• Friday, September 22, 2023
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Growth through international trade:Economist urges Nigeria to return to South Korea’s model

Growth through international trade:Economist urges Nigeria to return to South Korea’s model

Nigeria was said to have taken off with South Korea in 1972 to create wealth through international trade as recommended by theorists from mercantilism through Smith absolutist advantage to David Ricardo’s comparative advantage.

Nigeria however veered off the track and is today battling to balance its trade account, owing huge debts.

Now, a 75-year-old professor of economics and trade policy expert, Edet Bassey Akpakpan, and deputy vice chancellor of the University of Uyo, who came to the University of Port Harcourt as keynote speaker on the World Trade Day, has advised Nigeria to trace its steps back.

Akpakpan, who was staff number 74 in UNIPORT, and who served Nigeria as far back as 1993 as economic adviser in the presidency, said it is true that trade as an engine of growth for countries but warned that big countries manipulate the system to be ahead in international trade to the detriment of small powers.

On what Nigeria can do, the teacher squarely said the problem of the Economy is the government. “So, fix the government, then fix the economy.”

He asked the university dons that filled the hall to forget sending ideas because government in place does not use expert ideas. “Government is a critical vehicle of economic development. We must factor how government is formed and how government leaders are recruited: Politics!

“International Trade is critical. Any country that wants to gain must be able to produce goods and services.”

On what South Korea did, the sage said; “South Korea liberated itself. Nobody will liberate you. No one group should stop the wish of Nigerians. If you cannot go to Abuja to pray for God to intervene in the affairs of Nigeria and allow the wish of majority of Nigerians to come to pass, at least pray in your homes.”

South Korea vs Nigeria (Export)

Akpakpan who seemed deeply in love with South Korea and General Park Hee showed that by 2022, South Korea export was put at $49Bn, whereas Nigeria’s was $4.8Bn. “South Korea is rated as the world’s 7th largest exporter and 10th largest importer, meaning that they exported more than they imported by applying the theory of comparative advantage. They thus rated as the 3rd exporter of cosmetics. They did this by producing and selling the surplus in targeted areas.”

South Korea model

He explained what South Korea did. He said the country used international trade to create wealth and economic growth. “Nigeria and most other countries copied the model. Why did Nigeria not succeed?

“Answer: We have not been able to produce and export. Why? Government intervention; naïve policies, dishonesty, frivolity in government actions, etc.”

He said he has evidence to show that the above factors were reasons for failure. “Government projects sometimes are not intended to succeed. Ajaokuta Iron & Steel Project is a glaring example. If you get the real detail, you will weep. Wrong design, but why did Nigeria accept it? Why didn’t Nigeria go for smaller plants?”

He said Nigeria discovered that for you to have idustrialisation, you must have technology (which it added the 3rd national plan. “Nigeria thus set up an institute which ended up only doing registration of patents, and later did setting up technology incubators. “Go and see the one at Agege (1993) if you can even locate it. The one in Uyo is zero.

Read also: Why economic growth in sub-saharan Africa could permanently decline IMF

“Nigeria suffers from poor management, frivolity abounds. Nigeria easily signs trade agreements they don’t read: out of 31 trade agreements signed, only 15 are in force. We do not read the clauses of what we sign. Those who travel to represent Nigeria go for jamboree and sign without reading.”

Tracing the world order, Akpakpan said the International Monetary Fund (IMF) wanted Nigeria to raise fuel price from N7 to N15. “I punctuated the mathematical equation the white man came with and he fled. Abacha eventually announced N11.

“The West will always manipulate you if you are not prepared. AGOA? Read it well, it shows you have to open your economy.”

He advised the Nigerian Export Promotions Council (NEPC) to first research on the conditions every country stipulated for import of each product and ensure that Nigerian exporters comply with these rules right here in Nigeria before allowing such products to leave the shores of Nigeria, else, they would suffer rejection.

Background and theories of international trade

The University of Ibadan trained economized who helped to revise the syllabus gave a background of the evolution of trade theories.

He said the first group to draw the attention of the world to the importance of trade were long distance traders from Britain.

Mercantilism: They saw trade as the source of wealth to the world. They saw wealth as metals (gold and silver) and advised government to manage and protect trade so they can have goods to sell.

“I want to say that mercantilism is not a theory but an idea. It suggests that countries should promote production and thus produce more than they can consume and thus have surplus to sell (export).

“Adam Smith opposed it, saying all countries cannot produce more and sell at the same time. Instead, he proposed the theory of absolute advantage (absolutism) which advised governments to create absolute advantage of production and use it to trade.

