Why do they overfly Africa to all the distant lands at the extreme ends of the world, when they can similarly invest in nearby Africa and reap rich returns? "Investment in Africa yields the highest returns than anywhere else in the world," Mahathir thundered!
The usual "African politicians are corrupt" and "it is a difficult place to do business" mantra cannot quite explain the behaviour of the "private investors from developed nations" towards Africa. There is something more than that.
The Asian countries were not a perfect place to invest. They had the same "difficult" conditions as Africa - corruption, political instability, personal insecurity, dictatorship, conflicts, poverty, unskilled labour, lack of technology, you name it. But that did not prevent the "private investors from developed nations" from going there to build industries and bringing benefits to all. It warrants repeating that there is something more to the reluctance of the "private investors" to help Africa than meets the eye.
Which takes us back to Mahathir's admonition of making new friends. "If we Asian nations become genuine partners in African development and not exploiters of wealth and opportunity," he said in that memorable speech, "and if we Asian nations can help enrich Africa with our capital, skills and technology, we will benefit from the increased trade and opportunities that a wealthier Africa will offer.
"This is what happened when the developed countries invested in Asia. This is what will happen when we invest in Africa. It is a win-win formula which all must endorse. It will create a cycle of prosperity."
Mahathir went on: "In as much as I would make a plea to my Asian friends and Asian businessmen to create smart partnerships on mutuality of benefits and sustainable relationships, I would like to make the same plea to my African friends, both the private sector and the governments.
"One of the fundamental prerequisites of cross-border Foreign Direct Investment (FDI) flows is political stability. Without this assurance of political stability, investors will just not invest however high the returns on investment are supposed to yield. The world's investment community must feel assured of political stability with its concomitant assurance of peace, security, non-violence, etc.
"I admit that frequently exaggerated and tendentious media reports on Asian and African countries make life difficult for the governments of these continents. But truth will still prevail if there is peace and stability.
"People and their governments must always remember that the idea that a change of government will solve all problems is fallacious. Much more than a change of government is needed if there is to be stability and peace in a country. Each one of us, Asian and African, will have to identify our weaknesses and work at them so that we will enjoy peace and stability for our own people and by extension for foreign investors."
The Taiwan experience
Mahathir made a good case for peace and stability as the bedrock for attracting foreign investors. But that was not always the case in Asia. Take Japan, Taiwan and South Korea as examples.
Japan fought a destructive war in the Asian neighbourhood during the Second World War and got nuked in the end by America, the first country in the world to suffer the devastating effects of atomic bombs.
Taiwan had been at conflict with mainland China for decades - and was still in conflict with China - when America and the "private investors from developed countries" came to build industries that brought benefits to all.
South Korea and North Korea had been at war; in fact South Korea was a broken country when the Americans and the "private investors" arrived.
The rise of Japan as the economic giant that we know today came when the Americans arrived after the Second World War, guilty-laden, after dropping the atomic bombs on Hiroshima and Nagasaki, and killing hundreds of thousands of innocent Japanese.
The Americans were weighed down by their heavy consciences. They had nuclear-bombed a nation that did not deserve to be so bombed. Washington thus made a conscious decision (with its allies) to occupy and help reconstruct Japan after the war. And they did not just send money or the famous "aid", they despatched a whole delegation of economic and other experts led by the American army General Douglas MacArthur to go and show the Japanese how to reconstruct their country and economy.
The first thing General MacArthur and staff did in Japan was land reform which made land accessible to the largest ever number of people in Japan - for, the Americans knew that land was one of the most important factors, if not the most important, in economics. Which makes the resistance of the Americans against Zimbabwe's land reform programme of 2000 under President Robert Mugabe, a major mystery.
General MacArthur's exploits in Asia, particularly Japan and Taiwan, has earned him a long biography on Wikipedia, part of which reads like this:
"On August 29, 1945 MacArthur was ordered to exercise authority through the Japanese government machinery, including the Showa Emperor. As Supreme Commander of the Allied Powers (SCAP) in Japan, MacArthur and his GHQ staff helped Japan rebuild itself, institute democratic government, and chart a new course that ultimately made Japan one of the world's leading industrial powers.
