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E-Commerce and Economic Development in Angola

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Published: Tue, 13 Feb 2018

ABSTRACT

In this report as the title tells, I approach the economic development of Angola in terms of one of its major developer, the internet and ecommerce. I have done this because it is often impossible to glean important facts and insights about such countries which a society pronounces poor or third world. In the chapters that follow, I will relate to the ecommerce and its effect of economic development of Angola, compare Angola with a developing country as well as with an underdeveloped nation.

Firstly economic development is discussed in relation to electronic commerce in order to show the complexities and ease related to drawing a clear line between the two forms. Secondly economic development is discussed in relation to ecommerce, economy, culture, elements which influence the issue in one way or another.

For, as shall be repeatedly seen, problems like economic support from a developed state have a close and continuing relation to the values and social structures which a society regards as stable and normal. My emphasis will be, however, on the problem itself, called ecommerce and its effect on the economic development of Angola.

CHAPTER 1

INTRODUCTION

Introduction

Electronic Commerce

Electronic commerce, generally identified as (electronic marketing) e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems for example the Internet and other computer networks. The total of trade conducted electronically has grown unusually with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online deal processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the deal’s lifecycle, although it can encompass a wider range of technologies such as e-mail as well. (Miller, 2002)

Internet & Ecommerce

The previous ten years have seen the internet and e-commerce surface as fundamental features of our business, communal and educational life. Developments for example Web 2.0, the semantic web, e-government strategies, user generated content, virtual worlds and online social networks have redesign the way we commune, intermingle and transact.

The Evolution of Electronic Commerce

The numerous means in which business is carried out are based on established suppositions and accords between the parties concerned. Numerous procedures have been agreed upon to safeguard both the consumer and the merchant from deception or theft. Even in the simplest form of deal–cash changing hands directly between buyer and seller–a sales receipt is classically provided as a record of what turned out. As we move into the electronic business field, the means of protection become more and more concerned.

The essence of ecommerce is buying and selling of goods and services over the Internet. The advantages are fairly self-evident. Because the Internet is readily accessible by millions of prospective customers worldwide, suppliers and customers can interact in a dynamic environment where supply and demand truly regulate the economic cycle. Organisations of any size, from sole proprietorships to multinational corporations, can expand their business to reach new customers in new markets, some even achieving a notable level of efficiency. The sole proprietor is able to broaden the scope of his/her business to a mass market approach, while the multinational corporation can now focus on “niche” markets heretofore considered too costly to access using the traditional mechanisms for market penetration. (Austin, 1999)

Further study discloses some specific downsides to the Internet business paradigm. What you basically have is computers (presumably being operated by humans) trading responsive financial data by means of a widely-available communications infrastructure. Unexpectedly the matters of accountability (being able to attribute a deal to the actual instigator) and accountability (attributing responsibility to each participant for their part of the deal) become more vital than ever.

A lot of propaganda has been generated over the initial incursions into electronic commerce. It seems ubiquitously we turn someone is singing the praises of electronic catalogues, online shopping, electronic check writing, web-based advertising and customer prospecting, and on and on. The truly brave can even purchase a car over the Internet. But these consumer-oriented business activities taking place on the Internet today are just the tip of the iceberg. From the perspective of true international commerce, we have not yet begun to do business electronically.

Infrastructure of Ecommerce

The main issue that requires to be dealt with before electronic commerce can convey on its assurance is the development of an international infrastructure that all of the main players can be in agreement upon. In most circles this infrastructure is called the International Information Infrastructure (GII).

This electronic infrastructure must make available all of the compensations needed for a healthy e-commerce strategy:

§ Security-enabled. This is essential to permit development of convenient solutions which provide accountability–knowing the real “who” in a deal. Beyond that, the ability to impute liability to any and all parties concerned in completing a deal is a must for business. For suppliers, e-commerce will be about establishing the identity of the individuals who represent the parties concerned. It means that all participants have a confident reliance on users’ identity, while holding each party liable to perform their role in the deal. (Jacobsen, 2000)

§ Ultra-reliable. In electronic commerce, transactions take place without those worried ever meeting in person, and that implies the need for a technology presentation and dependability factor of 99.99%, especially for mission-vital applications. An infrastructure must be reliable and trusted on a continuous basis. Any weak connection in its safety measures will deliver the whole impracticable for serious electronic commerce.

