Maravi

Expert advises govt to help ailing firms

Expert advises govt to help ailing firms
Written by Chiwoyu Sinyangwe and Fridah Zinyama
Wednesday, January 21, 2009 11:22:15 AM

DEVELOPING countries like Zambia should do everything possible to ensure businesses do not close amidst the current global economic recession, Southern African distinguished business Professor Hoosen Rasool has observed.

And Zambia Associations of Chambers of Commerce and Industry (ZACCI) had advised the government not to nationalise the mines at this stage as it would put undue pressure on other taxpayers in the country.

Meanwhile, Prof Rasool has observed that the world is tilting more towards socialism than communism as governments strengthen their participation and regulatory authority on private businesses.

Prof Rasool said this in Lusaka on Monday when he addressed a “Distinguished Speakers Forum” organised by Management College of Southern Africa (MANCOSA) under the theme ‘The Financial Crisis: Causes, Consequences and Lessons for the Future”.

Prof Rasool said there was need for the governments in developing countries like Zambia and South Africa to find a way of stimulating ailing companies so as to avoid the negative social economic complications of closing down industries which might lead to scaling down jobs.

“Stem the tides of foreclosures means to do everything possible to support the business and do everything possible to ensure there were no closures,” said Prof Rasool who is also managing director of MANCOSA.

Meanwhile, Prof Rasool has called on developing countries to be less dependent on the International Monetary Fund (IMF) and World Bank-tailored structural adjustments packages and fiscal stimulus initiatives to overcome the effects of the current economic crisis.

And Prof Rasool has cautioned developing countries not to ‘rush’ to both the IMF and World Bank as they sought ways to source finances for stimulating domestic economies.

He observed that earlier economic initiatives driven by the Bretton Wood institutions had mostly failed and left the affected countries in worse economic positions than before.

“Avoid IMF/World Bank economic overture. A good number of developing countries that had followed the IMF/World Bank medication have ended up in...the medication is worse than the disease and end up killing the patient instead of healing the patient,” Prof Rasool observed.

Meanwhile, Prof Rasool said the current economic crisis had seen an increase in public private partnership which had been negated in recent years as the recent capitalist-led market reforms favoured extreme free market fundamentalism.

Prof Rasool, however, said the economy was moving more towards socialism than communist-led economic model.

“I think communism has failed and even countries like China and India that pursued that economic or political ideology have decided to open their market to free market…even Cuba which is still a communist state is in bad state,” observed Prof Rasool.

“What I see, rather, is a shift towards socialist economic practicalities which I think are good because they increase government regulatory authority and active participation in the market. So it helps the government and private sector to become partners.”

And ZACCI chief executive office Justine Chisulo said nationalising the mines in times of difficulties might save jobs but was costly to taxpayers because the funds to maintain operations had to be found.

He said this implied that taxes may have to increase in order to prop up such entities.

“It would be preferred that the banking sector is encouraged to make some funds available to the mines in order for them to continue their businesses with underwriting being done by government,” he said.

Chisulo said the government could not afford to profitably run the mines at the moment.

“Furthermore, it will send a wrong signal to rogue entrepreneurs that they can make money during good times but encourage them to take off expecting government to takeover their businesses when times are bad,” he said.

Chisulo further added that the government’s decision to consider cutting taxes for the mining companies would help them to operate effectively.

“When times are hard, people spend less money, therefore government’s decision to consider cutting taxes will encourage spending,” said Chisulo. “It is important to have money being spent in the economy as it ensures job creation and investments to be made in the economy.”

Labels: HOOSEN RASOOL, NATIONALISATION, ZACCI

posted by MrK @ 11:24 AM