FIN - 1127 Introduction to Regional Economics

8/12/2019 FIN - 1127 Introduction to Regional Economics

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INSTITUTE FOR OPEN

LEARNING

STUDY MANUAL

INTRODUCTION TO REGIONAL

ECONOMICS (SADC) /

NAMIBIAN AND REGIONAL

ECONOMICS

CODE: FIN 1127 / FIN - 111

IUM FIN 1127 / FIN - 111 1


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COPYRIGHT

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TABLE OF CONTENTS

Study unit TitleSyllabus

1 Introduction to Economics

a. What is economics

b. Macro and micro-economicsc. Economics terminologies and their respective definitions

2 amibian Macro-Economic !nalysis

a. !nalysis of amibia"s main economic sectors

b. !nalysis of amibian government structure

c. #overnment $ong and short term plans

% S!&' Macro-Economic 'omparative !nalysis

a. !nalysis of S!&' countries economies

( amibia"s 'ompetitiveness and International !ffiliations

a. )actors determining amibia"s competitivenessb. amibia"s sta*e in International bodies

c. amibia"s E+,

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M+%u$ Ou'+$"

!nalysis regional economic policies

+lan the best course of action to ta*e in order to avoid economic

debacle

)ormulate viable economic policies for the country

P+.*$ C+'$' *% L$*!. Ob@$'!,$"

A'$ +6$'!. '#$ 6+.*$ "'u%$'" "#+u% b$ *b$ '+ :

1 &efine economics and *ey ords in the definitioni. &ifferent definitions of economics

ii. &efinitions of *ey ords such as scarcity and opportunitycost

iii. 'ompare and contrast various economics concepts

2 !nalysis of amibian main economic sectorsi. &iscuss and analyse Mining )ishing !griculture

Tourism and Manufacturing being the main economicsectors of amibia.

ii. /nderstand other sectors of the economy li*e 0an*ingand Insurance Transport and 'ommunication.

iii. &efine money *no the financial institutions and theirrole and functions.

iv. Eplain the main input and output of each sector.v. Identify the main challenges faced in each sector.

vi. Ma*e recommendations on the course of action to beunderta*en.

vii. 'ompare and contrast the main activities and theirrespective contribution to the #ross &omestic +roduct.

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viii. no ho to compute #ross ational +roduct #rossational Income and Ependiture.

% !nalysis of the amibian government structurei. #eneral understanding of forms of governments

ii. 'ompare amibia to other countries or *ingdomsiii. &iscuss the three main branches of government namely

$egislature 3udiciary and the Eecutive.iv. Institutions *ey roles and functions of each branch

( S!&' Macro-Economic !nalysisi. Tabulate and *no all the S!&' member states

ii. Identify and *no the main economic activities of eachS!&' country

iii. 'ompare and contrast the main strengths and endomentof each S!&' country.

iv. Tabulate a comparative analysis of S!&' countries

4 'ompetitive !dvantagei. Why amibia

ii. What ma*es amibia an investment destinationiii. Salient features of amibia"s competitiveness

5 amibia"s sta*e in international organisations 6S!&' S!'/'7MES! WT7 and !#7!8

i. !nalysis of amibia"s sta*e in internationalorganisations

ii. Identify the international organisations amibia is amember or an affiliate of

iii. &iscuss the aims and ob9ectives and:or strategies of eachbody amibia is a part of.

; Eport +rocessing ,ones 6E+,8

i. &efine E+,ii.


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M$'#+%" + A""$""$'

'ourse or* 6continuous assessment 6'!88 comprising of

assignments and tests account for (=> of the overall final mar*s.

Written formal eamination account for 5=> of the overall finalmar*s. Time alloed % hours.

7verall mar* is 1==> that is (=> '! and 5=> )E.

R$+$%$% T$>'"/M*'$!*"

1. Introduction to amibia 3ournal Ministry of Trade.2. Trade &irectory 2==;%. &+ 1 2 and %.

(. ?ision 2=%=4. +ositive Economics


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UNIT 1

194 INTRODUCTION

This manual covers relevant materials for first year students in


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Economics is not only concerned ith the #+!$"that individuals ma*e butalso studies the decisions of businesses government and other decisionma*ers in society.

Economics can therefore be defined as the study of the use of scarceresources to satisfy unlimited human ants. The central elements ofeconomics are therefore "*!'& and #+!$9

!lthough scarcity and choice lie at its heart economics is not merelyconcerned ith the types of choice. Economics also see*s to describe epB-lain analyse and predict a variety of phenomena such as economic grothunemployment inflation trade beteen individuals and countries the pricesof different goods and services poverty ealth money interest ratesechange ratios and business cycles.

The study of economics is usually divided into to parts@ !+$++!"and *+$++!". In !+$++!"the focus is on individual partsof the economy.

M*+$++!"is concerned ith the economy as a holeC e focus onthe big picture. We develop an overall vie of the economic system and estudy total or aggregate economic behaviour.

Thus hile!+$++!"

studies the operation of the economy at thelevel here basic decisions are made *+$++!" focuses onaggregate economic behaviour and the aggregate performance of theeconomy.

!nother important distinction is beteen 6+"!'!,$ and +*'!,$$++!". ! 6+"!'!,$ statement is an ob9ective statement of fact. !+*'!,$statement involves an opinion or value 9udgement.

It is also important to understand the central concepts of scarcity choice and

opportunity cost.

1.3 ECONOMICS DEFINITIONS

G++%: ! tangible ob9ect that is capable of satisfying human ants.

S$,!$: !n intangible action that is capable of satisfying human ants.

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S*!'&: ! condition in hich it is impossible to satisfy all human antsfor goods and services@ the central concept in economics.

E++!*& %!"*%,*'*.$%:

&escribing any individual ho receives a substantially smaller share ofgoods and services than average regardless of the reason.

T*%$-+: The act of choosing one alternative at the epense of another.

O66+'u!'& +"':The value of the second best choice that is given up hena first choice is ta*en.

