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Africa: ECA Calls for Developmental States
AfricaFocus Bulletin
Mar 31, 2011 (110331)
(Reposted from sources cited below)
Editor's Note
"What is certain is that, as with the successful growth and
development experience of many countries, the state has a key role
to play in economic diversification and structural transformation
in Africa. It is therefore important for the state that is
accountable and responsive to the needs of its population to assume
its developmental responsibility and guide sustainable social and
economic development in African countries." - Economic Commission
for Africa
This observation, from the annual Economic Report on Africa (ERA)
released by the Economic Commission for Africa this week, may seem
unremarkable. But it represents a significant marker of recent
shifts in development thinking in Africa. The report decisively
rejects both free-market fundamentalism of the "Washington
Consensus" and exclusively state-controlled development as failed
models. In contrast, it highlights the need for state planning,
democracy, accountable bureaucracies, proactive industrial policy,
and other state initiatives, as well as the critical roles of
private sector and civil society engagement.
As with all such highly general prescriptions, the implementation
of this call for "developmental states" is both complex and
problematic. And reading this report one feels that repetition of
the "developmental state" mantra is likely overdone, as compared
with relatively little attention given to the obstacles to the
emergence of such states, of which the authors are undoubtedly well
aware.
This AfricaFocus Bulletin contains excerpts from two of the press
releases on the meetings of experts and ministers at which the
report was launched, as well as brief extracts from the report
itself.
The full report is available at http://www.uneca.org/era2011
Additional background from the joint AU and ECA meeting of
ministers of economy and finance is at
http://www.uneca.org/cfm/2011/index.htm
For previous AfricaFocus Bulletins on economic issues, visit
http://www.africafocus.org/econexp.php
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Consensual Framework on Role of State in Governing Development in
Africa Emerges from Experts' Meeting
African Union / Economic Commission for Africa
28 March 2011
http://www.uneca.org/cfm/2011/index.htm
Addis Ababa, Ethiopia 26 March, 2011 (ECA) - A draft consensual
framework on the role of the State in governing development in
Africa emerged from two days of deliberations on this year's theme
of the Joint Annual Ministerial Meetings of the African Union
Conference of Ministers of Economy and Finance and the ECA
Conference of African Ministers of Finance, Planning and Economic
Development, according to ECA's Information and Communication
Service.
Economic, financial and development experts had been meeting here
since Thursday in preparation for the ministerial meetings which
open in Addis Ababa, Ethiopia on 28 March, 2011 under the theme
"Governing Development in Africa: The Role of the State in Economic
Transformation".
Recommendations by the experts that will be tabled for discussion
by the ministers during the conference are now being fine-tuned,
sources indicate.
For two days, experts examined the role of the State in the context
of globalization and free enterprise and arrived at the conclusion
that State intervention in the economic development process does
not imply nationalization of the private sector, which in any case,
remains an essential driver of the development process.
In one of the marathon sessions yesterday, two leading African
economists used historical perspectives and concrete modern day
examples to allay the concerns expressed by some participants as to
the "dangers" inherent in what they called too much State powers in
the productive sector of the economy.
Messrs Emmanuel Nnandoze and R‚n‚ Kouassi, respectively Director of
Economic Development and NEPAD Division at the UN Economic
Commission for Africa (ECA), and Director of the Economic Affairs
Division at the African Union Commission, explained that in the
context of scare investment resources that characterize most
African economies, sustained economic growth would be near
impossible without States taking the lead, or at least playing a
major role.
But that was not the central argument Nnandoze pushed through to
justify calls for State participation in development initiatives.
In a highly applauded presentation, he outlined a number of key
areas in which no other stakeholders could play a better role than
the State - infrastructural transformation, the formulation of
suitable taxation laws, public/private partnerships, the use of
national development plans, as well as a judicial system in which
investors and citizens have faith.
This is why he underscored the key facilitator role of the State,
while cautioning that "we are not recommending copying exactly what
China, South Korea or Malaysia did, because the historical and
contemporary conditions are not necessarily the same."
Although Africa grew on average by 4.5 percent in 2010 up from 2.3
percent in 2009 and will most likely maintain steady growth of
about Five percent in 2011, governments and development partners,
including the ECA are worried about the sustainability of that
growth, observers say.
