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Sierra Leone: Building on an Export-sector-led Economy

Kenday S. Kamara asked:

Sierra Leone: Building on an Export-Sector-Led Economy By Kenday S. Kamara, October 4, 2008

Export sector development has become one of the most discussed issues in Sierra Leone’s development politics. The previous administration of Tejan Kabbah introduced some credible initiatives to promote Sierra Leone’s export trade worth pointing out. The investment code enacted in 2004 could actually increase visibility for Sierra Leone’s progress in creating an environment conducive to investment and poverty reduction if properly utilized. Empowering SLEDIC (Sierra Leone Export Development and Investment Corporation) as a “one-stop-shop” parastatal that simplifies business registration and minimizes transactions cost was also of strategic importance. But years of mismanagement of opportunities stifled the successful implementation of these initiatives. Today, however, there is reason to believe that commitment in implementing export sector development initiatives with the APC-led administration of Ernest Koroma can change.

Vast stretches of arable lands and abundance in mineral resources offer a natural comparative advantage for agricultural and technological development in Sierra Leone. The right commitment, in other words, can greatly square President Koroma’s goal of making government work in Sierra Leone.

The prognosis in Sierra Leone’s politics of self destruction has been hopelessly grim for decades. The country has consistently suffered decades of severe economic hardship and struggling with chronic problems of corruption and a broken management system at national proportions. The Gross Domestic Product (GDP) has not looked good for decades and the country has consistently ranked very low in the United Nations’ assessments of countries’ human development indices. It might make sense for the new APC administration to be serious about government, commit to a selfless agenda of national development, and expect the best to come out of Sierra Leone. But the commitment to change the pervading prognosis of systematic mismanagement of resources can even be now much more promising than it has been since the APC is being given a second chance, and President Koroma living up to the high standard of expectations Sierra Leoneans have for his government. Apparently, Sierra Leoneans have lost every patience and all they want to see is a government that can build on a pattern of positive change for sustained development.

The last one year Koroma has been in power has brought major changes in the underlying strategic calculus facing Sierra Leone’s governance system – an ACC made stronger, emphasis on performance and fiscal responsibility in public office, and creating new, more positive development dynamics and incentives.  And these developments can be made sustainable with the vast potential in agricultural and technological development. Insisting on excellence in public service and emphasis in export sector development initiatives developed within the framework of the trade agreements and the WTO trade rules that apply to international trade will work under the new conditions in Sierra Leone. President Koroma has shown praiseworthy commitment to “unite both the private and public sectors for a well-ordered society and economic progress”, a position made clear at a private sector forum at the British Council which State House convened in conjunction with the Sierra Leone Business Forum”. However, the laudable efforts of the president require a sustained commitment that supports a liberalized trading system to promote trade and diversify exports.

Both to build on the export sector development initiatives started by Kabbah and to introduce new dynamics, any commitment to good governance, now that the mechanisms of democracy are in place, should be reassuring and taken seriously.

Enabling Environment

Most countries have a mental image of Sierra Leone that is defined by the chaos of a society overrun by corrupt politicians and business people. But Sierra Leone can be made a very different place than for what it was known. Overall development can make paramount the pursuit of accountable, transparent and corruption-free policies to ensure a carefully sequenced opening up of investment opportunities in the country. The effort towards establishing mutual recognition agreements for agricultural exports with other market countries can greatly impact Sierra Leone’s export development sector. The Ministries of Agriculture, Marine Resources, Mineral Resources, Foreign Affairs, Trade and SLEDIC have a role to play. They have to create the environment to attract major investments to develop Sierra Leone’s cottage industries and raise the quality of products made in Sierra Leone. There are certain things the government can also do such as:

· identify and enhance divestiture of state-owned enterprises;

· augment the liberalization of trade and exchange rate, deregulation of prices, strengthening of fiscal management and domestic resource mobilization, and elimination of subsidies (especially on petroleum products and the staple food, rice);

· streamline and facilitate the process for exports by eliminating duplication and ensuring coordination between Government provided services to the export industry; and

· sustained support to the agricultural sector.

In the same token, small and medium-sized enterprises are key drivers of the economy. Helping them to develop is a reaffirmation of the fundamentals of trade sector development which include the establishment of export processing zone, provision of micro finance, and reactivation of skills training centers.

These are remarkable trends that are in sync with trends in facilitating the development of value added products for accessing markets in the United States and Europe through the United States African Growth and Opportunity Act (AGOA) and the European Union’s Everything But Arms (EBA) Initiatives; and formulating transparent investment guidelines.

Sustainable rural development programs that support supply side resources available for export which are in the rural sector and the development of these resources shall also see benefits occur in the development of viable income for the rural sector. The government’s role in facilitating development of the infrastructure for clean water, healthcare, roads, electricity and telecommunications is critical. The European Union, the World Bank and other international development agencies are partners in development for Sierra Leone. The government has to show a sustained responsibility and commitment to cooperate with these world institutions.

