, not
only in terms of the number of people engaged in it, but in terms of the
economic product associated with it. Even so, the informal sector does not
usually appear in the economic statistics that are compiled, and to the extent that
it does, the methodology for assessing its scale and its value may not be
particularly well conceived.
Social, Evironmental and Economic Sectors
Social Sectors
The social sector comprises activities like education, health, support services for
the vulnerable, and so forth. Social services have been a major focus for the relief
and development sector, as well as for left leaning governments that have a
commitment to social justice.
Expenditures in the social sectors are very valuable because they contribute
significantly to quality of life, and they also serve as an investment in the future.
But success in the social sectors does not translate directly into economic
progress ... it merely removes a major constraint to economic progress. Without
opportunity in the productive sector success in the social sector is for nought.
Environmental Sectors
The environment has been ignored in most economic thinking up to the present time, yet it is really the essential foundation for everything on planet earth. This has to change in a very fundamental way, both substantially and rapidly.
Economic Sectors
There are many sectors that make up the productive sector: agriculture,
fisheries, manufacturing, mining, energy exploitation, forestry, tourism,
transport, etc.
All of the activities in the productive sector transform input resources into
something of more value ... when this is done in a for-profit organization the
outputs are goods and services that are sold and a profit for the organization.
These are value creating operations ... and to the extent that there is tangible
value creation in the productive sector, there is value that can be used for social
value creation on the social sector.
Relief and Development Sector
Humanitarian relief
The relief and development sector is the subject of this book. But success in the
performance of the relief and development sector depends as much as anything
on the relief and development sector doing less, and all the other sectors doing
more. We have argued in this book that the relief and development sector has
performance badly, and cannot reform itself to be successful ... and that
therefore there needs to be improvement in other sectors to improve socioeconomic progress.
But when that happens, there are very valuable roles for many of the institutions
of the relief and development sector.
Development Assistance
The World Bank, for example, is an organization that can easily focus on
rebuilding the “Public Finance” sector in the “south”. The World Bank is well
suited to doing this work, and could do it easily within its present mandate. The
World Bank could also be a useful financial partner in helping large scale public
works projects for infrastructure improvement get funded. Broadly speaking, I
would like to see much less policy intervention coming from the World Bank,
but a strong commitment to being engaged with universal public accounting
and accountability.
The UN needs to maintain its critical role in convening meetings and
encouraging dialog, but should deemphasize providing finance and technical
assistance. I would like to see the UN also committed to the idea of universal
public accounting and accountability.
Central Banks around the world should be much more engaged in the relief and
development sector representing the financial interests of their respective
countries. They ought to be much more central stage than they have been in the
past, and should be at the forefront of efforts to ensure that there is universal
public accounting and accountability.
Basic Needs and Luxury Items
Basic Needs
With a world population soon to be 8 billion people, there is a vry large demand for all the basic needs for living life ... food, water, shelter, clothes, health, education and so on.
It the same time, modern production producivity is very high, and the global economy has the capacity to produce more than enough for the basic needs of everyone. The challenge, is not so much the capacity to produce, but the ability to produce profitably, and at the same time to produce without doing further damage to the environment.
Basic fairness in the global eocnomy has not been a priority, but rather the idea of prodit maximization for those with their hands on the levers of power.
Luxury Sector
A very profitable sector
The luxury sector is a driver of a lot of the apparent wealth creation in the
“north”. The value chains associated with the luxury sector are unusual ... and
while profits are real in an accounting sense, the value associated with the profit
makes little sense.
When a fashionable pair of shoes is priced at over $2,000, or a handbag a similar
amount ... there is a huge profit in being the supplier and being in the supply
chain. But at the end of the chain a person only gets a pair of shoes or a handbag ... and
a basic pair of shoes or a handbag would be more correctly priced at something
like $50.
The same thing is going on in the automobile industry. Various types of
automobile are being built and then being priced at luxury prices from $50,000
to $250,000 and up. Basic transport can be priced at (say) $20,000 and be
perfectly functional.
The “phantom value” in the supply chain is not real value
at all, but merely a process of value destruction subsidized by the very wealthy.
Concentrated wealth and huge personal fortunes is very good for the luxury
sector, whether it is for the sale of jewelery or the sale of luxury yachts ... neither
of which have very much socio-economic value ... but the wealthy still buy
them.
The bubble of the luxury sector may go on for a long time. The capital
markets have concentrated a lot of wealth into relatively few hands, and these
people may sustain the luxury market for a long time ... but not for ever.
About the Sectors
Agriculture sector
Part of the productive sector, and of huge importance in the global scheme of
things. Without food, there is no life. The revolution in agricultural productivity
set the stage for the “north” to become wealthy a long time ago, and it is often
overlooked that “north” agriculture remains amazingly productive. Under 5% of
the “north” population is engaged in agriculture and there are embarrassingly
large surpluses.
In contrast poor “south” countries might well have 80% of the population
engaged in rural agriculture and associated support activities, and the country is
hungry because there is not enough food. This is all about productivity, and a
terrible failure of the relief and development community.
Agriculture, fisheries and food
Food security is enhanced if it is possible to move food stocks easily and at
relatively low cost. Food security is also enhanced if it is possible to store food
stocks with minimal loss in places where food stocks are needed, or likely to be
needed. As part of the overall area proposals there will be significant
improvement in the storage infrastructure. Food security is improved when
there is an efficient transport system.
Banking and Financial Services
Commercial Banks
An important sector for success
A broad range of banking and financial services help socio-economic
development progress. While these services are readily available to the rich and
in wealthy communities, they are not universally accessible, and the poor at the
bottom of the socio-economic pyramid are not well served at all.
In fact, the mainstream banking and financial service companies have either
retreated from service to the poorer segments or society, or have increased the
pricing of services that are used by poorer people. To add insult to injury
interest rates are high and fees are also high making the total cost of service
more like loan sharking than mainstream banking.
Community needs
In the last four decades rural banking has stagnated and in many places has
disappeared. Perhaps for the last 25 years there has been some growth in
microfinance, but this is a very limited subset of banking and arguable not an
important subset. The growth of micro finance is progress, but it is not the single
silver bullet that is going to solve all the socio-economic development problems
of the south. In any community, there is a need for at least three main financing
components:
- micro finance that serves the individual and micro-business;
- mini finance to satisfy the needs of the small and medium sized businesses; and,
- muni finance that provides financing for economically desirable community projects.
Commercial banking for enterprise
The Commercial Bank sector in Iraq either through national banks or in
association international banks has the ability to provide a full range of financial
services to major business enterprises. The challenge is to expand the service to
included smaller businesses and those that have the potential to grow, but not
the financial strength to grow.
Informal systems for financial services
Where the formal commercial banking and financial services sector is weak, a
range of informal systems for financial services are available. These systems are
very important to the local economy, especially the informal sector and the small
business. Some of the informal systems, however, while providing a needed
service, also exploit the poor in a very aggressive manner.
Public finance
The mainstream banking sector should be in a position to assist with the
financing of the public sector and be available to make funds more easily
available in areas distant from Baghdad.
Banking and Finance Sector
The “south” needs a broad range of banking and financial services that help
each segment of the economy and the population to progress.
In the last four decades rural banking has stagnated and in many places has
disappeared. Perhaps for the last 25 years there has been some growth in
microfinance, but this is a very limited subset of banking and arguable not an
important subset. The growth of micro finance is progress, but it is not the single
silver bullet that is going to solve all the socio-economic development problems
of the south. In any community, there is a need for at least three main financing
components:
- micro finance that serves the individual and micro-business;
- mini finance to satisfy the needs of the small and medium sized businesses; and,
- muni finance that provides financing for economically desirable community projects.