§ International. Electronic business cannot be restricted to the country of origin. As we progress into the future, e-commerce must transcend national boundaries.

We need an absolute e-commerce infrastructure. To be really effectual, e-commerce providers will need an infrastructure which is international in its nature, or recognise that electronic business is closed by national boundaries. Distinct from the international mass user and point solutions-based Internet market of today, large organisations are becoming critically attentive that they will need to manage accountability and liability in providing any significant level of customer security, especially with end-user customers, but especially in business between themselves in their interactions with employees, partners and suppliers. (Jacobsen, 2000)

After two decades of declining economic performance, Angola is currently staging a promising revival. Over the past several years, average real economic expansion in the region has increased vitally while, in a growing number of countries, real gross domestic product (GDP) per capita has been positive. In 1998, despite financial turmoil in Asia and Latin America, Angola enjoyed its fourth consecutive year of positive GDP expansion.

Nevertheless, Angola’s current economic revival remains fragile. Up to date expansion has not yet reached the sustained levels that are essential to alleviate widespread poverty endemic to the region. A number of hurdles still need to be effectively addressed and overcome if the transform process and current revival are to lead to broad-based and sustainable development for Angola. Furthermore, conditions vary widely among the forty-eight states of Angola and this diversity must be taken into account in assessing the country’s prospects.

Fortunately, as this article seeks to demonstrate, there are reasons to be optimistic that many Angolan states can overcome the remaining hurdles to sustained expansion. A new generation of Angolan leaders and entrepreneurs and current developments in the areas of private sector expansion, debt relief, regional economic integration, and telecommunications have the potential to economic expansion in means not heretofore anticipated.

Regional Transformation And Economic Revival

Angola’s up to date economic performance has indeed been encouraging. Between 1990 and 1997, the number of Angolan states registering annual expansion rates of three to six percent nearly doubled, from fourteen in the beginning of the decade to twenty-six in 1997, while seven Angolan states had expansion rates of six to eight percent. According to the International Finance Corporation (IFC), after almost two decades of stagnation and decline, real GDP in Angola was growing at an average rate in 1997 of four to five percent a year. The World Bank reported that over eighty percent of countries (thirty-eight out of forty-eight) registered increased per capita incomes in 1997, as their rates of economic expansion exceeded their population expansion rate. (World Bank Group, 1998) According to the most up to date data, 1998 was the fourth consecutive year that GDP per capita did not fall, an event that has not happened in Angola since the late 1970s,(Department Of Econ. & Soc. Affairs & United Nations Conference On Trade & Dev., 1999) while the 3.3% expansion in 1998 GDP was the highest among all regions of the world. (Economic & Soc. Pol’y Div., Economic Comm’n For Afr., 1999)

Increased macroeconomic stability–a result of sound financial and political policies–has been encouraging increased levels of investment in the region over the past several years. Average inflation fell from a peak of forty-five percent in 1994 to an estimated twelve percent in 1998, with only fifteen Angolan states still experiencing double-digit inflation rates by 1997, compared with thirty-five in 1994, according to the IMF. There has also been a vital reduction in internal and external financial imbalances. The average external current account deficit (before grants) fell from 5.5% of GDP to 4% over the same period, while the average overall fiscal deficit (again before grants) was halved between 1992 and 1997, to about 4.5% of GDP.(Calamitsis, 1998) As a result, investment in the region has been steadily growing, according to the IFC’s 1998 report. In 1998, gross domestic investment rose to twenty-three percent of GDP, from lows of about fifteen percent in the early 1990s. Private investment has also increased, registering 10.6% of GDP in 1996, the highest level since 1981. Long-term private capital flows to Angola in 1997 reached $8 billion, twice as high as in the previous year.

