An economic strategy for The Gambia

Recently I spent time in The Gambia, a country whose people overthrew a megalomaniacal, authoritarian and vicious President, Yahyeh Jammeh, in an extraordinary democratic moment, due to their courage and the timely supportive action of other countries in West Africa (and very little if at all due to support from major powers, apart from their role in placing some effective limits on prior abuses and eventually supporting a Security Council resolution that helped to legitimize the regional action).

I was able to observe a moving event in which members of the country’s diaspora, from Alaska to Taiwan and from Cape Verde to Sweden, most of whom were active in opposition (and quite a number of whom were highly educated professionals successful in the countries to which they have departed) assembled to meet the new President and to express their pleasure at the New Gambia as well as their sincere hopes for the future. Conversations with ordinary Gambians reveal general relief and enormous optimism. Arguably, the current juncture provides the first opportunity since the country’s independence in 1965 for a broad ranging public conversation on the ends and means of development.

On the agenda of the new and widely welcomed government are now not only the restoration of the rule of law and democratic institutions, but addressing economic and social concerns long severely neglected. Gambians had been among those who are crossing the Mediterranean to Europe, in the hope of a better life, in large numbers relative to their small population. Many concerns need urgent attention. This includes a population in poor health and insufficiently educated, an undiversified economy vulnerable to downturns in demand for its few exports, and an economy unable to generate sufficient employment, especially for youth. The smallness of the country makes it difficult to pursue many strategies available to larger countries, such as those which might accord a driving role to domestic demand (which presumes that the national economy can provide the scale and diversification required for such an approach).

Break the chains of imperialism? Rouse the people to revolution? One wishes it were so simple. The responsible economic analyst must provide prescriptions relevant in the here and now, while not losing track of the broader questions and ultimate concerns. International and national realities – financial, technical, political and social – must all be faced, even as one dreams a dream. Fostering a dynamic and inclusive market economy, able to weather the unforgiving storm of the global economy, even while combatting its constraints and attacking its limitations, is the most proximately realizable utopia.

The dominant approach to economic management for the Gambia and countries like it, coming from the World Bank, IMF and Western governments (who tend speak more or less in unison on such issues) emphasizes “sound” macroeconomic management, interpreted in terms of maintaining manageable debt, low inflation, a realistic exchange rate conducive to avoiding sustained external deficits, and a climate for doing business that is attractive for investors. This is not always wrong, but it is very frequently wholly inadequate. The focus on these priorities reflects the thinking and interests of external institutions, and in particular the perceived desirability of a reliably pro-business (and in particular pro-foreign investor) economic environment. It is based on the idea that such conditions, perhaps complemented by some investment in human capabilities and administrative reforms, are sufficient to jump-start economic growth, as the country specializes in the areas in which it has a comparative advantage. This worldview leads to a concern with lowering costs rather more than it does with raising productivity. Most importantly, it does not directly consider what is needed for the incremental structural transformation of an economy.

Those countries that have successfully developed in any sense have generally pursued a more active strategy. A program of action focused on a country’s own development goals must therefore extend beyond providing economic stability and an institutional and policy environment attractive to business, whether foreign or domestic. In the present delicate transitional situation of The Gambia, sensitivity to a broader range of issues – economic, social and political – as well as a long-term orientation that is strategic, is needed.  (For purposes of this discussion I shall take as given the colonially derived borders of the Gambia, despite the reasons for thinking that it is an important part of the reason for the country’s woes. The maxim that one might adopt is that the borders may not be abolished but that they can be made less relevant).

One contrast between the different views on economic policy is expressed at the level of high theory by the orthodox view that it can be dangerous and costly for any government to attempt to intercede in ways that aid particular industries, as this involves forms of prognostication of which it is not capable – picking winners. However, this criticism fails to recognize that interventions can be of very different kinds, and that they do not have to involve costly subsidies – which may be infeasible quite apart from their being ill-advised. They can involve helping to remove infrastructural obstacles (such as in power, storage or transportation), changing trade or tax policies so as to lower the costs of producing or procuring specific inputs, steps to enhance skill development and dissemination of technical knowledge, improving marketing or distribution, organizing industry, workers and civil society to share information or overhead costs better and otherwise solve problems, and many other actions. Some of these measures can be undertaken even by governments with limited capabilities, on the basis of a specific analysis of what is needed combined with a realistic assessment of what it is capable of doing. The idea of growth diagnostics advocated for in recent years is in this spirit, as it recognizes that there may be structural obstacles to be identified and removed in order to bring about higher levels of economic growth. A part of the theoretical grounding for such an approach within the framework of standard economics is the theory of the second best, which clarifies why impediments to the functioning of markets or states that cannot be directly negated might have their adverse effects diminished by introducing other measures, but noting that the right actions can only be identified through a contextually sensitive study of the various impediments that are present. These impediments may exist either in the national economy or in the world economy and may affect the ability to realize a higher national income presently to enter onto a higher growth path. A set of economic policies and actions that best serve the country’s development must at a minimum sustain livelihoods and generate employment, raise incomes and relieve the country’s foreign exchange constraint (The Gambia is perennially aid dependent and accordingly constrained).