R*'!+* #+!$: ! decision that results in the greater benefit at the leastpossible cost.

C$'$!" P*!bu": ! phrase that means all else remain eual orunchanged.

19; ECONOMIC PROBLEM

The problem of resource allocation has three broad dimensions@

0#*'goods or services ill be produced and in hat uantitiesF

These are output questions.

H+8ill each of the goods and services be producedF Go much of

the scare resources ill be used in the production of each goodFThese are input questions.

F+ 8#+ill the various goods and services be producedF Who

ill receive the goods and servicesF Go much of them ill theyreceiveF !nd here ill the production occurF These aredistribution questions.

19 DIFFERENT CATEGORIES OF GOODS

'onsumer goods @ - &urable

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- Semi durable - on-durable

)inal goods and intermediate goods

+rivate and public goods

Economic goods and free goods Gomogeneous and heterogonous goods

19< FACTORS OF PRODUCTION

There are four main factors of production@

atural resources 6or land8

$abour 'apital and

Entrepreneurship

atural resources and labour are sometimes called +rimary factors ofproduction hile capital and entrepreneurship are called Secondary factors.!nother possible distinction is beteen Guman


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UNIT 2

291 INTRODUCTION TO NAMIBIA

amibia is often described as !frica"s optimist and ith good reason. otonly does it en9oy one of the continents most pleasant peaceful and

politically stable environments but also its infrastructure rivals manydeveloped countries.

7ccupying an area of 2D(25D suare *ilometres and a population ofapproimately 1D million people its population density of less than to

people per suare *ilometre is one of the loest in the orld.

! vast country even by !frica standards amibia is situated on the south-estern !tlantic coast of the sub-continent bordering !ngola ,ambia andfor a short distance ,imbabe to the north South !frica to the south and0otsana to the east.

29191 OBECTIES

Students must have good understanding and be able to analyse the maineconomic sectors and activities of amibia. Students must also be able toeplain and discuss@

amibian Macro-Economic !nalysis

!nalyse amibia"s main economic sectors

!nalyse amibian government structures

#overnment long and short term plans

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This unit covers the medium and long term plans of amibia underthe auspices of the ational +lanning 'ommission

29294 FACTS ABOUT NAMIBIA

amibia has one of the most stable political environments in !frica.


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In addition it is a signatory to the 'otonou !greement giving duty freeaccess to the European /nion for a ide range of manufactured goods andagricultural products. amibia also has duty and uota free access to thelucrative /S mar*et under the !frica #roth and 7pportunity !ct 6!#7!8.

2.3 Economic System an Economic !isto"y o# Nami$ia

Economic system is the ay in hich the economy of a country isorganised. The government plays an important role in any economic systemand the influence of the government on the economy partially determineseconomic system in use. It is important for every amibian citien to really*non the pros and cons of different systems in order to be able to choosethe best system for our country. 7nly ith proper *noledge of all thedifferent economic systems can a responsible choice or decision be made.When deciding on the effectiveness of an economic system the folloingto aspects should be considered.

6a8 'reating Maimum ealth6b8 Eual distribution of ealth

F!*!* I"'!'u'!+"

The


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There are no five commercial ban*s operating in amibia in addition tothe +ost 7ffice savings 0an*. The ban*ing industry in amibia is highlycompetitive as evidenced by the similarity in interest rates and service feescharged by these ban*s. )irst ational 0an* of amibia and Standard 0an*

amibia are the to largest ban*s in terms of mar*et capitalisation. 7therfinancial institutions include building societies insurance companies and

public finance institutions including the &evelopment )und of amibia andthe !gricultural 0an* of amibia.

!ll ban*s provide comprehensive domestic and international services. Short-term and life insurance estate planning and factoring are some of the

ancillary services provided by the ban*ing sector.

There are plans by government in partnership ith the private sector toreform the financial mar*et system to allo for the introduction of financialinstruments such as parastatal bills debentures and bonds and negotiablecertificates of deposit. The changes are aimed at accelerating thedevelopment of a domestic money mar*et foreign echange mar*et andlocal inter-ban* lending hich is still underdeveloped.

29; INESTMENT CLIMATE

29;91 I,$"'$' I$'!,$"

amibia offers ecellent investment opportunities through a range of taincentives a liberal investment climate and natural resource endoments. ItsE+, policy positions the country as an ideal focal point for regional tradeithin Southern !frican. The primary focus has been on promotingmanufacturing fishing mining agriculture and tourism. Through a numberof trade agreements amibia offers vast opportunities to investors in ecess

of original benefits from the E+, status and ta incentives. With theeception of S!'/ the country has entered into agreements and is part ofnumerous other regional structures such as '7MES! the $omK I?'onvention and S!&'.0ilateral trade agreements also eist ith ,imbabeand ,ambia.

29;92 C$'!!*'$ + S'*'u" I,$"'$'

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0enefits accruing to holders of such certificates consist of@

+referential access to foreign echange to repay foreign debt royalty or

similar charges remit branch profits and dividends as ell as proceeds of

sale of an enterprise. The right to retain abroad foreign echange earnings from eports.

Eemptions from restrictions regarding categories of business reserved for

amibians.

+rotection against epropriation of business.

29 S6$!* I$'!,$" + M*u*'u!. E'$6!"$"

The folloing incentives apply eually to local and foreign companiesregistered as manufacturers.

4=> corporate ta abatement for 4 yearsC linear phasing out over a further

1= years.

e investment:relocation pac*age A a further negotiated ta pac*age.

!ccelerated depreciation on factory buildings - ritten off over 1= years.

Eport promotion costs ta deductible at 124 -1;4>.

Training costs ta deductible at 124>.

&irect production ages deductible at 124>.

Industrial studies available at 4=> of cost. 'ash grants loans of 4=> of approved eport promotion epenses.