We need to figure out how to do this, and I will argue that it is not very difficult.
All it needs is for some financial brain power to address the problem, combine it
with some ICT brainpower and some solid practical knowledge flowing from
remote rural communities that need community financing, and the problem will
soon solve.
Communications
Telephone
The telephone service in Iraq has become much more wireless in the past few
years. The technology is insufficient and service leaves much to be desired.
Urban areas are being targeted, but remote areas are not being served. Getting a
good telecom infrastructure is a good basis for other progress.
Internet
In Iraq the Internet is available through a variety of services, none are cheap.
The Internet ought to be working on top of a good local infrastructure and be
accessible easily and at low cost.
Private sector
The most effective strategy is going to be to make sure that the development of
communications is handled by the private sector, with the public sector
authorities having a regulatory role that ensures a quality service and pricing
and service agreements that are reasonable.
Construction
Almost all construction in the “south” be undertaken by organizations based in
the “south” and using professionals in the “south”. Performance may be
enhanced in some cases with technical input from the “north”, but it should be
limited and relevant to the issues at hand. However, almost all of the
infrastructure building that is needed can be done by organizations in the
“south” with little or no technical assistance from the “north”.
The quality of the work in the “south” should be ensured in the “south” just as it
is in the “north” by independent professionals and quality control organizations
like independent testing labs.
Education
Education sector
Education is, more than anything else, the investment that will facilitate a
successful future. Education is a prerequisite for jobs and opportunities and to
be able to have valuable lives. The value of education is not a “certificate” but
the training of body and mind so that a person can do valuable things.
Education needs to move from basic to higher levels where a person is not only
challenged academically, but also is prepared for a productive life. Accordingly
there needs to be not only primary, secondary and tertiary education, but also
vocational and professional eduction.
Education does not need to be done in traditional or old-fashioned ways, but in
any way that works and is cost effective, including using electronic resources of
various sorts. In the future, the education sector is likely to include activities
related to the use of Internet resources.
Educational policy
Some appropriate goals of an education policy in Iraq might be the following.
No specific goals have been included here. Thus:
- Expand primary education
- Address priority needs in secondary, technical and vocational education
- Improve quality and equitable distribution
- Extend new curriculum to all levels,
- Increase the number of certified primary teachers
- Lower textbook ratio
- Achieve more efficient use of teachers,
- Raise female participation
- Increase the proportion of female teachers
- Rehabilitate all schools damaged by wartime activities
Under-served areas
Iraq has some areas that are under-served regions. The literacy rate in Iraq is
very variable depending on the place. In the main urban centers literacy is
around 80%, while in remote rural areas it is more likely to be 20%. Literacy
among women is 50% of the literacy rate for men.
Curriculum and text books
Iraq has a well developed curriculum of education. A laudable effort has been
made to revise the curriculum and prepare textbooks and teaching materials. A
lot remains to be done to improve the curriculum and the teaching materials.
Textbooks are also needed for the schools and training centers. The program will
support the preparation and the purchase of textbooks for schools and training
centers.
Teachers
The number of teachers in secondary schools in particular is less than optimum.
The proportion of female teachers in primary school is low and there are almost
no female teachers in secondary schools. New teachers need to be found, and
most important, new teachers need to be trained. Iraq needs capacity to teach
teachers. The teaching of teachers is needed for primary grades and secondary
grades, but also for skills training and the non-formal basic education initiative.
Planning and management
Planning and management capacity at every level is very weak. The
decentralization process implies that a lot more is expected from regional and
local government. There are a lot of vacant posts in the regional education
bureau and almost all the zonal offices are a one man offices. Most people in
responsible position at all levels lack the required qualification and experience.
Women and girls
The situation of women and girls in education in the area should be addressed
by the program in a practical way. There are ways in which women can expand
on skills they already have to become of very much more value to themselves
and to the community. Health skills training, for example, already known at an
artisanal level can be upgraded so that health skills can be used for the benefit of
the community at large. Informal, but nevertheless real, knowledge can be
mobilized so that it forms the basis for teaching in the non-formal educational
environment.
Skills training
Skills training for mature adults is critical for the growth of the economy and to
of their capabilities.
Skills training is needed for all, young and old, male and female. There is,
however, and important need to address the skills training of young adults,
many of whom have lost many years of education and are now uneducated,
unskilled, unemployed and potentially a source of future difficulties.
Employment and jobs
Jobs is not really a sector or sub-sector ... but employment and jobs are very
important. The effort to creating self-employment opportunities that require a
lot of labor for very little return needs to be supplemented by much more effort
to make it possible for small employers to become bigger employers, and for
employees to self-improve so that they can do bigger and better paying work.
The jobs that are created need to be profitable, that is value adding, in order to
be sustainable. Where the value is social, as in health and education, there also
needs to be jobs in productive sectors that generate the cash flows to pay all the
wages.
Education sector
Education is, more than anything else, the investment that will facilitate a
successful future. As noted already, education is merely an enabler. Educated
people need jobs and opportunities to be able to have valuable lives, but this is
impossible when people have not had education.
The value of education is not a “certificate” but the training of body and mind so
that a person can do valuable things. Education needs to move from basic to
higher levels where a person is not only challenged academically, but also is
prepared for a productive life. Accordingly there needs to be not only primary,
secondary and tertiary education, but also vocational and professional eduction.
Education does not need to be done in traditional or old-fashioned ways, but in
any way that works and is cost effective, including using electronic resources of
various sorts. The education sector is likely to include activities related to the
use of Internet resources.
Academia
The academic sector has several important impacts on relief and development performance including:
- substantial use of relief and development funds;
- a substantial influence on thinking and public perception about relief and development;
- a big role in “teaching” relief and development to students and future policy makers; and
- being controllers of information about relief and development.
The academic community has a challenge to show that its work in the relief and
development area is net value adding. There is some evidence that relief and
development resources are being used to a considerable extent to fund academic
programs while there is little tangible benefit at the community level in the
“south” where needy beneficiaries live.
Energy sector
Oil and Gas
The energy sector has two very different dimensions in the “south”. There are
huge energy resources that can be exploited, and there is a shortage of energy
that constrains development.
At one level there are abundant fossil fuel resources, especially oil and gas, and
also coal, and on the other end of the scale, there is a dramatic shortage of
fuelwood and charcoal for household cooking.
Better management of the energy resources would yield substantially more
wealth for the “south”. This is something that should be a priority, but it is not
easy to do. Big energy is an “extreme” area of hardball business. The stakes are
very high, and the wealth flows associated with it unimaginable.
The energy arena is not getting easier, but a lot more difficult. The oil and gas
industry is not just big “western” companies, but also companies from Russia
and China. Companies from other countries like Venezuela, Mexico and India
are going to change the energy sector landscape. Whether this will make the
sector more beneficial to people at the “bottom of the pyramid” is not at all
clear ... but there are interesting possibilities.
There is an opportunity for wealthy oil and gas enterprises to embrace the moral
high ground and start doing a lot more for communities in places where they
operate. Though politics is often controlled by the gun, people power can have
an enormous impact. Guns did not get the British out of India, but people power
with Mohatma Ghandi in the vanguard. Martin Luther King did not catalyze
progress in racial relation with the gun, but by mobilizing people peacefully.
