Here you can find articles about BECANS and the Business Environment that have featured in the National Press.
HOW STATES CAN ATTRACT FOREIGN INVESTORS BY VP, SOLUDO
Emeka Anuforo, Abuja
VICE President Goodluck Jonathan yesterday offered a two-pronged blueprint for the development of states in the country. According to the Vice President, deepening of the business environment and ensuring competitiveness are the routes to attracting local and foreign investors.
The Vice President's view was also shared by the Governor of the Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, when both men spoke in Abuja yesterday at the opening of the second forum on Business Environment and Competitiveness Across Nigerian states (BECAN) organised by the African Institute for Applied Economics (AIAE).
Jonathan also officially unveiled the BECANS Business Environment Report 2007. The report contains findings of analyses of the conditions for private enterprise and doing business across Nigerian states. It aims at providing scientific evidence base for constructive dialogue with state governments, private sector and civil society. The Vice President, whose speech was read by Chief Mike Oghiadomhe, stressed that the need to deepen the quality of business environment and its competitiveness remained imperative "if we are to redress the numerous challenges facing the private sector, particularly in the areas of physical infrastructure, financing and international competitiveness of Nigerian products."
On the BECAN report, he was optimistic that the proposals arising from it would help in fast-tracking the attainment of government's vision of making the country join the league of the 20 largest economies of the world by the year 2020. He continued: "It is gratifying to note at this juncture that this administration is also taking steps to redress the observed weaknesses in the business environment. Accordingly, the issues of infrastructure and utilities, regulatory efficiency, investment promotion and security, rule of law and regional development, particularly the issue of Niger Delta development have been identified as critical elements of the seven-point economic agenda of Mr. President."
The VP further laid emphasis on the relevance of the private sector in promoting favourable investment climate in the country. He said: "It is imperative for the governments at the state and local government levels to work along this direction, if we must achieve the desired levels of job creation and wealth generation. The private sector must also be vibrant and well-positioned to drive the economy, while government concerns itself with creating the enabling environment through the provision of physical infrastructure and efficient regulatory framework."
Goodluck further challenged the private sector to utilise the report as important evidence base for advocacy, stressing that the continued participation of the private sector in promoting the research and advocacy programme would be crucial to its effectiveness and sustenance. He added: "It is therefore urged that private sector organisations should intensify their public-private collaborative efforts at the state and local council levels to ensure that the recommendations of the reports are implemented."
In a short remark on the occasion, Soludo stressed the need for each state to appraise its performance as indicated in the report. He challenged states, which did not measure up to the desired standard in performance to work towards improving by next year. He said: "If the environment is not good, the investors will not come. But if all states realise that a good business environment is important to attracting investors, then Nigeria will be better for it."
BECANS: ADR ADVOCACY FOR COMPETITIVE BUSINESS ENVIRONMENT (II)
Research has shown that parties to a dispute are more willing to comply with the terms of settlement in which they participated. In our recent political history, we witnessed a situation where cases were adjudicated through judicial process and yet the disputes remained unabated and ADR process christened ”political solution” was eventually resorted to. A case in point is the Resource Control question which went to the Supreme Court for adjudication and after which political solution was applied, wherein the parties met and discussed and temper and frenzy agitation doused. Another example is the Bakassi Penisulla ( Nigeria – Cameroun boundary) dispute, which the International Court of Justice, the Hague, adjudicated without producing a viable solution. The actual resolution came through ADR – Political solution.
ADR, which was the earliest or our traditional dispute settlement machinery, it should be reiterated, is not a substitute to litigation. Both have their profound places in justice delivery. Just as there are disputes that do not fit into litigation scheme, on the ground that they are not about legal right or wrong, so is ADR inappropriate process in certain cases. Some instances where litigation should be preferred option are:
The causes of most disputes cannot be appreciated using legal eyes, particularly when they are about values and not about facts. That is why, after many years of litigation, a case may remain unsettled. In the courtroom, litigants hardly admit errors or mistakes. They hardly own up to their acts or omissions. Yet these are intangibles of peaceful settlement of a dispute considering that Personality goes with interest, values and ego. This is true, not only of human individuals but also with respect to juristic persons. Therefore, any meaningful resolution of a dispute must address interest – ego equation. And this may fall into the realms of sentiments, which is outside the scope of legal determination and will be better handled using any of the three main ADR Processes, namely Negotiation, Mediation or Conciliation and Arbitration.
In Negotiation, parties engage in direct communication with a view to smoothening the rough edges and resolving their differences. Although the communication tends to make clearer the main spheres of the conflicts, most times, it may be difficult for the parties involved in the dispute to negotiate constructively. Their emotional attachment to their positions in the matter would prevent them from searching for a common ground for the settlement of their dispute.