29< E>6+' I$'!,$"

The Eporters Incentive grants an D=> alloance on taable income derivedfrom the eport of manufactured goods ith the eception of fish and meat

products irrespective of hether the goods have been produced in amibiaor not.

2.7 ECONOMIC SYSTEMS

!n economics system is a set of rules or understandings that govern hoscarce resources are used to produce goods and service that satisfy humanants.

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Throughout history all communities have had economic systems. Theseeconomic systems include capitalism command and mied economies.

2.7.1 Ca%ita&ism Economic System

'apitalism is an economic system in hich the factors of production areoned and controlled by private citiens 6people8.Goever one needs to understand a range of economic assumptions andconcepts before they are able to fully appreciate the ay capitalismfunctions either in theory or reality.)or capitalism to function the conditions and institutions described in thefolloing section must eist.

+rofit motive +rivaty property

)reedom of choice

'ompetition

$imited role for government

&ecentralied &ecision ma*ing

'apitalism is an economic system here there is no central planning and allproduction functions are privately oned ith minimal state control.

C#**'$!"'!" + *6!'*!"

6a8 P+6$'& !" *.$& 6!,*'$& +8$%9

!ll factors of production are oned by private individuals ho may buyand sell as much as they ant. +rivate onership opposed to stateonership is one of the cornerstones of the fees mar*et system.

6b8 F$$%+ + #+!$

Every individual is free to choose his occupation ithin the limits of hiseperience training and ualification.The consumer has the freedom to choose hat he ants to buy ith hislimited income.

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Every individual has freedom to choose beteen savings and immediateconsumption.

6c8 N+ $'* 6*

+roduction and consumption as ell as the remuneration of the productionfactors are planned and organised by individuals ith no governmentinterference.

6d8 C+6$'!'!+

!ny product can enter a profitable production line in other ords differentproducers can supply the same product.

Advantages o Ca!"ta#"s$

1. ! capitalist system leads to economic efficiency due to the profitmotive.

2. ! capitalist system offers an individual freedom of choice becausethere are no elements of force.

%. This system contributes to rapid development of Technology and thecreation of increased production for the hole community.

(. This system shos better results in the allocation of resources and theoptional distribution of goods and services.

%"sadvantages o Ca!"ta#"s$

6a8 Self-interest eighs more heavily than the interest of thecommunity.

6b8 Mar*et forces determine employment not government highemployment levels cannot alays be maintained.

6c8 The capitalist system leads to economic fluctuations li*e

recession depression and inflation.6d8 In the capitalist system there is an uneven distribution of

ealth hich leads to ineuality of economic and politicalpoer.

6e8 +ressure groups may be formed by producers 6calledmonopolies8 by employees 6called trade unions8 or even by

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consumers. These pressure groups may eclude or harm othergroups and ma*e competition impossible

Cont&o##ed Ca!"ta#"s$

+ure capitalism does not eist anyhere in the orld because there isalays some ay that the government interferes.

Desc"i%tion o# Cont"o&&e Ca%ita&ism

The system could be described as a combination of the private and publicsector but ith very little intervention from the state.

2.7.2 Comman Economic System

It is an economic system that relies on a central authority to on mostresources and to ma*e the three central economic decisions. 7n the otherhand socialism is an economic system in hich government ons andcontrols the factors of production.

2979 S+!*!"

)actors of production are oned and controlled by the government 6people8hose basis for operation is@

Service motive

+ublic property

'ommunity

'entralised decision ma*ing

A%,*'*.$" + S+!*!"

'ommunity concern

+eople driven economy

o unhealthy competition

Economic stability

Inclusive economy

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3ob security due to the fact that #overnment is fully involved and very

active

D!"*%,*'*.$" + S+!*!"

$imited individual freedoms in running of the economy

Inefficiency due to semi and:or uns*illed labour

0loated labour force due to allegiance and government obligation to

create employment for all

)alsified economic indictors

$imited choice on the mar*et

2979; M!>$% E++&

0oth private and public institutions eercise control of the factors ofproduction for basically to reasons@

Maimum creation of ealth

Eual distribution of ealth

Mi'e Economic System

!n economic system that is similar to capitalism but has somecharacteristics of other economic systems. 0oth public and privateinstitutions eercise economic control.

2.( NAMI)IAN *O+ERNMENT STRCTRE

T#$$ b*#$" + .+,$$'

The 'onstitution sets up three branches of government@ The eecutive6+resident and 'abinet8 the legislature 6+arliament8 the 9udiciary 6thecourts8

The legislative branch ma*es las the eecutive branch puts them intoaction and the 9udicial branch interprets and enforces them.

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The poer to run the government is divided up amongst three differentbranches so that there can be a system of chec*s and balances. This meansthat the three branches *eep an eye on each other and share duties. Thishelps to ma*e sure that no one in the government becomes too poerful andthat the governmentJs poer is not abused.

The central plan* of our 'onstitution is the separation of poers beteenthe $egislature the Eecutive and the 3udiciary ith in-built chec*s and

balances. )or the proper development of our country there must becontinuous interaction beteen the three branches of State. !ll three

branches must or* in concert to defend and protect our fragile democracy

E>$u'!,$ b*#

The eecutive branch of government consists primarily of the +resident the+rime Minister and 'abinet. It puts into action the las that are made.

P$"!%$'

The +resident is the Gead of State hich means that he or she is in chargeof the eecutive branch of the government. The +resident is also the

'ommander-in-'hief of the amibia &efence )orce.

!ny man or oman ho is at least %4 years old and ho as born inamibia or has a amibian parent can try to be elected as +resident.

The +resident is elected directly by eligible citiens of amibia throughvoter casting using secret ballots. The +resident must get more than half ofall votes cast to be elected. The +resident remains in office for a term of fiveyears and can only serve for to terms.The +resident appoints the +rime Minister and the &eputy +rime Minister.The +resident also establishes ministries and appoints Ministers and &eputyMinisters to direct them. !ll Ministers and &eputy Ministers must bemembers of the ational !ssembly. This means that many of the mostimportant government officials ill be people ho serve as therepresentatives of the people.

