African transport infrastructure, trade and competitiveness

The Trade and Development Board recognizes that :

1. A major problem preventing Africa from achieving sustained growth and sustainable development is the lack of investment in human and physical infrastructure. The transport sector is among the most important elements of physical infrastructure. However, capital investment in this sector has been squeezed during the past 20 years. Existing infrastructure has also suffered from lack of maintenance, owing inter alia to paucity of resources.
2. While there is a case to be made for greater participation by the private sector in transport infrastructure development, private investment is still limited.
3. The relatively high cost of transport has seriously undermined the competitiveness of African exports and contributed to increased prices of key imports, thus adversely affecting the balance-of-payments positions of African countries. This has been exacerbated by the high level of foreign exchange payments for transport services, which are particularly high for sub-Saharan Africa and especially the landlocked countries among them. High transaction costs, including customs procedures, are also contributing factors.
4. Poor rural transport systems have adversely influenced specialization and market development as well as the national and international tradeability of goods. The weak supply response of African smallholders to policy reforms reflects, inter alia, the poor rural transport infrastructure and a lack of access to markets.

The Trade and Development Board considers that :

1. Private finance in transport infrastructure offers a welcome new source of investment. It can make a useful contribution in public-private partnerships, which need a predictable national and international environment. Risk perceptions and the need for sufficient and predictable returns on investment limit the types of assets and locations to which such resources are attracted. Multilateral financial institutions, in accordance with their rules and regulations, can be helpful in providing long-term finance and credit guarantees in order to enable countries to tap capital markets. In this context, there is a need to diffuse best practices between investors, regional development banks and other financial institutions, and to make every effort to overcome exaggerated perceptions of risk which deter private investment in commercially attractive products.
2. One role of the government could be to facilitate market forces by adopting a strategic perspective on infrastructure rehabilitation and development, including by identifying profitable projects in which the private sector might get involved. National policies should also continue to improve, and where needed create, an enabling regulatory environment for encouraging private sector financing, including foreign direct investment.
3. However, in the light of the limitations on private participation in infrastructure development and maintenance, the role of public finance remains crucial. African countries need policy flexibility for mobilizing sufficient public finance to meet transport infrastructure requirements without creating excessive fiscal deficits or harming incentives. There is a need to adopt principles of cost recovery, but due attention has to be given to any adverse effects on users of transport services, prices of tradeables and competitiveness. Cost recovery should be enhanced by measures which aim to reduce infrastructure financing costs.
4. There is an important role for ODA in infrastructure financing, including as a catalyst for the attraction of foreign investment and as a means of promoting rural development. The fall in the levels of ODA flows in real terms continues to be a cause for concern, and donors are invited to increase the level of ODA in accordance with internationally agreed targets. Efforts should be made to untie official development assistance, as the frequent practice of tying aid in infrastructure development may tend to undermine international competition in procurement and may increase costs and lead to the installation of inappropriate equipment.
5. A heavy debt burden and lower export earnings from falling commodity prices are important external factors that limit the possibility of national Governments to raise sufficient capital for much-needed investments in the transport sector. The recently enhanced heavily indebted poor countries initiative (HIPC) arising from the Cologne Summit is indicative of the faster and deeper debt relief required in order to assist African countries to invest in human and physical infrastructure development. Equally, better access to markets for products of export interest to African countries is required in order to generate income for investment.
6. African countries have long recognized the vital role of regional cooperation and integration in facilitating intra-African trade and export competitiveness and in creating economies of scale. Such cooperation and integration are particularly important for creating complementarity of interests between landlocked and coastal countries. Practical measures to facilitate regional and subregional cooperation in transport infrastructure development in Africa include strategic convergence of regulatory regimes and effective cross-border coordination. Multilateral financial institutions are invited to increase their share of financing of regional and subregional projects.
7. The Trade and Development Board welcomes the incisive and relevant study on African transport infrastructure, trade and competitiveness undertaken by the UNCTAD secretariat (TD/B/46/10) and encourages the secretariat, within its mandate, to continue its analysis of the development problems of African countries, as well as its technical cooperation activities aimed at reducing transaction costs, such as the Advance Cargo Information System (ACIS) and the Automated System for Customs Data (ASYCUDA), as UNCTAD´s contribution to the implementation of the United Nations New Agenda for the Development of Africa in the 1990s.

908^th plenary meeting
29 October 1999