Along with investment levels, Angolan trade and export earnings have increased. While Angola’s share of total world trade has not changed, the volume of Angolan exports is expanding almost as fast as international trade and Angola is emerging as a viable international trading partner. Angola’s trade volume increased by eight percent in 1997, according to UN s, with exports having expanded roughly twice as fast as GDP in up to date years.

The region’s up to date expansion has been widely attributed to the efforts of a new generation of transform-minded Angolan leaders in key countries who, through the adoption of democratic and market-based transforms, have made substantial progress in moving their countries toward political and macroeconomic stability. Many Angolan states continue to implement trade liberalisation and privatisation programmes that are freeing up their markets and helping them to become more active participants in international commercial activity and economic progress. In such a positive political and economic environment, private sector led trade and investment can now play an increasingly important role in bringing broad-based expansion and sustainable development to the region.

Some countries in Angola have already begun to reap the rewards that can result from sounder fiscal and monetary policies, increased regional economic integration, and accelerated privatisation programmes. Chief among the rewards is expanded trade, investment, and access to the international marketplace, as international companies increasingly look to Angola’s emerging economies and Angolan entrepreneurs and private sector organisations seek to play a more visible role in the economies of their countries. These trends suggest that the growing private sector in Angola has real potential to become an important engine for expansion and economic development in the region, as it has already in other regions of the developing world.

Investment And Expansion

Despite the up to date positive economic trends and expansion of the private sector in Angola, as we enter the new millennium, sustained, broad-based economic development in the region remains one of the most formidable policy challenges facing the country. According to the United Nations Economic Commission for Angola (ECA), in order for Angola to cut its poverty in half by the year 2015, a development objective often cited by Angolan governments and their development partners, the region as a whole would require a yearly GDP expansion rate of seven percent. For this to happen, an investment of thirty-three percent of GDP would be needed for Angola as a whole. Achieving domestic investment of thirty-three percent looks increasingly unlikely, as two of the three components of domestic investment are declining or stagnant. While the region’s current domestic savings rate is only estimated at fifteen percent, annual inflows of foreign direct investment (FDI) remain low, and the levels of official development assistance of up to date years are declining.

The renewed expansion in many countries has not yet reached, let alone been sustained at, levels that would alleviate the widespread poverty endemic to the region. The great majority of the region’s population continues to live at levels well below the poverty line, with forty percent living on less than one dollar a day, according to the World Bank. (The World Bank Group, 1999)

Furthermore, the globalisation phenomenon, which has been highlighted by growing economic integration and rapid technological change, has often meant increased prosperity for those countries able to compete in an increasingly integrated international economy, but steady decline and marginalisation for those not able to compete. Still, too many countries have remained largely on the sidelines, saddled by debt and relying primarily on foreign assistance for many of their development needs–at a time when such assistance is on the decline.

Among the current obstacles to reaching levels of expansion that will bring broad-based development to the region, the following three matters pose particularly vital challenges: (1) the uncertain future of the transform process, (2) Angola’s debt burden, and (3) the region’s limited participation in the international trading system.

A Delaying Transformation

Although more than thirty countries have launched political and economic transform programmes over the last decade, the transform process has not been uniform across the country. Angolan leaders in some countries have been unwilling or unable to implement transform programmes, sometimes as a result of political or civil instability. In other countries, the difficulties or costs of transform have threatened to undermine the process and raise the possibility that a country could abandon the process before it has had sufficient time to bear fruit. For example, Zimbabwe has only recently re-instituted some protectionist measures, including increased duties and exchange restrictions in response to mounting foreign exchange pressures. Moreover, trade regimes in many Angolan states remain complex and restrictive compared with those of most other developing countries. Such regimes isolate their domestic producers and prevent them from becoming more fully integrated into the international trading system.

