Development Sierra Leone

Week 1

Sierra Leone is considered one of the least developed countries. Despite suffering two major shocks, the Ebola Epidemic and collapse of iron ore prices in 2014-2015, Sierra Leone was able to bounce back. Since the last quarter of 2015, Sierra Leone has been able to maintain a positive economic growth, supported by new investments in mining, agriculture and fisheries.

Before the outbreak of Ebola in 2014, Sierra Leone was aiming to transform into a middle-income country, but the country is still suffering from post-conflict attributes of high youth unemployment, corruption, and a weak nation cohesion. Poor infrastructure and widespread rural and urban impoverishment still persist in spite of the constant economic growth. After the civil war in 2002, Sierra Leone has been growing at a constant rate of about 7% GDP.

http://www.worldbank.org/en/country/sierraleone/overview

Week 2

Week 3

Education

Education in Sierra Leone is legally required for all children for six years at primary level and three years in junior secondary education, but a shortage of schools and teachers has made implementation impossible. The Sierra Leone Civil War resulted in the destruction of 1,270 primary schools and in 2001 67 percent of all school-age children were out of school. The situation has improved considerably since then with primary school enrollment doubling between 2001 and 2005 and the reconstruction of many schools since the end of the war.

Although the increase in access to education has made major improvements, the cost of providing primary education by the government is really costly. The government not only has to pay a set amount every year, but also building new schools.

Access to technology

Telecommunications in Sierra Leone include radio, television, fixed and mobile telephones, and the Internet. Radio is the most-popular and most-trusted media source in Sierra Leone, with 72% of people in the country listening to the radio daily. Internet usage is low, reaching just 1.3% of the population in 2012, but improving with growth in 3G mobile cellular data services.

Women's empowerment

Achieving gender equity remains a challenge in Sierra Leone. Women enjoy limited access to decision-making power, and access to and control over resources. The government aims to promote gender equality across sectors by focusing on improving women’s health, increasing their participation in governance at all levels through increasing the political, social and economic rights of women in Sierra Leone. Improving the role of women in society links to child survival rates and fertility rates. Empowering women's rights will benefit the country's economic development.

Week 4

over specialization

Sierra Leone is rich in diamonds. At the height of the diamond era, from 1930-1970, diamond exports were the backbone of Sierra Leone's economy, accounting for more than two-thirds of the country's export earnings and one quarter of its GDP. When diamonds were first found, it was thought that they would bring great wealth to Sierra Leone. Instead, it is the reliance on diamonds that has kept the country amongst the poorest in the world. Reliance on diamonds can be risky. If so much relies on diamonds, then any change in the demand will affect the economy. This could be for the better—a rising commodity prices will increase revenues to be used for financing education, health, and infrastructure.

On the other hand, if demand and therefore prices fall, terms of trades will be deteriorated. Current account deficits will increase and it will be difficult for countries to finance current expenditure and necessary imports. In 2009 the industry sector of Sierra Leone decreased 13 per cent from 2008. This was due to the decline of output in the mining sector, which the industry sector is heavily dependent on. Mining was experiencing negative growth because of the decrease in demand for diamonds due to the global recession. The industry sector is heavily dependent upon the mining sector, thus when externalities affect the growth of the mining sector, Sierra Leone experiences negative GDP growth in the industry sector (Dutch Disease).

price volatility

The price elasticity of demand for commodities (diamonds) and the price elasticity of supply for commodities tend to be relatively inelastic on the world market. A change in the demand will lead to large price fluctuations. Because the demand in Western countries determines the price, it makes it difficult for producers and governments of developing countries to plan ahead. This lack of control impacts foreign investment because nobody wants to invest in an industry with no guarantee of a successful future. This hurts the governments planning for education, health care, and infrastructure.

In addition, with price fluctuations, it is difficult to envisage the profit margin from which peasants can accumulate and renovate their productive units.