"The US was firmly in control of Japan to oversee its reconstruction, and MacArthur was effectively the interim leader of Japan from 1945 until 1948. In 1946, MacArthur's staff drafted a new constitution that renounced war and stripped the Japanese Emperor of his military authority. The constitution, which became effective on May 3, 1947, instituted a Westminster system of government, under which the Emperor acted only on the advice of his ministers...
"The constitution also enfranchised women, guaranteed fundamental human rights, outlawed racial discrimination, strengthened the powers of Parliament and the cabinet, and decentralized the police and local government.
"A major land reform was also conducted, led by Wolf Ladejinsky of General MacArthur's SCAP staff. Between 1947 and 1949, approximately 4,700,000 acres (1,900,000 ha), or 38% of Japan's cultivated land, was purchased from the landlords under the government's reform program, and 4,600,000 acres (1,860,000 ha) was resold to the farmers who worked them.
"By 1950, 89% of all agricultural land was owner-operated and only 11% was tenant-operated. MacArthur's efforts to encourage trade union membership met with phenomenal success, and by 1947, 48% of the non-agricultural workforce was unionized..."
As Japan began to recover, the Americans opened their doors widely for any number of Japanese goods at concessionary entry terms - for, without ready markets an economic miracle is not possible.
When Japan became prosperous, thanks to the American largesse and tutelage, it invested its money in the Asian neighbourhood, and thus helped the other Asian countries to prosper as well.
Taiwan miracle
Five years after planting the seeds of the Japanese miracle, the Americans extended General MacArthur's mandate to cover Taiwan; and so the kind general and his staff arrived in Taiwan not long after the Chinese general, Chiang Kai-shek, and his nationalities had left mainland China after their defeat by the communists in 1949, and fled to the island then called Formosa.
In Taiwan, as in Japan, the first thing General MacArthur and his American staff did was to embark on land reform, redistributing the land to cover a wider segment of the island's population as the foundation for the economic miracle they hoped to achieve. And not only that, they put Taiwan through the same paces as they had done in Japan, including political and social reform.
In September 1999, I was invited by the Taiwanese government to visit the capital, Taipei, so I had access to Taiwanese official documents that most journalists arriving there would not normally see. I will therefore devote a longer time in this piece to show what brought about the Taiwanese miracle and what Africa can learn from their experience.
But first, what is Taiwan? The "nation" (which China still considers as part of Greater China), is made up of scores of islands, the biggest and most productive island is Pescadores (or Penghu to mainland China). It is the same size as Guinea Bissau (14,000 sq miles), and lies 90 miles off the Chinese mainland.
The Europeans called Pescadores Formosa. With no natural resources of its own, Taiwan used to be a Japanese colony for 50 years, but it has achieved a stupendous miracle in the last 50 years, thanks again to American largesse and tutelage.
By 1999 when I visited, Taiwan (then with a human population of 23 million and a car population of 17 million) was the 19th largest economy in the world; 14th largest trading nation; 7th largest foreign investor; and a major donor to a long list of less wealthy nations in Africa, Latin America, and South Asia.
In 1989, a year before my visit, Taiwan's foreign reserves stood at a staggering US$84 billion. Its national income per head was a cool $13,233; and miracle of miracles, Taiwan had no national debt! To an African ear, that sounded like heaven - no national debt!
And all this achieved in the teeth of spending nearly one-third of the national budget on defence - defending itself against the Big Brother across the Taiwan Strait, mainland China.
Taiwan's other statistics was equally impressive. In 1999, it was the second largest producer of computer hardware in the world, up from third position in 1997. In fact, IT (or Information Technology) is Taiwan's largest foreign exchange earner today, bringing in over $20bn annually through the activities of 900 computer hardware manufacturers.
