Published on 12/22/2007

What about the government? How should they spend the money in their custody? Just like private investors, every government has limited resources, as a result, it is faced with the same problem of choosing which projects to embark on behalf of the citizens...

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"Economics is the art of getting the best out of life."

Garry Becker.
Nobel Laureate in Economics, 1992.

"...On the issue, there is no debating the presence of politics in the establishment of policies in Nigeria. It is rooted in we and them concept. Call it North vs. South or what ever you will, it is there and would stay for a very long time. My conclusions on the debate are as follows; -The Abuja federal capital decision was a dressed-up strategic move by the North to have a firmer grip of domination in Nigeria. Reasons for the move to Abuja would be tenable in any other country but was masked in the peculiarities of Nigeria. Igbos have more landed properties in Abuja because they are wise merchants with a greater tendency to fall for the one-Nigeria utopia. If you move the capital to another place in Nigeria, they would probably do the same. History and experience have shown that ones region comes first even in locating ones investments in Nigeria. The Igbos care less about that but that's another days cookies. Yoruba's have to thread easily with complaining about dropping the Lagos choice because it was formerly Calabar and nobody died when it changed to Lagos. However, by the time Lagos became the capital of Nigeria, there was hope in the believe that what became a kpali marriage-amalgamation of Northern and Southern protectorates would produce a near perfect creature. Alas we were all fooled by the British. Folks, the imperfections of what is called the Nigerian nation-state is a deliberate move to compound incompatible bed-fellows in a marriage of convenience. However, we can turn it around for good. The problem is that we can hardly agree on a common agenda. Let me reserve the rest of the comments for the conclusion on this interesting diatribe!

Papino. NVS villager.
Comment on Abuja: Capital of Nigeria or Northern Nigeria? (Part 2)
September 21, 2007.

"...Abuja: fake, artificial, fallacy, bogus, unreal, and all. Lagos is the city! Abuja will remain ever artificial until our lying rulers start to be genuine about "the center of unity". For now, Abuja is just a center of thievery in the name of unity. It's no more than a big government town because everything revolves around government. The banks establish presence in Abuja mainly to capture deposit accounts of government agencies. No manufacturing is going on in Abuja. No meaningful incentives exist for investors. Only 7-Up has managed to set up a plant in Abuja. all the rest is centered around construction, construction of government buildings and private buildings by mainly people who depend on government corruption. Abuja was decreed into existence and has no distinct culture as other cities like Lagos, london and Paris do. Abuja has a long way before it can be the city that that's about people. For now, Abuja is all about the best structure, best architecture, etc. But without a happy people who can live comfortably and savor the physical structures in Abuja, all is rubbish. And that is where El-Rufai's reforms failed. El Rufai was in a big rush to turn Abuja to London, but he forgot that it is people that make London, not vice versa. Thus, we have a huge estate always taunted by "patriotic" government officials as the "largest" in Africa, but it has remained the "LARGEST UNOCCUPIED" housing estate in Africa.
Abuja is one huge lie..."

Philipikita. NVS villager.

Comment on article "Lagos and Abuja: a tale of two cities" September 27,
2007.

"...The private sector allocate resources where they will earn the highest return. The government in contrast, allocate resources to projects that meet their political interests. However the lesser the economy depends on politics, the better for the country and the people. Thus, influential politicians must not decide who should be given a bank credit and who must not. Nevertheless, this is what happens in countries with authoritarian regimes where politicians build 'crony capitalism.' Projects with high profitability potential get little or no funding while dubious and unprofitable projects are lavished with government funds simply because the brother-in-law of the president is in charge. In such situations, the consumers loss in two ways. First, tax money are squandered when unviable projects which should never have been funded in the first place go bust (or when the whole banking system needs to be bailed out because it is full of rotten loans which were issued to implement unviable, dubious and politically motivated projects) Secondly, the economy does not develop quickly and effectively as it should because credit ( a limited resource) is channeled away from worth-while projects. It looks like this in real life: new automobile factories are not built, students don't get loans to finance their education, entrepreneurs are deprived of capital needed to develop their businesses. Resources are squandered and as a result, the economy does not perform anywhere near its potential. Countries without functioning government are not oases of free market prosperity. They are places in which it is expensive and difficult to conduct even the most simple business. Nigeria has one of the largest reserves of oil and natural gas, yet firms trying to do business there face a problem known locally as BYOI - Bring Your Own Infrastructure. Angola is rich with oil and diamonds, but the oil has financed over a decade of civil war, not economic prosperity. In 1999, Angola's rulers spent $900 million in oil revenues to purchase weapons. never mind that one child in three dies before the age of five and life expectancy is a shocking forty-two years! These are not countries in which the market economy has failed; they are countries in which the government has failed to develop and sustain the institutions necessary to support a market economy. A recent report by the United Nations Development Program placed much of the blame for world poverty on bad government. Without good governance, reliance on trick-down economic development and a host of other strategies will not work, the
report concluded..."

