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Creating a developmental state

The MDC Alliance recently launched its manifesto for the forthcoming elections. This is quite a detailed and rather longish document which seeks to articulate their policy approach in transforming Zimbabwe in all spheres of social, economic and governance matters.

By Vince Musewe

At the centre of it is the aspiration to create a transformational developmental state in Zimbabwe.

As an economist, I want to focus first on the issue of a developmental state since many out there may not necessarily appreciate what it entails. Then I want to look at what they are calling “transformation markers” in creating a sustainable, shared and inclusive economy. I assume these are intended deliverables which will indicate successful transformation.

The transformation of any society requires three things: first the profound realisation that it must change, second is finding those practices that will cause the change and third is adopting those practices. I think all political parties in Zimbabwe are on the same page. The question will always be in the HOW.

The developmental state is a term coined by Chalmers Johnson that is used to describe states which follow a particular model of economic planning and management. It was initially used to describe post-1945 Japan and its rapid modernisation and growth.

A simple definition would be that “A developmental state is a state where the government is intimately involved in the macro and micro economic planning in order to grow the economy”, with the addition “whilst attempting to deploy its resources in developing better lives for the people”.

What are the characteristics of a developmental state?

The UN lists the characteristics of developmental states as the following:

A government with the political will and legitimate mandate to perform the required functions;

A competent and neutral bureaucracy that ensures implementation. This requires a strong education system and efficient set of public sector organisations with little corruption;

An institutionalised process where the bureaucracy and government engages with other stakeholders; and

An established development framework and a comprehensive governance system to ensure the programme is implemented e.g. a central function responsible for overall co-ordination.

China, Singapore, India, Thailand, Taiwan, Vietnam, Malaysia, South Korea, Philippines, and Indonesia are all categorised as developmental states.

Accordingly, it is agreed that the developmental state not only refers to the collective economic and human development, but also describes the state’s essential role in harnessing national resources and directing incentives through a distinctive policy-making process.

The state has a role as a partner with the private sector in the national industrial transformation. The state is a catalytic agency and managers respond to the incentives and disincentives the state establishes.

In my opinion, there is absolutely nothing wrong with this idea as articulated by the MDC Alliance.

In fact, the new dispensation is also trying to achieve same. The question will always be the political will and capacity to effectively implement and monitor resource allocation and management which was the main problem under the Mugabe regime.

The MDC Alliance further identifies key deliverables as:

Restoration of macro- economic stability.

Monetary policy reform including, immediate scrapping of the bond note and strengthening of the multi-currency regime.
Urgent implementation of the debt resolution strategy.

Restoration of the land market and the issuance of title deeds to beneficiaries of the land reform programme.

Attending to tax reform including the enactment of a new Income Tax Act and the establishment of a flat corporate tax rate.

Promotion of foreign direct investment and foreign portfolio Investment through enactment of a new foreign Investment law and the ease of doing business.
Attending to pension reform and establishment of stand-alone defined benefit pension scheme.

Increasing productivity and promotion of the hard sectors of the economy.

Promotion of industrialisation, value addition and an alternative accumulation model.

The new ideas here are the discountenance of bond notes and a flat corporate tax rate.

I must repeat my assertions here that bond notes are NOT the root cause of the cash crisis but were an attempt to address the root causes which are, among others, fiscal indiscipline, cash hoarding due to lack of confidence in the banking sector, corruption and speculation, informalisation of the economy at large and illicit fund flows.
These cannot be addressed overnight as they are structural and cultural issues to consider.

The adoption of the rand could solve many problems albeit it may have its own unintended, unanticipated negative consequences.

But I have learnt throughout the years that at times what makes economic sense may not necessarily make political sense.

On the issue of a flat rate of 15% for company tax, this will require tax reform and an efficient tax collection architecture as acknowledged in the manifesto.

It is a positive thing as we seek to attract investment. In my opinion, the Zimbabwe Revenue Authority is a major inhibitor of foreign direct investment. Substantive reforms there will be critical.

It is also key that we deal with land tenure and security after having rationalised the sector.

The key actions required there have been adequately dealt with in the past and in the manifesto and what will be required is the political will to deal with issues of multiple farm ownership and land productivity.

We must however not forget that most of the above were raised by the Minister of Finance, Patrick Chinamasa, under the Lima strategy document of September 2015 when the minister issued a document titled “Zimbabwe’s strategies for clearing external debt arrears and the supportive economic reform agenda.”

The supportive economic reform agenda stated in that document includes: the strengthening of confidence in the financial services sector, accelerating re-engagement with the international community, revitalising agriculture, advancing beneficiation in or value addition agriculture and mining, focussing on infrastructure development, unlocking small to medium enterprise potential, improving the investment climate, accelerating public enterprise reform, modernising labour laws and aligning of laws with constitution and dealing seriously with corruption.

Of course what matters is the actual implementation and urgency of economic revival.

An inclusive developmental state is the correct way to go but it requires a leadership with a deep understanding of the complexities and challenges of socio-economic transformation.

I posit here that Zimbabwe will require a recovery phase where we re-establish a normal society and functioning economy. A transformation stage where we build new inclusive, effective and accountable institutions.

Lastly, a consolidation phase, where we create a new growth trajectory. For me these phases require different styles of leadership priorities and different behaviours and capacity. I wish all manifestos could articulate that.

There is nothing new under the sun, what will make the difference is the political will to change and this is always seen as easy and doable until one actually gets into government.

Second will be attracting and deploying the right skills in the right positions and creating a performance culture where there are consequences for non-delivery. We have not seen that in the past both at national and local government levels.

In my considered opinion, the MDC Alliance manifesto does pay attention to most of critical issues around transformation.

It comprehensively paints the ideal Zimbabwe we want but, as I have said before, manifestos have tended to be academic documents used to create excitement and over-promise on delivery but are sadly soon discarded after elections because there are no consequences for non-delivery.
The jury will be out.

Vince Musewe is an economist. You may contact him on vtmusewe@gmail.com. These weekly New Perspectives articles are coordinated by Lovemore Kadenge, President of the Zimbabwe Economics Society (ZES) Email address kadenge.zes@gmail.com and cell +263 772 382 852.

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