Taiwan therefore controlled 80% of the world's production of computer chips, 74% of all PC motherboards - the printed circuit board and chips that make up the basic platform of a computer - 70% of notebook computers, 10% of DRAMS - the chips that hold much of the software running on a computer - 4% of all computer modems, 39% of network cards, 53% of all monitors, 55% of all video cards, 61% of all keyboards, 65% of all mouse, and 95% of all hand-held scanners.
Your computer or laptop may be made in the USA by IBM, Compaq, Dell or Apple, and may be running on Intel processors, but without Taiwan, these American giants will be reduced to rubble.
One might ask why the world - especially the hard-nosed Americans - has allowed Taiwan to have such a dominant hold over the global IT industry. But that is the beauty of the Taiwan miracle. You will not understand it if you don't look at the politics behind it all.
America and Japan
The Taiwanese are a hardworking people, no doubt about it. But take out the American and Japanese element from the Taiwan miracle, and it would have taken the Taiwanese much longer than 50 years to achieve the miracle. You will never see as many skyscrapers concentrated in one place as Taipei, the Taiwanese capital. Even the Americans who pioneered that kind of cityscape do not have as many skyscrapers concentrated in one city. It is awesome!
Yet the truth still stands that in the early years of "nation" building, Taiwan relied heavily on generous American financial and political support to stabilise and develop. But that is only half the story.
The other half is that, even to this day, many of Taiwan's industries rely heavily on key parts and cutting-edge technology from Japan, in particular in the IT and car industries. This help from America and Japan, combined with the resourcefulness of the Taiwanese people, have made Taiwan a truly economic and maritime (if not military power) in the Western Pacific.
Barefoot school kids
Yes, Taiwan has come a long, long way in a relatively short time, but its prosperity is young. Ger Yeong-kuang, author of the Government Information Office (GIO) handbook, The Story of Taiwan, admits as much: "People of roughly the same age as myself," he says, "can certainly still recall the poverty of our youth, when children often went to school barefoot, wearing undershirts sewn from flour bags. Such scenes from the post [Second World] War era must be hard for the children of today's skyscraper cities to imagine.
"Indeed the contrast between the island's present prosperity and its earlier poverty are like heaven and earth. The success, however, was not achieved overnight. Taiwan has evolved from a poor backward place under an authoritarian system to a democratic, prosperous, diversified, and vigorous society," Yeong-kuang adds.
So how did Taiwan make it? Part of the answer lies in the "American element" - which, from whatever angle one looks at it, is a credit to US foreign policy in the Far East. To have a fuller understanding of it, a bit of history is needed here.
Though government officials don't talk about it in Taipei, and you would not find it in any government handbook, the fact remains that when mainland China went communist in 1949, following in the steps of the Soviet Union to the north, America and its capitalist allies deliberately set out to contain communism by making countries like Taiwan, Japan, South Korea and other East Asian Tigers become the paragons of economic prosperity - as a way of holding back the spread of communism. And in five decades, Taiwan has become a star product of that American mindset.
A great history
The "issue of China" goes back to 1949. In that year, the legitimate government of China under the Koumitang (KMT) party that ruled over all of China (including Taiwan), was defeated by Mao Zedong and his communist followers, forcing Generalissimo Chiang Kai-shek and his nationalist supporters to relocate the KMT government to Taiwan, then a poor, broken island 90 miles away from the mainland coast.
At the time, China was known by the world as the Republic of China (ROC). The republic had been founded in 1912 after Dr Sun Yat-sen (Chiang Kai-shek's mentor) and his followers had defeated the Ching dynasty which, in 1644, had in turn overthrown the imperial Ming dynasty that had ruled China since 1368 and in the process conquered Taiwan and added it to the Chinese nation.
The Europeans started arriving in the Western Pacific in the 17th century. The Portuguese, as usual, arrived first, and it is said that when their sailors first saw Taiwan, they were bewitched by its breathtaking beauty that they shouted "Formosa" - the Portuguese word for "beautiful island". Formosa, thus, became the name by which the Europeans and much of the world knew the island until Chiang Kai-shek and his nationalists arrived.