-Charles Wheelan. Author of "Naked Economies: Undressing the Dismal Science."
excerpt from chapter 4 "The Government and the Economy: The Army was lucky to get that screwdriver for $500"

FINANCE 101: INVESTMENT ANALYSIS.

In order to assess "objectively" the tragic decision of the Northern led federal government to build a new capital in Abuja "from scratch," we will put aside politics for the time being, and deal with this very important issue "strictly" from the "economic point of view." However, some knowledge or background in investment project analysis is necessary for our discussion. We will try to provide the minimum here.

In corporate finance, or to be more precise, in investment analysis, investors are taught to embark on an investment project only if the Net Present Value (NPV) of the project is positive. If we are to use the language of a layman, who does not have a background in finance, what this relatively means is that an investor should take on a project only if the financial benefits from the project outweigh the cost. Before proceeding, it is also of utmost importance in our discussion and analysis to define or understand what an investment project is. So, what is an investment project? An investment project is an undertaking that requires time and resources - financial, human, technical, technological and raw-materials to implement, and are carried out, in most cases, with the sole purpose of making profit.

Having defined what an investment project is, now let us complicate the task of the investor a little bit. In a situation whereby the investor is considering a number of potentially profitable projects with positive NPV,
which one should he choose? The fact that capital is a limited resource makes many projects mutually exclusive. In other words, by choosing one, two, three or more projects, that his limited capital is capable of
financing, an investor is compelled to forgo other projects, despite the fact they are all profitable. The one billion dollar question now is: What criteria should the investor use in deciding which of the potentially
profitable projects are worth embarking on? The rule of thumb in investment analysis says that "all things being equal," the "rational" investor should invest in the project(s) with the highest net present value(s) in
order to maximise the return on his investment (R.O.I.) By this, I mean that investment decisions taken by a rational investor are not based on emotion, philanthropy, charity, politics, external pressure or influence, e.t.c. but are taken "independently" and based "solely" on maximizing profit or financial reward from his investment. In other words, a rational investor invests in project(s) that maximizes his profit.

But what about the government? How should they spend the money in their custody? Just like private investors, every government has limited resources, as a result, it is faced with the same problem of choosing which projects to embark on behalf of the citizens. Before we proceed
with our analysis, it is very important to emphasize here the concept of "opportunity cost." Opportunity cost is of great importance in economics because it influences every decision in which a scarcity of means and a choice between alternatives play their part. We will return to this concept later in our discussion.

According to Garry Becker, the 1992 Nobel Laureate in Economics, "Economics is the art of getting the best out of life." Suffice to say that there is more than meets the eye in this simple statement. It is possible to write not only a treatise in order to explain this statement made by Becker, but volumes of books could be written as well. However, the reader will be spared the ordeal of reading a treatise in order to expain the meaning of Becker's very important statement. We will try to explain the meaning of this sentence as simple as possible in a lay man's language.

Simply put, this sentence means that individuals, investors, companies and governments should always strive to get the "maximum value" for their inputs or resources. But the question we need to answer is "What should be the
criteria for measuring maximum value for investors, individuals and the government?" As earlier stated, for rational private companies or investors, the only acceptable measure of value or criteria are the profits from their investments. Similarly, all things being equal, a rational individual should offer or sell his service or labour to the highest bidder or the company that is ready to pay the highest salary.

