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Africa in the World Economy

Date
Time (GMT +01) 16:30 18:00

Speaker:
Barry Coates - Director, World Development Movement (UK)
Chair:
HE Isaac Osei - Ghanaian High Commissioner (UK)

  1. Barry Coates welcomed the opportunity to talk about the New Partnership for Africas Development (NEPAD), an initiative that is being placed at the heart of political and economic relations between the rich world and Africa. The talk (as well as the entire series of talks) was timely because there is still a lot that is fluid and able to be changed.
  2. There is no NEPAD as yet. In a sense, in his view and that of some other NGOs, there are a myriad of NEPADs. What NEPAD is depends a lot on how one perceives the political and economic relations that NEPAD addresses. There are many different perspectives that can be brought to bear.

  3. NEPAD comes at a time when many of the governmental policies that are driving the process of development in globalisation are under unprecedented scrutiny. Barry Coates identified three contexts as important for examining the role of NEPAD and how it can help African economies, in particular, fit into the world economy.

    1. The 2001 UNCTAD Trade and Development Report undertook a review of Africa's development over the past 20 years and concluded that the past 20 years have been dominated by the economic instruments of structural adjustment programmes (SAP) that were adopted under the tutelage, if not mandate, of the International Monetary Fund (IMF) and the World Bank. (Although there are arguments about the degree to which African governments have actually implemented all of the conditions of SAP, it is generally recognised that these have been the dominant economic policies.)

      • The report added that the period under which these policies were operated saw a fall in per capita income in sub-Saharan Africa of around 10 per cent per annum. Putting this into a historical context, Barry Coates stated that this was worse than the fall in income over a decade of any Western country under the Great Depression.

      • The key issue then is that NEPAD comes at a time of crisis. Therefore, Prime Minister Tony Blair is to be applauded for taking this kind of initiative and driving it forward, and subsequently to be joined by some of the leaders of the G8 countries. Also, the African leaders are to be applauded for saying that a new vision, a new approach and a far more profound economic relationship between the north and south are required.

      • However, there is increasingly the question as to whether or not the bases of Africa's future and development have been laid by the policies of adjustment programmes that have been followed in the past, or whether in effect these policies have seriously damaged Africa's human and productive infrastructure.

    2. The second context refers to recent happenings in the global economy with regard to not only the fall in commodity prices and the continued dependence of African nations on natural resource based commodities, but also to the fall of prices of low wage manufacturing, like textiles and clothing, footwear and leather goods. Where previously, countries would use low wage manufacturing in order to get a step up the development rung, as the UNCTAD report points out, these manufacturing industries are now subject to the same kind of declining prices experienced in commodities. The report also talks about changes in the world economy where the value added in these and other industries is increasingly being captured by networks of Multinational Corporations (MNCs), with the result that growth of trade is not matched by growth in value added. Therefore, what countries do vis--vis these MNCs becomes vital for their future development.

    3. A third context is set by the 2001 study of the Council on Economic Policy Research (United States). Using IMF data, they compared two time periods: 1960-1980 and 1980-2000 (the era of globalisation). Among their findings was that per capita income for sub-Saharan Africa grew by 36 per cent between 1960 and 1980, but fell by over 10 per cent in the subsequent period. (The report also addressed Latin America and parts of Asia.) The conclusion of the report was that the countries (like the Asian Tigers) that had done well out of the globalisation era were those who were able to set their terms of entry into the global economy. Such countries had managed during the crucial development phase to retain a highly regulated base for their economy and an interventionist set of government policies. Barry Coates noted that increasingly, those policies have been ruled out for use by today's developing countries in international trade agreements and through structural adjustment programmes.