Export sector development, and especially its emphasis on enabling investment opportunities for the development of small and medium enterprises and raising standards in product development, will enable the growth of the Sierra Leone economy. Agriculture, combined with financial resources generated from the country’s vast mineral resource base and a strong export sector development knowledge of what standards are required to compete in the global market, will essentially drive Sierra Leone’s engine of growth.

Essentially also, access to information is fundamental to the development of a viable private sector. The private sector needs to know what is out there and how to capitalize on the market access agreements available. To reaffirm its responsibility and commitment, the Government needs to leverage technology to make available such information. A combination of business training and development programs and the one-stop approach to ensuring coherence in private sector development shall result in the sustainability of available resources.

Further, agriculture and fisheries are areas if enabled can quickly deve
lop an export led economy. The APC-led administration seems to recognize this. A successful example of this is the boost in fishery exports since last y
ear when the APC was voted in. The Ministry of Marine Resources (one of the country’s highest employers with over 100,000 employees for those in marketing and processing marine resources and 30,000 employees for local fishing communities) generated Le1,196.42 billion from October to November 2007; Le1.2 billion in December 2007 and Le1.7 billion in January, 2008.  In spite of the persistent pirating by fishing vessels traversing Sierra Leone’s territorial waters, the Ministry has managed to conserve the country’s marine resources and to avoid depletion that has seen stable profitable growth in the sector.

A national export strategy (NES) can be fully developed as part of the Ministry of Finance budget information. Government can support the aggressive expansion of the availability of financing for export development and to assist in the development of standards and regulations of the services sector to provide a base for the export of this sector of the economy. Consistent with what the APC-led administration of Ernest Koroma is trying to do, government should do more to strengthen public-private partnerships and ensure it is never taken for granted.

The private sector can feel appreciated when government can ensure the participation of the private sector in high-level diplomatic missions, assisting companies in accessing trade shows and markets internationally. The ability to access distribution channels for exporters cannot be over-stated as high level missions can open doors that the individual companies cannot open. The opportunity to gain exposure in overseas markets is an underutilized initiative and needs to be strengthened.

Moreover, developing a database/register of customary land based on clear standards of ownership of land is also fundamental to Sierra Leone’s export economy. The net result of all this would be a profound change in the underlying strategic calculus in the APC administration’s commitment to drive economic development in Sierra Leone – building on the essence of an export-led economy which creates jobs and promotes a stable and progressively developing Sierra Leone.  It is worth noting that a combination of initiatives to drive an export-led economy is chief driver of sustained economic development. Much of the country’s GDP remains underutilized but shows great potential. And whereas an export-led economy argument implies that GDP increases are realized, a national export strategy that encompasses all the initiatives of the previous administration and evolving new ideas can be fully integrated in a well articulated national export strategy.

Supply Side Potential

If the APC administration and its leaders are to keep Sierra Leone moving toward economic stability, they must still overcome a range of supply-specific challenges that need to be developed to meet the standards of the global market. These challenges promise to be generally less daunting with the right leadership resolve to drive change, and where resolve is lacking they could still make worse the severe economic woes of the country. Sierra Leone may still rank last in the United Nations Human Development Index (HDI), but as, Dmitry Titov, Assistant Secretary-General of the Department of Peacekeeping Operations (DPKO) puts it, Sierra Leone’s prospects of moving forward and boosting its socio-economic situation is ‘hopeful” (Scoop World Independent News). Achieving this, however, will be the responsibility of the country’s leadership to guide an export-sector-led economy and to develop such economy to meet the standards of the global market. There are a good number of supply-specific areas that can be developed, but it is worth highlighting some of the most important.

First, there is the challenge of developing the country cloth and garments market. This is possible with a garment training center or other body established with industry standards either established through SLEDIC or the Ministry of Trade. The possibilities of a garment training center should be a critical element in growing the garment industry in Sierra Leone. With major production enhanced, the need can be simultaneously created to support fashion or trade shows and a greater interaction between the hospitality industry and the garment industry.

Sierra Leone obtained the AGOA Visa for textiles and garments in April 2004 and that should be an excellent tool for exploring export opportunities available as well as through other initiatives such as those afforded through the European Union-African Caribbean and Pacific (EU-ACP) cooperation, World Trade Organization and the economic Community of West African States (ECOWAS). A Standards Bureau can help in implementing standards and quality control measures to make Sierra Leonean products competitive.

The Agriculture and Agro-Processing industry is also with great possibilities if it can overcome sanitary, bio-security and technical barriers to trade. Proper agro-processing adds value in the local environment and achieves a market ready product for immediate distribution or sale reducing offshore costs and maximizing returns. Standardized agro-processing facility can assist rural communities by providing a local base for their exports. SLEDIC should provide guidelines on sustainable processing for better market access and should come up with a quality mark for all Sierra Leonean agro-processed products. Identifying tropical products which have combined high returns to the farmer by either having high yield or high returns has the potential of giving farmers the options to look at more innovative plants that can form a basis for value adding.

