OPEN FORUM OF THE MINEPAT:
Biya’sdev’t vision in seven questions
1. Why
act now?
 |
| Louis Paul MOTAZE |
In about three years, the first phase of
implementation of our long term development Vision which is materialized by the
Growth and Employment Strategy Paper (GESP) will be completed. Its
implementation which our main partners considered as "overall satisfactory"
contributed amongst others in the execution of major projects which should also
be completed next year and are expected to improve the structure of our economy
so as to make the private sector the economic growth driver.
It
is widely recognized that the first half of the 2010-2020 decade has been
marred by various kinds of threats, and marked by the disquieting performance
of Cameroon's economy. Indeed, while the national and global environment was
less friendly as we are going to see later, its immediate consequences were
effectively controlled thereby avoiding a fundamental upsetting of our growth
objectives and jeopardizing our march towards economic and social progress.
These headwinds which are far from fading out and which have sometimes compelled
us to delay large-scope investments such as the Mbalam Iron Ore project (about
6 billion US dollars of deferred investments representing over CFA F 3,000
billion) shall be addressed more vehemently in the next years.
This
said, major first generation projects will reach their completion point by
2018. 2020 will usher in a new phase in the implementation of our Development
Vision by 2035. In between these two periods, there are some gaps which
absolutely need to be filled like investments in digital facilities, completion
of certain roads indispensable to link production areas to markets or even
projects of the Emergency Plan. On this particular issue, the Head of State
himself said that "the primary aim of the Emergency Plan is to step up national
economic performance and improve the living conditions of the Cameroonian
people so as to achieve the objective of becoming an emerging country by
2035". Moreover, some projects such
as the Yaounde-Douala highway will not be completed in 2018. In order to avoid
the consequences of a wait-and-see position which may ensue from the period of
inactivity between the end of the first cycle of major projects and the launch
of the second cycle, we have to act. And we have to act fast.
2. Where
are we coming from and what have we done?
During
the first cycle of the programming of Cameroon's economy which is underpinned
by the Poverty Reduction Strategy Paper (PRSP), economic growth was mainly
driven by consumer demand and recorded a modest 2 per cent performance rate on
average during the 2000 decade. As from 2010, the Cameroonian Government
embarked on an ambitious public investment programme in overarching
infrastructure notably in the areas of transport and energy so as to improve
the competitiveness of the economy. Thanks to this bold economic programme, the
country recorded steady GDP growth rates moving from 3.3 per cent in 2010; 4.1
per cent in 2011; 4.6 per cent in 2012; 5.6 per cent in 2013; 5.9 per cent in
2014 and 5.8 per cent in 2015. Better
still, all development partners have lauded the Government for the sound
management of some of these projects. The most recent recognition was from the
Managing Director of the IMF who gave a positive but non-biased opinion on
projects such as the LomPangar dam and the Kribi Deep Sea Port during a
reception offered in her honour by the President of the Republic.
The
good performance ever since recorded, prompted analysts to describe our economy
as "a resilient economy" because of its peculiarity in a global and
regional context that was characterised by prolonged slowdown of economic
activities since 2013/2014. In this respect, we should recognize that since the
start of the implementation of the GESP in 2010, Cameroon has moved from a
sluggish economy to a relatively buoyant economy with a growth rate projected
to 5.9 per cent this year. As a matter
of fact, thanks to the economic improvement and changes brought in as a result
of the implementation of the GESP notably through the Programme for Major
Projects which is based on core area No.1 on the "Development of
Infrastructure", Cameroon's economy has succeeded in addressing the
negative effects of (i) war against the Boko Haram terrorist group; (ii)
unfavourable conditions on the international front and unaccommodating
conditions with its main trade partners notably China which has been
readjusting its economic model; (iii) the prolonged drop in commodity prices,
notably oil; (iv) credit crunch; (v) persistence of climate disruption
especially in the Far-North region and (vi) the influx of refugees into our
country.
This
concept of our economic development drivers over the past years (or our
resilience) is vital in the sense that it is a decisive factor in the choice of
our future economic policies and should guide in the selection of
measures/actions which should help Cameroon's economy achieve the key
objectives of the GESP by 2020.
3. What
next in the coming years?
It
is true that 2018 will usher in the completion of the major first generation
projects which were the main pillars from which our country derived its
”economic resilience" as observed these past years. However, the
infrastructural gaps stand as the major constraints to Cameroon's economy
according to the various surveys conducted with the private sector. In fact,
some components of the programme for the development of infrastructure required
to revitalize growth driven by the private sector are either uncompleted or
even unexplored. While public capital stock has considerably increased in our
country since 2010, there are gaps or pockets of deficits; for instance in the
energy production capacity of the country or our alignment to international
digital standards. This calls for a change of the focus which needs to be
strengthened and extended so as to maintain and scale up the first achievements
for spillover effects on the private sector. This infrastructure programme will
thus be more likely to bring in the economic change desired by the Head of
State through investments in the new sources of growth identified in the
Industrialisation Master Plan (Energy, Digital and Agribusiness).