In addition to economic considerations, there may of course also be ecological, social, cultural or political concerns which enter both into the description of the objectives and the constraints. A program of inclusive growth and development, for instance, might aim not only to achieve sustainable growth but to ensure its adequate distribution across income groups, social groups and regions. Considerations of diverse kinds ought to be integrated into any strategy from the first, as early choices carry consequences as to what will be possible later. A democratic pathway to development requires public discussion and support for the choices made, in order to inform, justify and implement them.

A conversation among Gambians on a development strategy for the country might reflect on the following possible proposals for a realistic development strategy:

What do Gambians wish for their country in ten, fifteen, twenty-five or fifty years? What is the program of action needed to get there? Can The Gambia build new areas of specialization, and not merely further extend existing ones (traditional agricultural exports such as groundnuts, and tourism)? Are there areas of economic activity that are potentially remunerative for the country which can be further developed in the short and intermediate term (floriculture, fruits, medicinal herbs and plants, business process outsourcing, e.g. medical transcription or other niche internet dependent service exports for which the English language, the time zone and sufficiently educated workers are an advantage)? If so, what is the potential role of Gambian government, domestic or foreign businesses, producer or worker cooperatives, or others working together in identifying and providing a spur for such activities, in providing technical knowledge or in certifying quality? What are the factors that make Gambian activities in certain areas uncompetitive and to what extent can these be addressed through specific actions? (Consider the possibility that high power costs might be diminished by better inducements for solar power – the costs of which have greatly fallen in recent years – or other measures). Very deliberately scanning the field of opportunities nationally and globally is necessary. This process can start immediately, but will require the aid of collaborators outside government and perhaps outside the country.

Taking an inventory of national capabilities, some of which may be hidden (e.g. in the substantial Gambian diaspora, small in absolute number but a large resource for the country) is another necessary early step. How will future steps build on earlier ones? Can The Gambia link its strategy to existing areas of robust economic growth in the region and globally (for example, what possibilities exist for taking advantage of linkages to Senegal or other countries in the specific industries in which they have been experiencing robust economic growth)? What obstacles must be removed in order to do so? How should the economic strategy reflect main goals such as increasing youth employment? Crucially, what are areas of tax revenue that can be progressively increased? Taxes, if raised, should be clearly tied, through political commitments if not administrative earmarking, to productivity enhancing investments in physical and social infrastructure. As noted already, costs are not as important an obstacle to investment, foreign and domestic, as is low productivity, which can be improved through appropriate public and private investments, with public investment playing a leading role. A close tie between tax revenues and sensible investments can therefore create a virtuous circle. How should a broad-based educational strategy seek to provide the profile of human capabilities that most conduces to the self-realization of citizens as well as the development of a productive, sustainable, economy? What weaknesses in the educational infrastructure, both in terms of quality and quantity, must be attacked in order to do so? What about health and social services? With limited natural resources, The Gambia must urgently invest in people as its ultimate resource. Relatedly, what are the demographic opportunities and obstacles that are likely to present themselves? An irony of modern demography, reflected in the Gambia, is that high fertility rates and the associated boom in the number of youth reflect poor health and educational outcomes rather than good ones. Addressing people’s needs better can therefore both directly and indirectly relieve developmental constraints. What about the relation between city and country? The country has been experiencing rapid urbanization, with rapid growth in a single “primal” city concentrated along the coast, also the resource that draws international tourists. As in many other countries, this is a consequence of push from rural areas as well as pull from urban areas, as inattention to sustaining productive agrarian livelihoods or decentralizing high quality social services has changed the calculation as to where to live.