The Dutch and Spanish would later establish colonial outposts on Formosa but their efforts were shortlived. The Portuguese meanwhile were concentrating on the neighbouring Macao. In 1642, the Dutch drove the Spanish out of Formosa, but 21 years later (in 1663), the Ming dynasty general, Koxinga, led an assault force to evict the Dutch from the island.
A year later, the Ming dynasty itself was overthrown by the Ching dynasty which was established by the Manchu emperors who were part of the Mongoloid people of Manchuria in northeast China.
In 1895, the Ching dynasty lost the China-Japanese War and was forced to cede Taiwan to Japan who ruled the island for 50 years thereafter, relinquishing it only in 1945 after Japan's defeat in the Second World War. Japan thus returned the island to Koumitang (KMT) rule; four years later Mao Zedong and his communists defeated the KM T and proclaimed the People's Republic of China (PRC) in 1949.
Today Taiwan is officially known as the Republic of China (ROC), the old name before the communist defeat; while mainland China is officially known as the People's Republic of China (PRC).
Thus in late 1949, China suddenly found itself with two governments and two official names. At the time mainland China - which today has become an economic superpower by itself - was seen by much of the world as a renegade government ran from Beijing by Mao Zedong.
The "two Chinas" existed side by side until 1971 when the American president, Richard Nixon, sent his secretary of state Henry Kissinger on a secret visit to Beijing via Pakistan to discuss rapprochement with "Communist China". That visit led to Nixon visiting Beijing himself in February 1972.
The most significant thing to come from Kissinger's secret visit was a controversial UN Resolution (2758) passed in 1971, stripping the ROC of China's UN seat which was then given to the "Communist" PRC. That resolution effectively marked the death of Taipei on the world stage. Life was never the same again after Kissinger's visit.
Since then much of the world has bought Beijing's notion that Taiwan is a "renegade province" of China's, and as a result mainland China does not consider Taiwan as a "country".
Mao and the Americans
In 1944, five years before Mao Zedong's communists won the civil war against Chiang Kai-shek's nationalists, Mao is reported to have made an approach to the American president, Franklin Roosevelt, to help unite the communists with their nationalist rivals against their common enemy, Japan. Mao had hoped that Washington could work with them and build a "democratic China".
Sadly America did not take up the offer. President Roosevelt died and Washington decided that Chiang Kai-shek was a better preposition than Mao. Thus began the strategic alliance between America and Taiwan that gave birth to the Taiwan miracle.
Paradoxically, in March 1979, Washington opened an embassy in Beijing and downgraded its embassy in Taiwan to an "institute". The "American Institute" in Taipei has since acted as the de facto American embassy in Taiwan. The Americans call this policy "useful ambiquity" - they still stoutly support Taiwan but diplomatically, they consider mainland China as "the nation".
By 1999 when I visited Taipei, 120 countries worldwide recognised China, and only 27 recognised Taiwan as a country and had embassies there.
However, both China and Taiwan have a common goal of reunification in the future, but the devil is in the detail. Taiwan is insisting on a "democratic political system" in China and a "free market economy" (a euphemism for capitalism) before reunification.
Mainland China, on its part, wants reunification on the basis that Taiwan has always been part of the Chinese nation. Beijing has therefore offered Taiwan the "one country, two systems" formula given to Hong Kong and Macao. Under this system, Hong Kong and Macao will continue to live under their democratic, free market systems for the next 40 years while Beijing continues with its communist system. But Taiwan doesn't want any of this.
Africa and Taiwan
What can African learn from the Taiwan miracle? If America's "useful ambiguity" policy has not been of much help to Taiwan on the diplomatic front, Washington has definitely been of immense help to Taiwan on the economic and defence fronts.
For 18 years between 1951 and 1968, America pumped $1.48bn free money into Taiwan to help it lay the foundations for economic prosperity on the island. The American money started flowing into Taiwan just two years after Chiang Kai-shek and his nationalists had arrived n Taipei.
In today's mega-rich Taiwan (with $84bn of its own foreign reserves as at 1999), $1.84bn over 18 years may look like peanuts, but in those halcyon days of the 1950s and 60s, $1.84bn was serious money! Too serious to make any small country successful!