This
means that Cameroon has to optimize despite constraints and in a context of
upward rigidity of income (no increase of salaries or social allowances
projected). Besides, the economic trend characterised by an increasingly
stringent budget calls for internal adjustments and improvement of public
investment efficiency. The domestic debt which is estimated at about CFA F
1,100 billion also stands as a burden to businesses. In the same vein, the
persistent sluggishness of external demand might produce recessive effects on
economic growth. With the slowdown in the economy of our main trade partners
like China, external demand might continue to impact negatively on our economic
performance.
We
therefore call for a stimulus policy which is based on the multiplier effects
of investment demand. While giving precedence to such demand, this option will
further lay emphasis on back-up measures by scaling up investments to create a
business environment conducive to the sustainable development of the private
sector. Stimulus policies are trend policies used to address time-based
weaknesses in growth in the presence of unused production capacities. As we see
it, it is a timely and relevant option given the slight slowdown observed in
2015 because we must create roads that serve markets and consumer centres while
further investing in the digital economy as prescribed by the Head of State;
and facilitating electricity and water supply, providing quality
telecommunication and internet services to economic operators, and creating the
main trade corridors, etc.
This
is why, in keeping with the Head of State's vision, we should proceed with the
launch of the Programme for Major Second Generation Projects which should come
on the heels of the programme under completion. We will mention projects like
the construction of railways in accordance with the National Railway Master
Scheme approved in 2011; the third bridge over river Wouri; the Limbe Port; the
extension of the optic fibre throughout the national territory, etc. This
commitment is very acute especially as the country has to go through economic
hardships in the next years which, in our point of view will be the most
difficult ever faced since 2010, notably with the entry into force of the EPA
and other increased threats, like smuggling which destroys segments of the
economy; influx of refugee in the East region where they already account for 20
percent of the population of the region, with all the related effects on the
security and economy of the region that bears the consequences especially in
the sectors of livestock and farming.
4. What
do theories hold?
Like
any Government, Cameroon is pursuing numerous objectives with limited resources. Trade-offs are therefore a routine
action. Such trade-offs according to
Douglass North reflect their preferences and depend on institutions, meaning
formal constraints (rules, laws, institutions) and informal constraints
(standards and behaviours).
The
works of prominent economists like Keynes show the efficiency of economic
policies hinged on State intervention to address constraints associated with
unfriendly environments, acting on demand through expansionary budget policies.
The stimulus policies seek to increase either the available income of economic
agents (tax reduction, increase of social allowances, salary increase) or the
domestic demand through increase State expenditure (major projects). Thus,
Keynes' policies were implemented for several decades over the world with a
real success (post-1944 period referred to as the Glorious 30s owing to the
major project policy carried out in Europe, or even the New Deal of President
Roosevelt, for instance), until the oil shock in 1973. As from that moment, the
budget instrument proved its limits especially with the high tax rates it
builds on to fund its deficits and the difficulties in effectively
anticipating/projecting the behaviours of economic agents with regard to
savings and consumption. In fact, demand-driven stimulus policies only prove
successful if economic agents have a low propensity to save and use their
exceeding income to consume more; and such consumption is maintained by the
high production capacity of existing industries. Moreover, stimulus through
consumer demand has its limits especially in terms of time horizon because it
is essentially effective in the short term through its multiplier effects;
meanwhile in the long term, it is challenged by asymmetric information in terms
of agent behaviours. We agree with the economist Paul Krugman that the
essential legacy of the New Deal implemented by President Roosevelt in 1933 is
the creation of conditions for the effective redistribution of wealth which
characterised growth in the post-war period also referred to as the "the
period of the Glorious 30s".
5. What
about stylized facts?
According
to the World Bank, lack of infrastructure reduces growth by two (02) points per
year and the effects thereof will be worsened with climate change. Besides,
inadequate or poor infrastructure harms the development of businesses and
stands as an impediment to the development of manufacturing and service
industries while jeopardizing the policy of diversification of private
investment in the local processing of our basic commodities.
As
for the IMF, its Managing Director Mme Christine Lagarde, in a round-table
conference at Hilton Hotel in Yaounde on 8 January 2016 said before the Prime
Minister, Head of Government, Mr Philemon Yang that lack of infrastructure is a
constraint to economic growth and that the upgrade of the said infrastructure
calls for huge investments. According to her, the economic boom of our country
rests on the continuation of the programme on which we are embarked since 2010.