Thus, for an individual, the amount of salary is the criteria used in measuring his value for his inputs or labour. By receiving the highest possible salary that his labour or service could fetch in the free labour market. Subsequently, an individual gets the maximum from life within the limit or range his salary could afford him - by spending them on the things that give him the maximum satisfaction. What gives people maximum satisfaction varies from person to person and strictly depends on individual preferences and criteria.

However, since the government is our main focus in this article, therefore, it is appropriate to ask "How does the government ensure that the populace get the maximum value from life?" In other words, how does the government ensure that its citizens derive the "maximum benefit" or value from the money put in its custody to manage?

In large corporations or publicly listed companies, owners or shareholders elect the board of directors to represent them or act as an intermediary between them and the management of their company. The board of directors, in turn, appoints the management of the company that will run the day to day activities of the company. So, what do the shareholders expect from the management? The shareholders expect management to maximize the value of their company or stocks. And how can management maximize the value of shareholders' company? By investing in projects that give the highest Net Present Values (NPV). It's only by investing in projects that give the maximum NPV that management can maximize the market value of each stockholder's stake in the company.

There are lots of similarities between a public company and the government. Like in a corporation, each citizen is like a stock or stakeholder in his country. His country is like a big corporation. Citizens, in the capacity of stakeholders vote for the President, who in turn, appoints the ministers that form his cabinet. The President of a country is like the Chief Executive Officer, CEO, while his ministers are like top managers or directors of the departments of a big corporation. The President and his ministers are entrusted with the responsibility of not just taking political, economic and social decisions but the right decisions that are in the "best interest" of its citizens.

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Governments, all over the world get money mainly from tax proceedings, investment projects and/or sale of mineral resources. In the case of Nigeria, the government gets practically all its revenues from the export of oil that belongs to the Niger deltans. Needless to say that a responsible and competent government is expected to spend those limited resources that are put in its custody by citizens wisely, and neither embezzle nor squander them on unviable projects. The only criteria that the citizens can use to access how the government "effectively" manages or spends the money in its custody is the "effect" of government projects on their lives. Obviously, we are talking about "positive effects" here. In other words, citizens are supposed to access the competence of their government based on the "benefits" they derive from government projects or spending.

Citizens look upon the government to implement projects that are too expensive and complex to organize for them or/and private companies to carry out alone. Expressed in a different form, citizens look upon the government to carry out projects that give their lives the maximum value. The only way a reliable, competent and accountable government can achieve this (or
meet this demand) is by implementing projects that will raise "as high as possible" the standard of living of "as many people" as possible! By the phrase "as high as possible," we mean projects of very high quality that
will benefit a large number of people, and not projects of very low quality.

The next question we need to ask ourselves is: "What kind of government projects will go a long way in raising the standard of living of the populace? I guess you don't need to be a professor in economics in order to answer this question. All that is needed is just common sense. The answer is obvious. Undoubtedly, they are "infrastructure projects." But, why infrastructure projects? Because infrastructure projects not only make our lives more meaningful but as well go a long way in improving our standard of living.

If you doubt this statement, try to imagine your life without a pipe borne water or electricity, to mention just a few, just for a week. If you live in Nigeria, I can understand you, if you can imagine this. However, if you have been living in an industrially developed country for years - where the regular supply of water and electricity is a norm, then I am completely sure that this will be very difficult for you to imagine.

Suffice to say that the role of modern and functioning infrastructures in the economic development of any country can not be overemphasized. Developed and functioning infrastructures are an integral part of developed societies. They are the "locomotives" that drive the economy. They are the backbones or spinal cords of any economy.

However, governments, unlike private investors or companies are both financial and social investors. By this, I mean that governments are also expected to carry out social projects like the the security of our lives and properties, of course, provided that the government is reliable and competent. In addition, the government, unlike private investors or companies that use financial profit as the only yard stick to measure the value of their investments, must also take into consideration other social factors before embarking on any infrastructure. There is the need for a balance between the financial and social aspects. Thus, the other major social factor or criteria that any reliable and competent government must put into consideration before embarking on any project is "the number of its citizens" that will benefit from its projects!