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The +resident also appoints many other important government officialsincluding the !ttorney-#eneral and the 7mbudsman. Eperts must advisethe +resident on hich people have the right s*ills for certain government

positions.

The +resident also has other poers and duties such as accrediting!mbassadors and Gigh 'ommissioners from other countries negotiatingand signing international agreements and presenting special aards to

people ho have served amibia ell.

The +resident is not a Member of +arliament but attends the house onspecial occasions such as the opening of +arliament at the beginning of eachyear and to give the annual State of the ation !ddress. The +resident hasno vote in +arliament.

If the +resident becomes too ill to function or dies hile in officeC the +rimeMinister ill act as +resident for the remainder of the term or until the+resident is able to resume his or her duties. If the +rime Minister isunavailable the duties are performed by the &eputy +rime Minister. If the&eputy +rime Minister is not available the 'abinet ma*es an appointment.

The +resident must ta*e an oath to uphold protect and defend the'onstitution as the Supreme $a of amibia. The ational !ssembly canremove a +resident from office if the +resident disobeys the 'onstitution orany other la or is impeached. To-thirds of the members of the ational!ssembly must decide that the +resident should be removed. 6This poer toremove the +resident is one of the ays that the legislative branch *eeps achec* on the poer of the eecutive branch.8

!ny action ta*en by the +resident can be revieed and changed by theational !ssembly if to-thirds of the members of the ational !ssemblythin* that this is necessary. This is another part of the balance of poer

beteen the eecutive branch and the legislative branch.

C*b!$'

The 'abinet is a group of government officials ho advise the +resident.The members of the 'abinet are the +resident the +rime Minister the&eputy +rime Minister and the Ministers of each government department.

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Some of the duties of the 'abinet are@

to advise the +resident

to supervise the or* of ministries government departments andparastatals and to ma*e a budget for the government each year

to ma*e plans for the development of amibiaJs economy

to give draft las called LbillsL to the ational !ssembly hich may

decide to ma*e them into las

to ma*e decisions about foreign policy 6the political and economic

relationships beteen amibia and other countries8

to advise the +resident on hich international agreements amibia

should agree to as ell as on matters related to national security and the

maintenance of la and order

to ma*e sure that apartheid tribalism and colonialism never return to

amibia and to decide ho to help people ho have suffered from theserongs in the past.

to attend meetings of the ational !ssembly and to be available for the

purposes of any ueries and debates pertaining to the legitimacy isdomeffectiveness and direction of #overnment policies.

L$.!"*'!,$ b*#

P*!*$'

+arliament has to parts@ the ational !ssembly and the ational 'ouncil.These to form +arliament.

N*'!+* A""$b&

The ational !ssembly has the poer to ma*e las for amibia. Theational !ssembly consists of ;2 members ho represent political partieselected by the voters and 5 non-voting members appointed by the +resident.

The members of the ational !ssembly must represent all the people ofamibia. They must be guided in their decisions by the 'onstitution by thepublic interest and by their on conscience.

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The ;2 members of the ational !ssembly are elected every five years on aproportional representation. +roportional representation means that eachpolitical party submits a list of its preferred candidates before an election.?oters cast their ballots for a party and not for a candidate. !fter theelection parties ill be represented in the ational !ssembly in proportionto the support they received. In other ords if a political party receives 5=>of the vote it ill receive 5=> of the seats in the ational !ssembly.

The advantage of this system is that it ma*es it possible for small parties tobe represented in government. The disadvantage is that members of theational !ssembly may have stronger loyalties to their political party thanto the voters.

The ational !ssembly has the poer to ma*e any las that are in the bestinterests of the people of amibia so long as the las are not in conflictith the 'onstitution.

The ational !ssembly also has the poer to approve the budget for thegovernment each year and to decide ho much individuals and businessesshould be taed. It must approve all agreements beteen amibia and othercountries.

The ational !ssembly must ta*e hatever steps are necessary to upholdand defend the 'onstitution. It has a duty to ma*e sure that apartheidtribalism and colonialism .do not return to amibia and it must decide hoto help people ho have suffered from these rongs in the past.

The ational !ssembly has the poer to decide to hold a referendum onuestions of national concern. It is li*e an election ecept that the voterschoose an opinion rather than a political party.

N*'!+* C+u!

The ational 'ouncil helps the ational !ssembly ith its tas* of ma*inglas.

The ational 'ouncil has to members from each of the 1% regions of

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amibia ma*ing a total of 25 members.

Shortly after independence the +resident appointed a group of eperts*non as the &elimitation 'ommission to decide here to dra the

boundaries of the ne regions. This 'ommission recommended that thereshould be 1% regions. This &elimitation 'ommission also decided ho todivide the regions up into constituencies. The +resident reappoints a&elimitation 'ommission periodically to re-eamine the -division of theregions into constituencies. ! &elimitation 'ommission must be appointed

beteen si to telve years after the last 'ommission as appointed.

The residents of each region elect people from to the


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even someone from one of the other branches of the government.

Su6$$ C+u'

The highest court in amibia is the Supreme 'ourt. The head of this court iscalled 'hief 3ustice. !t least three 9udges must or* together to decide anycase in the Supreme 'ourt.

! decision of the Supreme 'ourt must be obeyed by all the other courts andby all people in amibia. The Supreme 'ourt can hear cases hich areappeals from the Gigh 'ourt. It also has the special duty of ma*ing finaldecisions on any uestions about the 'onstitution and the fundamental rightsand freedoms that the 'onstitution protects.

H!.# C+u'

The net highest court in amibia is the Gigh 'ourt headed by the 3udge+resident. The Gigh 'ourt listens to serious cases and ma*es decisions onappeals from the $oer 'ourts.

