The horns of a dilemma: Economic discipline and economic development in South Africa

Economic debate exploded across the South African policy landscape during the last two years. However, the discussion and many of the emergent policy recommendations seem constrained by old paradigms and confined to incremental changes. A fundamental shift of paradigm is urgently needed, to one based on a holistic view of South African society and economic realities, one which integrates macro‐economic discipline with developmental restructuring interventions. Ultimately, a democratized economy built around widespread participation of all peoples is essential to underpin democratic political processes. A framework for macro‐economic policy reforms is presented in the form of an agenda — issues that must be addressed to restore economic health. By themselves, these reforms are essential but will not be sufficient. Equally important are interventions to rebalance economic participation, closing employment and income gaps and beginning the process of stimulating growth and redistribution simultaneously. Key strategies are identified and placed in the context of a three phase economic policy approach extending into the next century.     

Productivity change and the effects of policy reform in China's agriculture since 1979

During China's rural reforms, policies were frequently adjusted. Most policies favoured the continuation and deepening of reform; but some were contradictory or even led to regression in the reform process. How have the rural reforms affected China's agricultural production over the past three decades; and what lessons can be learned to aid the future course of reform? To answer these questions, this study estimates productivity change in China's agriculture and evaluates the effects of policy on agricultural output during the reform period. Aggregated provincial‐level data for the 1979–2008 period are used in a translog production frontier model to estimate indices of total factor productivity (TFP) change and its three components—technical change, technical efficiency change, and a scale effect—with a focus on explaining the variation in technical efficiency. The estimation results show that the impressive improvement of TFP change is dominated by the technical change component. However, technical efficiency change and scale effects have worked against the improvement in TFP change in most periods. To improve technical efficiency, social welfare policies designed to eliminate the rural–urban divide, and reform polices focusing on factor market reforms, such as reform of the household registration system (hukou) and reform of land rights, seem to hold some potential.     

Stabilization and its Discontents: Argentina's Economic Restructuring in the 1990s

This paper assesses the Argentine stabilization and market reform strategies since 1989. We argue that Argentina may be penned in by its own success: exchange rate targeting quelled inflation but the resulting real appreciation has limited export and employment growth; microeconomic reforms raised efficiency but have threatened income distribution and hence political stability; exclusive styles of policy-making helped enact reform but have led to corruption and policy insensitivity and contributed to rising social discontent. We close by suggesting how a “second generation” of reforms could tackle these issues and spread the proceeds of reform to a wider segment of the Argentine public.     

Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt

Abstract: This paper investigates the impact of financial reforms on competitiveness and production efficiency of the banking sector, as well as the short‐term and long‐term impact on economic growth, in Egypt during 1992–2007. The results suggest that the reforms have a positive and significant effect on competitiveness and production efficiency. Also, the evidence shows that state‐owned banks are generally less competitive than private banks and foreign banks are less competitive than domestic banks. The average x‐inefficiency of Egyptian banks is around 30 per cent, which is comparable to those reported for other African countries. Finally, there is evidence to suggest a significant relationship between financial bank productive efficiency and economic growth in the short run but not in the long run. Overall, the results support the argument for continuing the financial sector reform programme in Egypt.     

Survey of Recent Developments

Outgoing Indonesian president Susilo Bambang Yudhoyono's second-term record is creditable, measured against the targets he set himself in 2010, but deficient in key areas: economic reform, infrastructure investment, and anti-corruption. Indonesia's 2009–14 parliament has been active in economic policymaking, and will leave as its legacy a raft of protectionist legislation. Both presidential candidates, Joko ‘Jokowi’ Widodo and Prabowo Subianto, have appealed to nationalism in their campaigns, calling for Indonesia to assert its sovereignty and increase its self-sufficiency, but Jokowi's economic platform is more moderate and economically literate than Prabowo's. The incoming president will inherit an economy that continues to slow. Growth is now not expected to approach 6% until 2015 at the earliest. Having engineered a reduction in the current account deficit, Indonesian policymakers now face the more difficult problem of structural fiscal adjustment. Energy subsidies are the most immediate problem, but fiscal reform more generally will emerge as an overriding and unpleasant imperative for whoever wins the presidential election on 9 July. Unless difficult fiscal policy measures are taken, Indonesia will face major trade-offs between deficit control and investment in social programs and economic infrastructure. The new president will struggle to restrict the deficit to the cap of 3% of GDP: a balanced budget will likely not be feasible for several years. He will need to increase the ratio of revenue to GDP and eliminate fuel subsidies—through a more systematic approach than the infrequent price increases of the past. He will need to choose carefully between competing expenditure priorities, such as infrastructure and defence. The new president would also be well advised to tread cautiously in implementing the legal mandates he will inherit, and to work with parliament to avoid further and unwind current earmarking of public expenditure.     