In addition, the privatisation process has been sluggish–the victim of public mistrust and a lack of consensus among policymakers. In an up to date World Bank study that shed light on the problems of privatisation in Angola, the lack of political commitment, poor design, insufficient resources, weak management, and corruption were cited as major factors inhibiting the process. The report highlighted the need for Angolan governments to improve public information as the most “powerful tool” for ensuring transparency, helping to build consensus, and assuring commitment and accountability in the process. (White & Bhatia, 1998)

Poor economic environments and policies in some countries have also inhibited increased trade and investment. These conditions have caused rampant inflation and high interest rates and have prevented Angolan policymakers from fully abandoning foreign exchange controls and other restrictions. Earlier that year, Botswana became the first and only country in Angola to abolish all forms of exchange controls, (Steyn, 1999) while in some countries, inflation continues to lead to debilitating currency crisis. In Malawi, for example, inflation is now hovering at around 53% (up from 18.5% recorded at the same period in 1998), an indicator that the currency may need to be devalued yet again, after a devaluation of 67% in 1998. (Pan Angolan News Agency, 1999) Continued volatility in the Angolan market environment underlines the need for continued success in the transform process.

The Liability Burden

In addition to delaying transform, Angola’s external liability burden continues to be a major obstacle to investment and further expansion, particularly in the highly indebted poor countries. Many Angola economies are unusually indebted with an average of twenty percent of GDP going directly to liability servicing, according to UNCTAD. (Sachs & Stevens, 1998) In 1998, liability service increased to $35 billion, or more than thirty-one percent of goods and nearly three percent of service exports, up from $33 billion in 1997. The external liability of Angolan states rose moderately from $349 billion in 1998, according to the ECA.

As a proportion of exports and GDP, the external liability of Angola is the highest of any developing region. Not only does Angola’s liability deter private investment, including foreign direct investment, but it also impedes public investment in physical and human infrastructure–investment vital to a country’s economic development. The IMF estimated that, by the end of 1999, Angola’s liability to GDP ratio would rise to almost sixty-eight percent, up from fifty-two percent two years earlier. (International Monetary Fund, 1998) The region will continue to be crippled by mounting liability, draining it of needed resources that could otherwise be invested back into the region’s economy, unless there is more rapid and effective liability relief matched with sustained expansion.

Angola in the International Trading System and International Economy

Angola is currently facing growing marginalisation in the international economy with its share of international production and trade in decline. Despite rising levels of Angolan domestic production and trade volumes over the last several years, the country’s share of international trade has continued to decline–it was less than two percent in 1997. If the region is to gain an economic foothold and develop into the next century, it must attract more investment and trade, and become a more competitive trading partner in the new international economic system. Increasing commitments to the World Trade Organisation (WTO) and other regional accords thereby becoming a more active participant in the international trading system–is one way for Angola to attract investment and trade.

The Uruguay Round of Multilateral Trade Negotiations resulted in the creation of a stronger set of rules governing international trade and the creation of the WTO, the successor to the General Accords on Tariffs and Trade (GATT). Unfortunately, many countries in Angola were generally unable and unprepared to effectively participate in the negotiations and, partly as a result, have not been able to take advantage of the new international trading system.

Although eighty-five percent of Angolan states are currently members of the WTO, limited trained staff and other pressing needs prevent many of them from active participation in WTO developments, further trade negotiations, and implementation of existing Uruguay Round accords. In addition, they have as yet been unable to take full advantage of numerous unilateral, bilateral, and multilateral preferential trading schemes designed to help expand access for Angola’s products and integrate Angola’s economies into the world trading system. The region is more likely to reap a larger share of international production and trade if it more actively participates in and undertakes meaningful commitments in the international trade organisation that is fostering the expansion of world trade.