In such difficult moment of deadlock, mediation process becomes a better method of dispute resolution. And this involves an invitation of an impartial or neutral third party called a Mediator, by the parties themselves, to facilitate the resolution of their matter. The mediator facilitates communication, promotes understanding, focuses on the core interests of the parties and use creative problem - solving techniques to enable the parties to reach amicable Settlement
Conciliation, to a large extent, shares the same characteristics with mediation and in most jurisdictions, both processes are used interchangeably. The subtle differences between Conciliation and Mediation can be appreciated by the fact that Conciliation is usually statutorily provided for. The Conciliator is often a government official who is required to act as an advocate of Government policy and has a statutory obligation to further the objectives of Government. He can give an opinion or suggest an agreement terms for the parties.
Just like in the case of Mediation or Conciliation, in Arbitration, disputants appoint an independent, impartial and neutral third party called an Arbitrator whose duty is to hear evidence of the parties and decides the dispute for them by way of giving judgment known as Award. Like litigation, parties may hire legal practitioners and the Arbitrator has power to give binding decision, which is enforceable like a court judgment.
The principal causes of conflict in most cases include: misunderstanding, poor communication, personality clashes, lack of co-operation, frustration, substandard performance, differences over work method, Authority and Responsibility issues, values and goal differences and non-compliance with rules and policies. And even through man is conflict – prone, he however does not endure the conflict – situation for a long time. In a commercial environment, the more the dispute subsists, the greater the cost in terms of expenses and further business relationship. Thus, judicial system in relation to business environment must focus on the causes of delays in the courtroom settlement, the presence of a platform for Alternative Disputes Resolution, improved process for protecting rights and enforcing Contracts, the facilities and equipment in the court houses, the extent to which the judges and lawyers are trained in ADR and whether there is a special court to handle commercial disputes.
When the nation’s economic stakeholders congregate between 16th and 17th August, 2007 at Transcorps Hotel. Abuja, for the BECANS Forum, the various states shall be rated on the competitiveness of their business environment using the reform in the judicial sector as one of the key factors for consideration. While the judicial process generally grinds slowly but surely, the pace or velocity of the court house differs from State to State. For example, while some States in Nigeria have provided automatic recording machine to ease the job of the judges, judicial Officers in many other states still write the Court Proceedings in long hands. Some States have tried to quicken Justice delivery by adopting a process known as front-loading, whereby the originating processes and depositions of the witnesses are all filed at once. They have also pegged the maximum time allowed for amendment of pleadings to two. Some states have set up multi-door court houses, thus giving a window of alternative disputes resolution for disputes that are not amenable to litigation. A necessary adjunct of the judicial sector reform is the requirement of mandatory counselling of litigants by counsel and filling of Pre-counseling certificate with other of Court processes to discourage frivolous litigation. It is now almost a mandatory requirement that all contract agreement should contain ADR clause. With this clause ADR process of settlement must first be exhausted before the disputants can approach the court.
The quick and efficient justice delivery which ADR promotes and its contribution in decongesting the court, gives the court the breathing space to focus on real legal uses and faster the court process and thereby restoring confidence in the judicial process and this the goal of BECANS. It provides, a platform for State peer-review on judicial sector reform for a more competitive business environment.
BECANS PROMOTES RESPONSIVE BUDGET AND FISCAL MANAGEMENT
By Godfrey Ubaka
Budget is a tool of financial planning, an economic forecasting mechanism of planned expenditure pattern in line with competing development needs alongside projected revenue. Beyond serving as a financial guideline on expenditure pattern and resource allocation, budget constitutes a legal policy document that reveals the sectoral priorities of any government.
Nigeria’s developing economy is administratively expressed in 36 states with the Federal Capital Territory and a network of 774 local governments. This brings the governmental entities to 812. This nexus of administrative seats of governmental authorities and economic dispensations are all intricately connected by centrally generated revenue from oil, a federal allocation system and the realities of budgeted developmental pattern.
Budget however is a theoretical economic forecasting mechanism. It is a financially mapped out plan of developmental intentions. It therefore takes a whole lot of fiscal discipline for a laudable budget to be translated into the developmental goal of economic empowerment for the people, infrastructural development and improved living standard for the target populations. Fiscal federalism therefore refers to the division of revenue – generating powers and expenditure responsibilities across the levels of government. This is operationalised through the assignment of tax-raising powers, revenue sharing and developmental functions among federal, sate and local governments. As a tool of financial planning, the beauty and developmental relevance of a budget as a document lies in its implementation through fiscal discipline. That is what makes it an effective or ineffective developmental tool.
