Agro-industrial processing: From consumption to production – Part 4

Asia has 75% of all Special Economic Zones (SEZs) in the world as at 2018 out of which China alone had over 2,5001. China alone hosts over half of all SEZs in the world.

For example, Vietnam has major concentrations of economic activity in its two economic centers, Hanoi and Ho Chi Minh City, which collectively account for more than 60% of the country’s Gross Domestic Product. Vietnam has 376 industrial parks, the most prevalent instrument for manufacturing and industrial growth in Asia. Vietnam in the past two decades emerged as a global leader in agribusiness and a top exporter in several commodities and products that are important in Nigeria’s agribusiness sector. In 2019, Vietnam generated export earnings of at least US$ 3 billion from each of the following commodities – cashew nuts, rice, cassava, fish, coffee, tea, black pepper, and rubber – resulting in total agricultural export revenue of US$40 billion. These eight value chains have experienced strong export growth, founded on productivity growth in on-farm and off-farm segments and improved coordination of investments across the value chains. Access to remunerative export markets has generated broad-based gains in the incomes of farmers and higher returns for agribusinesses, thus increasing foreign exchange earnings and public revenues.

South Korean government aggressively pursued an economic development strategy with a central focus on manufacturing-sector growth driven by industrial complexes. More than 900 industrial clusters account for 62% of the country is manufacturing production and 80 per cent of total exports2. The path of industrial development in South Korea revolved around building industrial complexes and clusters scattered across the country, and it initiated the measures and policies that enabled industrialization3. These industrial complexes have as a result, as of the end of 2018 a total of 1,207 industrial complexes had been built in South Korea: forty-four national industrial complexes, 664 regional (general) industrial complexes, twenty-seven metropolitan high-tech complexes, and 472 agricultural and industrial complexes been the backbone of Korean industrialization. These 472 agro-industrial parks, constitute 40% total.

The SAPZ programme stimulates Investment in Infrastructure
Although agriculture in Africa is predominantly a private sector business, its success is likely to be determined by targeted public investment in physical infrastructure and human capital development and adequate capacity of government institutions for regulation of private investments such as SAPZ type projects. Improved physical and institutional infrastructure, especially roads and energy, and logistic services and aggregation that facilitates transition to value-addition activities through agro-industrialization represent important drivers of agricultural transformation.

SAPZ as a catalyst for private sector development
The AfDB identified the private sector as a key partner in mobilizing investment for the development and implementation of SAPZs. The Bank has traditionally supported private sector development in Africa because of the sector’s potential to drive and sustain economic growth in complement with public sector efforts. In the case of the SAPZ model, the private sector is likely to be the main source of strategic investments to finance agro-industrial processing activities. The AfDB envisages that the participation of the private sector in the operation and management of SAPZ activities will include both foreign and domestic private investments comprising a mix of large, medium and small-scale investors. Evidently, local micro and small enterprises (MSEs) would be involved in the operation of SAPZs.

SAPZ as a Strategy for Human Capital Development
Growth and shift in the structure of agricultural production beyond the agrarian level requires higher skills and knowledge. The transformation of the sector would contribute to rising labour productivity and the creation of new employment opportunities. A major challenge with respect to the deployment of SAPZs concerns skills development and upgrading across the agriculture and agro-industrial value chains. In addition to measures to increase labour productivity, effective labour market planning must consider the requirements for the implementation of SAPZs. This is in the sense of supporting skills formation and entrepreneurship training needed for putting labour to productive use in agriculture and agribusiness.

As I end this lecture
I emphasize the need for deeper involvement of engineering professionals in national development plans. It is a great misunderstanding to hold the view that what happens, for example, at a country’s Central Bank necessarily alone determines the country’s economic growth. According to Michael Best commenting on America’s war time endeavor: “Both fiscal and monetary policies were involved, but they were subservient to the transformation of the nation’s productive structures (factories and laboratories)…the massive increase in federal R&D funding during World War II laid the institutional foundation of the S&T infrastructure that enabled the emergence and postwar of America’s regional innovation system” Best, 2018, pg 7,8).

My emphasis today is on the need to strategically promote the building of industrial technological capabilities for manufactured exports, invest more in infrastructure and institutions that foster Ease of Doing Business. The ‘factory of national firms’ is the furnace where long-term fortunes are formed. The wealthiest nations are the ones with the strongest industrial capacities. The United States has 12.85 million manufacturing jobs —employing 8.5% of the workforce. Manufacturers contribute over US$2.3 trillion to the economy of the United States every quarter, over 9 trillion every year. China leads the world in terms of manufacturing output, with over US$2.01 trillion in output. Manufacturing constitutes 27% of China’s overall national output, which accounts for 20 percent of the world’s manufacturing output. Germany, Italy, Turkey, and South Korea have the highest percentage of their workforce employed in manufacturing.

How do we move forward?
The summary of this paper is that behind the wide and terrifyingly widening wealth gap between developed Production Nations and poor meaning Consumption Nations like Nigeria, is the huge gap in scientific and technological knowledge to produce and sell to others.

If crude oil was the basis of wealth, Nigeria will not be too far down the prosperity ladder yet we are sadly among the poorest on earth. Rich nations on the one hand have a long history of producing, Learning from their mistakes and selling to Consumption nations. A poor nation on the other, possess enormous natural resources, but lag far behind in the technological knowledge necessary to transform their natural endowment to high value goods.

First, we need elite agreement, an intent that this country must develop. South Korea, China and other Asian nations achieved a high degree of industrialization and sustained growth over four to five decades Nigeria remains relatively an underdeveloped Consumption nation. The examples I reference demonstrate clearly how the agenda, mindset and policies of the political elite made up of politicians, bureaucrats and the private sector have exerted an extreme impact on the economies of their society. The dramatic economic extremes in income divergence, highlights the impact ruling elites and leaders can have in the economic welfare of states.

Second, you hear industry people say that venturing into the manufacturing industry in Nigeria requires a lion heart due to dysfunctional infrastructure, corruption and rent-seeking at ports, airports, government offices and so on. There is a long list of challenges: finance, infrastructure/electric power, skilled work force, exchange rate, complex and difficult destabilizing bureaucracy, dependence on imported technology and machines local manufacturing companies. These are surmountable challenges. Why are these so hard to achieve if not for vested and self-interests that come before public interest.

Third, Nigeria promoted industrialization after gaining political independence; we have not sustained the momentum. In fact, Nigerian politicians and bureaucrats over the last five decades are complicit in truncating the industrialization agenda. There is a need for renewed commitment to industrialization as part of a broader agenda for economic diversification, resilience to external shocks including by foreign wars foreign exchange shortage caused by drop in oil prices, the development of productive capacity for high and sustained economic growth and the creation of employment opportunities and substantial poverty reduction.

This is the domain of engineers and scientists as it is of economists. The profession should seek to make greater contribution. I have shown a few of the several factors and variables that determine the rate and direction of our economy and growth. Clearly, the choices and actions taken by those in political positions, the ‘Leaders’ and ‘elites’ tend to trump all other factors. Their choices, interests and predilections have pushed this nation into the current trajectory of a negative economic development pathway. We must not be shy to speak the truth. Only the Truth will help those who hold the levers of leadership no matter how unpalatable.

Concluded
Professor Oyelaran-Oyeyinka, senior special adviser to the President on Industrialization, The African Development Bank, delivered this lcture titled From Consumption to Production: ‘The Role of Special Agro-Industrial Processing Zones’ at the Assembly of Fellows for the Nigerian Academy of Engineering – Nigeria, recently.