In each and every area, comprehensive scrutiny of the limitations and possibilities is needed in order to create an integrated development strategy.

Although the question is vulgar, one must still ask, in the media-driven world of today, what is The Gambia’s country brand? (This can be different for different purposes, e.g. for attracting investors and tourists.) How will it be publicized consistently and powerfully? How will the country’s self-presentation to foreign investors, development bankers, aid donors or others reflect its economic goals and priorities and its consolidation of democracy?

How can the government find strategic partners who will help the country to develop needed competences? Private companies can play this role but so can international organizations and national counterparts, once strategic thrust areas have been identified. Some dialogue with the partners may be necessary to identify what these are (for instance in the case of entirely new export activities, for which reliable demanders are needed). Government can help to develop production of certain goods and services on a national scale to make them more viable than they otherwise would be.

Some social goals may be of special interest to foreign partners (e.g. youth employment for European partners concerned about migration) who should be asked to support specific aspects of the policy regime (e.g. tax credits, wage subsidies or other economic inducements for firms hiring youth, vocational training, and aid for small business development). Foundations and policy organizations specifically concerned with particular strategic priorities can be invited to advise and participate. The government must take a strategic approach to identifying and inviting partners to work with it in high priority areas that it itself defines.

Crucially, how can the relationship with Senegal be revisited to create new opportunities for both countries (e.g. by improving infrastructural links between Senegal’s volatile Casamance region and the rest of the country, while also enhancing trade links with the Gambia? The elimination of administrative impediments and the improvement of the infrastructure for everyday commerce as well as other forms of practical collaboration – put on the shelf due to the poor relationship between the previous government and Senegal – is an historical goal that should be again pursued with urgency, taking advantage of the good feeling that has followed ECOWAS’s initiative to support democracy in the Gambia.

In what ways can the consolidation and deepening of democracy in the country aid the economic strategy? Sending a signal that the government intends to value and uphold the rule of law can be important to investors but maintaining the active support of the people for the economic strategy is also essential to provide balance and to ensure its longer-term credibility and success. In order to attain this, measures of different kinds can be helpful. Important among these can be the engagement of citizens’ groups in the development of the economic vision for the country, to ensure its substantive relevance, its social and cultural appropriateness and its legitimacy. A multi-level process throughout the country of envisioning desirable collective futures and determining what are the obstacles to them that must be addressed can help to guide the government’s future actions (some organizations have some expertise in this area, such as the Society for International Development, which has undertaken such work in Kenya). Initiatives to increase local decision-making power such as participatory budgeting can play a useful role. A range of administrative reforms can also signal the government’s commitment to enhancing accountability to diverse stakeholders. These can include measures to increase transparency (e.g. instituting a right to information about governmental decision-making processes). However, no closed list of specific reforms can substitute for the open-ended idea of the deepening and widening of democratic participation. There is experience in these different areas that the Gambia can draw upon with the aid of progressive governments elsewhere that have undertaken relevant experiments, international and non-governmental organizations, or other friends and intermediaries.

Like other postcolonial nation states, The Gambia should undertake a comprehensive reassessment of its administrative architecture, inherited from the colonial period, and its appropriateness to support the objectives of a dynamic and developmental state. The relation between state and society also must be reconsidered, with thought being given to creative legal and institutional reforms that might support broader democratic engagement in development processes. In the meantime, here are a couple of modest suggestions to enhance the quality of ideas entering into the public debate and thereby into administrative decision-making:

Friends of The Gambia groups – The Government can benefit from the advice of the “think tank” that has been established domestically by the new government to make proposals on Gambian economic policy but the Government can also benefit from the assistance of friends of The Gambia elsewhere, taking advantage of the goodwill that exists in the wake of the democratic transition. These can include independently-minded internationally recognized economists, public health specialists, infrastructure experts, engineers, lawyers, public officials or others from Africa and beyond (whom it may wish to consult when formulating its strategy or interacting with development partners). Membership of the groups can be made open and flexible, so as to draw on all expertise that might be useful to the government. If they are consulted selectively, the involved experts may be asked to volunteer their efforts.