  1. Against the above contexts, what can NEPAD do? Barry Coates identified three key areas: international trade, debt and investments.
    1. Understandably, there is great reluctance from the G8 leaders, who are the primary interlocutors with African nations on NEPAD, to give trade concessions in NEPAD while there are ongoing trade negotiations in the World Trade Organisation (WTO). The WTO ministerial meeting in Doha in November 2001 set a development agenda for trade negotiations, which are underway at the moment. Those trade negotiations are to a certain extent a rerun of many of the bitterly contested issues (textiles and clothing in particular, and agriculture) that were negotiated in the Uruguay round of trade negotiations that was completed in 1994. What can the industrialised nations, particularly the G8, do especially in many of the areas where African nations will be looking at substantive concessions? Obviously they could, and should open their markets to exports from developing countries and end the damaging agricultural subsidies without demanding concessions for doing so. However, it became clear at Doha that the G8 would demand that developing countries pay again for the broken promises of the Uruguay Round. This presents the G8 leaders with a problem they have little to deliver because they are using their unfair trade policies as a bargaining chip, yet trade will be seen as a key test as to whether NEPAD is serious and is going to deliver.
    2. African leaders have called for debt cancellation to be fast tracked as part of NEPAD. There is an ideal opportunity for the G8 leaders to do so with first the G7 Finance Ministers meeting (June 2002) before the G8 summit. According to a report released at the spring (2002) meeting of the IMF and World Bank, almost half of the countries that have gone through the initial process of HIPC have slipped back below the debt sustainability ratios. HIPC is failing to put African nations on a sustainable development path. NGOs have been calling for a reversal of the debt sustainability criteria, to start off with ensuring there are sufficient financial resources for African nations to meet the millennium development goals, which includes to reduce by half the number of people living in absolute poverty by 2015. The choice for the governments that are the major shareholders of the IMF and World Bank is either to agree to deep debt cancellation or bear a share of responsibility for the likely failure to meet the millennium development goals. This is a stark choice the G8 leaders need to be reminded of.
    3. Perhaps the major economic focus of NEPAD is on investment and private capital projects. This is an area in which there has not been much publicly available information on what has been discussed behind closed doors. NEPAD's agenda emphasises the degree to which African societies need to be re-shaped and re-structurally adjusted in order to become a more friendly environment for foreign investment. However, there are trade-offs with the powers of governments to intervene in markets to promote the public interest. Similarly, there is a danger that, under the rubric of promoting foreign investment, African governments will sacrifice their rights to use many of policies to promote domestic industry that have been used by other rich and emerging societies during their development.
  2. While it is not a focus of this seminar, it should be noted that NEPAD will include a major focus on peace and security, conflict resolution and conflict prevention. One important step would be commitment by all the G8 nations to control the flow of small arms trade into sub-Saharan Africa.
  3. There are said to be 40 different plans for Africa's development gathering dust on the shelves. Why will NEPAD be different? It comes down to two key issues: selectivity and peer-based conditionality. Selectivity was initially defined as being a way in which the G8 donors could give substantial amount of resources to between six and eight African countries who fulfil certain criteria deemed by donors such as the US to constitute good policies. Coates drew attention to the potential dangers of a new form of conditionality that is likely to be embodied in NEPAD. Who defines what the policies are? To what extent are those policies more reflective of the views of the donors than of the African countries themselves? To what degree will those development policies end up channelling resources to those countries that need them the least and not to those that need them the most?
  4. This raises the fundamental question about who owns NEPAD. A recent conference of NGOs in Africa, organised jointly by the Council for Development and Social Science Research in Africa and Third World Network Africa, noted that the civil society has not been centrally involved. The conference declaration highlighted the fact that the NEPAD document embodies policies that extend the liberalisation paradigm that has been so questioned in sub-Sahara Africa's experience with structural Adjustment programmes over the past 20 years. The voices of Africa, as previously expressed through initiatives such as the African Alternative Framework to Structural Adjustment, have been squeezed out of this initiative essentially before it has even been subject to any consultation.
  5. The following issues were raised during the discussion:
  • There is one NEPAD and not a myriad of NEPADs.
  • Partnership implies a certain amount of reciprocity, mutual respect and equality. Where there is a huge gap in the power controlled by one arm, there is a danger of the partnership being abused by the dominant power to serve its own ends. Therefore, if there is to be any substantial change between the rich countries and sub-Saharan Africa, there has to be a new framework for this relationship; one based less on power and more on such principles as mutual respect. Thus, an important role for the civil society in the north is to put their governments under such pressure so as to avoid an abuse of the kind of spirit of partnership that should be at the heart of NEPAD.
  • Barry Coates emphasised the need to understand that there is no single economic model for Africa, but rather there are a plethora of potential development paths for different countries. There is concern that NEPAD is further going down the line of providing a blueprint of the economic policies that would apply to all countries, instead of recognising the importance of diverse economic policies that correspond to the diversity of economic, ecological and socio-cultural histories.
  • Africa should look to its own strengths. NEPAD should focus on promoting intra-Africa trade as an important instrument of growth.
  • Although NEPAD may have its problems, the concept of an African-led strategy is important. With an equitable framework, such a strategy can be made to work and should be supported.

Maureen Ofili

Description

This event discuss Increased and high-value-added exports that are crucial to Africa's development and how the international trading system works against these outcomes. It also discusses what options African countries have as they attempt to increase their share of world trade and range of exports?