The expectations management approach to stabilization in Argentina during 1976–1982

The main goals of the economic authorities in Argentina during 1976–1982 were to open the economy to foreign trade and to reduce inflation. The stabilization plan relied first on the control of money and wages, later on a preannounced schedule of a declining future exchange rate—actions that were supposed to be accompanied by a fiscal policy to reduce the public sector deficit.The stabilization plan was abandoned in the first quarter of 1981 for two reasons: an important financial crisis during the second quarter of 1980, and a deterioration of fiscal discipline that could no longer assure coherence between the deficit and the preannouncement schedule. The paper also argues that the political situation in Argentina undermined the credibility of the reforms and particularly the stabilization attempts. With the abandonment of the stabilization schedule, new commercial and exchange rate measures were gradually introduced, reversing the policy of opening the economy to foreign trade. The financial reform was reversed in 1982 with the virtual nationalization of deposits.The experience of Argentina suggests that capital inflows responding to interest rate arbitrage play a fundamental role in the short run dynamics of real exchange rates. They can promote the adjustment, or they can precipitate a run on the foreign exchange market. The lesson is that a stabilization plan based on the preannouncement of future exchange rates is highly risky for an economy like Argentina's.     

The Market‐Promoting and Market‐Preserving Role of Social Trust in Reforms of Policies and Institutions

Social trust has been identified as a catalyst for reforms. We take the literature further in two ways. First, we analyze mechanisms through which social trust enables liberalizing reforms—by overcoming obstacles in the political process (stemming from ideology, ideological fractionalization, coalition government, minority government, and legislature‐seat instability). Second, we define reforms as distinct changes in the quality of the legal institutions and in the scope of regulation and separate reforms that increase economic freedom in these two areas from reforms that decrease it. We study separately how social trust, interacted with the different types of political hindrances, affects the probability of reforms. We find a dual role of social trust in the political process—facilitating liberalizing reforms and making deliberalizing ones more difficult. This suggests that trust does not make agreement on any reform more probable—the content of the reform is crucial.     

Services Policy Reform and Economic Growth in Transition Economies

Major changes have occurred in the structure of former centrally planned economies, including a sharp rise in the share of services in GDP, employment, and international transactions. However, large differences exist across transition economies with respect to services intensity and services policy reforms. We find that reforms in policies toward financial and infrastructure services, including telecommunications, power, and transport, are highly correlated with inward FDI. Controlling for regressors commonly used in the growth literature, we find that measures of services policy reform are statistically significant explanatory variables for the post-1990 economic performance of transition economies. These findings suggest services policies should be considered more generally in empirical analyses of economic growth. JEL no. F14, F43, O14, O40     

Citizens' support for Economic Reforms in Sub‐Saharan Africa

The objective of this paper is to investigate the factors that influence citizens' support for costly economic reforms in sub‐Saharan Africa. This is relevant for several reasons, but the most obvious perhaps is that economic reform will be difficult if faced by strong resistance from citizens. In this paper, individual data from Round 4 of the Afrobarometer surveys is used to investigate how support for economic reforms is influenced by factors falling under the following broad categories: (i) Economic variables; (ii) group identity and fairness variables; (iii) Institutional and state/government variables; (iv) Demographic and control variables. An individual's trust in the president and the belief that the government manages the economy well are two of the most significant and robust factors. This is in keeping with the results found in Williamson (The Political Economy of Policy Reform, Institute for International Economics, Washington, DC, 1994 ). Another robustly significant variable is satisfaction with how democracy works in the country. Variables related to ethnic identity and community membership also play a significant role in support for costly economic reforms, which is in line with the theories put forward by van de Walle (African Economies and the Politics of Permanent Crisis, 1979–1999. Cambridge University Press, New York, 2001 ). Females are less likely to support economic reforms, while individuals with higher levels of education are more likely to support economic reforms.     

French Retirement Reforms and Intragenerational Equity in Retirement Duration

As most developed countries, France has gone over the last 20 years through a process of pension system reforms, mainly aiming at increasing the average retirement age, through increasing the required number of contribution years or through postponing legal (minimal and/or normal) ages. Public debates over which lever should be preferred have been paramount in France, with concerns focusing on redistribution issues between high wage high life-expectancy and low-wage low life-expectancy workers. In this paper, we empirically address this issue by simulating the differentiated impacts of the past French reforms on average retirement ages across wage quartiles. Our simulations show that increasing the required duration criterion—as was done by the 1993 and 2003 reforms–have redistributive impact as regards retirement age, while increasing the normal age—as was done by the 2010 reform—has a counter-distributive impact. The redistributive impact on average of the required duration criterion however only holds thanks to the fact that disabled workers—most of them in the lowest wage quartile—are exempted from it. Last, increasing minimal age has ambiguous impacts according to gender: redistributive among women but counter-distributive among men.     