“David Ricardo frowned at the aspect of ‘absolutism’ and rather put forward the theory of ‘comparative advantage’ of goods over others. This encouraged countries to create comparative advantage on some goods over other producers and thus build trading power with those goods.”

He said all the theorists concluded that trade should be free. Akpakpan saw this clause as a tool for manipulation by the advanced countries over small ones. “Mercantilism produced the likes of Mongo Park as countries sponsored expeditions to discover colonies to rule and sell to. This idea or theory ruled for about 300 years during which kings in Europe captured trading posts or colonies around the world.

“Lesson: Trade is a tool by some countries to make themselves permanently ahead of others. In building these theories, terms of trade were ignored. This looked at rate of import versus rate of export; that is, fixing of prices of exports versus prices of imports.”

He said Arica has always been at disadvantage because they have always been dictated to in terms of prices of what they buy and what they sell.

“Free Trade: Africa accepted this clause not knowing it is a weapon to expose their borders to stronger trading nations. Agric produce (with low prices) thus competed against manufactured goods (with high prices). Trade, no doubt, is good.”

In examining new trade theories, the Economist posed some questions. “Why do countries import what they produce? Does international trade really stimulate trade? Why did it not stimulate growth for Nigeria? What do we do?”

He said the case of South Korea is important for Nigeria in the quest for use of international trade for growth.

He gave the history of how Japan colonized Korea, but after their defeat in the 2nd world war, Korea was divided into North and South. North Korea (NK) was given to Russia to manage while South Korea (SK) was given to America to manage. SK was poor but north was industrialised. Soon, Nk invaded SK and war began, which was Russia vs America. It ended in no victor, no vanquished. The UN declared ceasefire. Each became a country and were free to develop as they wanted.

The Story of South Korea’s Economic Growth

The US thus helped SK to develop and build up strong economy. An Army General, Park Chung Hee, staged a coup and announced economic plan. This attracted the masses who were in desire of economic prosperity as the North had.

SK was massively corrupt, but Gen Park brought those corrupt people into a national committee to rebuild the economy. He nationalized the banks and thus captured the looted funds dumped in those banks.

Gen Park did not embrace free trade but needed international trade to create wealth to build South Korea. His regime checked to see what to excel in to compete in world trade; to produce and export.

SK thus launched a 5-year development plan. (Nigeria did, same year, 1972). South Korea did plan one to seven. The gave export credit, low rate, tax exemptions for inputs in export products, they gave export targets to those who got the incentives.

There were monthly meetings chaired by the President where achievements and targets were reviewed and solutions proffered. This led to boom.

Success, he said, brings problem: Gen Park sought to host the 1988 Olympics to show that SK had arrived to the club of wealthy nations. He thus launched a cleanup operation because SK was still seen as a filthy nation. The government was cleaning people and places up with iron hand. This caused suspicion as detractors said he was transmuting to a Dictator. He was assassinated. Subsequent regimes however stayed with his economic policy.

Emeka Nzekwe PhD (Chairman, PHCCIMA Oil & Gas Group)

This is an annual event with focus on international trade, which is trade with other countries. It produces winners and losers, and trade connects countries. We are looking at growth of Nigeria through international trade.

We produce almost nothing, and we consume mostly imported goods. Nigeria is well positioned to dominate African trade: geographical location, situated along the Atlantic Ocean, high population, highly educated people, abundance of mineral endowments, etc.

The World Bank has even predicted that Nigeria gross domestic product (GDP) will hit $570Bn by end of 2023. Nigerians are highly resourceful and supply a large chunk of human capital around the world.

Ease of Doing Business in Nigeria is an issue, the problems are man-made.

Mike Elechi, PHCCIMA President

Suggestion: Inward Integration

World Trade Day which is always in May is to draw global attention to small producers and workers especially in developing countries.

It has 324 associations in 70 countries. It aims to reduce child labour and forced labour as well as show respect to the environment in the cause of production and trade.

There is huge trade deficit against small countries. This is why we suggest inward integration. Try and use what have to produce what we need.

Ijeoma Emele Kalu: Director, Institute of International Trade and Development

The aim of the event is to create awareness on the need for Nigeria to join international trade for growth and development and do this from point of advantage.

Nigeria needs to put effort in non-oil export. We believe that most of the participants are people close to policy-making and they can take the key messages to the corridors of power.

The guest speaker was carefully chosen because of his huge knowledge and experience in the sector.

Sylvester Udeorah, PhD: Deputy Director, IITD, and Chairman, Local Organizing Committee

It is tasking to put this even together. It is an annual event designed to create awareness and sensitise the Nigerian public on the benefits and procedures of international trade. It shows how international trade can create wealth and growth.

We plan to come up with a report and submit this to the relevant and strategic places.