Catalyst large farms can provide consistent volumes that can then be used to coalesce the many small community landholdings into a reliable consistent sustainable supplier of produce. More active pest eradication and assessment programs are necessary to build faith in agricultural supplies from Sierra Leone.  Also looking at organic farming as a future for Sierra Leone and as a niche market with high value with government providing certification will have an added virtue of sparking an agricultural boom and thereby helping reduce unemployment. And with standards provided for the output of agricultural products, farmers and exporters would clearly understand the export needs of the different markets.

Effectively managed agricultural support measures such as the provision of machinery and improved seedlings to farmers and farming communities is expected to help not only in achieving Government’s goal of food security but also encouraging crop diversification for both domestic consumption and export. With support from partners notably UNDP, FAO and the ADB considerable improvement has been made in the agricultural sector with the establishment of more than 130,000 Agricultural Business Units (ABUs) in the rural areas that account for the anticipated increase in agricultural production. These are existing facilities that can be further developed and adequately utilized.

Value adding through drying or smoking as well as packaging should be a priority for the fishing industry as another export sector development possibility. Facilities to handle fishing vessels need upgrade and aquaculture practices developed to meet global standards in fisheries development.

Credible policy reforms in the mining sector are important for sustaining improved minerals production. Modern mining operations require substantial investments. The ability of existing indigenous operators to modernize their operations depends on the availability of foreign investments to acquire the necessary hardware and expertise. What could be done is to promote the effective organization of cooperative joint ventures with owners of diamondiferous lands whose lands could be used as collaterals to secure the foreign direct investments and/or lines of credit needed to
acquire modern mining equipment like bulldozers, excavators, front-end loaders, dragl
ines, etc.

Further, setting up of diamond cutting and polishing stations equipped with workbenches designed for use with diamond cutting fly wheels along with several grinding applications is necessary.  Diamond cutting is the art, skill and, increasingly, science of changing a diamond from a rough stone into a faceted gem. Diamond cutting requires specialized knowledge, tools, equipment, and techniques because of its extreme hardness. The history of diamond cutting and polishing has its origins in India, where it was discovered a long time ago by Indian lapidaries that a diamond could be made to glisten simply by grinding another diamond against it. The setting up of these diamond cutting and polishing stations in Sierra Leone will aid the local diamond trade. The goal is to import diamond polishing skills and technology to Sierra Leone to enable the country to compete with other countries like the United States and India in the diamond processing sector. The Government of Sierra Leone should applaud this initiative since it is emphasizing the need for indigenous Sierra Leoneans to share in the downstream benefit of diamonds.

A final export sector development strategy worth noting is the services sector. At present the country does not have a well supported and regulated consultancy sector which could form the bulk of exports in the services sector. The only sector recognized is the Tourism sector which although important is not the only services sector with opportunities. Sierra Leone shows great potential in a number of areas and this expertise is yet to be developed using Government assistance and there should be an export focus on these areas.

Efficient Production Practices

Firms in Sierra Leone are often unaware of their own inefficiency. Such firms attribute too much of their inability to export to external factors and too little to their lack of efficient production. Import restrictions creating protected domestic markets have given entrepreneurs a false sense of competence. These entrepreneurs are only slowly aware of the critical roles that quality control, price and on-time delivery plays in international markets. Once their eyes are opened to the importance of these factors, access to buyers and technical support focused on production constraints can provide them with the means for lowering costs and raising quality.

Filling in specific service gaps can speed up the private sector response to policy improvements, and can accelerate export growth. With more knowledge and contacts, firms will achieve a higher level of export sales and more firms will enter the market. In short, intervention in the market for export services can be justified based on “infant industry” and “learning by doing” considerations.

Finally, the institutional structure of the export support service entity must fit the type of service provided. Membership-based trade groups, such as exporters associations, have been effective in providing basic information on buyers and foreign markets. But private non-profits or freestanding projects have been more effective in providing customized, firm-specific services. The point is that they often have the autonomy, expertise and flexibility to link firms with appropriate commercial sources of services, such as buyers, suppliers, and investors.

Of course, much could be done by utter commitment of the leaders who should understand and accept the importance of private sector input in the formulation of government trade and general economic policies. The potential of the global marketplace as a source of corporate expansion and economic growth is great. The policy makers have the sublime role to support private companies in seizing the opportunities that an integrated world economy offers – access to foreign capital, new market opportunities and increased trade.  A Trade Policy Review with the support of the World Trade Organization (WTO), substantial deregulation to boost investment and private sector development, will yield a stability that endures as Sierra Leone economic growth is defined.

Credit: Cocorioko Sierra Leone Portal

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