| Key Issues for Izmir High-level Workshop, 04-05 March 2008 |
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Introduction:
This high-level workshop is focused on the main development challenges of African LDCs with a view to identifying a collaborative course of action to accelerate the pace of economic development and prosperity for this group. A course of action founded in solid understanding of the causes of poverty and underdevelopment, free of blames, driven by honest and objective motivations, practical, pragmatic and credible solutions locally lead and internationally supported.
What characterises the LDCs in general and in particular those in Africa include: massive poverty and under-development, poor soft and hard infrastructure, weak supply capacities lack of institutional and technological capabilities, low labour productivity, brain drain, low levels of savings and lack of domestic resources for development. These are further reinforced by civil strife and conflict; political instability; desertification, drought and land degradation; high population growth and ill-health which hinder the growth and development prospects of LDCs. Most African LDCs are also landlocked and therefore face high transit-transport costs which further compounds the ability of African LDCs to produce and trade on the regional and international markets, thus, undermining their international competitiveness.
1. The New Africa - Where are we now? Where are we going?
1. Over the last 5 years, Africa has experienced high rates of GDP growth and some observers now say that the continent has passed a turning-point so that economic success will be sustained in the future. How true is this? " New prosperity, old inequality are fueling Kenya's violence: …..the sub-Saharan Africa 's economy has expanded by 125% over the past 10 years, thanks to soaring prices for oil, minerals and other commodities, …..but the new wealth hasn't trickled down " . Sub-Saharan Africa is home to most African LDCs. How sustainable is this ?
2. The basic problem is that what is occurring is economic growth without development in the sense of structural transformation and broad-based improvements in human well-being.
3. African LDCs are undergoing a major social change, with increasing rates of urbanization, which however are not accompanies by either a corresponding increase in job creation or significant changes in the structure of the economy. There is an intensifying employment crisis, which is evident in the fact that the ability of the agricultural sector to absorb the growing population of working age is diminishing, but there are few formal-sector jobs outside agriculture and very low productivity and earnings in non-agricultural informal-sector activities. This accelerating urbanization without industrialization can potentially be a major source of tension and continuing poverty. How is this change to be dealt with?
4. The employment crisis is the basis of the persistent poverty problem in many African LDCs. It is also difficult to envisage a sustainable achievement of the MDGs unless the productive base of African economies develops. Climate change is going to exacerbate this problem as the labour absorptive capacity of agriculture will become even more challenged.
5. While African LDCs have attracted increasing amounts of inward FDI, these inflows, however, have not resulted in tangible employment creation, transfer of technology or development of the domestic enterprise sector. What new FDI policies need to be devised in order to reach these three goals?
6. Competition in international markets for goods and services is becoming increasingly knowledge-intensive. This poses a major challenge for the firms in the LDCs in order to be able to compete internationally without falling into the trap of being locked in specialization in the lower ladders of the processing and value-added chain.
7. The current commodity boom poses different challenges for African LDCs.
a. The net exporters of commodities with increasing prices should be able to capture and manage rents and direct them to the development of productive capacities. This is constrained by their very weak state and policy capacity.
b. Net importers of commodities with high prices are faced with additional import bills, which come on top of increased imports that resulted from trade liberalization over the last 25 years
8. In addition there is an increasing inter-country heterogeneity in the LDCs in Africa – between oil-exporters and oil-importers, between donor darlings and donor pariahs, between attractors of resource-seeking FDI and others. The existence of some much more advanced countries in Africa (South Africa and in North Africa) open possibilities for regional cooperation. But the development of an intra-regional flying geese pattern of trade and investment expansion is as yet limited.
9. There is widespread international concern with the failure of Africa to achieve MDGs. Against this background, major commitments have been made on traditional systemic issues (Gleneagles G8 - aid scale-up, doubling 2004-2010; debt write-off; trade) but progress has thus far been mixed. The international trade dossier (including commodities, aid for trade and also EPAs) is particularly troubling.
10. There are also emerging new systemic issues that are important for African LDC's development – STI and IPRs, migration and climate change –and will become more important in the future. With regard to climate change, African LDCs will be the countries most affected by the consequence of climate change and are already experiencing the difficulties of advancing desertification. Yet these are the societies and economies that are least prepared and equipped to deal with shocks, due to institutional weakness and inherent economic and social vulnerability.
2. Policy Implications
1. It is possible to build on and spread the growth success of the recent past if the present moment is made into a policy turning point.
2. At the national level, there is a need for new national development policies that address the Achilles heel of past economic reforms – namely their failure to develop productive capacities and productive employment and promote diversification. The resources generated by present commodity booms need to be used to create a sustainable productive base. This will require good development governance and also policy space for homegrown initiatives. Sustainable achievement of MDGs requires economic development and employment promotion.
3. The effective and on-going international efforts need to be followed through in relation to aid, debt and trade. But there are new areas for action. Aid for STI is a particularly important but climate change and also migration are relevant. Increased aid needs to create the conditions for reduced aid dependence with a greater focus on productive capacities.
4. A very positive new development for African LDCs is the emergence of new development partners (e.g. Turkey and China). They have a key role in supporting Africa in its efforts to transform growth into development.
5. Increasing differentiation within Africa also open opportunities with increased trade and investment flows. The most promising possibilities are between growing North African countries and their neighbors in the south of the Sahara and also between South Africa within the southern African region. Important proposals for resources-based development based on sub-regional infrastructure investment in development corridors could be implemented.
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