Still on this issue, the IMF, earlier on in 2014, upheld that it was time to
revive the economy through infrastructure (Global Economic Outlook). Since
public investments in massive and quality infrastructure are essential to boost
economic activities and create jobs and that if investments are managed
properly, their boosting effect on production will offset the loans incurred.
As shown in this report, infrastructure is the base of daily life and the
cornerstone for economic activities. No activity can be carried out without
infrastructure in some form.
Countries
like Côte d'Ivoire, Senegal and Kenya with 2016 growth rates projected to 8.5
per cent (against 9.4 per cent in 2015 and 10.7 per cent in 2012), 6.5 per cent
and 6 per cent respectively have undertaken to make massive investments in
infrastructure. If Côte d'Ivoire is counted among the top 10 countries to have
improved their business climate in the world, it is notably through public
investments which are above all funded with external funding. Such investments
which are backed up in priority by the State and under the Public Private
Partnership scheme concern the extension of the Port of Abidjan, renovation of
the Abidjan-Ouaga railway or construction of the Henri Konan Bedie bridge.
6. What
are our main issues of concern?
In
order to better materialize our determination and achieve the objectives we
have set, we have to absolutely address two main issues to guarantee quality
and ensure compliance with the deadlines set for the construction of
infrastructure. To this end, we can count on the assistance of our development
partners who have assisted us in the drawing up of strategies to be adopted to
address these issues.
The
first one is lack of maturity of first generation investment projects some of
which witnessed certain delays in the kick-off and operations at construction
sites. Efforts shall be made to solve
problems of expropriation and payment of compensation which hinder the smooth
conduct of some projects like the Yaounde-Douala highway where cases are
sometimes reported of the populations vehemently demonstrating for the payment
of their compensation.
The
second issue is the persistent problem of contracts where the necessity of
compliance with the procedures has often given rise to certain loopholes and
delays in the execution of projects.
The
creation of the National Public Debt Committee (CNDP) chaired by the Minister
of Finance ushers in new perspectives for the process of maturation of
projects. In fact, this body is
increasingly vigilant regarding the quality of projects to be executed. To
avoid excessive debt-servicing, it is imperative to kick-off projects on time,
comply with the prescribed time limits and initiate administrative, financial
and technical procedures before these projects kick-off. Greater attention will
be given to these aspects as well as to the regular upgrade of existing
infrastructure so that there should be less abandoned projects but more
added-value generated.
7. What
can we conclude?
With
the implementation of the Programme for major second generation projects, the
Government has as ambition to keep up the trends recorded during the first five
years of implementation of the GESP on the one hand and create sustainable conditions
for a conducive environment to the development of the private sector, the main
sector which creates wealth. In other words, it is the policy mix which impacts
on investment demand to suppress or reduce clogs and release offer. This
renewed economic ambition through major second generation projects added to an
active policy of direct support to the private sector while scaling up through
increased focused on our "national champions" would boost production
in the short term, by stimulating overall demand; and in the long term by
increasing the productive capacity of our economy. The IMF (2014) showed that
excess public investment in infrastructure stands to boost the GDP thereby
offsetting the debt increase so that the public debt/GDP ratio remains stable.
Finally,
revival through investment demand which is a follow-up to the implementation of
the GESP should rest on the implementation of major second generation
investment projects with the private sector as the key actor in the process.
Emphasis should thus be laid on productive investments with increased
assistance from public authorities to make private investments act as the
intermediate point for public investments by the period of implementation of
our strategy. This will contribute to emergence or the consolidation of our
"national champions" in the growth-bearing sectors of our economy
(agribusiness, digital economy, energy...) in the prospect of an
industrialization process backed up by the private sector. The Minister of the
Economy, Planning and Regional Development (MINEPAT) had already held
discussions with GICAM to develop this approach built on "leaders of
industries"; a bold approach which will rest on direct support to certain
sub-sectors selected beforehand on the basis of unbiased criteria.
Apart
from the public investment budget which stands as our lever, our future
strategy shall consist in mobilizing our traditional partners for more
substantial support to the private sector benefiting from public guarantee.
There
are funding margins for this bold option underpinned by major second generation
projects at the domestic level with the good performance recorded in terms of
mobilization of domestic resources, as well as at the external level given the
debt sustainability with an outstanding public debt with public guarantee
accounting for only 27.3 per cent of the GDP as at end of July 2016, that is
far below the community standard of 70 per cent.
Minister of the Economy, Planning
and
Regional Development
Louis Paul MOTAZE
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