WORLD COMMISSION ON THE SOCIAL DIMENSION OF GLOBALIZATION

AFRICAN REGIONAL DIALOGUE
"MAKING GLOBALIZATION WORK FOR ALL"

Statement

by K. Y. Amoako,
Executive Secretary of the Economic Commission for Africa,

Arusha, Tanzania
6 February 2003

Your Excellency President Benjamin Mkapa,
Honourable Ministers and distinguished guests,
Ladies and Gentlemen

I am deeply honoured and pleased to be among you at this important gathering. In particular, I am also grateful for the honour of sharing the podium this morning with President Tarja Halonen of Finland, who is co-chair of the Commission, my good friend Juan Somavia, Director-General of the International Labour Organization, and my brother Amara Essy, Interim Chairperson of the African Union.

It is a pleasure also to see so many of my distinguished friends here today including Salim Ahmed Salim, Anna Tibajiuka, Simba Makoni.

As we seek to find ways to extend the benefits of globalization throughout our continent, indeed the world, the findings of The Working Party on the Social Dimension of Globalization assume all the more importance. For, to paraphrase this nation's founding father, Mwalimu Julius Nyerere, "msingi wa maendeleo ni watu," meaning, the purpose of development is the human being.

Globalization has been a plus for many countries. It has enabled several countries to reap the benefits of economies of scale through enlarged market size. It has facilitated the development of new technologies and products. It has encouraged and increased efficiency in the use of domestic resources to enhance competition. It has also provided an opportunity for poor countries to earn crucially needed foreign exchange. As a result, these countries have registered marked improvements in well-being and a dramatic decline in poverty.

Yet globalization has not worked for everyone, and concerns continue to be widespread. It can expose countries to global risks and uncertainties thereby increasing their vulnerability to shocks. This is because of structural deficiencies in their institutions and policies, rendering many countries unable to compete in the global market place. Even where countries do attempt to compete, strategic industries cede their comparative advantage, often resulting in reduced profit margins and the loss of jobs. In cases where countries have benefited, the dividend is unequally distributed, with elites capitalizing on opportunities at the expense of the majority of the population.

Despite these risks, we cannot wish globalization away. It is an inevitable part of the development process and African countries must respond to its challenges to ensure they reap its benefits while minimizing its risks. If we agree on this, the question we should then ask is: How can we make globalization work for all? - The theme of this Conference.

In a sense, it is the opposite of the problem that confronted Albert Einstein one day when he was traveling on a train. The conductor asked for his ticket. The absent-minded Einstein began searching frantically through his briefcase, spreading its contents across a number of seats. Certain that the great man had purchased a ticket, the conductor assured Einstein that the loss was not a problem. Einstein responded: "Maybe for you it is not important, but if I don't find this ticket, how will I know where to get off?" Well, when we contemplate globalization, we face the opposite question: "How do we know where to get on?"

Your Excellency
Distinguished Guests

To successfully board the globalization train, action is required on three complimentary fronts: the national, global and regional.

At the national level, the creation of a good investment climate - addressing the policy, institutional and regulatory environment - is key to growth, job creation and poverty reduction. It involves more than simply soliciting high levels of external investment. It is about fostering a conducive environment to unlock the entrepreneurial potential of the domestic private sector, especially small and medium scale enterprises. It is about broadening national poverty reduction strategies to enable trade and investment and stimulate the private sector, and to create employment on which the poor depend.

Government policies must also ensure a level playing field that guarantees broad participation, fosters inclusion and harnesses the energies of the poor. Greater investment in education, health and public infrastructure is a guaranteed win-win. In making these social investments, Africa should also harness the potential of its hidden growth reserve: Africa's women - who provide more than half the continent's labour potential but are hampered by inequalities in access to education and factors of production. This missed potential for growth must be tapped if Africa is to enjoy the fruits of globalization. The strongest economies are those that enable both men and women to participate fully in economic activity and decision-making at all levels. Gender equality can therefore act as a potent force for accelerating poverty reduction.

To me perhaps, the unnoticed elephant in the room is youth. Demographic trends show that young people - our future - pose huge challenges for development. In some countries, such as Ethiopia where I live, more than 60% of the population is under 25. In many of our countries, youth unemployment is in excess of 40%. We must create far greater educational and employment opportunities for our youth. With formal employment as only a modest part of the solution, agricultural development and micro-enterprise are the real hopes. Whatever tools we use, we must know that unless our children have a viable future, our collective future will be bleak.

Africa must also enter the information age if we want our countries to be competitive in the global economy. In doing so, we must ensure that ICTs are a force for reducing inequalities among Africans and within countries, rather than for exacerbating them. The information revolution should not lead to the creation of new elites, but rather should aim to economically and politically empower communities that have been disenfranchised in the past. The equitable distribution of ICTs across regions and gender, between cities and rural areas is therefore a must to benefiting from globalization.