Which leads to the question: Why doesn't Africa ever get some of this "serious money" given on sympathetic terms to help it develop as America did to Japan, Taiwan, South Korea, Germany and Western Europe after the Second World War?
The breakdown
Broken down into its yearly allocations, America's $1.48bn free money to Taiwan looks quite impressive even in today's terms: $90.8m was given in 1951. $75.8m in 1952. $100.3m in 1953. $108.3m in 1954. $132m in 1955. $101.6m in 1956. $108.1m in 1957. $81.6m in 1958. $128.9m in 1959. $101.1m in 1960. $94.2m in 1961. $65.9m in 1962. $115.3m in 1963; $83.9m in 1964. $56.5m in 1965. $4.2m in 1966. $4.4m in 1967. And $29.3m in 1968.
For Doubting Thomases, I must add that these figures were given to me by the Taiwanese Foreign Ministry in Taipei in 1999. This, in effect, as government officials in Taipei will tell you off the record, was the platform on which Taiwan's miracle was built.
And the formula was simple. As the Taiwanese government received the free money, it set up a committee to administer the money. (Please make no mistake, these were not, repeat not, loans; they were free money not to be repaid, the Taiwanese Foreign Ministry told me in Taipei).
The committee was given the mandate to receive business proposals from Taiwanese business people, and consider each on its merits; if a particular proposal would benefit the country, the committee would allocate a sum of money to the company or businessman behind the proposal.
For example, if Mr A wants to produce cutlery, he will send his business plan to the committee, which will consider what usefulness cutlery will be to the country and the economy. The hotel and restaurant industry will need cutlery, so the committee will give Mr A $20,000 free seed money (not payable) to set up a factory to produce cutlery.
Every month, the committee will send inspectors to Mr A's factory to make sure that he is in fact producing cutlery, and making some profit. Thousands of such factories and businesses sprang up; and in no time Taiwan's economic miracle was on the way.
By the mid-1960s (1964-68) as the figures above show, Taiwan's experiment had been so successful that it weaned itself off from the American free money. By 1968, Taipei did not need the American free money any more, and kindly asked Washington to turn the tap off.
Comparisons
For those Africans who are fond of doing the Africa-Asia comparisons without putting it in context, consider the following facts: In 1958, Ghana's President Kwame Nkrumah approached the American government for a loan of $40m to add to Ghana's own $30m to finance the much needed Volta hydro-electric project at Akosombo.
Nkrumah's government was about to embark on a radical industrialisation policy which, Nkrumah hoped, would achieve economic independence for Ghana in a generation and make the country a model for Africa.
But Ghana's industrialisation project would not be possible without sufficient electricity to power the factories that Nkrumah's government hoped to build all over the country. The key thus lay in the Akosombo hydro-electric project.
In his 1963 book, Africa Must Unite, Nkrumah was clear about what he wanted Ghana to achieve. "In the industrial sphere," he wrote, "our aim has been to encourage the establishment of plants [factories] where we have a natural advantage in local resources and labour, or where we can produce essential commodities required for development or for domestic consumption.
"During 1961, over 60 new factories were opened [in Ghana]. Among them were: a distillery, a coconut oil factory, a brewery, a milk processing plant, and a lorry and bicycle plant.
"In addition, agreement were signed for the establishment of a large, modern oil refinery, an iron and steel works, a flour mill, and sugar, textile and cement factories... For unless we attain economic freedom, our struggle for independence will have been in vain, and our plan for social and cultural advancement frustrated."
Nkrumah then turned his attentions to the Volta River Project: "All industries of any major economic significance require, as a basic facility, a large and reliable source of power," he wrote. "[They] must have a plentiful supply of electricity if they are to achieve any large-scale industrial advance. This, basically, was the justification for the Volta River Project. This project, and the extension of the port and harbour at Tema, will have a massive effect on our national economy and enlarge its development."