The lack of electricity in poor places is a chronic problem. The technology exists
to have adequate electricity supplies, and to distribute electricity to where it is
needed. It takes investment, and it takes a reasonable approach to profit
expectations. The key requirement is that electricity investment and electricity
management and operations are done efficiently, ethically and without being
dominated by greed and corruption from any quarter. This is possible, but it
cannot be achieved simply by “privatizing” the sector and moving initiatives
from an incompetent ineffective “public” sector arena to a totally unconstrained
profit maximizing arena. One is as bad as the other. Good management in an
enterprise that aims to maximize the public good is entirely possible ... and a
good way forward.
Fisheries sector
Commercial fisheries
Fisheries is another component of the productive sector. The dynamics of
fisheries are very different from agriculture, with best performance not achieved
with maximum investment, but usually with less. The relief and development
sector experts have often got it wrong, and there is far too much overexploitation of the resources.
The “south” has opportunities in the fisheries sector, but they need to be better
at negotiating how fishing resources are exploited. Local investment is needed
rather than foreign investment, and access to major markets should be
negotiated so that there is reasonable benefit for the “south”.
Value chain analysis in the fisheries sector will show that many fisheries
agreements can be improved significantly if the agreements were reasonably
fair, rather than being totally in favor of the foreign parties.
Artisanal fisheries
Very important for the local community
Distant water fisheries
An industry that has complex rules ... but many actors in the industry do not play by the rules.
Governance and Administration Sector
The essential activities of governance and administration are supportive in
nature, and only result in tangible economic benefit when there are also
productive activities in the economy. Bad governance and administration can be
a huge constraint on success, and improvement or diminution of the bad
activities in governance and administration can be very favorable.
Getting rid of corruption is the obvious big issue, but there are a lot of other
smaller issues that can be addressed. For example, reducing the complexity of
procedures to do routine administrative activities, and shortening the time to do
these things all helps.
The public sector's most important job is governance and administration. It is
important, but it does not in itself create wealth, and is an “overhead” of society
and socio-economic development.
These functions facilitate success in a society, and bad governance and bad
administration can be a huge constraint on the performance of society and the
progress of socio-economic development.
There are a whole host of activities that “government” is expected to provide for
the citizens. In the “south” the government has often found itself in a financial
bind, and the delivery of services is impossible because of the funding
constraints.
A lot of services are best delivered at the local government level rather than by
an organization controlled and funded by a remote central government, such as
local public works such as street repair and waste removal.
Health
Health situation
The health status of Iraq has deteriorated relatively in the past years. Health and
health related services are limited because of shortages arising during the
economic sanctions and the war conditions. Coverage is low with the
distribution biased towards the urban population. Most health facilities in Iraq
are understaffed and the quality of training of some of the current health
workers is poor. Moral is low because of the state of chaos.
Management capacity at all levels is very limited and whatever management
information system existed previously has almost ceased to function.
Rehabilitation of health sector
The rehabilitation of health sector is a priority. Funding is needed for the
necessary construction work that needs to be done to rebuild and expand the
infrastructure. There is also a need to rehabilitate equipment and funding is
needed for this. The infrastructure includes both urban hospitals and health
clinics in smaller communities.
Many of the projects are an integral part of the Health Ministry's program and
are designed to facilitate their integration into the mainstream of the health
development of the region.
Education and training
Training nurse is a very high priority. There are not enough nurses. The need for
nurses is very high. Furthermore, nursing is a training and employment
opportunity for women. Training of nurses should be encouraged through all
means.
Training doctors and medical professionals is a long (and expensive process).
However, the long terms success of the area economy depends on having
trained professionals from the area in the area. Funding long term professional
training should be a part of the ongoing development strategy for the area.
Mother and child health programs
Mother and child programs should remain a priority in the health sector, with
continuing efforts to reach the mothers and children of pastoral families.
Immunization programs for children should remain a priority in the health
sector, with continuing efforts to reach the children of pastoral families.
Mental health
Mental health is a problem that is not enough of a priority. Mental health
practices are ones that became unacceptable in industrialized societies several
decades ago. The traumatic experience of the area in the last twenty years (or
more) has created a serious mental health problem.
Health sector
The health sector in the “south” is very challenged. Sickness is aggravated by
poor water and malnutrition almost everywhere in the “south”, and resources
for care and cure are very limited. Almost everything is in short supply, and
even though there is a health crisis throughout most of the “south”, there are
substantial financial abuses both in terms of the misuse of resources and
profiteering by suppliers of medications and equipment.
Even though there is crisis in the “south” health sector, some of the staff do
amazing work with very little. The tardy payment of nurses is common.
But health sector performance is unsatisfactory in the “north” as well. Though
scientific developments in health have been amazing, the cost and the
inefficiency of modern medicine is mind boggling. In some places in the “north”
the high costs and profiteering now makes good medical attention unaffordable
for many of the poor and middle class.
Good management information and public accountability has the potential to be
of substantial value to help performance improvement.
Housing
Housing stock
The housing sector has not kept pace with the growth in population, and the
quality of shelter for many in the poor “south” is less than satisfactory. Urban
slums are common, and rural shelter is poor reflecting the poor state of the local
economy.
Few houses in poor areas of the “south” have adequate services. Water and
latrines are generally unsatisfactory, and contribute to poor health in these
places. There is little access to electricity. Not surprisingly, there is little access to
telephone and Internet. Living conditions are bad, and the crowding is
contributing to the increase in diseases like tuberculosis.
The solution to housing should be one that involves both the private sector,
government and the financial sector. With thoughtful planning, the housing
sector can be a valuable component of economic activity and serve to upgrade
the housing sector and the employment sector at the same time.
Industrial sectors
TO DO ... add text
Infrastructure
The goal should be to construct infrastructure of an adequate quality at the
lowest possible cost so that the economy can be more productive.
Tarmac Roads in Equatoria, Sudan
I worked in the south of Sudan in the 1980s. It was an interesting
learning experience, to say the least.
I have had an interest in the transport sector since my student days as
an engineer. So I took some interest in the transport situation in the
Equatoria Region. The most important local highway was the road
between Juba and Yei, a very unpleasant ride in dry weather and
practically impossible when there was rain. This was not an “all
weather” tarmac road but a deeply rutted laterite road in need of a lot of
maintenance. There were very few trucks (except those owned or
contracted for by UNHCR) and a heavily loaded pickup would usually
get stuck. A surplus of agricultural produce in Yei did not easily move
to Juba, a government city with food shortage.
As I recall the Canadians had brought road construction equipment into
the area. It was in a yard in Juba, and had been for some years.
Apparently it had been donated by Canada, but was used equipment
without spare parts. USAID had also done some road construction, but
their beautiful tarmac roads were limited to the confines of the USAID
compound. Kuwait had done a few miles of tarmac road construction,
basically from the airport to the Government Buildings, past a new
mosque that Kuwait had financed and just a few weeks before the Emir
of Kuwait made a visit to Juba.
Value analysis of the road from Yei to Juba suggested that improving
the road to a reasonable all weather standard so that the separate
markets of Yei and Juba could interact without a transport constraint
would give a payback measured in just a few months. Instead the
international relief and development sector had really done absolutely
nothing.
Infrastructure sector
There is enormous catch up to do in order to get the infrastructure in the
“south” up to enough basic levels of performance. There needs to be investment
to catch up on maintenance and to put in needed infrastructure, especially
around communities.