Let me now turn to the global level. How can the international community, in the spirit of mutual responsibility and accountability, revisit their policies on aid, trade and debt in such a way as to reinforce rather than undermine national development efforts? Let me offer some key points on which action is essential:

• First, continuing resistance by the developed countries to removing agricultural subsidies needs to give way. I was astounded to recently learn from a lecture by Nick Stern, Vice-President and Chief Economist of the World Bank that the average European cow receives 2.5 dollars and fifty cents a day in government subsidies. For the Japanese cow, it is 7 dollars and fifty cents. Compare this to the fact that 75 per cent of Africans live on less than 2 dollars a day. Agricultural subsidies in high-income countries are more than 300 billion dollars annually, or roughly six times the total amount of aid to developing countries. With a level playing field, trade can be a much greater force than aid in reducing poverty. But it requires political will, followed by tangible action.

• Second, tariff escalations continue to deprive developing countries from access to export markets in which they would otherwise thrive. As long as African countries export unprocessed materials, the tariffs remain low. But for every step in the processing chain that adds value, the duties rise sharply. These tariff escalations undermine manufacturing and employment in industries where developing countries need to be competitive. For instance, because of escalating tariffs, Cote D'Ivoire and Ghana have no choice but to continue exporting unprocessed cocoa beans. The same is true for Kenya and Uganda with coffee beans. Africa's partners therefore need to take concerted actions to lift these constraints.

• Third, unfavourable terms of trade are a key factor in Africa's inability to embrace globalization. In 1999, and if we exclude Nigeria and South Africa, exports earnings for Sub-Saharan Africa amounted to US$ 11 billion. Estimates show that if real prices of commodities had stayed constant between 1970 and 1999, Africa would have earned 30 billion dollars from its exports. This means that declining commodity prices resulted in a loss of 20 billion dollars over three decades. Clearly one answer to the question of what happened to all the aid provided Africa in the last thirty years is that it was used in part to offset the incredible decline in commodity prices. The international community urgently needs to revisit the issue of compensatory financing to offset terms of trade shocks on African countries.

• Fourth, there is now a consensus that the focus on Overseas Development Assistance (ODA) needs to go beyond simply maintaining or increasing the volume of aid, to ensuring consistently higher quality and greater effectiveness. Despite this, partners have been slow in aligning their support to match the priorities of African countries and advance the principles of African ownership. Donor-driven procedures, aid tied to projects, and multiple reporting requirements, persist. It is said that because of reporting requirements by different donors, the Government of Tanzania had to produce up to 2,500 reports per quarter. I know that Tanzania, together with its partners, has made significant progress in addressing these issues. But more needs to be done across the continent.

• Fifth, we need to come up with fresh ideas on how to address the debt burden in Africa's poorest countries. The HIPC initiative is not working well enough. Only six African countries have reached their completion point, and for some of them, the debt remains unsustainable. Several proposals are on the table for moving beyond HIPC to greater debt relief. What is needed now is to move faster to increase relief, to align it with the pursuit of the MDGs, and to free up more resources for development.

For all of this to happen, Africa needs a stronger voice in the global context - be it in trade negotiations or in the governance structures of the international financial institutions.

Having outlined some actions needed at the national and global levels, let me emphasize how critical it is to register progress at the regional level. We cannot move forward in integrating with the global economy unless we increase market access and trade within Africa. I want to see intra-African integration first and foremost because it will improve our lives here. It will increase market size. It will lower costs. It will encourage more cooperation in infrastructure development and reduce transaction costs. It will insulate Africa against policy reversal by promoting collective ownership and responsibility. It will provide larger and stronger economies that can pool risk between otherwise small and vulnerable economies and attract needed investment. It will make the plight of African consumers so much more hopeful. And it will also speed Africa's effective integration in the global economy. This is the promise of NEPAD.

So where are we in our quest to integrate regionally? The reality is that the results have not been commensurate with the many efforts in the past. At ECA, we recently undertook a major study to assess regional integration over the last 30 years. Our Assessment of Regional Integration in Africa (ARIA) sees the African Union as providing a fresh opportunity to make tangible progress. However, we stress that an array of institutional issues impinging on integration should be addressed as a sine qua none for the success of the Union. At the core of these issues are the inadequacies of national and regional institutions for stimulating and managing effective integration. Regional institutions have to be streamlined and better equipped to deal with the complexities of this effort. Regional Economic Communities should be better-coordinated and endowed with skills, resources and authority commensurate with their expected roles as driving forces for the AU. An important dimension of this is the commitment by African governments to implementing regional treaties and protocols through concrete actions at the national level.

Your Excellency
Distinguished Guests

Allow me to conclude my brief remarks today by reiterating the following:

Whether or not we should integrate with the world economy is a false choice. We must integrate. But will reap far greater rewards from integration into the world economy if our own house is integrated first.

We should therefore step up our collective efforts and choose actions selectively to accelerate Africa's integration into the global economy. In doing so, we should hold our partners accountable by ensuring they create the space for Africa to be an equal player in, and beneficiary from, the marketplace that is globalization.