6 ms·

So Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources? I think it's probably a much better plant to extract a good deal of wealth

by jariel 6y ago

So Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources? I think it's probably a much better plant to extract a good deal of wealth from the natural resource and invest it in other areas of higher value creation, even in the same vertical. There's a good chance that Ghana's policies are needlessly constrained. More obviously there are 100 things Ghana could do to improve living conditions in more obvious areas i.e. corruption etc.. Consider the immediate situation: Ghana's exporters have just been banned from exporting. They are going to go out of business very soon. Ghana doesn't have all of the layers of industry necessary to support development and export of products i.e. there are no market buyers at any reasonable price. Result: collapse of the industry - unless somehow the Government of Ghana can artificially inflate prices and keep them alive for a very long time while domestic partners somehow magically are able to get off their feet. This plan feels not very well conceived. I'll bet something is lurking under the surface.

msg3 6y ago
By itself, it's probably not a good idea. If the government supports the development of a chocolate production industry, including support for cocoa exporters, then it has every chance of success.
- jfim 6y ago
  It might, and it might not. Even though Japan also makes some fine watch movements, Swiss ones command a premium over the Japanese ones. I'd assume that this would be similar for chocolate.
  - rout39574 6y ago
    If Ghana were to position itself as the 'Casio' or 'Seiko' of chocolate, I expect they'd tolerate the fact that there was a still an Omega out there. And with the Casio profits, they could make a reasonable run at unseating Swiss chocolate in another century or so.
zorked 6y ago
Do you have any specific knowledge about Ghanaian industry or is this just your opinion? Can you provide some sources for your claims?
- barry-cotter 6y ago
  Why would the Ghanaian government be any better at economic planning than the Argentinian or Indian ones? Sometimes industrial policy “works”, as in South Korea or Japan. But we have no strong reason to believe either would have failed to develop without government help. Hong Kong didn’t need it. People talk about the successes of industrial planning a lot but Argentina and India aren’t the only countries to piss away enormous resources propping up domestic industries that vanished in a puff of smoke as soon as they stopped being protected by tariffs or non tax trade barriers.
  - andrepd 6y ago
    Maybe you would want to research what Japan and South Korea have in common and what Argentina has different. Hint: it involves something that starts with U and ends with SA
  - hindsightbias 6y ago
    SK's recovery from the war was very sluggish for a decade until a military coup, protectionist economic polices, nationalization and multi-$B US economic donations.
luckylion 6y ago
> So Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources? Canada maybe not so much, but Saudi Arabia and the UAE? Yeah, and I think they understand that as well. If we have a fusion breakthrough next year, what will Saudi Arabia export besides Wahhabism?
- m12k 6y ago
  The Saudi royal family is busy buying as much of Silicon Valley as they can, to ensure they can still live atop a mountain of cash once the oil runs out. As for the rest of the country - yeah, they are royally fucked (pun intended) since no other industry than oil was ever developed.
  - arethuza 6y ago
    They seem to be trying to develop their tourist industry - I keep getting adverts for holidays there!
    - andrepd 6y ago
      It's possibly one of countries in the world I'm least interested in visiting.
      - nasmorn 6y ago
        Where else to go to a good oldfashioned lashing?
        arethuza 6y ago
        Saudi Arabia apparently has stopped using flogging: https://www.theguardian.com/world/2020/apr/25/saudi-arabia-to-end-flogging-as-a-form-of-punishment https://www.theguardian.com/world/2020/apr/25/saudi-arabia-t... However, plenty places still use corporal punishment, including Singapore: https://en.wikipedia.org/wiki/Judicial_corporal_punishment https://en.wikipedia.org/wiki/Judicial_corporal_punishment
fakedang 6y ago
> Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources? Actually yes. The trend happening there is reminiscent of the spice trade. The UAE will stay afloat because of its massive externally invested wealth fund and Canada's liberal policy will keep the talent coming (although imo destroying the local population's affordability). But Saudi Arabia has a huge problem right now, since they squandered a lot of their oil wealth and are in no position to rely on immigrant growth - especially when native Saudis are not employable at all. I know for a fact that the UAE actually monitors intelligence in Saudi Arabia to make sure that a revolt or an insurgency doesn't happen there. OPEC annual meetings are literally a mercantilist exercise.
TeMPOraL 6y ago
Other points are already addressed in different comments, but to address this one: > Ghana doesn't have all of the layers of industry necessary to support development and export of products i.e. there are no market buyers at any reasonable price. Per the article, they literally control half of the world's cocoa. This means they get to define what "a reasonable price" is, as long as the rest of the world wants to keep its chocolate plentiful. I'm not a politician or economist - but to me, it seems obvious the plan here is to bootstrap domestic cocoa processing industries, get the current exporters to sell cocoa to domestic producers, and export processed products (like chocolate). They're not going to just stop cultivating cocoa - being in control of half of the supply of raw materials for a highly prized product is their one big leverage on the international market. As to not having the necessary industry base to pull it off - the question is, how fast can they build one? I'd guess a couple of years, if no foreign powers try to make it hard for them.
- Chris2048 6y ago
  The first question is: where are the main markets for chocolate? If Ghana loses access to a large percentage of the global chocolate market, controlling half the supply is as much a liability. The second question is: Is there any reason cocoa can't be grown elsewhere, or the second biggest producer can't increase production?
  - brodock 6y ago
    There is a location/clima reason. Cocoa grows (well) only in a certain part of the world around the equator line as it requires tropical weather with regular rains and small dry seasons. It may be possible to use artificial techniques to grow it elsewhere, but I'm assuming it's not economically viable or you get a product with worst quality in the end
  - rob74 6y ago
    Yeah, I already see other tropical-zone countries cutting down even more rain forest to make space for cocoa plantations (in addition to the rain forest they are already cutting down or burning for e.g. palm oil plantations). That's not really the desirable outcome here I think...
jeffreyrogers 6y ago
It's called the Dutch disease for a reason. When Holland discovered large natural gas deposits the entire rest of their economy became less competitive. High wages from natural resources (and oil is the worst for this because it is so valuable) raise wages in the rest of the economy. This makes your exports less competitive. It also shifts employment into the natural resources sector (due to high wages), when many of those people would maybe be better allocated elsewhere. They only country that has been able to do what you're talking about successfully is Norway and maybe the US and Canada, which have much better institutions than anywhere in Africa and the Middle East.
rory 6y ago
Maybe the government is trying to pressure Swiss companies up the value chain to move processing operations to Ghana? That seems like a reasonable way to increase income to Ghanaians and build local human capital, without having to start industry from scratch. I don't know the fine details of how chocolate is made, but a chocolate bar seems like a fairly straightforward industrial product. Why should it be made in somewhere as high-cost as Switzerland, if not just because of operational and brand-value momentum?
- bingbong70 6y ago
  The story of this century, "cut off useless middlemen", Europe has a lot of comfortable useless middlemen left over from the colonization period.
- SyzygistSix 6y ago
  >Ghana's exporters have just been banned from exporting. They are going to go out of business very soon. I do. It isn't, necessarily. Quality is becoming much more important now and makers of high quality chocolate are growing in market share. Like coffee, there is more demand for higher quality and less exploitative business models. There is a significant demand for high quality cacao such that producers of chocolate are helping to develop the cacao industry in producing countries to move to a higher quality,less exploitative model. I don't know for certain, but Ghana, and other African countries, may be staking their future on this model, which has been successful in Central and South America, rather than continuing to use egregiously exploitative labor to produce low quality of cacao to sell large quantities to companies like Nestle. More and more, the money is elsewhere.
SyzygistSix 6y ago
>Ghana's exporters have just been banned from exporting. They are going to go out of business very soon. This is just refusing to sell to Switzerland. High end chocolate companies are very interested in developing higher quality and more equitable cacao production in other countries, as there is a shortage of high quality cacao. I know the company I worked for has recently been buying cacao from Ghana, something that they did not previously do. Working with these kinds of producers is probably far more beneficial than continuing to work with companies mass producing chocolate.