However, if we are to speak "strictly" in financial or investment terms, the government is "almost" like a private investor in the sense that since it costs the government substantial amount of capital to carry out a project, therefore, the more people (citizens) the project benefits, the lesser the "marginal cost" of the project to the government. Subsequently, the higher the value or profitability of the project(s) to its citizens and the government respectively! A government that is able to achieve this result creates a win-win relationship between itself and its citizens. Therefore, the main criteria a competent and reliable government must use in measuring the value of its infrastructure
projects are:

(1) Cost of the project;

(2) Cash flows;

(3) Number of benefactors.

THE ROLE OF INFRASTRUCTURE PROJECTS IN OUR LIVES

Mere stating that infrastructure projects are locomotives that drive the economy, or are the spinal cords of our economy are general assertions. We need to be specific. Infrastructure projects play 3 very important roles in our lives and economy. They include the following:

(I) Infrastructure projects help in raising our standard of living;

(II) Infrastructure projects help in reducing the cost of doing business;

(III) Infrastructure projects are catalysts to growth and development.

Although, to the well informed, the above assertions are obvious and comprehensive and comprehendable enough, without any further explanation. Nevertheless, they must not be taken for their face values. They need to be explained, at least for the benefit of the lay men reading this article.

(I) INFRASTRUCTURE IMPROVES OUR STANDARD OF LIVING.

So, what exactly do we mean by this? Or to be more precise. How do infrastructure projects improve our standard of living? By raising the quality of our lives.

Basic human needs will be used to explain this point. By basic needs we mean things that have great impact on our lives, without which it is practically impossible to live or our lives become unbearable. So what are the basic human needs? They include water, food, shelter, electricity and efficient health service. In his ground breaking book, Motivation and Personality, the great American psychologist, Abraham Maslow divided human needs into 6 different hierarchies. In the lowest hierarchy are the basic human needs: food, water and shelter. According to Maslow, if the needs in the lowest level are not satisfied, it's practically impossible for man to move on to the higher levels or satisfy needs in the higher level.

Water, as the popular saying goes, is life. No water, no life! We need water to cook our meals, to drink, wash our bodies, mouths and clothes, e.t.c. The importance of water in our lives can not be overemphasized. Since about 75% of the human body is made up of water, therefore, in order to keep on living and be healthy, we need to drink not just any water but "clean" water. In order for you to have water in your house, the government needs to build a water reservoirs, cleanse the water and supply it to your house through the pipes. This is not only a capital intensive project but a project that takes quiet a long period to recoup itself. Moreover, the process of cleansing, recycling and distributing water to households is such a sensitive process that is connected with the security of the populace that private companies can not entrusted with such projects. Now, please imagine that the government for one reason or the other has failed in its responsibilities to provide water for you.

Irrespective of whether the government has failed to fulfill one of its
major obligations in providing water for you, nevertheless, you still need water to live. So how do you get water for yourself? What are your options? You have about 3 options. Either you dig a well or go to the nearest river, spring to fetch your water or you buy it. Irrespective of the option you choose to get your water, one thing is certain. All the options are time consuming, physically demanding, stressful and very inconvenient.

What about electricity? Like water, it is practically impossible to imagine life in the modern world without electricity. It'll be no exaggeration to say that life is basically meaningless without electricity in the modern world. The importance of electricity in our lives can not be overemphasized. Electricity has penetrated practically into all spheres of our lives. In order to appreciate the importance of electricity in our lives, try to imagine for a moment that you have gone blind. The role of electricity is so important to the extent that even God started his miracles with the creation of light! Without electricity, all your sophisticated electrical and electronic gadgets are basically useless, and serve more as decorations.

Without electricity, you can't operate your washing machine which could have saved you hours. You are compelled to either wash your clothes manually or pay for them to be dry cleaned. Without electricity, you can't watch your plasma TV. Without electricity, you can't operate your computer. You are not only deprived of the opportunity to watch your favourite TV programs but you will as well find it difficult keeping abreast with national and international events. Moreover, you are denied the opportunity to work from home or use your computer for other productive activities like browsing the internet for valuable information to support your business or work. Subsequently, your output or level of productivity is reduced substantially.

