Trade and Development Board executive session debates "Financial crisis, macroeconomic policy and the challenges of development in Africa"
Geneva, 8 July 2010 -- African countries should take steps to transform their economies as they emerge from the global recession so that they can grow in stable fashion and are less vulnerable to future downturns, experts said at the Trade and Development Board´s (TDB) 50th executive session this afternoon.
UNCTAD´s Secretary-General and three African economic officials said the shock of the world financial crisis has given nations on the continent a strong reason to shift towards greater industrial capacities, improved infrastructure, and expanded regional relations, and increased economic ties with developing countries overseas.
They said achieving such progress requires enlightened government action to revitalize domestic markets and participation in international commerce, and that better mobilization of in-country resources -- that is, funding that is less vulnerable to outside shocks -- should be combined with aid and other international support to reach this goal.
"Together with liberal market mechanisms, we need to build up states with strong institutions that can create enabling environments for business, economic growth, and economic recovery to take hold," Secretary-General Supachai Panitchpakdi said in opening the discussion. "That will help Africa build up its resistance against crises that could recur." Governments will have to "pave the way to create enabling circumstances" that will support industrialization, job creation, and increased demand for more sophisticated goods as incomes rise, he said.
The Secretary-General said that while African economies enjoyed growth rates averaging some 6% annually from 2003-2008, growth dropped to 1.2% in 2009. Because of population expansion, that meant that income per capita actually declined.
African trade with other developing countries - so-called "South-South" trade - has been a bright spot, he added, noting that these South-South exchanges have held up fairly well during the crisis.
The one-day TDB session was devoted to discussion of UNCTAD´s activities in support of African development.
An afternoon panel discussion focused on the issue of "financial crisis, macroeconomic policy, and the challenge of development in Africa."
Linah Mohohlo, Governor of the Bank of Botswana, told the meeting that the economic crisis had revealed once again that it is important for developing countries to have their own economic and financial houses in order. Although recovery from the recession was losing momentum, especially in Europe, sub-Saharan economies were proving more resilient than expected. It was predicted that growth in the region would accelerate to 5 % in 2010. A number of countries had been able to implement strong counter-cyclical policies, which had helped them to weather the downturn.
To buttress Africa´s development efforts, international mechanisms should be put in place that are reliable and sustainable, Ms. Mohohlo said. Africa´s representation in international economic and financial institutions should be enhanced; trade barriers affecting African exports should be lowered; and, above all, Africa should proceed in the process of taking charge of its own development agenda, she said.
Prof. Akpan Ekpo, Director-General of the Lagos-based West African Institute for Financial and Economic Management, said Africa, of course, was not the cause of the crisis, but Africa had felt the crisis´s impact to such an extent that a number of its countries would not be able to meet the Millennium Development Goals. There were great variations from country to country. Lessons from the downturn are that it is important to restore confidence, to take steps to secure sufficient banking liquidity, and to take counter-cyclical measures to limit drops in demand. In sub-Saharan Africa, the role of the state should be "developmental," Prof. Epko said. "It should go beyond creating an enabling environment" to include boosting "hard and soft infrastructure" such as, respectively, transportation facilities and education, and it should help countries establish viable industrial sectors.
Imperatives for post-crisis growth in Africa include steps to strengthen financial institutions such as banks; to improve access to credit and the transparency of financial and economic institutions; and to build up existing social "safety nets" so that domestic populations are less vulnerable to convulsions in the international economy, Prof. Epko said. He added that African countries should strengthen regional trade and financial arrangements so that "robust" regional markets develop that can underpin the continent´s economies in times of stress.
Prof. Olu Ajakaiye, Director of Research at the African Economic Research Consortium, in Nairobi, told the meeting that spillovers of the crisis for Africa had included rapid declines in trade and foreign direct investment, and a constriction in aid that had taken effect more slowly. Although the downturn seems to have "bottomed out," there is a risk of a double-dip recession "and it is not a small one," he said. A number of African nations had rapidly put counter-cyclical policies into effect, but those which had benefited from the earlier commodities boom were in a better economic position to do so.
Risks now facing the continent include a perpetuation of Africa´s dependence on commodities and "crude material production," Prof. Ajakaiye said. "If we continue that way, we´ll worsen our vulnerability to another crisis." Instead, he recommended state leadership that is "pragmatic" and that is "free" - that does not leave African countries vulnerable "to markets alone" and that invests in broadening economic capacities and invests in the education and training of Africans. Economic crisis are happening more and more frequently, he said. "Other ones are going to come. Let´s get ready."
In the course of moderating the debate, TDB President Jean Feyder, Ambassador of Luxembourg, told the meeting it is vital for African nations to proceed in "adding value" to the commodities they long have exported - more highly finished products can help countries expand their economic capacities and can yield better returns in terms of profits and job creation. Governments can boost such transformations, among other things, by supporting the building of much-needed infrastructure, he said. He added that market access for African countries should be improved and good governance enhanced.
National delegations contributing comments from the floor said among other things that African governments need to better manage natural resources so that income from commodities is effectively employed to broaden the capacities of the continent´s economies; that price stabilization programmes and social safety nets in African nations were in many cases dismantled under the economic theories prevailing during the last decades of the previous century; that UNCTAD could play a more extensive role in helping African countries draft national policies to reduce dependence on external development assistance; that regional integration in Africa can make a significant contribution to economic growth; that progress useful to developing countries is needed in multilateral trade negotiations; and that Africa is often "held hostage" by economic actions and decisions taken elsewhere in the world.