by jariel 6y ago

msg3 6y ago

By itself, it's probably not a good idea. If the government supports the development of a chocolate production industry, including support for cocoa exporters, then it has every chance of success.

jfim 6y ago
It might, and it might not. Even though Japan also makes some fine watch movements, Swiss ones command a premium over the Japanese ones. I'd assume that this would be similar for chocolate.
- rout39574 6y ago
  If Ghana were to position itself as the 'Casio' or 'Seiko' of chocolate, I expect they'd tolerate the fact that there was a still an Omega out there. And with the Casio profits, they could make a reasonable run at unseating Swiss chocolate in another century or so.

zorked 6y ago

Do you have any specific knowledge about Ghanaian industry or is this just your opinion? Can you provide some sources for your claims?

barry-cotter 6y ago
Why would the Ghanaian government be any better at economic planning than the Argentinian or Indian ones? Sometimes industrial policy “works”, as in South Korea or Japan. But we have no strong reason to believe either would have failed to develop without government help. Hong Kong didn’t need it. People talk about the successes of industrial planning a lot but Argentina and India aren’t the only countries to piss away enormous resources propping up domestic industries that vanished in a puff of smoke as soon as they stopped being protected by tariffs or non tax trade barriers.
- andrepd 6y ago
  Maybe you would want to research what Japan and South Korea have in common and what Argentina has different. Hint: it involves something that starts with U and ends with SA
- hindsightbias 6y ago
  SK's recovery from the war was very sluggish for a decade until a military coup, protectionist economic polices, nationalization and multi-$B US economic donations.

luckylion 6y ago

> So Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources? Canada maybe not so much, but Saudi Arabia and the UAE? Yeah, and I think they understand that as well. If we have a fusion breakthrough next year, what will Saudi Arabia export besides Wahhabism?