Su6$$ C+u' *% H!.# C+u' @u%.$"

The +resident appoints all the 9udges of the Supreme 'ourt and the Gigh'ourt. ! group of legal eperts *non as the 3udicial Service 'ommissionrecommends people ith the right s*ills to be 9udges and the +residentma*es the final decision.

!ll 9udges must ta*e an oath to defend and uphold the 'onstitution and tofearlessly give 9ustice to all people ithout pre9udice.

L+8$ C+u'"

0elo the Supreme 'ourt and the Gigh 'ourt are the $oer 'ourts. Thesecourts decide cases that are not too serious.

Some $oer 'ourts are magistrateJs courts. The decision-ma*er in thesecourts is a magistrate. Magistrates are appointed by the MagistrateJs'ommission in terms of the Magistrates !ct % of 2==%. The Magistrates

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'ommission must ensure that magistrates are properly ualified andcompetent persons. It sets the pay ualifications and other conditions ofservice of magistrates. It is responsible for ensuring that appointment

promotion transfer and dismissal of magistrates ta*e place ithout favour orpre9udice. It must also ensure that magistrates are not improperly influencedor victimised. This is intended to ensure that all magistrates act impartiallyand independently hen ma*ing their decisions.

7ther $oer 'ourts are community courts. The 'ommunity 'ourts !ct 1=of 2==% transforms traditional tribunals into the ne community courts.'ommunity courts have the authority to hear and decide cases arising undercustomary la. They apply the customary la of the traditional communityin the areas here they operate.

295 N*'!+* P*!. C+!""!+

!rticle 12H of the 'onstitution reuires the government to establish aational +lanning 'ommission to ma*e plans for national development. Thehead of the ational +lanning 'ommission is the &irector-#eneral ho isappointed by the +resident. The &irector-#eneral is the principal advisor tothe +resident on economic planning and can attend 'abinet meetings at the

reuest of the +resident. The ational +lanning 'ommission !ct 14 of 1HH(contains more details about the operation of this body.

The functions of the ational +lanning 'ommission include@

designing and monitoring economic and social plans and policies

planning for national and regional development

developing employment strategies

budgeting

carrying out economic and social research collecting statistics and other data reuired for planning 6such as the

regular national population censuses8

managing and coordinating international aid to amibia

The ational +lanning 'ommission is also in the process of developing apolicy on partnership beteen government and civil society. The draft

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policy published in 7ctober 2==% contains four ob9ectives@

to create a greater commitment for civic participation through the

promotion and encouragement of active citienship

to enhance the environment for civic participation and partnership to bring government closer to the people and create partnership

opportunities that benefit government civic organisations and civilsociety

to enhance the capacity of partners 6government and civic organisations8

to enter into partnerships and 9ointly respond to development challengesand opportunities in an efficient effective and sustainable fashion.

29591 N*'!+* D$,$+6$' P*"

The #overnment of amibia has adopted the practice of setting out five yearnational development strategies. This process is spearheaded by the ational+lanning 'ommission.

The )irst ational &evelopment +lan 6&+18 covered the period 1HH4:1HH5to 1-HHH:2===. The Second ational &evelopment +lan 6&+28 covers the

period 2==1:2==2 to 2==4:2==5.

&+1 focused on reviving and sustaining economic groth. It set goals of4> average groth in the gross domestic product increasing investmentincreasing the real gross national income by 12> and diversifying eportand import mar*ets to reduce the share of trade ith South !frica. It also settargets for employment levels reducing ineuities in income distribution andreducing poverty.

&+2 continues and broadens the plan established in &+1. The ational+lanning 'ommission conducted meetings and or*shops ith sta*eholdersto determine the issues and threats to sustainable development in amibia.The ational +lanning 'ommission line ministries and sta*eholdersor*ed together to create a plan that ta*es environmental and sustainabilityissues into account hen dealing ith sectoral cross-sectoral and regionaldevelopment.

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&+2 outlines policies that bring together different sectors of the amibianeconomy. /nli*e &+1 &+2 loo*s at regional development issues.)inally &+2 also deals ith other issues not addressed in &+1 including

poverty reduction income distribution GI?:!I&S science and technologyand private sector development.

29592 ISION 244

Since independence the amibian government has regularly adopted 4-yeardevelopment plans. L?ision 2=%=L is a more long-term development frame-or* developed by the ational +lanning 'ommission. The long-term goalfor amibia is stated in ?ision 2=%= as follos@

The VISION for Namibia in 2030 is that the people of Namibia are

well developed, prosperous, health and !onfident in an atmosphere

of interpersonal harmon, pea!e and politi!al stabilit" and as a

soverei#n nation, Namibia is a developed !ountr to be re!$oned with

as a hi#h a!hiever in the !omit of nations. Namibia en%os&

'rosperit, Interpersonal (armon, 'ea!e and 'oliti!al Stabilit

The folloing eight themes have been identified as the ma9or issues forfuture planning@

1. Ineualities and social elfare2. +eace and political stability%. Guman resources institutional and capacity building Macro-economic

issues(. +opulation health and development4. atural resources and environment5. noledge information and technology

;. )actors of the eternal environment.

2.-.3 Fi"st Nationa& Dee&o%ment %&an /NDP10 /1--1--4

1---25550

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Ob@$'!,$"

Stimulating and sustaining economic groth

'reating employment


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management

+romoting participatory development and euity

UNIT

91 SOUTHERN AFRICAN DEELOPMENT COMMUNITYS

ECONOMIES

9191 OBECTIES

This unit unveils and eposes students to S!&' countries" main economicactivities and related topics. Therefore students must *no@

The S!&' Member state

!ims and ob9ectives of S!&'

The main economic activities of the respective countries

!nd compare and contrast the natural endoment of each country

ANGOLA

Situated at the north of amibia. Its land area is 1.2(; === suare*ilometers. Its climate conditions are tropical and humid in the north andsub-tropical ith loer rainfall in the south. Its population according to2==1 census is 1%.55 million. Its literacy level is (=>. #&+ is /S H.H54

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billion and the #&+ per capital is /S 545 billion in 2===. The main eportcommodities are crude oil diamonds refined petrol 6high valuecommodities8. The value of eport as /S ;.H21 billion in 2===. Its maineport destinations are /S! 0elgium 'hina and Taian.

