How to be an exporting country

W

e have often heard that Malawi must be a producing and exporting country rather than an importing and consuming country. But as of now, Malawi is not just an importing and consuming country, she produces tobacco, tea, sugar, cotton, and to a smaller extent, pulses. What then do our leaders exactly mean?

We can safely assume that they mean Malawi should engage in industrialisation and export processed and manufactured products over and above the primary commodities that she has been exporting for more than a century.

First step is to decide what industries to establish and which markets. We have to begin with those industries whose raw materials and components we can easily acquire.

We must be willing to learn from other countries that have recently been industrialised. There is no need trying to reinvent the wheel. The Tigers of the Far East took Japan as their role model. Of the four Tigers, South Korea modelled itself most than Japan. The latter began with few natural resources. For most of the industries, she had to import raw materials and components. This is what South Korea also did.

South Korea set up an institution similar to Japan’s Miti (Ministry of International Trade and Industry) to encourage entrepreneurs to build industries and export the products. President Park of South Korea was what we might call a benevolent dictator. With his team, he decided that his country should engage in such industries as steel, petrochemicals, non-ferrous metals, shipbuilding and electronics. To be able to compete in international markets, Park further decided that Korea should establish big companies. He selected a few national champions called chaebols. To these, the State gave extra attention.

At first, State support to chaebols was in the form of tariffs and imports followed by easy access to credit. In fact, they were artificial monopolies and were isolated from downturns.

President Park was a formidable task master. He made use of the technique devised by the American management guru, the late Dr Peter D Drucker, called management by objectives (MBO). He summoned his ministers to devise programmes for their projects and agree to achieve at least 80 percent of what had been programmed. Periodically, they were to report on what progress they had made. Those who failed to achieve the 80 percent minimum were fired.

The programme was pursued with extraordinary dedication, involving powerful work ethic. A Korean manager was quoted later as saying: “Koreans overcame poverty with hard work and discipline”. Public employees were highly regimented.

Taiwan’s approach was slightly different but its end result was the same. Within three decades, its per capita income multiplied hundred fold.

The Taiwanese concentrated on medium and small-scale industries. General Chian-kai Chex, the President of Taiwan did not allocate to himself the role that President Park had done in South Korea-directly supervising the work of his ministers and technocrats. Instead he entrusted the work of industrialising Taiwan and promoting its exports to what were called super-technocrats. These were very able officers most of them engineers, scientists and economists. They worked free of political interference.

K.Y. Yin, the first of these super-technocrats, said an engineer is a scientist who is knowledgeable about economics.

The super-technocrats set about creating a Taiwanese entrepreneurial class. They encouraged Chinese abroad to come home with their money and invest it in local industries. Like South Korea, Taiwan inherited the Japanese dedication to education with literacy almost at 100 percent.

Dr Goh of Singapore was sent to London School of Economics where he earned a PhD then came back home and teamed up with President Lee Kuan Yew. Said Lee: “To build a country, you need passion. If you just do your sums plus minus, credit and debit you are a washout. You have to be a visionary.”

Goh and his team established the Economic Development Board to guide the creation of a modern economy. Said Goh: “The key to economic success is not a matter of planning but rather the ability to adapt to change.”

The first step in being an exporting country then is being efficiently and effectively organised for producing and manufacturing products that the international market can accept. Marketing on its own is a big subject.

A country that introduces its products into the market must adopt a policy known as penetration, charging lower prices than competitors for products that are equal or superior in quality to those of the competitor. This is possible only when a country is a low-cost producer. Malawi is a high-cost producer, so it has a problem with being an exporter. n