Malaysia and Ghana: Economy and history

Malaysia and Ghana: Economy and history Decolonization Malaysia and Ghana shared similar economic and historic backgrounds fifty years ago. They are both former British colonies and gained independence from the British Empire in the 1957. After gaining independence both countries began with rich resources and sturdy British political and legal institutions, as well as identical educational systems. Why their development levels diverged so much is a big question. Ghana is among the poorest nations while Malaysia is a fast developing country and part of the middle income group of nations. Why has Ghanas development experience been so different from that of Malaysia since their independence? There is usually no individual factor that can single handedly determine a countrys economic outcome. Factors such as investment in human development, mainly education, the locals entrepreneurship, diversification in the economy and the economic impact of regional countries, all contribute to a countrys economic outcome. But looking at Malaysia and Ghan a from a historical perspective, it seems the main factor in the development difference is political stability. As former colonies, Ghana and Malaysia had British political systems but soon after independence both countries political situations and environment changed considerably. At the beginning Malaysia seemed less hopeful due to internal threats such as tension amongst racial groups; however since it gained its independence in 1957, Malaysia has enjoyed great political stability. Unfortunately, the same cannot be said in the case of Ghana, coups and counter coups have been inflicted on the country since independence. The comparison with Ghana could not be harsher. Nine years after independence in 1966, the first of a series of military coups which dipped the country into two decades of instability transpired. Ghana was the first nation in black Africa to come out of colonial rule. It became independent on March 6, 1957, with Kwame Nkrumah as the first prime minister and on July 1, 1960. Ghana became a republic with Nkrumah winning the presidential election that year making him the first president of Ghana. Merediths book â€Å"the fate of Africa† shows how Ghana embarked on independence as one of the richest tropical countries in the world (26). He describes the country as â€Å"Not only was the country the worlds leading producer of cocoa with huge foreign currency reserves built up during the 50s cocoa boom but it possessed gold, timber and bauxite† (26). This shows the wealth and economic stability the country had when the British handed power over to Nkrumah. Meredith describes Nkrumah in his book as being influenced by socialist ideologies while he was a student in England (18). Shortly after taking over Nkrumah started to lean more toward socialism by calling for greater state participation in the economy. He professed himself as the president for life and his party (Peoples convention party) as the sole political party in the country. The governments greater authority over the economy led to corruption. Nkrumah wanted Ghana to play a commanding role in Africas liberation from colonialism and was a strong supporter of a united African state. A mixture of economic mismanagement, corruption and rising inflation due in part to Nkrumah being a devotee of revolutionary movements and spending a lot of Ghanas resources and money on this â€Å"Pan-African cause† (he believed he could lead Africa to the creation of a United States of Africa). This led to a draining of the countrys foreign reserve forcing him to resort to deficit financing and foreign borro wing. The severe financial burdens set off growing opposition to Nkrumah which led to him being overthrown in a coup dà ©tat in 1966. This sprung a number of coups that would burden and oppress Ghana for years to come. Ghana pushed through all types of regimes that were never able to deal successfully with the multitude of problems handed down by Nkrumahs administration. Flt. Lt. Jerry Rawlings led a coup in 1986 which resulted in the fall of the civilian government in power at the time. Rawlingss government was the eighth government in the fifteen years since the fall of Nkrumah. Berry talks about how instability impacted the economy tremendously â€Å"the short terms and the numerous changes of governments in Ghana led to various changes in policies and a total collapse of Ghanas economy (51). Finally after serving for eleven brutal years, Rawlings returned Ghana to democracy by winning an election in 1992. Malaysia on the other hand has had great political stability since independence. After gaining independence from the British many expected Malaysia to do worst that Ghana due in part to Ghanas per capita GPD being slightly higher than Malaysias (World Bank) and also due to the fact that Malaysia had severe racial tensions which were lacking in Ghana at the time. Malaysia is a multiracial country made up of three main races (Chinese, Indian expatriates and native Malays). Right from the beginning it worked hard at resolving its internal tensions by ensuring that there was a racial harmony by creating a dual system of leadership. The countrys political parties are organized along racial lines and thus, Malaysia has three major parties. Under British supervision, the three parties formed an alliance developing a working relationship that has become the symbol of Malaysian politics since. The Malays are usually very educated but poor and were assigned to handle government affairs while t he Chinese and Indians were assigned with dealing with the economy. According to Snodgrass this worked for a while until the Malays complained of not getting their share of the nations riches thus prompting the government to reevaluate this structure and establish a new development policy called National Economic Policy (NEP) (99). The NEP marked a major change in government policy and was a great turning point in the history of the country. Bruton explains how the government began to assume a more active role in the economy, acting as a trustee for Malay economic interests until the individual Malays could take over (298). This initiative allowed the economic gap between ethnic groups to diminish which contributes immensely to the political stability in Malaysia. Economic growth grew during the fourth Prime Minister Dr Mahathir Mohammed reign. He believed that growth should come first before restructuring objectives could be effectively achieved. He realized that failure to reduce economic unevenness in a diverse society like Malaysia can lead to conditions that easily and regularly hinder any economic progress achieved (Mohammed). He also realized the importance of political stability and said â€Å"political stability is really important†¦ without it there can be no economic development† (Mohammed). The BBC described him as â€Å"well qualified to talk on this subject†¦ since he held power for an unbroken 20years†. With his inherited political stability and long reign, he was able to push the country into a higher growth path through taking advantage of regional booming economies such as Japans. He created an export led industrialization route, turning the country