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Wednesday, December 13, 2006


Political Economy

Political Economy
Developing countries never explicitly took one approach over the other, there seems to be noticeable differences between poverty reduction and wealth creation. In paved reduction focused countries, such as Madagascar, or Mali, systems tend to operate under a culture of control, monitoring, and bureaucratic procedures. Concern is put on socially oriented cost centers and manageable checks and balances to monitor those cost centers. This may look good interms of consumer confidence, but it is inefficient in terms of market responsiveness and competitiveness. Little effort is channeled towards income generating business activities, and managerial time and focus is on securing grants, rather than crating wealth. Very few companies survive on purely market driven business models, and when they try to , basic government services are not there to support them. In wealth creation focused countries such as Singapore or Mauritius, we see a tighter relationship between business and government. Leaders from both aids have a clear sense of the ir respective roles in the wealth creation process, and leaders on both sides are rewarded accordingly. As a result, organizations in such countries tend to directly or indirectly focus on supporting business. Public sector managers are asked to express clear and measurable wealth creation support objectives, and to claim the resources they need to achieve these objectives. Agencies in charge of critical income generating sectors become important agencies that work closely with the private sector and get priority support from other government departments. Where does this leave a country like Rwanda? It might help Rwandan public and private organizations be more conscious of the choices they inherently make every day. Aid-funded organizations that directly provide relief to the poor are necessary and will be needed in Rwanda for many years to come. However, it will be critical that Rwanda finds more sustainable ways to finance them. In the meantime, it is imperative for most other organizations to examine how their activities directly or indirectly contribute to the wealth of the nation. there are huge potential economic benefits from income-generating sectors like coffee and tourism. It is estimated that investments of $80 million and $100 million could, coffee and tourism could generate around $580 million in badly needed export receipts. Not to mention the thousands of jobs these high economic impact industries would create in the Rwandan economy. If these targets were achieved they would fundamentally transform the economy. Rwanda's path towards more competitive coffee and tourism industries will not be an easy ride, and the Rwandan public and private sector coffee and tourism leaders who have developed precise action plans for those industries all know that. Both they also fell that the risks and investments required are will worth the risk. The prospect of slowly crating prosperous coffee and tourism businesses in Rwanda is becoming more and more obvious and the country's stated goal to reduce reliance on foreign aid could eventually become a reality.

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