Without electricity or gas, your electric cooker is of no use to you. You will have to rely on fire woods or stove to cook your meals. Without electricity, you are compelled to move around your house with candles or lanterns. Needless to say that inhaling smoke from candles, lanterns, firewood are very harmful to your health.

The alternative is to get a generator. In that case, you will have to spend a substantial amount of your time queuing to buy the fuel to run your generator. But the noise from your generator is very harmful to your health, and in most cases, it is practically impossible to sleep when your generator is on. Your health will eventually break down due to the inability to sleep for uncountable number of nights because of the noise from your generator.

(II) INFRASTRUCTURE REDUCE THE COST OF DOING BUSINESS

Two examples will be used to illustrate this point. The first is
transportation. Transportation business is all about moving as many
goods and people as possible from one point to the other as fast as
possible and with the minimum cost. Supposing you want to set up a cargo
delivery or transportation company, what is the major infrastructure
you'll need for your business? Undoubtedly, the major infrastructure
you will need for your business is a developed and functioning
transportation network. By a developed and functioning transportation
network, I mean large networks of tarred roads, train stations and rail
lines, modern airports, water navigation routes, e.t.c. The ability to
reach your destination at the least time possible, allows your company
to deliver as many goods and/or passengers as possible. Thus, in order to
succeed in the transportation business, a transportation company must
find a balance between the two variables that its cost of operation
mainly depend on: volume of goods/passengers and transportation time.

Therefore, without a developed transportation network, it's practically
impossible to run "efficiently" or "profitably" a cargo delivery or
transportation company. Now imagine a situation whereby there are very
few roads, and they are all practically full of pot holes. Imagine that
the rail network is in a dilapidated state. How will these factors
affect your transportation business? Even to a lay man, the answer to
this question is obvious. What this means is that your fleet of cars,
buses, trucks, trailers, e.t.c. will be stuck for hours in hold ups.
The tyres of your fleet of vehicles will wear out much faster and eventually go burst due to the pot holes on the roads. In addition, there is a very high probability that the goods to be delivered to your clients could also be damaged because of the terrible condition of the roads. As a result, you might need to compensate your clients not only for their damaged goods but they might as well stop patronising you for damaging their goods and for late delivery. Under such a scenario, your expenses in running your transportation business multiplies because you will be compelled to spend more than necessary, under normal circumstances to maintain your fleet of vehicles in order to remain in business. In the long run, your cost of running your transportation business escalates and eats up all your profits. Eventually, your company goes bankrupt and all your employees are thrown into the unemployment market.

The invaluable role of infrastructure in reducing the cost of doing
business could also be explained using electricity. Supposing you are
planning to set up a factory, due to the irregular supply of electricity, you will have to factor into your calculation the high cost of procuring, installing, protecting and maintaining a generator needed to run your machines. Unfortunately, this inevitably increases the cost running your business by at least 30% The economic consequence of this is that your product are not competitive with imported products. In the end, your company shares the same fate with the transportation company previously mentioned in our analysis. In other words, your company will be compelled to fold up because the prices of your products are high thus making them unappealing to the consumers. However, this scenario could have been avoided if the government had invested heavily in the generation, transportation and distribution of electricity. By so doing, the government would have reduced drastically the cost of doing business for entrepreneurs.

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(III) INFRASTRUCTURES ARE CATALYSTS TO GROWTH AND DEVELOPMENT.

This conclusion follows from the 2 previously stated and proved assertions. It supplements the 2 earlier stated positions. In a way, it's like a continuation but not actually a repetition. This point will be explained from two sides.

(A) Personal Level:

What is the difference between our ancestors and the modern man? Today, the measure of progress or standard of living in any developed society is the amount of time and resources an individual expend in order to satisfy his basic needs. In the stone-age, our ancestors spent a substantial amount of the day trying to satisfy the basic human needs. They spent the whole day hunting, cultivating their crops, searching for water, preparing their food, weaving their clothes, building huts, e.t.c. As a result, they were left with practically very little time to devote to other endeavours.