...
Growth does not Happen by Chance... It is planned, Nurtured and
Sustained - UN Official
The Director of Economic Development and NEPAD Division at the UN
Economic Commission for Africa (ECA), Mr. Emmanuel Nnandoze told a
press conference in Addis Ababa on March 24 that growth and
economic prosperity do not happen by chance, they must be planned,
nurtured and sustained to be bring real change in the lives of
ordinary citizens.
The press conference followed a 1 day media workshop to familiarize
the wide cross-section of African media with the critical issues to
be presented at the Fourth Joint Annual Meetings of African Union
Ministers of Economy and Finance and the ECA Ministers of Finance,
Planning and Economic Development.
The Information and Communication Service (ICS) of ECA report that
Messrs R‚n‚ Kouassi, Director of the Economic Affairs Division at
the African Union and Emmanuel Nnadozie, briefed the media on the
essential messages of the 2011 edition of the Economic Report on
Africa (ERA2011) - a report to be released this week on Africa's
economic performance for 2010 and projections for the coming years.
The two officials acknowledged that Africa was set on a new path of
growth, the only continent with a projected growth rate of about
five percent this year.
However, this situation does not call for immediate celebration
because many efforts still need to be made to ensure that such
growth has a noticeable impact on poverty reduction because
ordinary people are yet to feel this upbeat economic posture.
While Mr.Nnadozie called for guarded optimism, Mr. Kouassi advised
that measures had to be taken to ensure that this upward trend is
sustainable for, he argued: "there is no point registering a
positive growth rate in a year and dropping the next year just
because adequate measures were not taken to ensure that the status
quo is not only maintained but that growth actually continues."
For Nnadozie, the State must be in a more proactive posture by
providing an enabling environment for growth. This can be done by
ensuring that institutions are strong,
while incentives such as good taxation policies and improved
governance are put in place. In the opinion of the two officials,
Africa must step up its productive capacity and try to conquer new
export markets.
This Fourth Annual Joint Meetings will be addressing the role of
the State in promoting equitable and clean economic development.
In answer to a question as to whether proposals of ERA2011 are
tantamount to a re-nationalization of key production apparatus in
Africa, both Nnandoze and Kouassi stressed that the initiative was
not about nationalization, at all.
"What the report calls for is greater involvement of the State in
matters that are exclusively of its domain, such as the taxation
system, the provision of essential services such as good transport
systems or reliable energy supply, which accompany development,"
they said.
Nnadoze argued that broadening the tax base, so as to avoid a
situation where very few overpay, will help inject more money into
the economy and spur growth. The recent cases in Europe where the
State ran to the rescue of countries such as Greece, Ireland and
Portugal were used as illustrations to justify the desire to see
the State get better involved in the running of African economies.
It is a known fact that Africa grew by an average of 4.5 percent in
2010 up from 2.3 percent in 2009 and will most likely maintain
steady growth of about Five percent in 2011. However, there is
concern as to whether such growth could be sustained for a full
decade, a condition for the benefits of growth to become
perceptible and palpable.
Economic Report on Africa 2011
Governing Development in Africa
[excerpts from Chapter 6. Full publication available at
http://www.uneca.org/era2011]
6.1 The state, economic diversification and structural
transformation in Africa: The need for diversification and
transformation
How to promote high-level, sustained, inclusive and clean economic
growth has been a main focus of African countries for decades.
Africa's high growth rates have not translated into high levels of
employment and reductions in poverty. They are also quite volatile,
especially in sub- Saharan Africa.
From about 1960 to the early 1970s, the continent's growth
performance was similar to that of other developing regions. During
1973-2000, however, it faltered and then declined, while other
regions achieved higher and less volatile economic growth rates.
During the last decade, Africa experienced an upsurge in growth,
and GDP rose twice as fast in this period as in the 1980s and
1990s. This improvement has been widespread, but the roots of this
improvement are traceable largely to the global commodity boom, not
to transformation. Despite this high growth level, there is still
high and rising unemployment, high poverty levels and a lack of
social safety nets, which imply that social development in many
African countries has been limited.
The nature of the recent strong growth surge raises questions on
sustainability and inclusiveness. One of the main reasons for these
two fundamental issues is the lack of structural economic
transformation in many parts of Africa. Up to the present, the
extent of structural transformation and diversification in output,
exports and employment has been limited in most African countries.
