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Opinion - The political economy of industrial policy

2021-10-20  Staff Reporter

Opinion - The political economy of industrial policy
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Josef Kefas Sheehama


Historically, the use of industrial policies by governments proved beneficial to a number of countries. The vision of Namibia’s Industrial Policy is anchored in Vision 2030. 

Accordingly, by the year 2030, Namibia should be characterised as “a prosperous and industrialised country, developed by her human resources, enjoying peace, harmony and political stability”.

The need for an industrial policy, states nevertheless adopted industrial policies, for instance, Namibia did this throughout its history. My aim is not to repeat the history of Namibia but to offer opinions on what I think we can collective do. I mean to say that the Namibia government uses various measures to influence the economy, such as in the agriculture sector by providing research and technical assistance and dissemination of such information to farmers through agricultural extension services and investments in irrigation projects. 

Moreover, industrial policy differs from the macroeconomic policy as the government targets only a subset of the economy, while the macroeconomic policy which includes tax rates, rates of interest, and levels of fiscal spending, generally does not discriminate against companies or industries, whereas industrial policy includes subsidies on research and development, taxes amongst other things. The strategic trade policy favours the entry of domestic firms into global markets. The policy is that government can assist domestic companies in capturing economic profits from foreign competitors. According to it, the government policy can alter the terms of competition to favour domestic firms over foreign firms and shift profits in imperfectly competitive markets from foreign to domestic companies.

Namibia’s government stresses that its economic policy is based on a competitive market economy. But some existing legislation distorts competition. Several local companies feel disadvantaged and complain about the preferential treatment foreigner investors receive. Economic policy in Namibia is guided by the need to achieve economic growth and to address high levels of poverty, inequality and unemployment in the country. One of the main failures of Namibia’s economy in recent years has been its inability to create sufficient jobs. 

In light of this, the Government of Namibia has adopted Harambee Prosperity Plan (HHP) which seeks to restructure the Namibia economy in order to improve labour absorption and the composition and rate of economic growth. The Plan does not replace, but complements the long-term goal of the National Development Plans (NDPs) and Vision 2030. Despite its focus on growth and job creation and the role of public spending on, for example, infrastructure, in supporting these aims, the new government initiatives reinforce the Government’s commitment to macroeconomic stability and low inflation. Other specific aims of Namibia’s economic policy include developing a better-educated and more skilled workforce, enhancing competition, promoting innovation, halting and reversing de-industrialisation, diversifying the economy into new sectors, building strong relations with other emerging economies and boosting intra-regional trade.

The Namibian Government still considers industrial policy to be a vital component of its broad developmental strategy for promoting and accelerating economic growth in a way that creates sustainable jobs and reduces the high levels of poverty and inequality in our country. The hope is that such broad-based industrialisation will promote employment growth and increase the participation of historically disadvantaged people and marginalized regions in the mainstream economy. 

Addressing the problem of chronic unemployment and the recent decline in the country’s industrial and manufacturing capacity. The plans outline cross-cutting actions that are crucial for industrial development, such as industrial financing schemes and skills development programmes, and pinpoint sectors which are to be promoted through targeted support for investment, infrastructure and industrial upgrading. 

On 7 October 2021 Development Bank of Namibia launched a climate adaptation facility. According to DBN CEO Martin Inkumbi said it provides an affordable and tailored financing solution for climate and environmentally friendly projects. I am convinced that if we pull together with one aim we will grow and develop our economy. 

Namibia’s trade policy, as articulated in the government’s Namibia’s Industrial Policy and Strategic Framework is, also informed and shaped by the county’s fiscal policy and the national economy objectives. Where further trade liberalisation is pursued, it is done gradually and selectively, and with a focus on supporting broader programmes aimed at industrial development and employment creation. 

Despite its pro-poor economic and social policies, which have mainly targeted the housing, healthcare, social security and education sectors, there are still more job seekers than there are jobs, thereby exacerbating the government’s ability to tackle poverty and inequality which result from unemployment. Another problem is the government’s lack of in implementing policies that comprehensively address poverty and inequality stemming from unemployment. Swapo, the dominant political force in Namibia today, regards itself more a liberation movement than a political party.

With liberation movements during times of struggle, there is the need for consensus in order not to expose divisions, which could be used against the movement by the enemy. Communities have become frustrated with the performance of those in leadership, especially in the local government context, and particularly with regard to nepotism, corruption and the lack of transparency.

It would be an incomplete analysis of the political economy of Namibia without considering the effect of growing investors-Namibia relations. The investor’s legitimacy is based upon securing the resources and energy required to keep its industries growing in order to lift millions of citizens out of poverty. Therefore, it will be crucial to adequately design, monitor and evaluate policies to ensure that resources are not wasted. As industrial policy by definition discriminates against non-targeted sectors of the economy, these complications call for pragmatic ways of assessing policies in terms of trade-offs among various development goals.


*The opinions expressed in the article are that of the author alone and are in no way linked to his employer or any affiliates.

2021-10-20  Staff Reporter

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