Myanmar: building economic foundations

Myanmar began a multifaceted economic reform process in 2011, soon after its political opening. The reform process is far from complete, and its impacts remain questionable. The paper examines progress to date and assesses opportunities and challenges for further reforms. Given the extensive list of development challenges remaining and the limited resources, careful prioritising of reforms is essential. Understanding of its strengths and weaknesses will help identify and sequence reforms and investments so as to maximise the growth dividends. This paper briefly reviews Myanmar's history and its legacy, examines the economy and some of the main policy reforms undertaken since 2011, assesses development potential and weaknesses, and outlines medium and long‐term growth strategies based on the country's specific context and international experiences and practices.     

新形势下经济特区的“特区之位”探析

在经济体制改革的新形势下,相对于"全国综合配套改革实验区"即"新特区"来说,经济特区作为"老特区"的改革实验田地位受到严重挑战,似乎已经完成了其作为改革创新扩大开放的实验田功能和全国改革开放的"窗口"、"排头兵"的历史使命,经济特区的"特区之位"已为综合配套改革实验区所取代。其实不然,经济特区在改革开放的攻坚阶段,仍将继续发挥其改革开放的"排头兵"作用。     

Financial Sector Reforms,Bank Performance and Economic Growth: Evidence from Zambia

Abstract: This paper investigates the effects of market‐based financial sector reforms on the competitiveness and efficiency of commercial banks, and economic growth, in Zambia. The results show that reforms adopted in Phase II (strengthening of regulatory and supervisory, payments and settlements, and financial operations frameworks) and Phase III (implementation of a comprehensive financial sector development plan) had significant positive effects on bank cost efficiency. Macroeconomic variables such as per capita GDP and inflation were insignificant. Further, using an endogenous growth model in which industrial production is a proxy for GDP growth, it was found that bank cost efficiency, financial depth, Phase II and III financial sector reforms, the degree of economic openness, and rate of inflation were significant determinants of economic growth. Phase II policies and the inflation rate have negative effects while the rest of the variables have positive effects on economic growth. Some plausible policy lessons are offered.     

Reform of one‐channel marketing systems: Expanding the debate and agenda for research

The recent exchange between Groenewald and Brand on the report tabled by the Committee of Inquiry into maize marketing arrangements makes for interesting reading. Professor Groenewald raises a wide range of important conceptual and pragmatic concerns, with the stinging conclusion that the Commission did not achieve its primary mission and an opportunity for substantive reforms was lost. Dr Brand countered by pointing out that the Commission focused on changes that were politically acceptable and would ‘set in motion a movement towards a more market‐oriented situation’. There is wisdom in the comments of both authors and the time is ripe for agricultural economists in South Africa to address an expanded research agenda on these issues.

At the outset, it should be made clear that no special knowledge of the maize marketing system in South Africa is claimed. However, the current debate bears many similarities to that which is currently engulfing agricultural policy observers in Canada and the United States. Agricultural reform and the need to remain competitive in an increasingly open world market is a theme that has thrust itself on policy analysts. In Canada, agricultural economists have engaged in an active professional debate on the merits of supply management and one‐channel marketing systems over the past ten years. Although the strengths and weaknesses of these systems have been well documented from theoretical and conceptual bases, the major impetus for change has come from empirical analysis and the realization that Canada had created an environment which fosters unproductive agricultural sectors, International uncompetitiveness, and food prices that penalize consumers, expecially those in low-income categories. In some cases, prices are so far out of line with the United States that border crossings are deluged on weekends with Canadian shoppers returning home with goods purchased. Food items, expecially those under one-channel supply management marketing systems, figure prominently in the goods brought back to Canada. The system of supply management is in crisis and even the marketing boards have acknowledged that significantly more market orientation is necessary.

Agricultural economists can make a significant contribution to the policy debate in South Africa. Brand is quite right in pointing out that the process will be evolutionary — what is politically unacceptable today may become the policy of tomorrow. The time frame of policy reform fits well into that which is needed to conduct empirical research. But this research must focus on the important issues, even though they may be unpopular. Groenewald makes an important first step in this direction by drawing attention to the issues of productivity and pricing. However, more steps are needed. A critical issue, from my perspective, is the capitalization of benefits from protective agricultural policies.     