It is very unfortunate to admit that in Nigeria, much has not changed
in this aspect. We still devote a substantial amount of our time, energy and financial resources into getting. basic human needs. This unfortunate fact deprives us of the opportunity of directing our enormous amount of time, energy and resources into self/professional development. Consequently, the level of our productivity as individuals and a society is minimal.

Furthermore, a well developed transportation network provided by the
government allows us to move from one place to the other at the shortest
time possible. Needless to say that the lesser the time it takes you to
move from one place to the other, the more time you have at your disposal for other productive economic and social activities. Millions of hours saved from traffic hold ups allow you to spend more time at work; attend an evening school or training courses for your professional development; spend more quality time with your families; attend more business meetings, sleep for more hours (Which is very useful for your health), deliver more goods and services; devote more time to sports, attend more vocational activities, e.t.c.

Since there is a correlation between output - which in economic terminology is called Gross Domestic Product, GDP, and the level of
development in a country, consequently, the more goods and services a
country produces, the richer its citizens. The richer the citizens of a
country, the higher their standard of living. The higher the standard of
living of the citizens of a country, the higher the quality of their
lives. The higher the quality of lives of the citizens of a country, the
longer the average life expectancy. The longer the average life
expectancy of the citizens of a country, the more wealth they generate
for themselves and the country. The lesser the time an individual
spend on satisfying his basic needs and moving from one point to the
other, the more productive and developed the society as a whole is going
to be - all things being equal.

Modern telecommunications networks also help in saving millions of man hours. With a modern telecommunications network, we are saved the ordeal of travelling from one end of the city to the other in order to get information, only to discover that the information needed is not yet available. Imagine after travelling for about 2.5 hours from one end of the city to the other in order to see a friend, a business partner or bureaucrat only to be told that he is absent and won't be back very soon. You will have to spend another 2.5 hours and money to go back. With modern telecommunications networks, all you need to do is just to call and confirm if or/and when your friend, business partner or bureaucrat will be available. Millions of man hours saved from unnecessary travelling from one place to the other could be spent on more productive activities. And the more time we are able to save from making unnecessary trips, the more productive we are going to be. And the more productive we are, the richer we and the government become. Thus, in this regard, modern telecommunication networks not only make our lives more convenient and meaningful but as well acts as catalyst to growth and development.

BUSINESS LEVEL.

In business, there is what is called "barrier to entry." As the name implies, barriers to entry, are barriers or obstacles that a potential entrepreneur must must jump or overcome in order to set up his business. If a potential entrepreneur is contemplating going into business in Nigeria, he must take into consideration the enormous cost of
acquiring, installing, protecting and maintaining his generators, absence of developed transportation networks, which increases the time it will take him to get to work and the cost of delivering his goods or services to his customers, lack of pipe borne water, absence of effective public security system, e.t.c. All these the above mentioned
are serious barriers or obstacles which are more than enough to discourage a potential entrepreneur from going into business. Standing between him and his dream are the monsters called "dilapidated infrastructures." But if he eventually summons the courage to go into business, the odds are against him in his quest to build a successful business. Thus, by providing modern, adequate and functioning infrastructures, the government not only reduces or removes completely the barriers before potential entrepreneurs intending to go into business but as well increases his chances of succeeding in commerce. The absence of barriers to entry encourage a large number of potential entrepreneurs to go into business. By providing infrastructures, the government helps in stimulating investments and more business transactions. The more businesses that are opened, the more business transactions. The more business transactions the more people are
employed. The more the number of people that are employed, the more goods and services are produced by the populace. The more goods and services that are produced by the populace, the richer the populace. The richer the populace, the lesser the poverty in the country. The richer the populace and society as a whole, the more the amount of taxes the government collects. The more taxes the government collects, the richer the government in general. The richer the government, the more it could afford to spend not only in maintaining existing infrastructures but also in building more infrastructures, hospitals, schools, universities and protecting the lives and properties of its citizens.