The cost
The initial cost of the integrated project (which included the Akosombo Dam itself, the construction of an aluminium smelter at Tema, the development of the Tema township and the construction of two smaller hydro-electric stations at Bui to serve the northern regions, and another downstream from Akosombo), was put at £300m.
At the time, aluminium was the world's miracle metal, used for the manufacture of a wide range of things - from clothing to cooking utensils, building materials, etc. And Ghana had large deposits of aluminium unexploited.
As a result, the country needed to find some loans abroad to finance the Volta River Project. In 1958, President Nkrumah personally went to Washington to meet President Dwight D. Eisenhower, but as warmly as he was received at White House, Nkrumah returned empty-handed.
The American government would not give him any loan, rather Eishenhower directed Nkrumah to go and see the American business magnate Henry J. Kaiser, who had a string of aluminium factories dotted around the world, for a loan.
Kaiser did help, but before the dam was completed, he was already planning (by February 1964) with the American and British governments to overthrow Nkrumah's government. The coup took two years in the works, and finally succeeded in overthrowing Nkrumah in February 1966.
The key point is, for 18 months Nkrumah looked for a loan and found none. Finally Nkrumah fell into the embrace of the World Bank which, though would give a loan and guaranties for a Kaiser loan, introduced so many conditionalities that Nkrumah's original concept of an integrated industrial project was killed.
Later the American and British governments lent the project £35m to add to Ghana's own £35m to build the main Akosombo Dam.
But for those who are fond of making the Africa-Asia comparisons without context, the key point is while the American government would not give Ghana a loan of $40m in 1958 to build the Akosombo dam, it gave Taiwan $81.6m in 1958 for free. Nkrumah wanted a loan, not free money!
For the next four years (59, 60, 61, 62), while Nkrumah sought for a loan, America continued to give Taiwan for free, $128.9m in 1959; $101.1m in 1960; $94.2m in 1961; $65.9m in 1962. A total of $471.7m between 1958 and 1962.
Imagine how many Akosombo dams Nkrumah would have built in Ghana with that kind of free money and the effect it would have had on Ghana's economy and future; and by extension on the whole of Africa.
In December 1957, only nine months after Ghana's independence, the American Central Intelligence Agency (CIA) prepared a report on Ghana for the American government and intelligence community, in which it said: "The fortunes of Ghana - the first Tropical African country to gain independence - will have a huge impact on the evolution of Africa and Western interests there".
If Nkrumah's government managed to open 60 huge factories in 1961, imagine what might have been, in Ghana and Africa, if America and the "private investors from developed countries" had helped him to achieve his aim in industrialising Ghana. Or if he had not been overthrown in the American-planned coup of February 1966!
And some people think there is something intrinsically wrong with Africans that prevents them from achieving economic development like the Asian Tigers! Or that Africa has been left behind - the Asian Tigers have progressed while Africa has retrogressed, they say.
Taiwan trade
The truth is not only has America helped Japan, Taiwan and South Korea to develop, America has forever been the three countries' biggest trading partner. America deliberately opened its doors for Taiwanese, Japanese and Korean goods at concessionary entry terms. It explains why Taiwan controls the largest chunk of the IT market in the USA.
By 1997, the two-way trade between Taiwan and America (excluding military sales) totalled $52.9bn. Taiwanese officials told me in 1999 that "for the past decade, we have enjoyed a large trade surplus, in some years over $10bn, with the United States". Although by 1997 America had been crawling back some of the deficit, it still stood at a tidy $6.3bn in favour of Taiwan.
Contrast that with America's attitude to trade with Africa. In the last decade and a half, America decided to be kind to Africa by introducing AGOA (the American Growth and Opportunity Act) which sought to give trade concessions to qualifying African countries to export textiles to America at concessionary entry terms.
But how many African countries produce textiles? And what impact has AGOA had on African economies? Why can't the same liberal trade terms given to Taiwan, South Korea, Japan and the others that saw them grow into economic tigers in 50 years be extended to Africa? These are the questions that the people who do the Africa-Asia comparisons without context, should be asking themselves.
source: allafrica.com