There are many dimensions to infrastructure including
- Roads and bridges;
- Seaports;
- Airports;
- Housing;
- Water;
- Sewage and sanitation;
- Hotels;
- Tourism destinations;
- Public buildings;
- Schools;
- Health facilities;
- Telephone and Internet; and,
- Electricity.
Most of the construction associated with infrastructure ought to be done by local
construction enterprises ... and the planning of infrastructure initiatives should
be based on the idea of creating the most value adding in the community as the
infrastructure is built, and as much longer term benefit for the community when
it is in use. The aim should also be to build infrastructure using the minimum of
external resources, and the maximum of the resources that are available in the
community.
Building infrastructure in the “south” should not be a totally uncontrolled profit
bonanza for multinational construction corporations, with additional debt the
only certainty from the projects.
The amount of investment needed to upgrade infrastructure to “north”
standards cannot be universally sustainable in the “south”. There needs to be
incremental upgrading so that constraints caused by infrastructure are reduced.
As economic performance improves, more upgrading can be justified.
Every community I have visited has always made reference to the need for
easier transport in the rainy season. All weather roads are valuable, but they
need not be to European or US standards. They just need to be usable when it is
raining, instead of totally stalling traffic.
Any visitor to the “south” from the “north” quickly notices the problems with
electricity. The status of electricity infrastructure is abysmal. Major upgrading is
needed. There is no reason why investment cannot come from the private sector,
except that the cost of international private financing is very high. The problem
is acerbated when government reserves to itself a monopoly position, and does
not have a satisfactory level of expertise and oversight on the activities.
In the “south” the telecommunications infrastructure is poor, with little access
to the Internet. Only high cost options for Internet access seem to function. The
“south” has not yet embraced the idea of very low cost communications as a
way to encourage development, but still uses the telecom sector merely as a
vehicle for extracting maximum economic rent.
The railroads has a big part in the modernization of the economy in Europe and
North America in the 19th century, and there was some railroad building in the
“south” almost a century ago. Rather little has been done in the last fifty years,
and mostly to support corporate minerals exploitation. A rail infrastructure is a
valuable component of the economy, and helps to keep transport services low
cost.
There has been a productivity revolution in modern ports, with almost total
containerization and using powerful materials handling equipment. Modern
bulk carriers are highly automated requiring small crews, and their cost is
remarkably low. But not much of the “south” is able to take advantage of all of
this. Most of the ports are antiquated with little modern materials handling
equipment, and the costs are very high. Shipping costs in and out of Africa are
very high, perhaps the highest in the world, and the service is the worst.
Large scale modern infrastructure is expensive, and it is only in rich countries
that the economy can justify making these very expensive investments. High
cost infrastructure in a low productivity economy is a formula for financial
crisis. Infrastructure investment to upgrade needs to be done in an incremental
fashion.
This can be done working from the community level. When infrastructure is
looked at from a community perspective, what is the most important to the
community can easily be identified, and there can be an investment focus on
what gets the best results for the community. This has the potential to increase
the socio-economic return from infrastructure investment from something that
will not justify investment to something that is gives an attractive socioeconomic investment yield.
Legal and Justice
A legal and justice system needs to be in place. This can be either a central
system or a local system, but it must have a functioning and have enough people
and money to operate. It does not matter so much whether the system has a
modern or traditional form ... what does matter is that it functions and that there
is a socially acceptable ethical foundation for the society.
There are a lot of pieces in a fully functioning legal and justice system including
- police;
- courts;
- prisons;
- lawyers; and
- legislators.
The system is
labor intensive and only works when there is sufficient reach for the criminal
and illegal elements in society to have a reasonable expectation of being caught
and convicted. In the “south” these functions are so underfunded that they may
as well not exist for the vast majority of the society.
Places where there is social tranquility usually have a system of local or
traditional law that is functioning well. In my experience, even where there is no
visible presence of “modern” law, a society still functions on an ethical basis that
is for all practical purposes universally acceptable.
An issue in many places is that the “executive” dominates the political space,
including control of the budget. In this situation there is frequently far too little
budget allocation to the legal and justice sector.
The rule of law needs to be fair, and justice needs to be universal. There is a lot
of work that needs to be done so that everyone has some of the benefits of fair
laws and equal justice.
There are too many situations where the law serves to make something
unethical, immoral or unjust, legal. This is particularly true in a lot of areas of
commercial law, real property law and intellectual property law.
Traditional law if often better suited to local society than more modern statutory
law that has been introduced by academic lawyers from the other side of the
world. One of the issues in poor communities is the cost of justice, and
traditional law is often far more cost effective and the only affordable justice.
Justice at the end of a gun is far too common around the world. Guns are bad
news.
Costs for a legal and justice system
I have helped prepared government budgets and plans in various parts
of the “south” and have been faced with the need for legal and justice
activities to be paid for through the budget. A modern legal and justice
system along the lines of the systems used in the “north” is beyond the
financial capacity of most “south” governments. When staff are very
lowly paid, or paid late or intermittently, then all sorts of petty
corruption starts, but when there is only a small reasonably paid staff it
only reaches as small part of the population.
Increasingly communities in the “south” have had to address the issue
of a working legal and justice system by reverting to traditional systems
... in many cases with excellent results.
During my work in Somaliland, I was able to learn something of the
traditional system of clan justice, and was impressed with its reach to
every single member of the clan. The fact that all of the society was part
of the same system of traditional law made it more useful than the
modern law, that had little impact on daily life for anyone except a very
few.
In Mozambique, after its long civil war, it was impractical for the
government to go through lengthy modern legal processes for all the
young soldiers who had committed various forms of atrocity in
connection with the war. They did not have the money nor the people to
do it. Instead they reverted to community level traditional systems to
punish and reintegrate everyone into their society. The system made it
possible for the country to become a lot more stable and reintegrated
than would have been possible using a more modern formal “north”
approach.
And of course, the Truth and Reconciliation Commission in South
Africa broke tremendously valuable new ground in bringing together
people who had been sworn enemies and committing atrocities for years
in a reasonable length of time and at a manageable cost.
Logistics
Transport ... Trucking
The transport systems in Europe, in North America, in Japan are incredibly
efficient. Transport is a very innovative sector in terms of the adoption of
technology. This needs to be applied to the “south” where transport
infrastructure, roads, rail, ports, have not been developed to the optimum. There
is the need for a huge investment by both the public and private sector. Some
valuable progress can be made by doing as much work as possible on a small
scale in and around communities.
Truck fleets
The truck fleets in Iraq have expanded based on the profits of the private
operators. The financing associated with the truck fleets is likely a huge cash
cow for those that are engaged in the financing.
Truck maintenance is handled by a large a competent workshop sub-sector.
Parts are not a problem as long as funds are available. The fuel situation that is
often a problem is not a problem in Iraq where refined products are widely
available.
Transport ... Air
Air transport service operators can be in the private sector. There can be
financial support from the government to facilitate the funding.
Airport fuel and service
Baghdad airport is international standard and all fuels and services from an
international airport are available.
Port operations
Port operations are going to be a major issue in the future success of Iraq, and
especially the oil and gas sector. A modern port capacity is going to be vital in
the handling of energy products exporting product using the largest of the
modern supertankers.
Pipelines
Pipelines are the main means of transporting petroleum products. They are an
easy target for bombers and have not been adequately protected so are not all
presently in service.
Warehouses
Warehouses are now a critical part of logistics operations. They serve much
more than merely to keep stock in a safe place out of the weather. They are now
fully equipped so that information about stock movements in facilitated in real
time.