Budgeting as an annual process is common to all the tiers of government. What differs is the level of compliance in the implementation and commitment along the trajectory of developmental imperatives.
It is in this light that one commends the African Institute of Applied Economics for initiating and leading the implementation of its Business Environment and Competitiveness across Nigerian States (BECANS) Initiative of benchmarking states in the spirit of competitive federalism so as to ascertain to what extent budgets on papers are being realized in human and infrastructural development. The extent to which Budgeting has been used as a tool of empowerment and improvement on the quality of life is one of the factors used in business environment ratings of all the states in Nigeria under BECANS platform.
The truth remains that public spending becomes un-justifiable when it cannot lead to public good. This public good could come in the form of development of private enterprise through the creation of the right business environment. One strategy of doing this is for governments to intervene to correct market failures and maintain confidence in the market system.
In line with the developmental challenges, public expenditure in Nigeria should be along the lines of poverty reduction, employment generation, wealth creation and the entrenchment of social security and value reorientation. The need to promote sound budgeting and fiscal management for the purpose of bringing about a better business environment, underscores the significance of the BECANS FORUM on Business Environment across Nigeria States tagged FOBEANS 2007 which is slated for August 16-17 at Transcorp Hilton Hotel, Abuja.
Budget and fiscal responsibility are part of the reforms the Nigerian government embarked upon since 2004. Five years after the implementation of NEEDS and with NEEDS 2 now in focus, the economy still smacks of poor service delivery, high dependency on oil export, low contribution of the secondary activities to the annual GDP, high cost of production, high import dependence of the economy and low aggregate demand.
The challenges of developing an economy along the social and economic goals of the National Economic Empowerment Development Strategy (NEEDS) and the Millennium Development Goals (MDGs) are so enormous, that the timely BECANS initiative must be applauded. The time for business environment advocacy and to inculcate the right growth-consciousness among all the levels of government in Nigeria is now. Nigeria’s democracy still being at a toddling stage requires the functionality of the various arms of government to see to it that budgetary pronouncements are translated into concrete life-improving projects. And the legislature as the first arm of government and peoples representatives in the exercise of its oversight function should ensure that budgeting does not become a mere ritual but a framework for improving the quality of life of the people. In the words of Chief Clement Ofuani, Developmental Economist and former Economic Planning Commissioner, Delta State, “the root of public expenditure in creating growth in the economy can not be over-emphasized. The powers and control over public funds are shared between the Executive and the Legislature . . . Nonetheless, it must be pointed out that there is still a lot of work to be done to further integrate legislature more deeply into the governance process. Legislature needs to be more intimately involved in the budget process from inception, perhaps under the instrumentality of the party to ensure that there is greater relationship between projects and programmes and the underlying policy thrust of government”.
After 8 years of uninterrupted democratic experience, it is now expected that the legislators as the elected representatives of the people should operate not as executive rubber stamp, but as an arm of government that will hold the executive accountable, on behalf of the people. This is one sure way of seeing to it that public expenditure is reflective of public good and popular yearning for individual empowerment and societal development. It is significant to note that from 2001-2005 average annual share of social services in recurrent and capital expenditures of the thirty six states were about 42% and 35% respectively. Economic services got the highest single average annual share of capital spending by all states, followed by social services in the same period. The bulk of expenditure on government administration remained on recurrent items, including personnel, goods and services. The challenge is for the operators of the economy to creatively fashion out ways of refocusing public expenditure to build the economy through poverty reduction, wealth creation and stemming the growing tide of unemployment. BECANS helps to focus attention on responsible and responsive budgeting and fiscal management. Sound management of public resources is sine qua non for a conducive business environment across the states. BECANS is truly an idea whose time has come.
BECANS: ADVOCATING SECURITY SECTOR REFORMS
What influences business and investment decisions is perception of the security situation of the economy in which entrepreneurs want to invest. With the spate of kidnapping in the Niger Delta, including the recent kidnapping of the three year old Briton, Margaret Hill and two-year old son of a Monarch in Rivers State; robbing of banks and other business establishments, high rate of extortion by security agencies ; politically-motivated assassinations; vandalistion of property; corruption in high and low places, coupled with gross inefficiency of the Police Force, the security environment in Nigeria is evidently repellant to both local and foreign investors. That is why the efforts by the immediate past President of the country, Chief Olusegun Obasanjo, to woo foreign investors into the country did not yield fruits. The investors were not convinced by the official national statistics, showing that crime rates in Nigeria have been on declining trend since 1996.