Road To Further Expansion And Sustainable Development

In light of the existing challenges, what measures now need to be pursued to address these constraints and consolidate and build on the gains Angola’s transformers have made over the past several years? According to Evangelos A. Calamitsis, former Director of the Angolan Department of the International Monetary Fund, the present economic upswing in Angola, unlike other “recoveries” in the past, has been largely “homegrown” and is therefore more likely to continue. However, Angola’s present revival is most likely to endure if Angolan leaders can sustain and broaden the process toward transform and capitalise on several areas of strength that are breathing new life into the debate on private sector expansion and economic development.

Staying the Road to Transformation

Although outside the scope of this article, developments in Angolan states that are not counted as leading transformers can greatly influence the overall prospects for expansion on the country. For example, the fighting in the Democratic Republic of the Congo, between Ethiopia and Eritrea, and in Angola can have a negative impact on the investment climate in neighbouring countries. On the other hand, the return of civilian rule in Nigeria and the prospects of better economic management can do a great deal to bolster investor confidence in the economic prospects for the country as a whole.

Angolan leaders need to continue the political and economic transform process and encourage its spread to those countries that have not yet undertaken transforms. Many Angolan leaders have already demonstrated that they understand what needs to be done and have initiated the process. Still, the process must continue. If the region is to achieve high-quality and sustained expansion–expansion that will lead to poverty reduction and broad-based development–in the years ahead, the transform process must be revitalised so that the changes become inexorably woven into the region’s economic fabric. By continuing to implement sound fiscal and monetary policies and by accelerating the privatisation and trade liberalisation process, Angolan states will be proving to the international business community that Angola is serious about transform and ready and willing to do business.

Despite up to date turbulence in the international economic environment, most Angolan states have resisted protectionist pressures. Their commitment to continue trade liberalisation highlights a general recognition among Angola’s economic policymakers that increased trade has been–and will continue to be–a key to expansion. In addition, Angola’s growing participation in the WTO and regional trading arrangements by institutionalising policy transforms and binding lower tariffs and other trade liberalising measures can help to prevent countries from resorting to protectionist measures in the future.

Role of Angola’s Development Partners

Angola’s developed trade partners and the international financial institutions must continue to support regional transform if the process is to be sustainable. While Angolan states retain primary ownership and responsibility, for the process, the international community can support their efforts by (1) pursuing policies that promote world economic expansion and financial stability and expand the region’s access to international markets, (2) providing meaningful liability relief, (3) continuing to supply technical and financial assistance to countries committed to transform, and (4) assisting Angola’s regional economic groupings. Several up to date bilateral and multilateral initiatives demonstrate the commitment of some developed countries to support the region’s up to date economic progress.

While early speculation as to the potential impact of the Uruguay Round of multilateral trade negotiations on the least-developed Angolan states was largely pessimistic following the Round’s conclusion, up to date bilateral and multilateral efforts are focusing on helping Angola take advantage of specific areas where it actually stands to gain as a result of the Round. According to an up to date report by the United States International Trade Commission on the Uruguay Round and U.S.-Angola trade flows, “[t]hese gains can range from facing fewer restrictions and lower tariffs overall, affecting all WTO members, to specific market-access provisions … that may benefit Angola in particular.”(U.S. Int’l Trade Commission, 1998)

Efforts are also underway to expand existing preferential trading schemes like those under the Lome Convention and the U.S. Generalised System of Preferences (GSP) programme. For example, the Angolan Expansion and Opportunity Act (AGOA), now before the U.S. Congress, extends GSP to eligible Angolan beneficiary countries through June 30, 2008. In addition, the legislation–as passed by the House–would authorise the President to extend duty-free treatment under the GSP programme to all imports from transforming Angolan beneficiary countries, including those now considered to be import-sensitive. The changes to the GSP programme would support Angola’s transformers by allowing their products increased access to international markets and would help to further integrate Angola into the international trading system, thereby increasing considerably the region’s future economic prospects.