The old era warehouse is still needed at the community level ... while the 21st
century warehouse and integrated logistics system starts to operate in the
country.
Maintenance
Repair shops, welding and machine shops
There is an ongoing need to strengthen the national capacity to maintain
equipment and do welding and machining. Much equipment, especially in small
enterprises, is old, and needs ongoing maintenance. There are a lot of small
facilities that do work at a basic level, but few that have the capability to pdo the
higher end work.
Access to training
Training will help improve the sector, and help increase jobs and employment
while also providing value for the community. It should be possible and easy for
people to upgrade their skills. All maintenance and machine shops of good
standing should be encouraged to train people to a higher level of skill.
Manufacturing
The state of manufacturing
Iraq is not known for its modern manufacturing, with the exception of its
production and export of crude oil.
There are parts of Iraq that have a history of handcraft ... but this is small scale
and artisanal, of historic value but not of great economic value as a driver of
modern Iraq.
The manufacturing sector is usually an important area for job creation ... but in
Iraq more of the jobs are in the services sector.
Many things need to be brought together in order for manufacturing to be
successful:
- availability of materials;
- availability of productive low cost labor;
- a reasonable enabling environment ... that is laws, regulations, culture, etc.;
- working infrastructure including transport and energy; and,
- markets and profit potential.
Of these it is the markets and profit potential that are
missing. Most of the market needs can be satisfied by products from other places
at lower cost and more profit than from local manufacturing in Iraq.
My Experience in Madagascar
For some years I was a consultant to a manufacturing group in
Madagascar. I have described this group as one of the best managed
companies that I had ever seen, in large part because of their
commitment to training their staff. Even though Madagascar had
tremendous socio-economic problems, and was faced with terrible
foreign exchange shortages, this company still put its staff training as a
top priority.
As a result, the company was able to produce world standard quality
and was able to participate in the global market on an equal basis with
other world class producers.
The company invested in good production equipment, and the staff were
able to use this equipment to make the very best quality product at very
competitive costs.
But all of this took time.
Manufacturing
The manufacturing sector is the economically failed “south” has not been at all
successful, but in the emerging success stories from the “south”, manufacturing
has been an important driver.
There are several things that need to be brought together in order for
manufacturing to be successful:
- availability of materials;
- availability of productive low cost labor;
- a reasonable enabling environment ... that is laws, regulations, culture, etc.;
- working infrastructure including transport and energy; and,
- markets and profit potential.
In the poor “south”, manufacturing is constrained by most of these elements.
There are some exceptions, but profitability has always been compromised
because of the need to carry out activities that would normally be part of the
enabling environment and infrastructure.
But without manufacturing, socio-economic progress must be constrained. Jobs
are going to be limited, and jobs are critical to success.
It is possible to be very successful in manufacturing in the “south” but it is not
quick and it is not done by a singular focus on short term profit performance. It
must almost be considered generational ... but there has to be a start, and now is
as good a time as any to get started.
Some places in the “south” have proved to be very efficient at factory
production. The results are not uniform across the “south” for a variety of
reasons. At one time Europe and North America manufactured and everyone
else bought their manufactured goods. More recently Japan and the Asian Tigers
started to be the source of manufactured goods and now it is China that is the
biggest producer of manufactured goods of most types, and India is becoming
increasingly competitive.
Manufacturing is an important part of economic security. Africa, with the
exception of South Africa, does far too little manufacturing, and is not attracting
investment capital into the manufacturing sector. In most places in Africa,
manufacturing potential is low because there is a very low productivity. In
Africa, too often wages are too high and production and quality too low. To add
insult to injury in Africa, the infrastructure is also bad and that increases costs
even further, and the availability of suitable raw materials another constraint.
Where does one start?
Media
Radio and Television
Radio and television have been under government control in Iraq. However
private channels can be picked up from satellites and from broadcasts
originating from other countries.
These are powerful ways of spreading news, entertaining people, spreading
propaganda and influencing people.
While the English language is used to some extent, the primary language in the
country is Arabic. While programs in English reach the international community
in Iraq, it is the Arabic programming that reaches the population at large.
Print media
There are a variety of newspapers in Iraq. A lot of material printed in the media
has originated from some official source. Newspapers are an important
communications medium and should be used not only for entertainment but
also for serious news and analysis.
New media ... Internet
The Internet must be thought of as a major component of the media sector. The
Internet has a combination of characteristics that have never been seen before ...
it can be extremely fast ... combine digital video, audio, text and interaction in a
bewildering range of combinations. It can be private or it can be very public,
depending on how the user chooses to interact with the Internet and the Internet
community.
Military and security sector
The military and security sector is a source of great distortion in modern
economies, not only in the “north” but also in the “south”. The fund flows
associated with military equipment and supplies are substantial, and rarely have
a good impact on the civil economy. Rather military fund flows tend to subtract
from what is available for the civil economy.
While “security” is a legitimate concern, it should not be confused with the idea
of protecting privilege or maintaining illegitimate power.
Worry About the Power of a Big Army
I was in on an assignment in West Africa when the Falklands war was
in progress. I was surprised that my African colleagues were supportive
of the British response to the Argentinian takeover of the islands ... until
they explained that they were all worried that a “big army” should not
have any right to come into a nearby country and take it over. They
were from a variety of African countries, and big armies were
everywhere.
A good army is a national asset ... and can prove to be very valuable in an
emergency. Of special note, I believe that the performance of the Indian army in
a variety of natural disasters has been very good indeed.
But the use of the army does not always produce good results, as for example in
support of local political and strong man regimes that have little interest in the
well-being of the people.
Making sure that the military use their power in an appropriate way depends
more than anything else of the quality of the leadership and the training of the
soldiers. There is a lot of good military leadership, but it is not universal.
Getting a high professional standard for all soldiers around the world is a
valuable thing to do.
Minerals and Mining
Summary overview
Mining and the exploitation of minerals in the “south” ought to be generating a
lot of wealth for the “south”. It will do so when the agreements are fully
understood by all parties, especially the signers for the “south” and there is a
solid framework for value analysis.
It is not clear what role bribery and corruption plays in the sector, but it is
probably significant. It is likely that substantial fund flows do not benefit the
country but only benefit individuals. This is difficult to address, because the
amounts involved are huge. Without addressing this, however, the wealth
creation that is possible will never materialize.
The international mining companies are at an interesting stage, and they are
likely to have some advantage when they are seen to be of benefit to the local
communities where they operate. This is not an easy balance to achieve, because
large scale mining causes a lot of change ... but it is possible, and could result in
mining being pulled to communities rather than having to be pushed into the
communities by the mining companies and a small elite.
There is every reason to expect that Iraq has mineral deposits that could be
exploited on a more commercial basis. The knowledge about the mineral
deposits in Iraq is not well substantiated. Much of the information is old and not
supported by verifiable geological reports. There has been little exploitation of
the mineral resources in Iraq.
Iraq has little capacity to do the work needed to provide a basis for a rational
exploitation of the mineral wealth of the country.
The administration in Iraq should be supported so that better knowledge about
the mineral resources in the area can be obtained. The knowledge gap should be
closed as soon as possible with thorough geological analysis of the main mineral
deposits.
Policy about mineral resource exploitation
The administration should be supported in work to establish a policy framework
so that the exploitation of mineral resources is fair to all concerned and
contributes to peace, security and economic development rather than having a
destabilizing influence.
Training in mining skills
In order for the minerals and mining sector to succeed there needs to be basic
skills training on a substantial scale. If there are exploitable minerals then there
should be skills training to complement the other resources needs for successful
industry development.