Crime and insecurity are threats to social and economic life. An insecure business environment deters investors, entrepreneurs and managers. It is an obstacle to business as it increases the cost of doing business, business risks and uncertainty of investment. Indeed, security is not just an intrinsic aspect of development, it is also an essential pre-condition for sustainable development since no meaningful socio-economic growth can be attained in the environment of chaos and insecurity, akin to Hobessan State of nature.
Insecurity which has been listed as second business hindrance after power supply, results into a vicious cycle of poverty, for lack of human security has adverse consequences on economic growth, which in turn, fuels poverty and reduces the level of development. In the same view, imbalanced or inadequately planned development, contributes to criminality and greater insecurity which constitutes a threat to good quality of life, security of life, property and businesses, democracy, good governance, the rule of law and ability of government to provide greater democracy dividends.
According to the United Nations Office on Drugs and Crime (UNODC), Investment levels in Africa are lower them they should be, and much of this is attributable to the perception that the rule of law does not prevail in the continent. Insecurity and crime destroy economic, human and social capital and have a far greater adverse impact on the lives of citizens in poor countries than rich ones. Perhaps most importantly, crime of corruption, damages the relationship between the citizens and the State as it undermines democracy and the ability of the State to promote development.
Although the national economic reform agenda embodied in the National Economic Empowerment and Development Strategy (NEEDS) recognizes that security of life and property is a fundamental human right, guaranteed under the Constitution and is a formidable instrument for improving the climate for social and economic life, not much has been done to improve the security situation in the country. The recommended policies to achieve greater security efficiency, including changing the orientation of the police to improve the quality of service and increased use of scientific methods in crime control and prevention, remain unimplemented.
The implication of poor security is manifold. It increases cost of doing business, which can be the direct loss of goods or the costs of taking precaution, such as hiring security guards, building fences, or installing alarm systems. These costs may not be sustainable in the long-run and definitely can impede business development and progress with attendant negative consequences for employment and poverty alleviation. For instance, foreign firms will decline to invest, and domestic investors may flee the country to a more peaceful locale. Above all, the fear of crime restricts mobility which interfers with social and economic interactions among business agents.
In assessing security index, Bajpa Kanti (2000) remarked that reference should be made to the following among other factors, categorized into direct and indirect violence. Direct Violence includes: Violent death/ disablement, dehumanization, slavery, trafficking in women and children in households, kidnapping, abduction, unlawful detention of political opponents plus rigged trials; drug addiction, discriminatory Laws/ practices against minorities and women; banning/rigging elections, inter- state tensions/crises, spread of weapon of mass destruction, small arms and landmines. And indirect violence factors include: deprivations of basic needs and entitlements (food, safe drinking water, primary health care, primary education), incidence of life-threatening diseases; unemployment, inequality, poverty, economic instability, population displacement, environmental degradation etc.
From various International economic surveys, Nigeria have often been listed a high risk nation. For example, the International SOS Security in 2001, listed her a high risk country, along with 42 other nations in the world. Furthermore, Economist Intelligence Unit (EIU), evaluated the safety of a number of countries for foreign business and came out with a report that Nigeria is an unsecured environment for commercial operations.
Security risk, according to EIU, arises on three levels. The first comes from rising violent crime (e.g. robbery), the second level is subjecting companies/businesses to direct attack or blackmail, facilities being vandalized and staff being kidnapped. The third, is incidences of inter-communal violence and ill-equipped Police Force which is ineffective in stemming the crime wave in the country.
The fact that must be put in perspective is that the rating of Nigeria’s security environment may not be a true representation of the prevailing circumstances at the sub-national level and this is a major short coming of these surveys conducted by International bodies. This is where BECANS has important niche in showing the differentiation of security situation across States.
Much value will be added by benchmarking states against one another in order to foster peer review and mutual learning among the states. Under BECANS, Security is one of the benchmark areas of business environment evaluation. This is due to eminent place which security factor occupies in business environment. Indeed, if Nigeria is realize her dream of being one of the 20 top economies in the world by 2020, security infrastructure should be a priority of government at all levels.