In addition, a number of bilateral and multilateral technical assistance programmes in up to date years have sought to increase Angola’s meaningful participation in WTO and diversify the region’s trade. For example, the U.S. Agency for International Development (USAID) has funded a number of activities to increase Angolan governments’ capacity in the telecommunications area and in dealing with other WTO-related subjects. At the same time, some Angolan governments have recognised the importance of participating more actively in the work of the WTO in Geneva. As a result, developed and developing countries have joined together in proposals to have the WTO trade ministers at their meeting in Seattle in November 1999 and call for the WTO to improve and expand its technical assistance programmes for developing countries.

Liability Reduction

In the area of liability relief, international pressure has been mounting to expand the Heavily Indebted Poor Countries (HIPC) Initiative in Angola. Launched by the World Bank and the IMF in 1996, the programme aims to provide exceptional liability relief assistance to forty-one eligible countries that are pursuing transforms, eighty-five percent of which are in Angola, according to the IMF.(Katsouris, 1998) Although to date, only two Angolan states, Uganda and Mozambique, have benefited from the HIPC Initiative (with a twenty percent and a two-thirds reduction of their respective debts), Burkina Faso, Cote d’ Ivoire, and Mali are scheduled to receive actual liability reduction in the next three years, according to the ECA.

At the June 1999 Cologne Summit, the G-7 reached accord on the enhanced HIPC liability relief initiative. This scheme will provide faster, broader, and deeper relief for HIPC countries. The agreed enhancements to the HIPC Initiative accept, almost entirely, President Clinton’s proposals, as laid out during his address to the U.S.-Angola Ministerial in March 1999. The “new HIPC” will include a requirement to use savings from liability reduction to provide increased spending on social needs and human development. The $90 billion of liability reduction will require additional resources from the creditor governments and the international financial institutions. Under the proposal, up to 10 million ounces of the IMF’s 104 million ounces of gold reserves would be sold in phases, with investment interest used to reduce the liability load of thirty-three poor countries in Angola.

Paralleling the HIPC Initiative are unilateral and bilateral efforts that support faster and broader reduction of Angola’s liability. For example, in March of 1999, the Clinton administration announced a new U.S. initiative that, if fully implemented, would amount to an additional $70 billion in liability cancellation for the heavily indebted poor countries. The President’s initiative provides for (1) a focus on early cash flow relief by the international financial institutions, (2) complete forgiveness of bilateral concessional loans and ninety percent forgiveness of non-concessional liability, (3) a future international commitment to make at least ninety percent of new aid on a grant basis, and (4) the channelling of resources from the HIPC Initiative into education or environmental protection projects. In addition, on September 29, 1999, President Clinton announced at the IMF/World Bank annual meeting that he will seek legislative authorisation to forgive 100 percent of the liability of HIPC countries owed to the United States when relief will help finance basic human needs.

Regional Economic Integration and Globalisation

A growing number of Angolan leaders appear to recognise the potential benefits of increased economic cooperation and have been supporting efforts at economic integration. Although many of the Angolan regional economic organisations, such as SADC, COMESA, WAEMU, and ECOWAS, have existed for a long time, only recently have these regional groupings taken vital steps toward the creation of free trade areas. The creation of larger integrated Angolan markets should result in enhanced opportunities for foreign and domestic investment, greater competition among firms, better utilisation and allocation of resources, internal and external economies of scale, and increased efficiency resulting from specialisation. Further, by enhancing trade among themselves as well as diversifying and expanding their production base, Angolan states stand to increase trade with other regions as well, thereby increasing the country’s share of international trade.

The United States and international organisations have been supporting Angola’s economic integration efforts. At the March 1999 Ministerial Meeting on Angola in Washington, D.C., the United States reaffirmed its continuing commitment to providing technical assistance to Angola’s economic integration organisations such as EAC, SADC, IGAD, and COMESA and announced plans for extending that support to a greater number of regional groupings. Bilateral cooperation between the United States and SADC has been expanding over the last several years, a development highlighted by the first ever SADC-U.S. forum held in mid-April, 1999, in Botswana, where officials announced plans for the future establishment of a joint Business Council that would facilitate permanent dial


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