Supply is not a problem in price volatility. In the case of diamonds, De Beers controls the supply by storing diamonds and releasing them to buyers at their own discretion. By keeping the prices high in terms of supply, De Beers is actually helping Sierra Leone by creating a demand for their diamonds because they are “rare.” This is an exception for the trade barriers effecting economic growth in Sierra Leone.

Week 5

import substitution

The government of Sierra Leone adopted the Import Substitution Industrialization (ISI) strategy. The adoption of the ISI policy led to the establishment of many domestic industries in the country. These Public Enterprises (PEs) were set up by the government to carry out specified commercial activities. They were expected to produce industrial goods that were imported to dampen the effect of terms of trade by reducing imports and by diversifying exports. This would improve living standards of the people by increasing the range of choices of food and other manufactured products in the domestic market.

At the peak of things, there were 44 PEs established, involved in manufacturing, trading, mining, transportation, services, and the provision of utilities. The government established these industries behind high protective walls aimed at shielding them from competition from industries of the West. Protectionist measures were needed because newly established industries initially have high cost incurred from the setting up of fixed capital and utilities; and as such they require time for them to become competitive (Privatization).

The ISI strategy is a way for the government to promote economic growth. It protects the local culture by isolating the country from foreign influence and multinational corporations that could “take-over” the country. Plus, jobs are created and protected in the domestic market because domestic firms dominate. At the same time, thought, these companies are relatively inefficient and the country does not benefit from comparative advantage. Also, the lack of competition increases the inefficiency, because companies do not have to worry about losing consumers. This contributes to pollution. Finally, ISI may lead to high rates of inflation because of the domestic aggregate supply constraints.

Diversification

As a means to gain economic growth, Sierra Leone is pursuing export diversification. By doing this, the government is protecting the country from total dependence on diamonds (primary product exports). This will stabilize the economy and increase or stabilize employment. Agricultural products have progressively gained an increasing share of total exports (from €13 million in 2005 to €27 million in 2009), reflecting the progressive diversification of the Sierra Leonean economy and the recovery of its agriculture. This increase shows how the economy is able to right itself after the war and begin to grow and develop.

As Sierra Leone becomes more economically diversified, the use of technology will increase and so will the demand for highly-skilled workers. Eventually, training (which will improve the living standard of employees) will be needed and given to employees in order to catch-up to the need for the workers.

Week 6

Foreign Aid in Sierra Leone

Sierra Leone is a country characterized by high levels of aid dependence and unimpressive economic performance, as well as by long term political instability and armed conflict. Development aid has historically been a high proportion of Sierra Leone’s gross domestic product and surged after the civil conflict that took place between 1991 and 2002. Annual aid disbursed to Sierra Leone between 1970 and 2007 stands at an average of 14.2% of GDP, a figure much higher than the regional average of 3.7% for Africa as a whole. Despite this level of support Sierra Leone's economic performance has remained wanting in terms of both growth and poverty reduction.

Sierra Leone has had substantial inflows of foreign aid from a diverse range of donors sympathetic to the destruction of human resources, and social and physical infrastructure in the country. Therefore, more or less, the aid has had a positive effect on Sierra Leone's economic growth. However, the aid was less effective in promoting growth in the post-war period than in the pre-war period. There are 2 main reasons for this. Firstly, the economic growth experienced during the post-war growth may have been substantially influenced by factors other than foreign aid. Growth during the pre-war period was mostly associated with the agricultural sector which can be largely aid funded. In the post-war period growth seems to have inspired by increases in the services sector which receive little aid funding. Secondly, the adverse effects associated with damaged institutions during the civil conflict may have carried over into the post-war period. There is evidence of democratic reforms in the post-war period however these effects may take some time to develop.

Week 7

Interventionist approach would require great amount of money/resources for it to show effectiveness in the economy. However with the high existence of debt, LDCs would find it difficult to source the money/resources that they can use/budget for economic development. Market approach would allow anyone within the market to play role, have power. In order to build basics and have budget for development, market approach may be a better option. Additionally, some LDCs are caused due to poor governmental control/political issues. The interventionist approach would require

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