充分发挥WTO事务工作在深圳开放型经济体系建设中的促进作用

开放是深圳的立市之基,发展之源。以开放促改革促发展,是深圳经济特区30年来取得巨大成就的基本经验。WTO事务工作说到底是开放的工作。中国加入世贸以来,深圳WTO事务工作在促进深圳开放型经济体系建设中发挥了不可或缺的重要作用。当前,深圳正处在加快转变经济发展方式、全面提升开放型经济水平的关键时期。充分发挥WTO事务工作在加快完善开放型经济体系的促进作用,对深圳实现新跨越、新发展具有重要意义。     

Revenue enhancing tariff reform

Revenue Enhancing Tariff Reform. - Programmes of gradual trade policy reform have been included in most of the structural adjustment packages adopted by developing countries. So far the literature on piecemeal trade policy reform has concentrated on finding reform programmes that improve the welfare of a representative individual. Yet trade taxes are an important source of government revenue in many developing countries. This paper therefore examines tariff reform programmes that are both welfare improving and revenue enhancing. It first determines general conditions under which such a reform will exist and then considers specific reforms of both single tariffs and groups of tariffs. The standard welfare improving reform programmes — proportional and concertina reforms - are also discussed.     

Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods

Tax reforms are often motivated by their potential to improve economic performance. However, their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using “synthetic control” methods. We identify the eight Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post‐reform GDP per capita of “treated” countries with a convex combination of similar but “untreated” countries, while accounting for the time‐varying impact of unobservable heterogeneity. We find positive impacts in all eight countries, with seven out of eight cases significant at the conventional level.     

Female Access and Rights to Land,and Rural Non‐farm Entrepreneurship in Four African Countries

This paper examines the relationship between female access to land, rights to such land, and engagement in non‐farm entrepreneurship in rural Africa. We used data from the four countries (Ethiopia, Nigeria, Tanzania and Malawi) that were featured in the Living Standards Measurement Study—Integrated Surveys in Agriculture dataset for the period 2013–15. To estimate the relationship, we compute the marginal effect from the logistic regression, while controlling for other important covariates that explain non‐farm activities at the individual/household level. We find that overall, women's access to land and rights to such land significantly explain their likelihood to engage in non‐farm enterprises. However, this relationship is not seen across the sampled countries. In Nigeria, for instance, we find that though the relationship is positive, it was not significant. While for Ethiopia, Tanzania and Malawi, we find a positive and significant relationship. We explain our result based on two important perspectives. The policy implications of our result are included in the paper.     

Addressing Indonesia’s Infrastructure Deficit

Between September 2015 and February 2016, the government of President Joko Widodo (Jokowi) unveiled 10 economic policy packages in an effort to promote deregulation and support investment in key sectors. Foreign investors, at whom many of these measures are directed, have viewed the packages with a mix of cautious optimism and healthy scepticism. Investors have often heard Jokowi announce that Indonesia welcomes foreign capital, only to see these commitments countermanded by the actions of ministers and officials wanting more restrictive regulations and practices. It therefore remains uncertain whether these announcements and policy packages will lead to actual reform.

One area in which the government is showing both intent and progress is infrastructure. Decades of under-investment and poor asset management have left Indonesia with a major infrastructure deficit, the economic and social costs of which are substantial. There are encouraging signs, however. Jokowi’s administration is continuing its agenda of fiscal reform, shifting budget allocations away from energy subsidies and towards capital spending; investment approvals in infrastructure are rising fast; and the country’s four largest construction firms have reported a large jump in the value of government-awarded contracts. Recent months have also seen the completion of the Makassar–Parepare segment of the Trans-Sulawesi railway and the first stage of the New Priok Port at Tanjung Priok, while the long-awaited Umbulan Springs project, which will supply water to Surabaya and surrounding areas, has been awarded to a preferred bidder.

Demonstrating rapid progress in delivering infrastructure is clearly important to the Jokowi administration, but longer-term challenges remain. For one, Indonesia’s inefficient planning and delivery model for national roads needs to be overhauled if the country is to safeguard its economic growth. The government has yet to fully tackle this and other long-term reforms; it has, however, recently introduced regulations that augur well for new flows of private investment, such as reinstating the role of such investment in the water sector and allowing for a more realistic risk allocation in public–private partnerships.     

Current account balances and structural adjustment in the euro area

In the past decade, a set of euro area countries has accumulated large current account deficits. After a brief relaxation of the euro area internal imbalances in the wake of the financial crisis, it appears as if this pattern arises anew when times normalize again and Germany still sticks to export-led growth. This issue has been labelled one of the most challenging economic policy issues for Europe inter alia by the European Commission and some other players on the EU level. In this paper, we analyse the role of private restructuring and structural reforms for the urgently needed sustainable readjustment of intra-euro area current account balances. A panel regression reveals a significant impact of structural reforms on intra-euro area current account balances. This implies that in particular structural reforms and wage restraint in notorious current account and budget deficit countries such as Greece are highly suitable to support long-term economic stability in Europe.