Mining sector
Mining and the exploitation of minerals in the “south” ought to be generating a
lot of wealth for the “south”. It will do so when the agreements are fully
understood by all parties, especially the signers for the “south” and there is a
solid framework for value analysis.
It is not clear what role bribery and corruption plays in the sector, but it is
probably significant. It is likely that substantial fund flows do not benefit the
country but only benefit individuals. This is difficult to address, because the
amounts involved are huge. Without addressing this, however, the wealth
creation that is possible will never materialize.
The international mining companies are at an interesting stage, and they are
likely to have some advantage when they are seen to be of benefit to the local
communities where they operate. This is not an easy balance to achieve, because
large scale mining causes a lot of change ... but it is possible, and could result in
mining being pulled to communities rather than having to be pushed into the
communities by the mining companies and a small elite.
Natural resources
There are some resources in the “south” that everyone knows about ... gold,
diamonds, copper, bauxite, iron ore. There are world class energy resources ...
oil and gas, and coal. There is timber and amazing biodiversity. The potential for
development of these resources is huge. But there is a big open question about
who benefits from the development of big valuable resources in the “south”.
The “south” will probably benefit more by exploiting resources on a smaller
scale, and in ways that enable the “south” to maintain a good measure of control
over the distribution of the surplus to stakeholders. To have progress in the
“south” it is critical for the “south” to earn value from the exploitation of its
resources so that there is wealth creation in the “south” for further investment
and to pay for essential social services like health and education.
Experience has shown that large scale foreign direct investment (FDI) is often
good for corporate owners and those that benefit from profit, but that rather
little of the value added of the enterprise actually gets to stay in host
communities. Will ordinary people in the “south” be any better off if the major
resources are developed and exploited in ways that are the same as the old
colonial model under a different name. These “south” resources have huge
potential, but is it a potential that can be of much value to the “south”?
Natural resources in the “south” are many. They include:
- Petroleum;
- Water;
- Timber;
- Fisheries;
- Base minerals (iron ore, bauxite, copper pyrites, etc.);
- High value minerals (gold, silver, diamonds and other gem stones, etc); and,
- the natural fauna and flora.
They have a huge latent or
potential value, but experience has shown that the “south” has not been able to
earn a fair share of the value associated with the exploitation of natural
resources.
Merely knowing about the value chain and having the information easily
available will have a substantial impact on corporate behavior. As long as the
corporate world can profit and remain in in the shadows and anonymous, bad
things will happen as long as there is profit in it. But big companies do not like
well informed bad publicity.
Professional Sector
Professional sector situation
The professional sector includes professions like accountancy, law, medicine,
teaching, engineering, architecture, accountancy, the religious, etc. These
professional people have standards for their work that enable society to rely on
what they do. They serve to improve productivity in enterprise and in society
and in so doing create tangible value in society.
As long as there is instability and a lot of violence professionals are going to
move themselves and their families to safe places. The professional is a great
value to the society and to the economy, and emigration constrains success.
The private professional sector is very important for sustained development.
The government is able to set a legal and policy framework for civil society and
development, but there also needs to be the private professional community that
can provide a technical input so that the laws, regulations and policy are
compatible with global professional principles.
Professional employment is not a large number, but is an area where higher
incomes may be earned.
National professionals should be recruited to do professional work that is
required to strengthen the national frameworks for development. The state of
knowledge about development, about the law, about the society, etc. all need to
be improved, and this can and should be done by funding work to be done by
national professionals.
There should be active cooperation between local professional societies and
equivalent professional societies in other countries. Many professional societies
have active international programs and are looking to expand their global
connections. These links should be actively encouraged, in particular as a way to
facilitate world class training for the leading members of the professional
community.
Tourism
Tourism is a sector with huge economic potential. But tourism, like everything
else, requires investment to support its development. Some places have
developed tourism very effectively and have made it an important part of their
economic success, but in many places tourism is totally undeveloped.
The “south” has all sorts of opportunities to develop its tourism potential, but,
with some modest exceptions, it has not yet started to do anything like all that is
needed. The infrastructure needed for major international tourism has been
deteriorating for decades, and it will take time and investment to bring it back.
High economic value
Some places have developed tourism very effectively and have made it an important part of
their economic success, but in many places the opportunities of tourism are
totally ignored.
Destinations ... What To Do?
I have traveled a lot almost always on work assignments ... and I am
amazed at how many places have wonderful destination activities that
nobody knows about.
Iraq has an interesting and very long history ... places in Iraq were
determinants of history in Biblical times. The rivers in Iraq are part of
Biblical history. The archeology of Iraq is fascinating.
Iraq ought to be one of the must see tourist destinations ... one day ...
maybe.
But building back a tourism industry is important. Tourism is successful when
safety is sure, there are good places to see, good transport, good hotels, good
food and good entertainment.
Hotels, restaurants and entertainment
Hotels, restaurants and entertainment that serves local business does not attract
the international tourist community. For upscale international tourists there
needs to be a higher class of hotel and restaurant. International tourists look for
air-conditioning, spotless bathroom facilities and their own style of food. For
this they are willing to pay. There also needs to be entertainment value as, for
example, in various forms of destination that show of local history, culture and
sights.
From London to Cape Town
My old school friend and flat mate traveled from London almost to Cape
Town leaving London in August 1964 and reaching Salisbury, Rhodesia
(now Harare, Zimbabwe) about a year later. He and 3 colleagues
traveled in a 15 year old ex War Department Land Rover which
eventually died on them when they got to Rhodesia.
Over many (more than 40) years the “south” has had young back-pack
tourists learning about the world. While these tourists have a long term
importance, because the learning is invaluable, they are NOT the sort of
tourism that drives immediate socio-economic progress. The “south”
needs to attract tourists that are spending money to do things and enjoy
themselves.
In many places in the “south” , the only visitors are the “development
tourists” ... the staff of the relief and development sector traveling on their
missions, and the student back-pack crowd that are learning a lot but not
spending very much.
From Berbera on the Red Sea to Addis Ababa
A few years ago I drove from Berbera on the Red Sea coast in
Somaliland to Addis Ababa in Ethiopia. It is a distance of about 800
miles and spectacular.
I was doing this trip as part of a consulting assignment, but it would
have been wonderful to do the trip as part of a tour in a luxury motor
coach, and staying at (currently non-existent) comfortable air
conditioned guest houses along the way, with some traditional local
entertainment.
It is a fascinating journey with great tourist potential ... one day ...
maybe.
Tourism is successful when there are good transport facilities, good hotels and
good destinations. Success also depends on good security and the perception
that security is good.
Trade
International trade
International trade has been a key driver in making some countries prosperous.
It was the driving force behind a lot of wealth creation during the mercantile
and colonial era, and it remains important today. The success of Japan, and then
South Korea and now China and others are based on international trade. India's
success has been more trade in services than in manufactured goods, but it is
still very much international trade.
In the case of Iraq, crude oil is very much a component of Iraq's international
trade.
International trade sector
International trade has been a key driver in making some parts of the “south”
prosperous. It was the driving force behind a lot of wealth creation in the
“north” during the mercantile and colonial era, and it remains important today.
The success of Japan, and then South Korea and now China are based on
international trade. India's success has been more based on trade in services
than in manufactured goods, but it is still very much international trade.
The poor “south” has little to trade that it can produce on its own. While there
are some success stories about the “south” exporting to the “north” they are not
very large in the bigger scheme of things. And in almost all cases, the real value
is being generated in the “north” and not much gets to stay in the “south”.