m12k 6y ago
The Saudi royal family is busy buying as much of Silicon Valley as they can, to ensure they can still live atop a mountain of cash once the oil runs out. As for the rest of the country - yeah, they are royally fucked (pun intended) since no other industry than oil was ever developed.
- arethuza 6y ago
  They seem to be trying to develop their tourist industry - I keep getting adverts for holidays there!
  - andrepd 6y ago
    It's possibly one of countries in the world I'm least interested in visiting.
    - nasmorn 6y ago
      Where else to go to a good oldfashioned lashing?
      - arethuza 6y ago
        Saudi Arabia apparently has stopped using flogging: https://www.theguardian.com/world/2020/apr/25/saudi-arabia-to-end-flogging-as-a-form-of-punishment https://www.theguardian.com/world/2020/apr/25/saudi-arabia-t... However, plenty places still use corporal punishment, including Singapore: https://en.wikipedia.org/wiki/Judicial_corporal_punishment https://en.wikipedia.org/wiki/Judicial_corporal_punishment

fakedang 6y ago

> Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources? Actually yes. The trend happening there is reminiscent of the spice trade. The UAE will stay afloat because of its massive externally invested wealth fund and Canada's liberal policy will keep the talent coming (although imo destroying the local population's affordability). But Saudi Arabia has a huge problem right now, since they squandered a lot of their oil wealth and are in no position to rely on immigrant growth - especially when native Saudis are not employable at all. I know for a fact that the UAE actually monitors intelligence in Saudi Arabia to make sure that a revolt or an insurgency doesn't happen there. OPEC annual meetings are literally a mercantilist exercise.

TeMPOraL 6y ago

Other points are already addressed in different comments, but to address this one: > Ghana doesn't have all of the layers of industry necessary to support development and export of products i.e. there are no market buyers at any reasonable price. Per the article, they literally control half of the world's cocoa. This means they get to define what "a reasonable price" is, as long as the rest of the world wants to keep its chocolate plentiful. I'm not a politician or economist - but to me, it seems obvious the plan here is to bootstrap domestic cocoa processing industries, get the current exporters to sell cocoa to domestic producers, and export processed products (like chocolate). They're not going to just stop cultivating cocoa - being in control of half of the supply of raw materials for a highly prized product is their one big leverage on the international market. As to not having the necessary industry base to pull it off - the question is, how fast can they build one? I'd guess a couple of years, if no foreign powers try to make it hard for them.

Chris2048 6y ago
The first question is: where are the main markets for chocolate? If Ghana loses access to a large percentage of the global chocolate market, controlling half the supply is as much a liability. The second question is: Is there any reason cocoa can't be grown elsewhere, or the second biggest producer can't increase production?
- brodock 6y ago
  There is a location/clima reason. Cocoa grows (well) only in a certain part of the world around the equator line as it requires tropical weather with regular rains and small dry seasons. It may be possible to use artificial techniques to grow it elsewhere, but I'm assuming it's not economically viable or you get a product with worst quality in the end
- rob74 6y ago
  Yeah, I already see other tropical-zone countries cutting down even more rain forest to make space for cocoa plantations (in addition to the rain forest they are already cutting down or burning for e.g. palm oil plantations). That's not really the desirable outcome here I think...

jeffreyrogers 6y ago

It's called the Dutch disease for a reason. When Holland discovered large natural gas deposits the entire rest of their economy became less competitive. High wages from natural resources (and oil is the worst for this because it is so valuable) raise wages in the rest of the economy. This makes your exports less competitive. It also shifts employment into the natural resources sector (due to high wages), when many of those people would maybe be better allocated elsewhere. They only country that has been able to do what you're talking about successfully is Norway and maybe the US and Canada, which have much better institutions than anywhere in Africa and the Middle East.

rory 6y ago

Maybe the government is trying to pressure Swiss companies up the value chain to move processing operations to Ghana? That seems like a reasonable way to increase income to Ghanaians and build local human capital, without having to start industry from scratch. I don't know the fine details of how chocolate is made, but a chocolate bar seems like a fairly straightforward industrial product. Why should it be made in somewhere as high-cost as Switzerland, if not just because of operational and brand-value momentum?

bingbong70 6y ago
The story of this century, "cut off useless middlemen", Europe has a lot of comfortable useless middlemen left over from the colonization period.
SyzygistSix 6y ago
>Ghana's exporters have just been banned from exporting. They are going to go out of business very soon. I do. It isn't, necessarily. Quality is becoming much more important now and makers of high quality chocolate are growing in market share. Like coffee, there is more demand for higher quality and less exploitative business models. There is a significant demand for high quality cacao such that producers of chocolate are helping to develop the cacao industry in producing countries to move to a higher quality,less exploitative model. I don't know for certain, but Ghana, and other African countries, may be staking their future on this model, which has been successful in Central and South America, rather than continuing to use egregiously exploitative labor to produce low quality of cacao to sell large quantities to companies like Nestle. More and more, the money is elsewhere.

SyzygistSix 6y ago

>Ghana's exporters have just been banned from exporting. They are going to go out of business very soon. This is just refusing to sell to Switzerland. High end chocolate companies are very interested in developing higher quality and more equitable cacao production in other countries, as there is a shortage of high quality cacao. I know the company I worked for has recently been buying cacao from Ghana, something that they did not previously do. Working with these kinds of producers is probably far more beneficial than continuing to work with companies mass producing chocolate.