In a nutshell, by providing or investing in infrastructures, the government invariably not only provide the catalyst for growth and development, but in a way, is also the biggest co-investor for all potential, existing investors and its citizens. Therefore, from this analysis, we can infer that this scenario is a win-win relationship between a competent and reliable government and its citizens.

Foreign Direct Investment.

In addition to what has been said, it is also worth mentioning that modern and functioning infrastructures play a very important strategic role in attracting Foreign Direct Investment (F.D.I.) to a country. Trillions of dollars are invested by foreign investors in different countries every year. Every country, including even the United States, with the largest economy in the world, directly or indirectly compete for foreign direct investments.

Supposing you are a foreign investor, who is considering setting up a factory in a developing country, what factors will you take into consideration in choosing the country to set up your plant? If you are a shrewd business man, then apart from the tax law, general business climate that operate, the major and decisive factor in in your decision should be the level of infrastructure development in the country. Why? Because as has already been pointed out earlier, modern and functioning infrastructure reduces drastically the cost of doing business.

Thus by investing in infrastructure projects, a country strategically position itself as a serious competitor in the foreign direct investment market. Needless to say that all things being equal, the more foreign investments a country is able to attract, the more people are employed. And the more the people that are employed, the more business transactions. The more business transactions, the more the taxes the government collects. The more taxes the government collects, the richer it becomes.

BUSINESS VALUATION: TANGIBLE AND INTANGIBLE ASSETS

A substantial part of our analysis has been devoted to the importance of infrastructure projects in the lives of the citizens and the economy. In order to illustrate other very important projects, apart from infrastructure projects, that a competent and responsible government must implement in order to for its citizens to get the best out of life and make their lives more meaningful, the concept of business valuation will be used.

Companies usually carry out a business valuation of their businesses whenever a Merger and Acquisition (M&A) is in the offing or are about to go public by selling its shares through an Initial Public Offering (IPO). In business valuation, the assets of a company are divided into 2 parts: tangible and intangible assets. Tangible assets are assets that exist physically and can be seen or touched. They include land, machines, equipments, vehicles, plants, buildings, raw materials, e.t.c. Tangible assets are what the staff or workers use for production. With the exception of land, machines, equipments, vehicles, plants, e.t.c. depreciate in value with time. They include patents, intellectual property rights and most importantly the "human resources" or "professional skills" of the company's personnel.

In a way, infrastructure are like tangible assets that the citizens use for production. The intangible assets are the "invisible" assets of a company. In many cases, they are worth much more than tangible assets. This should not be a surprise. Afterall, it is the knowledgeable employees that design the sophisticated machines, equipments, drugs, made the inventions for the awarded patents, intellectual rights, e.t.c. In non-manufacturing companies i.e. companies that offer only professional services like accounting, auditing, designing, consulting, e.t.c., the value of their skilled personnel is even of more strategic importance. Their knowledgeable staff are their most valuable assets. To be more precise, they are invaluable to their companies because they are the goose that lay the golden eggs. Therefore, it's no surprise that smart and successful companies invest heavily in the training, providing medical insurance and other benefits in order to keep them and attract more employees with very high professional skills.

We can again draw another parallel or analogue between a corporation and a country. The citizens should be the most valuable asset that a country must have; and neither gold, diamonds, oil nor gas. There are a number of countries who are not rich in mineral resources but have managed to build some of the strongest economies in the world thanks to their knowledgeable citizens. To a responsible and competent government, its citizens should be invaluable assets. By stating that the citizens should be the most valuable assets that a country must have, Of course I mean quality and not quantity. I mean well educated and healthy citizens, and not millions of unhealthy illiterates and semi-illiterates. Therefore, it's the responsibility of a competent and responsible government to always strive to increase the value of its citizens.

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INCREASING THE VALUE OF THE CITIZENS THROUGH SOCIAL PROJECTS.