National Rountables – focused on addressing specific problems and thematic concerns, national roundtables can be formed flexibly as needed, bringing together government, political parties, diaspora representatives, business, professional organizations, labor representatives and media. Such roundtables need not have any statutory authority but they can be very helpful to share experiences and perspectives and formulate ideas, which can then enter the process of formulating and administering policies. They have worked successfully elsewhere to bring together different groups so as to to solve common problems (in particular in El Salvador, in the aftermath of its civil war, where the roundtables have been brokered by the UN). The Gambia is a small country, in which there are moreover pressing shared developmental goals that transcend the conflicts that may be present (in the old days this idea gave rise to the concept of a “national bourgeoisie”!). Both of these facts make possible such a method of social problem solving.

A deliberative approach is needed to gather together expertise, garner social consensus, and formulate an effective strategy. This is sure to be a multi-year, and indeed ongoing, process but it is better to begin as soon as possible, while there is broad commitment to doing things differently in order to bring about a New Gambia (as it has been called by Gambians themselves).

In light of The Gambia’s status as a small open economy, its import dependence and its present low level of foreign reserves (apparently due in some part to thieving by previous President Jammeh and his clique) a strategy for building a sustainable financial buffer is of high importance. Present donor interest in The Gambia should be capitalized upon, but might also lead to some increase in future indebtedness. One can hope that in the intermediate to long-term, an economic strategy aiming to increase exports can address the problem. In the short-term, other measures may be useful.

To capitalize on high diaspora and world interest in supporting The Gambia at present, the new government could announce a Gambia Development Bond, which might be subscribed in dalassis and select foreign currencies. The bond’s interest rate should be set at a low level to ensure that the financing it provides is at a rate favorable to the government and it should have a long maturity. Returns might even be made conditional on future economic growth. The Gambia Development Bond would be made preferentially available to citizens and members of the diaspora in small denominations so as to encourage subscriptions by the general public on terms favorable to the country. An online purchasing facility could be created for ease of subscription or it could be made available via missions abroad and registered intermediaries. Since the bond would be aimed especially at members of the diaspora, they could choose the option of receiving their return in dalassis at a higher interest rate. This would benefit the government by providing it foreign exchange in return for a long-term domestic currency liability in exchange.

Proceeds from the bond should be earmarked for developmental investments. Inducement to purchase the bonds could also be ensured by providing them with favorable tax treatment. The bond could be made attractive to foreigners by make any earnings received free of any taxes in The Gambia and with limited or no foreign reporting.

The potential gains from such an issue might be sizable. If forty thousand Gambians resident abroad and foreigners make an average investment of two and a half thousand US dollars each, it will result in one hundred million dollars of soft financing, which is not an insignificant amount for The Gambia, whose foreign exchange reserves are on a similar order.

The Gambia might also consider exploring agreements at the political level to settle its external payments obligations to ECOWAS partners, OIC countries, or others in dalassis or other soft trade financing terms (e.g. in terms of deliverable agricultural commodities) in order to take advantage of their willingness to support it at this time.

State funds have very likely been misappropriated and misdirected by the previous President and perhaps his inner circle. We know from efforts to recover funds in other cases (e.g. the Philippines) that the process can take many years and be only partially successful at best, and thus of little value for the short-run needs of the country. To identify the links between existing assets and previous financial misdeeds and to lay claim to them in court are painstaking processes. Nevertheless, it may be desirable to begin such efforts. A forensic audit of financial accounts is of more than historical value, as it can help to establish a principle of accountability and moreover to help diagnose where there are institutional gaps that led to the resulting failures. More importantly from a forward looking point of view, although very speculatively, if the proceeds of foreign loans were systematically stolen this might provide a basis for a claim for debt relief under the doctrine of “odious debt” or similar ideas which have been much mooted in discussions of international law but never applied. The Gambia may be able to work with relevant non-governmental organizations or work with foreign law firms on a pro bono or contingency basis to pursue such claims.

However, the resolution of such claims cannot substitute for a development strategy. Happily, Gambians have already started to take advantage of a historical opportunity to begin a conversation on what they want and how best to achieve it. Such a conversation must extend from politics to economics, lest the former does not run aground on the shoals of the latter. Better still, in this moment of a fresh start, good economics can gain its spur from good politics. Although they face the headwinds of a harsh world, the next steps are, as they should be, up to The Gambia’s people.

*This is an edited version of a post that appeared on Reddy’s blog, Reddy Reads.

Sanjay Reddy

Sanjay G. Reddy is an Associate Professor of Economics at The New School for Social Research. 

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