Economic Development in Africa
Ladies and Gentlemen,
It is a great pleasure for me to welcome you to today´s session on Economic Development in Africa. As you know, ever since most African States have gained independence in the 1960s, Africa has remained the continent that has benefited least from the globalization of trade and investment. Indeed, when the Secretary-General of the United Nations came to address the TDB in March, he referred to Africa as the continent that is experiencing a "development emergency". Dealing with this emergency and supporting Africa´s development has been at the core of UNCTAD´s mission ever since its inception.
Our broad mandate in this area has been reaffirmed and strengthened in the Accra Accord, which has asked us to promote action at national, regional and international levels to accelerate African development and allow a fuller participation and beneficial integration of African countries into the world economy. We in UNCTAD remain fully committed to this mandate and to promoting African development.
Today, we will discuss our latest Report on Economic Development in Africa, entitled Export Performance Following Trade Liberalization: Some Patterns and Policy Perspectives. I will leave the detailed presentation of the analysis and findings to my colleague, Mr. Ouane, the Director of the Division for Africa, Least Developed Countries and Special Programmes. As mandated by the Accra Accord, the Report is a stocktaking of past experience with development policies in Africa, with the aim of extracting lessons learnt and drawing policy conclusions for the future.
Let me only say a few words about its key findings and messages.
This report is a strong empirical vindication of a policy message that has been at the heart of UNCTAD´s advocacy for many years, if not since our foundation. And this message is that generating export growth requires more than just trade liberalization. Indeed, for trade liberalization to bear fruit, it needs to be complemented by domestic development policies and international support measures.
The report shows that one of the key obstacles to export growth in Africa has been the lack of an adequate supply response in agriculture and manufacturing.
As you know, we have often emphasised the need for such supply capacities to take advantage of export opportunities from trade liberalization. But such capacities are equally needed to fully exploit the benefits of domestic trade liberalization, and to support the structural transformation it is supposed to bring about.
Let us remember that after two decades of import-substituting industrialization, many African countries liberalized their trade regimes. This was recommended by mainstream economists and international financial institutions, because it was thought to bring about lower prices for imports, and thereby shift the incentive structure towards greater production of goods for exports, which were seen as more efficient.
It was also hoped that it would bring greater investment, which in turn would generate transfer of technology, knowledge spillovers and efficiency gains. African countries therefore liberalized - both autonomously, through structural adjustment programmes, multilaterally and in the context of regional integration agreements. Overall, trade liberalization was seen as a tool to create the enabling environment needed to bring about a structural transformation of the economy towards export-oriented production.
Of course, African exports increased, but they continued to fall short of the export-growth achieved in the rest of the world. Africa´s share in global trade has dropped from 6% in 1980 to about 3% in 2007. And the expected transformation of the economy also did not materialize.
Even in recent years, when a commodity price hike should have benefited African commodity exporters on world markets, the African share in global trade increased only marginally. Africa´s share in global FDI flows have also remained at a mere 3%. And if we take into account that prices of African exports actually increased by about 17% per annum between 2001 and 2006, this marginal increase in value terms may hide an actual decline in volume terms.
As far as agricultural exports are concerned, despite some positive developments and diversification into high-value products in a few countries, African countries remained by and large very small players, and their exports remain overwhelmingly concentrated in traditional bulk commodity exports. Many African countries which were net-food exporters in the 1980s have become net-food importers.
Export growth in the manufacturing sector has also been limited, and most African exports come from South Africa or the North African countries.
The report demonstrates that this inadequate export growth has largely been due to domestic structural and institutional constraints, including infrastructure constraints. The development of competitive productive capacities, buttressed by strengthened support infrastructure, is thus a sine qua non condition for trade reforms to bear fruits. These needs are particularly strong in Africa, and need to be addressed by the international community, as well as African policy makers.
This is a message that UNCTAD has stressed time and again. Indeed, it is the same lack in supply capacities that has played an important role in the current global food crisis, acutely felt in Africa.
So what are the complementary policies needed to strengthen Africa´s export performance? Mr Ouane will address these in more detail in his statement. But in broad terms the Report proposes a variety of measures from addressing the supply side constraints, reforming socio-economic institutions, promoting diversification towards higher value added products, moving beyond commodity-dependence, to encouraging effective private sector growth and participation.
These recommendations are not new, but their centrality to development and trade growth is only beginning to be fully recognized.
Let me therefore close by making some suggestions on how these policies could be introduced through regional and international initiatives, such as through NEPAD, and the EPA negotiations.
Within the framework of the New Partnership for Africa´s´ Development (NEPAD), a number of specific initiatives are already envisioned on infrastructure development, promotion of the agriculture sector and the development of the manufacturing sector. On agriculture - one the priorities of the NEPAD - a number of actions could be implemented to improve productivity, the institutional environment and to involve bilateral donors and multilateral institutions to return Africa to its old status as a net exporter of agricultural products.
The need to overcome supply-side constraints should also feature prominently in the Economic Partnership Agreements currently being negotiated between the ACP countries and the EU. More specifically, this means that EPA´s with Africa should include a package of additional development assistance for supply capacity building and adjustment costs.
Our findings also once more stress the central importance of Aid for Trade. Indeed, for Africa Aid for Trade may even be more important that further market access opportunities from the Doha Round. Nevertheless, a development-oriented outcome of the Doha Round that meaningfully addresses the concerns of African countries could still strengthen the African participation in world trade.
Finally, I would like to highlight the potential for regional cooperation in addressing these constraints. Here, it is important to improve regional planning, coordination, and financing mechanisms, and develop modern trade infrastructure, especially in African regional economic communities, under the auspices of the African Union.
As always, UNCTAD stands ready to assist African countries in their efforts overcome these crucial supply constraints, and to thereby free the way for Africa to become an equal partner in the world trade and the global economy.
In this context, let me mention briefly that UNCTAD has signed a Memorandum of Understanding with the African Union during UNCTAD XII, which will serve to strengthen our cooperation in working to support the development needs of Africa.
Thank you very much.