I6+'"

!ngola eports mainly the consumer capital intermediate goods and food.Its main import origin is South !frica +ortugal South orea /S! and)rance.

E++! P$+*$9

&espite the abundance of natural resources !ngolaJs economy has been

devastated by decades of continuous ar. !griculture mining andmanufacturing sectors hich are the bac*bone of the countryJs economyhave been ea*ened by the ar. !ngola as rated the fourth largestdiamond producer in the orld has a sieable iron mining industry andthriving manufacturing sector. 0ut due to lac* of inadeuate s*illed

personnel absence of sound economic policies and ar the confusion resulthas been a sever loss of economic groth.

The country has the potential to become one of the most important nations inthe S!&' region if the peace process continues and sound economic

policies are put in place.

The plan to build a larger refinery in the southern part of the country is apositive step toards economic reconstruction.

!ngola has richest agricultural land and as previously self-sufficient infood production. State oned farming enterprises become unsuccessfulhen ar bro*e out coffee and sugar industries disappeared. To step upeconomic recovery the government plans to be a member of the international

coffee organiation. This ill be done through an overhaul of the sector overa to year period through liuidation of some state oned coffee companiesand an invitation of investors to bid for largest plantation.

F!"#$!$"

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0otsanaJs economy is doing very ell according to the information above.The country has policies and programmes aimed toards the full realisationof a prosperous productive and innovative nation. The uninterrupted grothand soaring per capita since its independence in 1HH5 shos good economic

performance.

Goever the countryJs efforts to diversify the economy are threatened bythe GI?: !I&S scourge hich is a big challenge. The problem of GI? :!I&S underlines the need for a continued thrust toards economicdiversification as a strategy for development.

D$+*'! R$6ub! + C+.+ (DRC)

The &


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The country eport value is /12 billion in 2==% and the eportcommodities are@ diamonds copper crude oil coffee and cobalt. The eport

partners in 2==2 ere@

0elgium 5((> /S! 1%(> ,imbabe 5;> and )inland (H>

I6+'

Its import value stood at DH= million in 2==2. The import commoditiesere goods mining machinery transport euipment and fuels. Import

partners are@ 0elgium South !frica igeria )rance #ermany etherlandsand enya.

0ased on the above findings one may conclude that this is a forgottenparadise a country ith all the ealth that eists on earth yet the country ispoor. It has all the minerals on earth and the most fertile land ith enoughater resources. The country"s potential ealth declined and drasticallyreduced the national output.There has been an increase in corruption inflation and lac* of openness ingovernment. &espite richness in natural resources the devastation of arundeveloped economic infrastructure and political instability hamperseconomic development. The political uncertainty deters the potentialinvestors.

LESOTHO

It has a population of 22 million and its #&+ is /S =D1 billion #&+ percapita is /S %5D 62==18. Its main eports are manufacture food and liveanimals ool and mohair. The eport destinations are /S! S!'/ and E/.Its natural resources are diamonds ildlife mohair ool and ater. Thevalue of eport is $M7 25 billion.

I6+'

The country imports mainly capital goods food and beverages fuel andenergy. The imports originate mostly from S!'/ !sia E/ and /S!. Itseconomic productive sectors are mining. Though believed to have mineraldeposits attempts to eploit them are limited due to lac* of investors.

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A.!u'u$

!gricultural production declined over past decades and its contribution to14(> in 2==1. This is due to the populationJs dependence on agriculture forlivelihood therefore agriculture production is mostly for subsistence. Theshortfall as also facilitated by the drought conditions that affected most ofthe S!&' region. Several strategies ere put in place in order to reducedependence on food import from S! and protect domestic producers.$ivestoc* production contributes substantially to rural income. 'attle eportaccounted for one third of eport.

F!"#$!$"

)ish production is limited to village level fishpond pro9ects.

I%u"'&

The manufacturing sector eperienced groth in 2==1 of ;=> thedepreciation of $oti aided the performance hich as a result boosted demandfor manufactured eport. The duty free access to the /nited State of !mericamar*et offered under !#7! resulted in an increase in investments.

T+u!"

Tourist accommodation is being continually developed and there arenumber of hotels mountain lodges national par* and a variety ofrestaurants. Efforts to develop the tourism industry aim at 9ob creation and a

boost of foreign currency earnings. They plan to promote small holder

agriculture and support the handicraft industry.

MALA0I

It has a population of 12.H2 million. #&+ is /S1.D billion and #&+ percapita is /S1(1.==. Eport commodities include tobacco tea sugarground nuts and rice. Its eport value is /S7 .D% billion. It imports mainly

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consists of fuel machinery and euipment. The value of import rates is/S=.(D billion. This shos a good economic position. The eportdestinations are


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Its imports include cement chemical products cotton fuel gem stones ironsteel and petroleum products. The European /nion is the largest mar*et forMauritius goods and the free mar*et economy is operated by very active

participation of the private sector.

)rom observing the economic indicators the countryJs economy is heavilydependent on eternal trade despite very ell educated and hardor*ing

people. Goever ith sound economic policies on trade it shos thegovernment commitment toards economic sustainability and development.

MOAMBIUE

I%!'+"

+opulation is 1;54 million 62==18

#&+ /S %%; billion#&+ per capita /S 2=2sEports /S =%; billionImports /S 124 billion$iteracy rate 2D>+rincipal eports are prans cashe nuts sugar cotton copra citrus hile

principal import are machine transport euipment food product andpetroleum.The main eport destinations are South !frica /S! 3apan Spain +ortugaland ,imbabe. Main imports 7rigins@ S! /S! 3apan +ortugal and,imbabe. The natural resources are prans fish marine resourcescoconuts coal and gems.