There are constraints on exporting from the “south” to the “north”. It would be
helpful if these constraints were easier to learn about.
Where is Ghanaian Chocolate?
Why is it that we never see retail chocolate “Made in Ghana” when
Ghana is one of the largest producers of raw cacao, the primary
ingredient of chocolate.
Ghana makes some good chocolate, but it is not at all easy to penetrate
the markets of the “north” and profit from them. In some cases duties
get in the way, in some cases it is rules about packaging and labeling, in
some cases it is about factory inspections and health certification ... lots
of things that make it difficult.
The international coffee and cocoa business is very profitable, but hardly any of
the profit reaches the farmer in the “south”. The value chain from farm to
consumer is long, and nothing much is left for the farmer, even though retail
prices are pretty high. The situation for the farmer is so bad that conditions for
the children on coffee and cocoa farms are not much above slave levels. In fact in
some places, there is servitude that might just as well be called slavery.
The “Fair Trade” movement can be a step towards getting more money into the
hands of farmers and into the communities where coffee and cocoa is grown, but
the movement needs to ensure that it has an appropriate level of accountability
and transparency in order to be credible. Value analysis needs to be well done,
and the impact assessed taking into account any adverse unintended
consequences. One that is already emerging it seems is that a favorable price for
certain product is being offset by a reduced price and reduced market access for
the non-favored product ... a classic situation when there is a market situation in
play.
Wholesale trade
In the “south” wholesale is often linked to import / export. Wholesale is also
associated with traders and middlemen. Wholesale and distribution in the
“south” is often high margin, but it is also often high cost and profits are not as
large as they might superficially appear.
There are parts of the economy where the wholesale functions are still provided
by independent organizations. Spare parts for automobile maintenance are
carried in inventory by wholesalers who provide rapid delivery to auto repair
shops in their service area. It is a very efficient sharing of roles.
The wholesale trade may not have the same structure that it has had in the past,
but the functions of transport, distribution, warehousing, break-bulk, etc. still
have to be done. Though a larger part of the modern retail trade goes direct
from the manufacturer to the retailer, all the intermediate distribution and
wholesale functions are still done, but done in-house.
In fact every product and every channel of distribution is continuously evolving
to respond to economics and market pressures.
There are parts of the economy where the wholesale functions are still provided
by independent organizations. For example, spare parts for automobile
maintenance are carried in inventory by wholesalers who provide rapid
delivery to auto repair shops in their service area. It is a very efficient sharing of
roles.
In Iraq and many countries in the global “south” wholesale is often linked to
import / export. Wholesale is also associated with traders and middlemen.
Wholesale and distribution in the “south” is often high margin, but it is also
often high cost and profits are not as large as they might superficially appear.
The wholesale trade, and import/export are less important in the modern global
economy because of a growing tendency of global companies to handle all the
logistics from original manufacture on one country to retail marketing in
another.
The wholesale trade may not have the same structure that it has had in the past,
but the functions of transport, distribution, warehousing, break-bulk, etc. still
have to be done. Though a larger part of the modern retail trade goes direct
from the manufacturer to the retailer, all the intermediate distribution and
wholesale functions are still done, but done in-house.
Wall*Mart is a very good example of a modern corporate organization that has
brought all the functions from manufacturing through final sale to the customer
under its control. While many operational activities are subcontracted, the
overall operation is controlled by the Wall*Mart logistics system.
WalMart
What is WalMart? Is it a retailer, a wholesaler or a distribution
company? Perhaps the best answer is that WalMart is a success. It is
also perhaps the best example ever of an organization that has used
management information to optimize what it is doing to supply its
customers with what they want.
It has been one of the world's leading users of management information
for a very long time. It deployed mainframe computers for data analysis
long before it was fashionable. They have been ahead of the curve in
understanding customer behavior in their stores for years, as well as
understanding the detail operations of their organization. They know
their business and they know the data associated with their business.
As they grew it was not analytical genius that made them decide to
integrate their supply chain backwards to the manufacturers of their
products. But they were among the early adopters of integration of
operational data near real time into every aspect of the supply chain so
that inventory availability to customers at the stores went up and
inventory investment as a whole went down.
I thought it was interesting on the second day after the 9/11 disaster to
learn in the media that WalMart knew its customer buying activity
hour by hour at all its thousands of locations and knew precisely what
was being bought by a population in panic. Milk and bread, then guns
and ammunition as the hours progressed.
And WalMart was able to divert hundreds of truckloads of supplies to
hurricane affected areas in the aftermath of Katrina days more quickly
than government organizations like FEMA.
There is a lot to learn from WalMart. Excellence in the use of
management information has been one of its key strengths.
Retail trade
When I was growing up in the UK, the country was referred to as a nation of sahopkeepers. It is
nevertheless a very important part of the economy, and one that can play a great
role in establishing sustainable socio-economic progress.
Informal trade
The informal trade in all sorts of merchandise all over the world is
remarkabkeep everyone fed, and everyone clothed. They do better when the
community is prospering than when it is not.
An important sector for income generation
The services, retail and petty trade sector is one of the largest sources of income
for the poor and for women. For many, it is also the starting point for more
substantial business enterprise.
Regulations ... some are needed, many are not.
There are few formal regulations that apply to this sector. The sector thrives
with a minimum of regulation. In circumstances where the trade is made illegal,
as it was in the former communist regimes, the informal trade disappears, and
with it a very large part of the foundation of the economy. Though the sector is
untidy, it is where most larger businesses start.
END OF EDITED MATERIAL
The Sectors … A Sector View
Multi-sector linkage
When I was first engaged to work in relief and development planning I worked
with “projects” and I worked with “sectors”. With relief and development
results so bad, it is clear that not just one but many things needs to be fixed, that
a single sector approach to project design is insufficient. Even if a single sector
project is well designed, a project needs performance in many other sectors in
order to be successful.
Multi-Sector Linkage - The Power of the Telephone
My own experience operating in the “south” showed me very tangibly
how much inter-sectoral dependence there is.
In the “north”, when something goes wrong, the solution is easy. Use
the telephone to call up a supplier, pay money and almost instantly get
the goods or services. Someone operating trawlers in the USA could get
all the maintenance needed simply by telephoning. Spare parts are easy
to get, and do not have to be sourced from half way round the world.
I did not realize how much this is taken for granted until I became
involved with running fishing trawlers based around the world in the
“south”, and frequently not even in a urban setting. We needed to be
able to do everything for ourselves. We had water wells for water,
electric generators for electricity, maintenance technicians and spare
parts for everything electronic or mechanical, and took care of absolutely
everything ourselves. When a trawler needed maintenance, we did it all
ourselves.
But while this was the fisheries sector, keeping ourselves operating
required support from every other sector.
The issue is pervasive. I have been told over and over again that people will not
come to the remote rural area to work because something they need is not
available. It can be health services, or schooling or the social situation ... but it
emphasizes again the importance of the totality of sector and function in order
to have success.
A sector is not tied to any location, though what is best in a sector can change
from place to place. There has been a lot of thinking about development in a
sector, but it has not been universally successful. My experience has been that
single sector intervention in a resource constrained community is likely to fail,
simply because not all the constraints are being addressed. All the other
constraints remain in place. Nothing is optimum until all the constraints have
been addressed.
More on Sectors
More ... but Still Not Much
Introduction
This chapter describes a number of sectors in a little bit of detail, but still not
very much. For relief and development to be successful. All sectors must be
optimized and at least cost.
