Madagascar’s next transition
The coup, which has been a bit more popular throughout Sub-Saharan Africa as of late, has now brought a new government to the people of Madagascar. The new president is young and a proclaimed reformist, most typically are so only time will tell. Of the many challenges in establishing a new government, perhaps the greatest is attempting to determine the long-term outlook for a given nation and its people. Do I think this could put the country in a more precarious position? Potentially, but maybe not. Can I be sure of anything? Not in the slightest. With that, I will stick to the short-term.
South Korea had lofty aims to cultivate over a million acres of underdeveloped farmland within the Madagascar borders and then ship the produce back to South Korea as a measure of “food security.” Those plans have been scrapped. The South Korea proposition had one clear fault: they wanted the land for free. In fact, this dubious arrangement had prompted condemnation from many outsiders and provided additional impetus for the subsequent coup. Naturally, the new administration readily cancelled the deal. This is politically understandable, but I do not believe it is optimal.
Much of Africa, including Madagascar, has an impresive amount of farmland devoid of farming. A good driver of economic growth and wealth generation (typically increases health) is often the farming industry. Any country with the right landscape and climate for a particular good(s) can enjoy a healthy export industry, usually to wealthier nations lacking food production (like the Gulf states). Notwithstanding international trade issues/debates (particularly the Western farm subsidies), it may prove beneficial for Madagascar to put this available land to use, and if needed, use South Korean capital inflows to start the process. The catch is: make them pay rent. The arguments (from South Korea) about job creation and such being a payment of sorts are flimsy. It is difficult to say and especially quantifiy the future effects on Madagascar’s labor market. However, it would be quite manageable to include this new source of revenue in the country’s fiscal budget (using the money to bolster public health and education programs would not be such a bad idea). Thus, I think Madagascar should not fold their cards and walk away from the playing table; rather, they should play a better hand. And if they really are astute, and the land is truly valuable, they may wish to auction the land to all available bidders (tends to drive up prices).
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Michael Richards
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Good points- foreign investment is certainly one of the largest driving forces for economic development in Africa, and especially agricultural development (in addition to exploitation of mineral resources.
Developing agriculture, even in conjunction with a foreign nation, is especially beneficial because by importing agricultural technology and practices you can potentially have a large impact on the rest of the population, who will have opportunities to observe and adopt new, potentially better practices.
Of course, the potential benefits don’t justify allowing South Korea to use the land for free- I wonder, did S. Korea give any explanation of the benefits of their plan for Madagascar?
For the most part, South Korea felt they were making use of a neglected resource (i.e the land would have sat fallow otherwise) and that they would “create thousands” of jobs in the process for the people of Madagascar. That is possible but not truly calculable a priori. Labor can migrate and depending on the incentives Madagascar citizens may or may not be in the mix for new jobs. So, better to have something tangible (rent) and then see what spillovers come out of it.
Just read an interesting Economist article that highlights the importance of water resources in South Korea’s actions and the developments in Madagascar. Michael, what do you think?
http://www.economist.com/world/international/displayStory.cfm?story_id=13447271