0ased on the above indicators the country is doing relatively poorly andmore effort is needed if viable economic groth is to be realised. !lthoughthe country has achieved virtual self sufficiency in grain cereal and cassava

production ith the latter to eceed national needs agricultureproductivity remains ell belo the regional average and the sector hasconsiderable uneploited potential.

The civil ar that destroyed the transport system and other infrastructurecontributed to slo development in the industrial sector. The #&+ per capitashos a lo living standard. The lo level of education is also a setbac*.

NAMIBIA

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heavily depended on South !fricaJs main import. 'ommodities are foodstaff oil machinery and chemicals.

amibia is a peaceful environment ith a lo crime rate friendly peoplenatural attractions modem services and ell-established infrastructure andup to date telecommunication services. These ma*e amibia an ideallocation for investors. The country en9oys easy access to a regional mar*etof over %4= million consumers as ell as access to orld mar*et through itstrading partners E/ S!'/ S!&' 'omesa and 'otonov agreement.

The construction of the Trans alahari and Trans 'aprivi highays providesa fast and comfortable lin* beteen amibiaJs port of Walvis 0ay on the!tlantic coast and landloc*ed neighbouring countries. The highay providesa regional transport corridor. The railay netor* also plays a vital role in

amibiaJs economy.

The modem telecommunication infrastructure in amibia is HD> digital andprovides direct dialing facilities of the orld. The ultimate goal is of thiscombined effort is to develop businesses and promote trade in the S!&'region. 0ased on the factors mentioned above the conclusion is that

amibiaJs economy is ell managed despite the fact that little processing ista*ing place and the country is a main eporter of ra materials.

There are ne mining opportunities through cutting and processing ofprecious stone.

E%u*'!+

The amibian education system provides education for all. !t least H=> ofall children attend school. Goever more effort needs to be put on sectorsthat are vital to economic groth e.g. agriculture mining fishingengineering etc.

SEYCHELLES

This is a tiny Island in the Indian 7cean. Its population is =.=D= million. Itspopulation groth is =.(H=>. The land area is (44 suare *ilometres. #&+is /S(D=.= million. #&+ groth is D.44>. #&+ per capita is /S5.=24.Eport values /S=.12 billions. Import /S=.%( billions.

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N*'u* R$"+u$"

Sea and marine resources.

E>6+'

The principal eports are canned tuna fish and cinnamon bar*. The maineport destinations are / )rance Italy #ermany and 3apan.

I6+'

The principal imports include consumer goods machinery chemicals fueland food. Most of its imports originate from Italy due to decline in thehigh-end tourist business. Manufacturing increased only ith 1.4> oing toepansion of the Indian 7cean tuna company and epansion of constructionetc. The government is running a large deficit to the range of 14> #&+ andthese deficits are largely due to domestic borroing and dra dons in thereserve. The country"s vulnerability to eternal shoc*s particularly the recentdon turn in tourist activities affect the countryJs economy. Goever thegovernment is see*ing to strengthen the bilateral ties ith their neighboursand India. The country desperately needs economic policies and reformsdespite a ea* global tourism mar*et.

SOUTH AFRICA

South !frica is one of the highly developed countries in !frica. +opulation

is ((.DD million 62==18. #&+ is /S155.;= billion. #&+ per capita is/S%;l(. Eport value is /S%1(% billions. Import value is /S2;.2=

billions.

E>6+'

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Main eports are metal gold diamonds machinery and transporteuipment. The eport destinations are / /S! 3apan and #ermany.


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These include soft drin* concentrate sugar ood pulp and refrigerators.Main eport destinations are


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'entre hich identifies possible investment opportunities and helps potentialinvestors in navigating any procedural barriers that might eist.

E>6+'

It"s eports include sisal tea manufacturing goods cotton cashe nutsminerals and tobacco products. 'offee farming is the main eport product.The eport destinations are India / #ermany 3apan The etherlands and0elgium.

I6+'

The country imports consumer goods machinery and transport crude oiland industrial ra materials. The import origin is


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conditions over the past year and lac* of foreign echange left mostcompanies operating belo capacity hile others have closed don. Thenegative international perceptions folloing the implementation of the landreform programmes have compounded the countryJs economic difficulties.Therefore a lot needs to be done to bring the economy to standard.

UNIT ;

This unit raps up this module by loo*ing at the main features that ma*eamibia a preferred investment and tourism destination.

It is vital that students research to have a good understanding as to hyamibia is attracting )oreign &irect Investment 6)&I8 and activitiesboosting economic groth.

;9191 OBECTIES

Students must *no the folloing@

amibia is preferred compared to other countries ithin the region

and beyond.

7utline and discuss the main features that ma*e amibia stand out.

no international organisations amibia is affiliated to or member

of and the rationale behind that.

Main aims ob9ectives and strategies of the international organisations.

;92 0HY NAMIBIA

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+eace stability and good governance

)irst orld road rail and air infrastructure

Ecellent telecommunications netor*


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To promote the development transfer and mastery of technology. To improve economic management and performance through regional

cooperation. To promote the coordination and harmonisation of the international

relations of member states. To secure international understanding cooperation and support

mobilise the inflo of public and private resources in the region. To develop such other activities as member states may decide in

furtherance of the ob9ectives of S!&'.

T#$ +b@$'!,$" + SADC *$ '+:

!chieve development and economic groth alleviate poverty

enhance the standard and uality of life of the people of Southern

!frica and support the socially disadvantaged through regionalintegrationC

Evolve common political values systems and institutionsC

+romote and defend peace and securityC

+romote self-sustaining development on the basis of collective self-

reliance and the interdependence of Member StatesC

!chieve complementarity beteen national and regional strategies

and programmesC

+romote and maimise productive employment and utilisation of

resources of the


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describes regional integration by considering a scale ith = representing nointegration at all beteen to or more countries. 1= ould representcomplete integration beteen to or more countries. This means that theintegrating states ould actually become a ne country - in other ordstotal integration. The intention of regional integration is to form a centre thatill promote the interests of all the member countries - as the old adage saysNthere is strength in numbers".

