Download Committee: EcoFin

Chen 1
Committee: EcoFin
Topic: Regulation of Foreign Assets
Delegation: Angola
Highland Park High School
Ken Chen
The issue of maintaining a favorable balance of trade hearkens back to
mercantilism during the colonial era; except, in modern mercantilism, the concept of
bullion is largely superseded by the notion of hard currency. Hard currencies refer to the
stable monetary units in which investors express complete confidence. However, if your
country is considered among Least Developed Countries (LDC), the dilemma of either
encouraging the flow of foreign hard currency into the local economy or promoting
national sovereignty by depending on the domestic unit of exchange instead appears.
Choosing the former would instigate a flow of wealth into the native economy while the
latter would generate revenue through seigniorage: the carry obtained from money in
circulation. Nations may decide to use a floating currency since it can self adjust itself to
the daily fluctuations of the world market. Or they could employ a pegged currency
which “creates a stable environment for foreign investment” (Heakal 1).
As the recent economic depression in Zimbabwe proves, disproportionate
tampering with the economy with price controls and fixed exchange rates will only
produce inflation rates exceeding “4,000 percent...which is the highest in the world”
Chen 2
(Zimbabwe 1) Worsening the problem, President Mugabe, just a couple months back in
July, stated his intention to nationalize “at least a 51 percent share of the companies”
(Mugabe 1). Truly, this will serve as the epitome of excessive economic intervention for
the global community. We can learn from Zimbabwe's current predicament by
remembering caution when tinkering with the world market.
In Angola, we encourage foreign investment including foreign currencies.
Developing countries with growing economies such as ours require a constant increase of
hard capital. As long as potential investors comply with “licensing and authorization from
the Ministry of Finance and the Central Bank” (Assembly 5), they remain at liberty to
invest with foreign currencies. We also offer fiscal incentives and opportunities for those
companies that “employ a high proportion of Angolan workers” (Assembly 6). Since our
economy is blooming despite still being in the process of recovering from a recent
devastating civil war, this proves the merit of adopting a policy of careful but
noninterventionist control of the economy.
The Zimbabwe hyperinflation, however, presents a serious flaw to address;
economies of LDCs remain too fragile and brittle to withstand a sudden shift. To
strengthen our economies so that we are no longer at the mercy of the oscillating world
market, we must turn to the theory proposed by the Hungarian economist Bela Balassa,
“Economic Integration”. In his concept of monetary union (aka single currency), Balassa
presents the idea that a group of nations use one common currency in the interests of
economic stability; with the European Union and their Euro as the epitome success story.
Such close economic cooperation will “generate benefits that are not possible otherwise”
Chen 3
(Suranovic 1). In the African Economic Community (AEC), there exists a regional trade
bloc called the South African Development Community (SADC) of which Angola is a
member. SADC already have a program in “to create…a monetary union by 2016, and a
single currency by 2018” (Hennop 1). With Angola's economy as one of the fastest
growing in Africa, we feel that regional currencies in Africa (and else where) will grant
the financial security necessary for peace and security, politically and economically.
Chen 4
Works Cited:
Heakal, Reem “Floating And Fixed Exchange Rates” Investopedia 21 Oct. 2007
<http://www.investopedia.com/articles/03/020603.asp>
Hennop, Jan “SADC Pledges to Speed Up Economic Integration” Namibian 29 Oct. 2007
<http://www.namibian.com.na/2006/August/national/0640442439.html>
“Mugabe Seizes Businesses” The Zimbabwe Situation 21 Oct. 2007
<http://www.zimbabwesituation.com/jun26_2007.html#Z3>
National Assembly (Angola) “Angola Foreign Investment Law: Law 15/94” 20 Oct. 2007
<http://unpan1.un.org/intradoc/groups/public/documents/cafrad/unpan004664.pdf>
Suranovic, Steven “International Trade History and Policy” Private Website of an
Associate Professor 23 Oct. 2007
<http://internationalecon.com/Trade/Tch110/T110-2.php>
“Zimbabwe's Economic Crisis” BBC News 22 Oct. 2007
<http://www.bbc.co.uk/worldservice/programmes/worldupdate/news/story/2007/07/0707
05_zim_biles.shtml>