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Africa: UNCTAD Board urges closer international cooperation

by Chakravarthi Raghavan

Geneva, 24 Oct 2000 -- The Trade and Development Board (TDB) of UNCTAD, at its just concluded 47th session last week has urged closer international cooperation to ensure sufficient investment in human capital and social and physical infrastructure of Africa.

In agreed conclusions on the UNCTAD Contribution to the implementation of the United Nations new Agenda for the Development of Africa in the 1990s, a sessional committee of the Board chaired by Amb. Mrs.Fayza Aboulnaga of Egypt, said that Official Development Assistance (ODA) remains an important source of external financing in Africa at present.  Despite efforts by African countries for more efficient and better use of aid, such flows have continued to decline over the past decade. ODA is now less than one-third of UN targets, and “efforts must be made to increase ODA in line with these targets, and to maintain a substantial level of ODA flows for a sufficiently long period in order to fill the investment gap,” the Board said.

Africa needs an average annual growth rate of atleast six percent to achieve sustained and sustainable economic growth and equitable development, increase incomes and eradicate poverty. Sustained economic growth is a necessary condition for poverty reduction, and this must be complemented by a conducive national and international economic environment and a range of social investments and institutional reforms.

In the long run, domestic savings should be the main source of domestic investment. However, despite significant policy reforms carried out by a number of African countries, current levels of savings and investment in Africa are too low to ensure sufficient investment in human capital and social and physical infrastructure. Measures must be taken to fill this investment gap, and these measures could include increased foreign capital flows, private and official aid, and institutional reforms to reverse capital flight. In this regard closer cooperation at international level is required.

The Board noted that despite extensive efforts by African countries to attract and promote FDI, such flows have stagnated at a level of 1.2 percent of global FDI flows, and even that concentrated in a small number of countries. Despite recent slight increases in total flows of FDI to Africa and on the basis of past and current trends, these flows are unlikely to fill the resource gap in the foreseeable future. FDI in Africa should be encouraged through, inter alia, the promotion of cooperation between industrialized countries and Africa, and efforts made to mitigate the undifferentiated negative perception that is preventing the reforming countries from reaping the full benefits.

Underscoring the role of macro-economic stability, rule of law and predictable macroeconomic policies for mobilizing domestic and international financial flows, the Board said that financial resources commensurate with the needs of Africa’s development were required, and sustained efforts should continue to be made to create necessary conditions for increasing FDI and mobilizing international and external resources.

Concessionary resources of ODA type were required to address as a priority the structural rigidities that constrain Africa’s development efforts, especially the development of human resources capacities and poverty alleviation, as well as extension of physical infrastructure and production capacities, the Board said. ODA, the agreed conclusions said, remained an important source of external financing in Africa, and despite efforts of African countries for a more efficient and better use of it, such flows have continued to decline in the past decade.  Current ODA flows represent less than one-third of the UN targets.  Efforts should be made to increase ODA in line with these targets and maintain a substantial level of ODA flows for a sufficiently long period in order to fill the investment gap. Over the longer term, private capital flows and domestic savings should replace official financing, thereby reducing the aid dependence of African countries.

The Board’s agreed conclusions called for incorporating increased official flows into a comprehensive development approach and include other measures such as swift and effective reduction of Africa’s debt burden. Debt relief assistance, the Board agreed, should not be provided at the expense of other ODA flows. In spite of various efforts to address the debt crisis, Africa’s external debt has growth at a very high rate. The Heaviily Indebted Poor Countries (HIPC) initiative and the goal of bringing an additional 10 HIPCs to decision point by end of the year was a welcome development, the Board said and noted the recommendation of the UNCTAD Secretary-General for immediate suspension of debt service payments for HIPCs undertaking reforms, with no additional interest obligations being incurred in consequence.

A comprehensive approach to the development of African economies, the Board said, would be significantly assisted by greater market access for African exports and by the transfer of technology. And for African countries to take full advantage of market access opportunities, associated with positive externalities, it is imperative to enhance productive capacities and reduce supply constraints.

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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