into an export based economy and making the private s ector the driving force of economic progress. This made it easier to attract foreign investors doing business in neighboring countries who wanted in on this huge and expanding market potential. Surrounding countries high economy helped a great deal. If countries around you do well there is a high possibility that you will do well too. Creffield describes Malaysias geographical position as blessed â€Å"being vitally located in a vibrant economic region, Malaysia has gained from economic powers such as Japan, Taiwan, South Korea, Singapore, and Hong Kong (Creffield, 194). This is definitely an advantage it had over Ghana. A history of instability (the frequent interference of the military in government affairs in the past and the coup mentality) has done little to help in attracting the foreign investors that the country requires to boost its economy. The former UN Secretary of General, who is also a Ghanaian expressed his concern at a UN conference on trade and development stating â€Å"the image problem is the tendency of investors to lump all African countries together as a conflict zone† (UNCTAD, 1). Most of the time investors look at the political risks of a target country as well as those of the region in which the target country is located. This has unfortunately led to investors putting the whole region into a â€Å"war torn category†. Annan mentioned the image problem because most people think conflicts exist across the whole continent investors or not; in truth conflict exist only in some African countries. This shows that, in addition to Ghanas political instabilities drifting the country into an economic disaster, its geographical position to high risk countries contributed greatly. Ghana is surrounded by the former French colonies of Cote dIvoire (Ivory Coast) to the west, Togo to the east, Burkina Faso to the north and the beautiful Ocean to the south. The absence of cooperation and the often hostile relations between the former British and French colonies during the early years after independence didnt create a fruitful investment and commercial environment for all the West African nations. The recent conflicts in high political risk countries such as Liberia, Ivory Coast and Sierra Leone undermines the regions economic performance, especially Ghanas since its had a democratic political stability for 17 years now. In addition, there is no regional economic power in western African region that could positively and greatly impact surrounding nations. For countries in the African continent to make it, there has to be an efficient way to settle regional conflicts quickly and peacefully without resort to the usual dragged on armed and brutal conflicts which definitely undermines the appeal for investors. As discussed above, Malaysias gain from its neighbors flourishing economies shows it is in the best interests of regional countries to effectively cooperate with one another to stimulate the economic development of the region and create an appealing market. According to Pill et al†¦, Malaysia has today an income 13 times that of Ghana and according to the BBC â€Å"today, Ghanaians get by on an average of about $300 per year, while Malaysians earn over $3,000. Ghana is still exporting raw products like cocoa and gold, Malaysia makes its own cars and boasts skyscrapers that rival anything in New York or London†. It talks about how â€Å"The development of one product palm oil tells part of the story† (BBC). Ghana grows and processes palm oil to make oil and cooking oil. Malaysia imported its first palm oil from Ghana. They managed to improve its cultivation process thus turning the country into the largest palm oil producer in the world and developing chemicals such as bio diesel for industries and food addictives from the raw nuts. But Malaysia has enjoyed this economic growth at the expense of given up some rights like freedom of press. DR Mohammed once said â€Å"democracy is the right to change government throug h the ballot box Freedom to destabilize the country is not something that we consider as a part of democracy. But when ask why he held power for 20years he furiously said â€Å"That, too, is democratic, because that is the will of the people. So it seems Ghana has something that Malaysia lack -real democracy and freedom of the press but many Ghanaians say â€Å"you cant eat or feed your family with democracy† you need a good economy to be able to do all that. Colonized nations fought for independence as they felt colonialists violated their right to be free. They wanted freedom to improve their human and material well being. Its been fifty two years since Ghana and Malaysia gained their independence from the British. In spite of Malaysias internal tensions being on a larger scale than Ghanas especially since theirs was across racial lines and not merely ethnic lines, they managed to overcome it and use it to their advantage after gaining independence. After Ghana gained its independence there wasnt any significant ethnic tension going on but rather numerous coups disrupted the nation and held it back from developing and enjoying economic growth. After almost forty years of being declared an independent nation, came hope in the form of democracy with the 1992 elections. And its been peaceful and democratic since. Ghana has improved its international standing and has blocked the declines of the past. Its economic reforms and stabilized soci o-political framework provide grounds for optimism about the countrys prospects for attaining sustainable development. So, there is hope for Ghana, it just needs the opportunity to trade its goods in rich country markets to enable it trade its way out of poverty. To achieve this tariffs and quotas should be cut or eliminated on Ghanaian goods by foreign importers. Subsequently, this should boost direct foreign investments in Ghana, particularly in the manufacturing sector. If Malaysia could trade its way out of poverty and into sustained economic growth, Even though Ghana might be geographically disadvantaged, it should be able to do the same. Work cited BBC. â€Å"two countries contrasting tales†. Web. 15 Nov. 2009. Creffield. D. Malaysia . 51- 194. London: Euromoney Publications, 1990. Print Bruton H. J. The Political Economy of Poverty, Equity, and Growth: Sri Lanka and Malaysia 232-298. New York: Oxford University Press, 1992. Print. Pill. H et al. â€Å"Financial Liberalization in Africa and Asia.† 7-10 Finance and Development Journal, June 1997. Berry L. A Country Study: Ghana. 51. Washington D.C: US Government Printing Office, 1995. Meredith. M. a History of Fifty years of Independence: The fate of Africa. 1st ed. New York: Public affairs, 2005. Print. Mohammed. M. â€Å"Malaysia†: The Way Forward. A paper presented at the Inaugural Meeting of the Malaysian Business Council, Kuala Lumpur, Malaysia. 1991. Snodgrass. D. R. Inequality and Economic Development in Malaysia. 99. Kuala Lumpur. Oxford University Press, 1980. Print. United Nations Conference on Trade and Development (UNCTAD), Foreign Direct Investment in Africa: Performance and Potential United Nations, Washington and Geneva, 1999. World Bank, World Development Report. New York: Oxford University Press, 1998-2000.