1. Education.

The question we need to answer now is "How can a competent and reliable country or the government increase the value of its intangible assets i.e. its citizens? By making them "more knowledgeable." But how can a competent and reliable government make its citizens more knowledgeable? Before answering this question, we need to answer another question. Why does the government need to make its citizens knowledgeable? Because "Knowledge is Power!" The more knowledgeable a citizen, the more productive he is going to be to his country and himself. And the more productive a citizen is, the richer his country. Obviously, it's a win-win relationship between the state and the citizen. Now, let us go back to our unanswered question. How can the government make its citizens more knowledgeable? By investing heavily in their education from tertiary to university level. What does investing heavily in education involve? Investing heavily in education involve the following:

a. Giving access to as many of its citizens as possible by building as many schools and universities as possible;

b. Equipping old and new schools and universities with modern teaching facilities;

c. Building modern libraries in schools and universities;

d. Paying teachers and lecturers very good salaries in order to keep them and attract more of them with modern;

e. Making education free or affordable to all its citizens.

2. Health Care Programs.

How else can the government increase the value of its citizens? By investing heavily in his health. But why does a competent and reliable government need to invest heavily in the health of its citizens? Because "Health is wealth!" Investing heavily in the health of the citizen make him healthier, and get sick less. And the healthier the citizens, the longer they live. The longer well educated or knowledgeable citizens live, the more productive they are. And the more productive the citizens, the richer the citizens and the government. Another "win-win" relationship between the citizens and a responsible and competent government.

But how can the government make his citizens healthier? By investing heavily in health care programs. What does investing heavily in medical care programs involve? It involves the following:

a. Making sure that as many as possible of its citizens have access to medical care programs by building hospitals all over the country;

b. Equipping all the hospitals with modern medical equipments in order to allow medical personnel carry out their work impeccably;

c. Supplying all the hospitals with drugs;

d. Designing efficient medical insurance programmes that will make medical services affordable or absolutely free for its citizens;

e. Paying medical personnel very good salaries in order to keep them and attract more.

3. Protection of lives and properties.

As was pointed out earlier in this article, one of the main responsibilities of a responsible and competent government is the protection of lives and properties of its citizens. Why does the government need to protect the lives and properties of its citizens? Because the longer the citizens live, the more productive they are. And the more productive the citizens, the richer they and the government respectively. In addition, it's the obligation of the government to protect the properties of its citizens acquired from their sweat.

Citizens look upon the government to defend them, maintain law and other in general. Without law and order, anarchy reigns. Breakdown of law and other is not desirable by the government and its citizens because in such a situation, it's impossible both for the citizens and government to operate optimally or go about their respective businesses. perform. In other words, chaos deprive the citizens the ability to maximize their productivity or output. If the citizens are unable to maximize their productivity, both the citizens and the government get poorer, which undoubtedly is undesirable.

There is also a psychological aspect to this issue. By investing heavily in law and order, which obviously include the protection of lives and properties of its citizens, the government is sending a "strong and pleasant psychological message" to its citizens that their lives and properties are not worthless but are instead invaluable to it. It's a way of telling its citizens that it cares. Undoubtedly, this not only solidifies the bond or emotional attachment between the citizens and its government but also raises the level of patriotism between the two.

Therefore, both the government and the citizens are both interested in maintaining law and order. How can the government maintain law and order? By investing heavily in security. What does investing heavily in security involve? Investing heavily in security include:

a. Organizing and maintaining a well trained police force;

b. Paying the police good salaries in order to keep and attract more eligible personel;

c. Providing the police with modern and adequate equipments in order for them to carry out their responsibilities impeccably.

THE PECULIARITY OF SOCIAL PROJECTS.

In a way, social projects can be compared to the invisible sophisticated software program that runs a computer. Without the software, the computer is practically of little value. The main distinction between social, infrastructural and private projects is that social projects take much longer to recoup, and the emphasy is on man power development and the welfare of the citizens. Apart from the cash flows of an investment project, private investors also take into consideration the payback period or the time it will take to recoup their investments. Since private investors normally are very reluctant to take on projects that take more than 5 years to recoup. In addition, social projects, like infrastructure projects, in most cases are capital intensive. For example, it takes about 14 years of studies in order to be a graduate. A reliable and competent government must ensure that the citizen is healthy throughout the 14 years of his studies and afterwards so that he can be productive to the society and the investment made on him recouped. Therefore, citizens rely on their government to take on such projects.

TO BE CONTINUED ...