This has contributed significantly to the apparent inability of
African economies to achieve high and sustained economic growth
rates and social development, as well as to their high growth
volatility and unemployment rates.
...
The experiences of successful countries present three important
lessons. The first is that there are discernible common
characteristics in the patterns of structural change and economic
development processes in general, and industrialization and
diversification in particular. The second is that countries that
have succeeded in unleashing high growth rates in recent history
are not the ones that implemented the prescriptions of the
Washington Consensus. This is illustrated by the case of South
Korea, Taiwan and China, whose growth policies exhibit significant
departures from the Washington Consensus. The third and overarching
lesson is that the state plays a central role in guiding and
promoting successful economic transformation. Indeed, the
historical evidence shows that all countries that have successfully
transformed from agrarian economies to modern advanced economies
had governments that played a proactive role in assisting
individual firms in the process of structural transformation.
Modern economic growth theories point out that structural economic
transformation involves a process of continuous technological
innovation, industrial upgrading and diversification, and
improvements in the various types of infrastructure and
institutional arrangements which constitute the context for
business development and wealth creation. However, market
mechanisms may not be sufficient and the government has a potential
role to play in helping firms.
What is certain is that, as with the successful growth and
development experience of many countries, the state has a key role
to play in economic diversification and structural transformation
in Africa. It is therefore important for the state that is
accountable and responsive to the needs of its population to assume
its developmental responsibility and guide sustainable social and
economic development in African countries.
Economic Report on Africa 2011
Governing Development in Africa
[excerpts from Chapter 5. Full publication available at
http://www.uneca.org/era2011]
5.4 Towards the future: How to construct developmental States in
Africa
African countries clearly need developmental States to promote
economic and social transformation. Five major elements are crucial
in building them: purposeful leadership and a developmentalist
coalition; transformative institutions; focused industrial policy;
investment in research; and enhanced social policy.
Purposeful leadership and a developmentalist coalition
Capable and farsighted democratic leadership will be central to
constructing developmental states in Africa. Such leadership can
foster hegemonic developmentalist ideology and the necessary
coalition to underpin it. A powerful technical team will have to be
assembled to support the political leadership in crafting and
driving the developmental vision of the country. Forging such an
alliance will not be easy, especially given competing class
interests. The composition of the developmental coalition will have
to vary from country to country as often reflected in the process
consultative process and deliberations of country reviews under the
African Peer review Mechanism (APRM) of the New Partnership for
Africa Development.
The need to overcome underdevelopment on the continent and
dependency on external forces could unite these class forces around
a common vision for Africa's development. Towards this end, the
developmentalist coalition has to be committed to Africa's
industrialization and to creation of more opportunities for
productive and high-income activities in the formal sector.
Central to this, the state needs to ensure that people have
opportunities to acquire assets and sustainable employment. With
respect to the former, land reforms for example will be critical,
especially in Southern Africa. In other subregions where
subsistence agriculture is dominant, the state needs to promote
cooperatives and to support small farmers with access to skills
training, finance, markets, technology and so on. In effect,
agrarian reforms are required for African countries to become
developmental States.
...
Transformative institutions
To become developmental states, African countries will have to
build transformative institutions, and primarily a competent and
professional bureaucracy. Recruitment and promotion in the
bureaucracy have to be based on merit rather than political
patronage, ethnic and religious considerations. Also, civil
servants need to have predictable career paths. As in developmental
States elsewhere, including Japan, changes in political leadership
should not affect the positions of these civil servants, and the
bureaucracy has to be insulated from the political elite and direct
political and sectional group pressure. Moreover, the issue of
training and re-training is essential for capacity enhancement,
with adequate and competitive remuneration and modern ICT systems
for operations and service delivery.
African countries will also have to re-establish ministries of
planning or competent planning commissions charged with
responsibility for overall development planning, alignment of the
policies of line ministries, and ensuring complementarities between
economic and social development. In effect, the need to revive the
planning capacity of the African state is urgent through the
establishment of ministries of planning, or of planning
commissions, which will aim to ensure effective coordination and
alignment of government policies and programmes. Such planning
bodies are more effective when located in the office of the head of
government (president or prime minister) as strongly suggested by
the experience of Korea with its Economic Planning Board (before it
was disbanded in the mid-1990s), the Economic Development Board of
Singapore, the Economic Planning Unit (EPU) in Malaysia, and the
celebrated MITI of Japan.