The security benchmark comprises six measures, namely, major crimes (crimes with violence); minor crimes (crime without violence); police resources; cost and availability; perception of security situation by business enterprises; emergency preparedness and insurance, and security policies, strategies and programmes. Using the above security parameters, the principle of BECANS methodology is to comparatively assess and rank the performance of respective states. Thus, when the nation’s stakeholders converge at Transcorp Hilton Hotel, Abuja, August 16-17, 2007, for BECANS report on Business Environment across Nigerian States, the question that will be answered is: what is the security picture of individual states in Nigeria and how conducive security-wise, is individual states to business environment? BECANS’ report will provide credible and relevant data to inform advocacy for reforms in the nation’s security sector and thereby stimulate action by respective State Governments and drive public debate on security policies, particularly, the question of responsibilities between the three tiers of government in ensuring security for socio-economic development.
BUDGET AND INFRASTRUCTURAL COMPETITIVENESS ACROSS NIGERIAN STATES
The Nigerian economy has remained largely undiversified and undeveloped. The huge dependence on oil has not in anyway abated despite the singsong of government’s commitment to the diversification of the nation’s economy. It however remains a cruel irony that even this single product upon which the operations of the economy hinges is not locally available at its refined state. Instead, what we consume locally is imported at an exorbitant rate. Thus, day-in, day-out Nigerians are inundated with the sermon of subsidy, for a product with which they are generously blessed.
What makes the matter most pathetic is the poor infrastructure which has resulted in low productivity, weak competitiveness and very low income per-capita. Presently, the Nigerian economy is one of the least competitive globally. Even within the country, our local products are at a competitive disadvantage vis-à-vis imported products.
The Nation’s economic blue print encapsulated in the NEEDS Document, envisions that “the state shall harness the resources of the nation, promote national prosperity through an efficient, dynamic and self-reliant economy and control the national economy in such a manner as to secure the maximum welfare, freedom and happiness of every citizen, on the basis of social justice and equality”.
Government is also expected to promote a planned and balanced economic development through seeing to it that the material resources of the nation are harnessed and distributed as best as possible to serve the common good.
Budgeting is the framework for the attainment of this developmental philosophy. It is the tools for financial planning, an economic working manual on projected revenue and planned expenditure pattern to achieve the goal of building an enabling business climate among other objectives.
The three tiers of government in Nigeria, all come out annually with budgets that supposedly are fashioned to increase the developmental impetus of the area through infrastructural provision, human development and capacity building.
The truth about budget is that when it loses fiscal discipline or developmental directive, it ceases to be a significant economic forecasting mechanism. Indeed, when budget as government expenditure does not bear direct relationship with the aspiration of government to build a sustainable infrastructure as fulcrum of economic growth, then it no longer represents a development manual. In the absence of strict adherence to budgetary provisions, infrastructural development becomes easily sidelined and no meaningful economic growth can be witnessed. This is why BECANS, a flagship programme of the African Institute of Applied Economics in collaboration with the National Planning Commission, Central Bank of Nigeria and other stakeholders in public and private sectors, is laying emphasis on fiscal discipline and strict implementation of budgets.
Evidently, corruption is one of the factors that bring about a gap between budgeted actual expenses and the resultant development on grounds. The situation is made worse when communities either constitute a developmental road block under a misguided agitation described as youth restiveness, are themselves not adequately aware of the need for a follow-up on what has become of the execution of the project that is to impact on their lives. It is therefore expedient that Economic Planning Ministries across the country should set up projects monitoring desks, working with communities to check the corrupt tendencies of some contractors. Equally, elected representatives of the people should see it as a responsibility extending from their mandate, that projects budgeted for in their constituencies are executed to specification.
It is the opinion of this writer that in line with the developmental agenda of the Press in a developing economy, journalists in Nigeria should go beyond reporting the routine and celebrating the achievements of personalities to investigative journalism that can unearth those life-transforming projects that are being swept under the carpets as well as setting developmental agenda for all tiers of government. A responsible Press as a watchdog must ensure that greedy individuals do not convert what is designed for public good into private estate.
The level of the nation’s democratic culture is such that the people are yet to come to term with the whole idea of transparency and the practice of leadership being held accountable by the people. This has resulted in policy inconsistency and the practice whereby some projects reoccur in several budgets with funds allocated to them on annual basis.
Fiscal imprudence and poor public financial management has a way of resulting into macro-economic volatility. When public spending is well directed, government is then in a better place to efficiently and effectively impact upon the citizens and to create conducive business environment on which sustainable development hinges.
With the rather challenging state of public infrastructure in the country today, a sound fiscal policy is needed in a reform that will bring about an investment friendly-macroeconomic framework. Fiscal discipline and budget monitoring are therefore responsibilities that go beyond an arm of government but also involve the people in an effort to ensure provision of infrastructure for the general good of all. There lies the attractiveness of the BECANS noble initiative, which is a clarion call on state governments to go into healthy rivalry for infrastructural development with a view to making better the business environment.