The world history indicates that attaining economic development determined by various factors and among others the historical situation, the climatic nature of the countries, good visionary leadership, culture and others.
For instance, for the economic development of Gulf States, the extraction of petroleum through utilizing foreign investment and technology played pivotal role.
40 years ago, the United Arab Emirates was one of the poorest countries in the world, but thanks to its visionary leaders, in addition to unified the states, they modernized and made the country richer by extracting its natural resources. Currently, the country extracts revenue from services such as hotels and tourism in addition to petroleum and it has also become one of the hubs of information and communication technology.
By the same token, the end of the Korean wars in 1953 paved way for the creation of North and South Koreas. Both countries that time were pauperized in the world.
The outbreak of the Cold War after the end of World War II further divided the countries ideologically. North Korea pursued socialist ideology to build a government-dominated economy and create strong economic bonds with the Soviet Union and other socialist countries.
On the contrary, South Korea pursued a liberal politics to build capitalist based economy and won the strong backing of the USA and the Western European countries. In order to block the expansion of communism to the south, USA provided economic, military and technological support to South Korea. South Korea on its part used the opportunity to develop its economy created due to the cold war.
The inflow of foreign investment from western countries increased from year to year. The modernization of the agricultural sector, coupled with environmental protection, doubled the sector’s production and productivity. Within two decades, it changed itself from a net importer of food into an exporter. In the initial phase of its economic growth plan, the country gave emphasis to the expansion of labor-intensive manufacturing industries such as textiles and sugar.
The sector played pivotal role in creating jobs for hundreds of thousands. The expansion of research institutions on science and technology attributed South Korea’s structural transformation to policy reforms aimed at opening the country to foreign markets.
Indeed, the export-oriented policy of South Korea is one of the most important factors of its success. South Korea became one of the top 10 exporters in the world, and its exports as a percentage of GDP increased from 25.9% in 1995 to 56.3% in 2012. The increasing role of Korea in international import and export trade and industrialization accelerated the development of the country.
In addition, a strong business environment fosters growth in the domestic market and attracts foreign investors. According to the World Bank, South Korea is ranked No. 4 in terms of the overall Ease of Doing Business (DB) index in 2018, while the U.S. is ranked No. 6.
Recently, African Development Bank President Akinwumi Ayodeji Adesina called on Korean investors to seize untapped investment opportunities in Africa, especially in the energy and agriculture sectors.
He said that, Africa is a continent that cannot be ignored by investors during the opening ceremony of business forum attended by Chief Executives of Korean corporations, heads of financial institutions as well as ministers and business leaders from Africa.
The business forum was held at the 7th Korea-Africa Economic Cooperation Ministerial Conference, held in Republic of Korea’s second-largest city, Busan.
He also highlighted the potential for Africa to become a leading market frontier, boasting enormous potential in agriculture and renewable energy sources.
The bank chief assured Korean investors by telling that Africa is not as risky as it is explained by international media. It is a continent of opportunities, waiting to be tapped.
He cited Moody’s analysis of global infrastructure default rates which shows that the continent rank better at 5.5%, compared with 8.5% in Asia and 13% of Latin America.
The African Development Bank uses partial risk and credit guarantees to reduce the risks faced by the private sector.
Adesina observed that bilateral trade between Republic of Korea and Africa was important and growing, but said its volume needed to be improved. He said Korea’s trade with Africa in terms of exports and imports stood at only two percent of its total trade with the world. This, he said, must be changed given the huge economic opportunities and investment potential in Africa.
He also said that, the size of consumer expenditures is estimated to be $2.5 trillion by 2030. The African Continental Free Trade Area (AfCFTA), which is the largest in the world in terms of numbers of countries, is estimated at $3.5 trillion market size. With a population of 1.3 billion, of which 600 mln are young people, rapid urbanization and rising incomes of the middle class, Africa is the leading emerging market frontier.
Adesina listed several sectors which offered huge opportunities, including energy and agriculture, which is expected to grow to $1 trillion by 2030. This includes the development of special agro-industrial processing zones in which the banks and partners have invested more than $1.5 billion in 11 countries.
In the energy sector, Adesina said Africa has enormous renewable energy potential, including 11 WM2 huge solar powers, which is the highest in the world, but only one percent is utilized. With 350 GW of hydro, only seven percent is utilized; 115 GW of wind potential of which only two percent is used; and 15 GW of geothermal power of which only two percent is utilized.
Speaking at the forum, Korea’s 1st Vice President, Minister of Economy and Finance, Byoung Hwan Kim, acknowledged that despite global shocks, African countries were experiencing higher growth rates.
Kim shared his strong conviction that there are enormous opportunities for investment in Africa compared to other continents and highlighted the important role of the private sector in harnessing these opportunities. Kim recalled that Korea was one of the poorest countries in the world but was able to overcome this largely by focusing on its small businesses and the private sector.
As to him, he hopes that Korea has interest to share those experiences to the African counterparts and support the private sector to boost investment and provide guarantees tailored to private sector needs.
Kim said that the Korean government would work with the African Development Bank to identify opportunities and use the Korea Africa Economic Cooperation/KOAFEC/ Trust Fund to enhance the capacity of the private sector.
The meeting identified the African Continental Free Trade Area as a platform for mutual trade and investment.
The Chairman and President of the Export-Import Bank of Korea, Hee-sung Yoon, said Africa’s population and vast resources offered enormous opportunities for growth. He also said that the AfCFTA will connect Africa with the rest of the world and creates an opportunity for Korea to build strategic partnerships.
It is also learned that the forum offers strong investment opportunities to Africa in green metals that could drive global market growth in clean renewable energy technologies, where countries can create jobs, stimulate economic growth, and reduce their dependence on fossil fuels.
Adesina also said that, Africa is the perfect place to build batteries for electric cars and lithium-ion batteries.
During a subsequent panel session on Just Energy Technology Transition in Africa, the CEO of Neo Themis, Tas Anvaripour, encouraged Korean investors to consider on investing instead of only selling equipment. She corroborated at the gathering that the African Development Bank is a trusted risk guarantor on the continent.
Africa is endowed with natural resources such as renewable and none renewable energy, arable land, water, mines and others but due to the absence of sufficient investment and technology the resources are unexploited. As the result, the continent remains poor and relied heavily on the foreign handouts particularly in meeting food demand. Hence, it is time to exploit the natural resources by mobilizing domestic and foreign financial resources.
The other opportunity the continent can use as input for economic growth is the youth segment of the society. Almost 70% of the population is under the age of 30 and this figure shows that the continent has a potential for development through training and creating job to this segment of the society.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD TUESDAY 26 SEPTEMBER 2023