In !frica regional integration is necessary considering that the ma9ority of!frican countries are small ea* and poor. Integrating the countries of!frica ill help them in dealing ith the issues of globalisation that pose aserious threat to poor nations. !t international stages such as the /nited

ations World Trade 7rganisation International Monetary )und and theWorld 0an* the voices of smaller countries such as $esotho Sailand

Seychelles 0enin etc are not heard.With regional integration it is assumed that smaller countries such asSailand $esotho and 0otsana can come together and form onecommunity li*e the Southern !frica &evelopment 'ommunity 6S!&'8.In doing this they can form a collective poerful force that ill enable themto deal ith burning issues li*e eradication of poverty globalisation andsocial epidemics li*e GI?:!I&S.

$oo*ing at the cases of Tanania &emocratic


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Tourism 'ulture Information and Sport Marine )isheries and


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The folloing is an illustration of ho sectors ere allocated to eachmember country based on strengths and opportunities found in that

particular country.

1. !ngola Sector responsibility@ Energy Strengths@ !ngola is rich in mineral resources e.g. oil2. 0otsana Sector responsibility@ !gricultural


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1. To offload or* done at the S!&' Gead Ouarters to the 1( membercountries alloing the S!&' Secretariat time to focus on critical issues.

2. To give each member country a sense of control and a feel of belonging to the community by giving responsibilities in each member country.%. The S!&' also realised that there is fleibility in the decentralisation of

S!&' functions more rapid local responsiveness and attuning the'ommunity to local conditions of each member country.

&ecentralisation ensured that the decisions ta*en are influenced byconditions and cultures of each member country. &ecisions ta*en are ofteninformed decisions. evertheless on the operational level the decentralisedcountry by country sectors ere too comple to manage and coordinate.+ro9ects ere initiated but in most of the cases they ere not completed.

The decentralised approach also involved large sums of money that ere notalays available. With the decentralised approach member countries ereinstead of integrating became more polarised since each country asfocusing in developing sectors in their on countries and sa little benefitsin or*ing ith other member countries. With the decentralised approach inreality and practice there as no integration. These are reasons that forcedS!&' to re-loo* the decentralised approach and eventually restructureditself by 2==1.

R$"'u'u$% SADC: D$,$+6$'" *% *#!$,$$'"

With the restructuring of the S!&' the entire 21 sectors ere grouped andcentralised. 7ut of this restructuring process emerged four directorates all

based in #aborone 0otsana.The main reasons hy the S!&' centralised its functions are the folloing@

S!&' anted to facilitate coordination. S!&' sa the decentralised1( sectors dispersed in the 1( member countries difficult tocoordinate.

To ensure that decisions are consistent ithin the entire S!&'system. When decisions are dispersed around 1( countries countrymanagers can ma*e decisions at variance ith those at the S!&'Gead Ouarters in 0otsana. 'entralisation of functions reduces thisris*.

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Sales to local mar*ets of up to %= per cent production may be alloed onreuest.

! company hich eports 9ust one of its productions can also apply for E+,status by separating its eport activities into a separate company.Warehousing and pac*aging companies other than those involved in fishand meat processing can also apply for E+, status.

The pac*age of benefits and incentives hich apply indefinitely includes@ o corporate ta

o import duties on imported capital euipment ra materials

o ?!T stamp or transfer duties

+ermission to hold foreign currency accounts in local ban*s

;9;91 E>6+' P+$""!. +$ I$'!,$"

The flagship of amibia"s ta based incentives is the E+,-regime. $aunchedin 1HH5 by the E+, !ct the E+, is no vibrant and represents a hole neterritory for the investor to eploit. In its short life span amibia"s E+, hasattracted good response from countries as far as #ermany 'hina 0ritain'hile Italy Saudi !rabia India 'anada 7man and $ebanon. 7ver 51

companies have been granted E+, status. 7f these 14 E+, companies arefully operational producing goods ranging from car parts to ostrich leather

products.

Enterprises hich underta*e manufacturing assembly re-pac*aging andbrea*-bul* operations hich gear all or almost all of their production foreport mar*ets outside of S!'/ and hich earn foreign echange andemploy amibians ill be eligible for E+, status. They en9oy an attractiverange of both ta and non-ta benefits of unlimited duration.

Enterprises ith E+, status do not pay corporate ta import duties sales

taes stamp or transfer duties. It is a totally ta-free regime.

E+, enterprises may be eligible for a #overnment grant covering a part

of the direct training costs on the basis of pre-approved training plansonce training is complete.

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E+, enterprises are alloed to hold foreign currency accounts in local

ban*s.

They also en9oy industrial calm as no stri*es or loc*-outs are alloed in

the E+,-regime.

'ompanies operating under the regime are free to locate their operationsanyhere in amibia.

Through the 7ffshore &evelopment 'ompany E+, enterprises have

access to factory facilities rented at economical rates.

'ee&en(es)

1. M(Co&$"(*+ J. T,e E&o!ean Un"on) o#"t"(s and o#"("es. estv"e0

&ess) Bo#de& Co#o&ado+ 1.

2.'a$sa$+ &ega 2334 5#o6a# !a&tne&s,"! o& A&"(a. &esentat"on at

T,e ,$an &"g,ts (one&en(e on g#o6a# !a&tne&s,"!s o& A&"(as

deve#o!$ent+ 5a6o&one) SA%C

4.Int&od(t"on to Na$"6"a Jo&na#+ M"n"st& o T&ade.8.Na$"6"a T&ade %"&e(to& 2337

9.Nat"ona# %eve#o!$ent #an 1 +2

:Na$"6"as.V"s"on 2343

7.os"t"ve E(ono$"(s+ '"(,a&d ;"!se

FIN - 1127 Introduction to Regional Economics

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Transcript of FIN - 1127 Introduction to Regional Economics