The following are in alphabetical order. There is some overlap because of the
value of looking at set of sectors as a group.
Employment or jobs
Jobs is not really a sector ... but employment and jobs are very important. The
effort to creating self-employment opportunities that require a lot of labor for
very little return needs to be supplemented by much more effort to make it
possible for small employers to become bigger employers, and for employees to
self-improve so that they can do bigger and better paying work. The jobs that
are created need to be profitable, that is value adding, in order to be sustainable.
Where the value is social, as in health and education, there also needs to be jobs
in productive sectors that generate the cash flows to pay all the wages.
Productivity
Productivity of employments and jobs is a key issue. People in poor
societies work very hard, but at the end of the day, they have merely
survived for another day, and that is about as much as they can hope for.
A women and the girl children spend hours every day collecting water
for the family. It is unproductive work, terribly inefficient, though at the
same time of critical importance. People in the “north” get upset when
the water turns on and it takes just 15 seconds for the hot water to
arrive! What on earth would happen in a “north” city like New York if
the water took hours for everyone to collect every day. It is
unimaginable. But half the world's women are employed in this way.
The key is not merely to have a lot of people at work, the goal is to have a lot of
people doing efficient productive work that has value.
Enterprise sector
I sometimes refer to “for profit” organizations as the enterprise sector. These
organizations have been vitally important in the “north”, and especially in the
United States, in building wealth. The incentives in the enterprise sector are all
favoring the use of least resources for maximum revenue ... the least cost most
value idea that is essential to economic value creation.
The enterprise sector in the “south” accounts for almost all value adding
activity, and is struggling within failed economies where most of the financial
resources are controlled by government and indirectly also by donors and the
international financial community.
Getting the enterprise sector to grow and be profitable has multiple benefits
including the multiplier impact of more jobs and the impact of tangible value
adding in the community. A healthy enterprise sector attracts other investment,
and encourages other entrepreneurs to become involved.
Luxury sector
The luxury sector is a driver of a lot of the apparent wealth creation in the
“north”. The value chains associated with the luxury sector are unusual ... and
while profits are real in an accounting sense, the value associated with the profit
makes little sense.
When a fashionable pair of shoes is priced at over $2,000, or a handbag a similar
amount ... there is a huge profit in being the supplier and being in the supply
chain.
But at the end of the chain a person only gets a pair of shoes or a handbag ... and
a basic pair of shoes or a handbag would be more correctly priced at something
like $50.
The same thing is going on in the automobile industry. Various types of
automobile are being built and then being priced at luxury prices from $50,000
to $250,000 and up. Basic transport can be priced at (say) $20,000 and be
perfectly functional. The “phantom value” in the supply chain is not real value
at all, but merely a process of value destruction subsidized by the very wealthy.
Concentrated wealth and huge personal fortunes is very good for the luxury
sector, whether it is for the sale of jewelery or the sale of luxury yachts ... neither
of which have very much socio-economic value ... but the wealthy still buy
them. The bubble of the luxury sector may go on for a long time. The capital
markets have concentrated a lot of wealth into relatively few hands, and these
people may sustain the luxury market for a long time ... but not for ever.
Productive sectors
There are many sectors that make up the productive sector: agriculture,
fisheries, manufacturing, mining, energy exploitation, forestry, tourism,
transport, etc.
All of the activities in the productive sector transform input resources into
something of more value ... when this is done in a for-profit organization the
outputs are goods and services that are sold and a profit for the organization.
These are value creating operations ... and to the extent that there is tangible
value creation in the productive sector, there is value that can be used for social
value creation on the social sector.
Professional sector
The professional sector includes professions like accountancy, law, medicine,
teaching, engineering, architecture, the religious, etc. These professional people
have standards for their work that enable people to rely on what they do. They
serve to improve productivity in enterprise and in society and in so doing create
tangible value in society.
By making better use of the professional sector in the “south” there can be
substantial improvement in the productivity of the economy ... better decisions
at lower cost.
Retail sector
When I was growing up in the UK, the country was referred to as a nation of
shopkeepers ... a remark originating, I believe with Napoleon. At the time the
UK was still very much a manufacturing country, but the quality of life was
increasingly associated with consumption. The UK was probably behind the
USA in embracing consumerism, but it was emerging. Today the retail trade ...
shopping ... is a huge industry catering to the market in every way imaginable.
In the USA, big box retailing epitomized by Wal-Mart is now the largest
employer in the country. But the multi-store malls, department stores and urban
shopping centers also are a huge part of the modern US economy.
Arguably shopping is the top entertainment in the rich societies of the world.
And in the “south” shopping is rather more of a challenge. There are much
higher distribution costs because of poor transport infrastructure, there are few
economies of scale, there are constraining import export and customs
procedures and duties and the market demand is limited by peoples' buying
power. It is nevertheless a very important part of the economy, and one that can
play a great role in establishing sustainable socio-economic progress.
Social sectors
The social sector comprises activities like education, health, support services for
the vulnerable, and so forth. Social services have been a major focus for the relief
and development sector, as well as for left leaning governments that have a
commitment to social justice.
Expenditures in the social sectors are very valuable because they contribute
significantly to quality of life, and they also serve as an investment in the future.
But success in the social sectors does not translate directly into economic
progress ... it merely removes a major constraint to economic progress. Without
opportunity in the productive sector success in the social sector is for nought.
Transport
The transport systems in Europe, in North America, in Japan are incredibly
efficient. Transport is a very innovative sectors in terms of the adoption of
technology. This needs to be applied to the “south” where transport
infrastructure, roads, rail, ports, have deteriorated almost everywhere.
There is the need for a huge investment by both the public and private sector.
Some valuable progress can be made by doing as much work as possible on a
small scale in and around communities.
Other cost effective progress can be made by rebuilding roads to a workable
condition suited to the “south”. The most incremental value is achieved by
going from impassable to passable using low cost road building methods, and
there is probably value destruction on going from this level of construction to
super-highway at high cost.
Various Types of Sector
There are a series of commonly used ways of looking at sectors. They are useful
ways to simplify the dialog.
The relief and development sector will succeed when all the sectors are able to
function appropriately in any place in the world.
A more comprehensive view of sectors is being developed for publication in a
companion book that will probably be titled: “A Sector Perspective on Relief and
Development”. The following list is in alphabetical order.
Characteristics of sector
A comprehensive mix of sectors in any community is important. I have been told
over and over again that people will not come to remote rural areas because
something they need is not available. It can be health services, or schooling or
the social situation ... but it emphasizes again the importance of the totality of
sector and function in order to have success.
A sector is not tied to any location, though what is best in a sector can change
from place to place. My experience has been that single sector intervention in
almost any community is likely to fail, simply because critical constraints are
being addressed. One sector can improve, but all the other constraints remain in
place. Nothing is optimum until all the constraints have been addressed.
Sector expertise
Sector expertise is very important, and the products and services associated with
all the sectors should be accessible everywhere they are needed. In the poor
“south” only a limited amount of sector expertise is available, and a lot of things
that ought to be easy to fix never get done.
The relief and development community has responded to this in some measure.
Instead of agriculture projects, the World Bank morphed into rural development
projects, which was a reasonable response to the problem within the construct
embraced by the World Bank.
From a community perspective there needs to be the sector expertise that is
needed to improve the community. There are many sectors that might be
needed ... very much depending on the nature of the community and what the
community wants to make as a priority.
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