By Liana Cramer, Dakar
In February of 2014, Senegal’s government announced an ambitious new development plan: “le Plan Sénégal Emergent (PSE)” This initiative aims to jumpstart Senegal’s economy, which has experienced sluggish growth in recent years.
It’s objective: to launch Senegal to emerging market status by 2035. It envisions Senegal becoming a regional “campus of excellence,” and a hub for West Africa. To achieve this vision, economic policies and structural reforms will be put in place to promote strong and inclusive economic growth. The three pillars at the backbone of this plan are: higher and sustainable growth through structural transformation, human development and social protection, and governance, peace, and security.
According to the PSE, the sluggishness of the Senegalese economy since 2005 is in part due to failure to reform the investment climate and energy sector, inadequate capacity of the state, problems with the efficiency of public spending, and resistance to change by certain actors. The plan consequently outlines 26 priority projects, of which 18 will be implemented by a public-private partnership. These projects include, among others, development of transportation infrastructure, rural electrification, agricultural aggregation projects, and the construction of professional education centers and a business district.
The question is: is Senegal’s ambition to rise to emerging economy status within two decades achievable?
Dakar, Senegal’s capital, is a beacon of western consumerism. But outside of the city, it is a different story. In 2014, Senegal ranked 163rd out of 187 countries in terms of human development, just above Sudan, Haiti, and Afghanistan. While Senegal is considered one of the most politically stable countries in the region, it has yet to reap the economic rewards. At this time, Senegal does not have any major banks, industries, mining companies, or financial institutions. Further, about 90% of entrepreneurs operate in the informal sector, one of the largest in sub-Saharan Africa.
Recognizing that the private sector is the driver of inclusive growth, a primary objective of the PSE is to stimulate the private sector and develop the capability to export and attract investment. By 2016, the key reforms to be undertaken are: “computerization of administrative procedures, establishment of a fiscal and legal framework which is simple and motivating, improvement in the competitiveness of factors of production, and the promotion of high-impact investment.” This will be accompanied by more “proactive economic diplomacy”, and “deeper regional integration.”
Senegal is relatively well endowed with transnational infrastructure including seaport, air links, railways, road networks, and telecommunications infrastructure that connect it to the wider region. Thus, it is well positioned to integrate into the regional economy. However, as a member of the West African monetary union, Senegal’s currency is fixed to the Euro and is thus overvalued, which inhibits demand for Senegalese products outside the monetary union.
There are many other factors that may inhibit the success of the PSE. On the bureaucratic level this includes: institutional instability, resistance to change, inadequate mobilization of funds, unexpected social spending, or delays in the reform of the investment climate and the energy sector. Additionally, as Senegal relies on its raw materials for export, due to a lack of second-tier exports, climate shocks could limit resources available for export. Externally, political instability in the region may threaten the plan’s success by inhibiting demand in the region, particularly as the threat facing West Africa’s powerhouse economy, Nigeria, spills into neighboring countries.
Despite all this, the International Monetary Fund suggests that, driven by foreign-investment generated exports, Senegal’s goal to achieve emerging country status by 2035 is achievable. After all, it has been done before. The East Asian economic miracle, notably that of China and Japan, was driven by the state. A strong state and supporting institutions were critical to this development method, an attribute many African countries are lacking.
The “Plan Sénégal Emergent” may not follow the same path as the Asian tigers, but could similarly yield an African miracle.