...
It is not only the capacity of the bureaucracy and the planning
ministry or commission that should be invigorated, but also that of
all public institutions especially public financial
institutions--the central bank, the ministry of finance, the stock
exchange commission, the tax collection authorities (tax office,
customs, immigration, etc), and the oversight institutions such as
the offices of the accountant general, anti-corruption commission,
and the ombudsman, among others. Transformation institutions are at
the heart of state capacity. They should be inclusive and operate
transparently and accountably.
Focused industrial policy
To catch up and, more important, to meet its own development
objectives, Africa needs to promote rapid industrialization that
will promote innovation, technological adoption, entrepreneurship,
high value added and employment-generating manufacturing. This will
enable the continent to overcome the low contribution of industry
and manufacturing to GDP and employment. The formulation and
implementation of industrial policy will enable African governments
to target particular activities or sectors for support. Each
country will have to identify niche industries where it has
competitive advantages or the capability to develop dynamic
advantages. This in turn will contribute to Africa's industrial
development. However, unlike most countries in post-independence
Africa, which thwarted the emergence of a capitalist class, the
21st century African developmental state has to vigorously attempt
to build an indigenous capitalist class.
Also, unlike the experiences of the 20th century developmental
States elsewhere, industrialization in Africa in the 21st century
will have to be sensitive to environmental sustainability (chapter
3). The development of renewable energy and a green economy as part
of Africa's overall development strategy cannot be over-emphasized.
Renewable energy in particular and the green economy in general
offer Africa a basis for transforming the structures of its
economies and to create sustainable jobs and livelihoods.
The industrial strategy of the developmental States of East Asia
suggests that creating industrial winners through fiscal incentives
to facilitate enhanced productivity and some form of protectionism
were critical for the growth of local manufacturing. While
protectionism may be difficult and largely unfashionable in a
globalized economy regulated by WTO, nonetheless, as part of their
industrial policy, African States should ensure a phasing-out
process to protect local industries, which is necessary for their
growth and consolidation. This will enable them to compete, over
time, in the global economy.
Investment in research
In a knowledge-driven global economy, investment in research,
science and technology for economic development is central to
boosting production, enhancing human capacity and reinforcing the
capability of the state. To promote sustainable growth and economic
transformation, African countries would have to scale up their
investment in R&D, which stood at 0.4 per cent of GDP in 2007; Asia
had gross domestic expenditure on R&D (GERD) of 1.6 per cent as a
share of GDP. Except for South Africa, which invested 0.9 per cent,
GERD as a share of GDP of most sub-Saharan African countries was
less than 0.3 per cent in 2007. In Asia, Korea, for example, spent
3.2 per cent, China 1.4 per cent and India 0.8 per cent (UNESCO
Institute of Statistics dataset, 2010).
Given that Africa's R&D is very low, GERD should be increased to
more than 1.6 per cent of GDP--Asia' rate. This should be
accompanied by effective measures to improve the quality and
relevance of educational outcomes to the needs of the job market.
The tertiary education sector, especially the universities, which
should constitute the site of advanced knowledge production and
scientific research in Africa, is currently witnessing a severe
crisis in terms of standards due to poor funding, a brain drain and
massive commercialization in the sector (Akin Aina, 2010; Mamdani,
2007)
...
Enhanced social policy
To become developmental States, African countries have to revise
their social policies. As in Asian and Latin American developmental
experiences, these should include measures to increase income
support, gradually reduce income inequality and ensure access to
the basic social goods of education, health care and decent
livelihoods for people. In other words, social policy measures have
to meet the basic goals of human existence as contained in the
MDGs.
Heavy investment in skills, education, health care and
infrastructure (including economic infrastructure) will be
important tools for expanding human capabilities in Africa. They
will also become important means of enhancing the productive base
of African economies. Of course, a combination of development
strategies that promotes investment in education and
infrastructure, such as roads, water and electricity, would improve
the environment for doing business in Africa, and attract greater
volumes of FDI.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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