Africa: UNCTAD Documents, 1/2, 11/25/97

Africa: UNCTAD Documents, 1
Date distributed (ymd): 971125
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +economy/development+ +security/peace+
Summary Contents:
The UN Conference on Trade and Development, in its 1997 report on "Least Developed Counries," reports economic advance in about half of the 48 countries. Nineteen African LDCs have had growth rates in excess of 4 per cent since 1994.However, many countries, particularly those affected by civil strife, have suffered disastrous economic declines in the same period.

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For additional information on UNCTAD and UNCTAD studies related to African development, see http://www.unicc.org/unctad or contact: Office of Secretary of the Board Tel: +4122-907-4815; Fax: +4122-907-0056 E-mail: awni.behnam@unctad.org

23 September 1997 -- Press Release TAD/1849 (Excerpts)

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) ISSUES 'LEAST DEVELOPED COUNTRIES 1997 REPORT'

Finds Institutional, Economic Reforms Generating Growth in Some Countries; Cites Impact of Agricultural Sector, Effects of State Collapse

GENEVA, 1 September (UNCTAD) -- "The determined efforts to implement economic policy reforms have led to improved economic performance in about half the least developed countries (LDCs)," the United Nations Conference on Trade and Development (UNCTAD) states, in its new Least Developed Countries 1997 Report. The report is 213 pages and includes a 42-page statistical annex.

The fact that the performance of many LDCs remained relatively robust in 1996, despite generally unfavourable commodity prices and stagnating external resource flows, is testament to the progress of these economies, the report indicates. In the short run, the external economic environment facing LDCs is expected to be fairly stable. Thus, peace, security and competent governance will be crucial if the economic recovery which has begun for some LDCs is to be sustainable and replicable throughout the LDC group.

Growth among the world's LDCs remained relatively robust at an average of 4.7 per cent in 1996 compared with 5.2 per cent in 1995, according to preliminary estimates. The slight decline is due mainly to a slow down in the average growth rate of the 33 African LDCs, from 5.4 per cent in 1995 to 4.6 per cent in 1996. For the group of Asian and Pacific island LDCs, the average growth rate rose slightly, from 4.6 per cent in 1995 to 4.8 per cent in 1996.

The LDCs are, however, an extremely heterogeneous group and the most significant disparities in performance exist not at a regional but at a country level, with very large differences between the highest and lowest gross domestic product (GDP) growth rates for LDCs. ...

After a more or less stable first quarter in 1996, the combined dollar index of primary commodity prices steadily weakened during the remainder of the year due to sluggish industrial activity in the major importing countries, oversupply and speculative trading. The index fell from an annual average growth rate of 2.6 per cent between 1990-1995, to -4.3 per cent in 1995-1996.

Despite some successful attempts at diversification -- for instance in Bangladesh, Madagascar, Uganda and the United Republic of Tanzania -- many LDCs, including Burundi, Somalia and Zambia, continue to be highly vulnerable to commodity price movements. Of particular concern to LDCs were declines in tropical food prices (15 per cent) and minerals (13 per cent). Precipitous falls in the prices of coffee and copper (over 20 per cent) were of special concern. ...

In 1992, the members of the Development Assistance Committee, which comprises countries of the Organization for Economic Cooperation and Development allocated 0.09 per cent of their gross national product (GNP) to LDC development assistance. In 1995, that share had fallen to just 0.06 per cent, the lowest on record. This was despite a commitment in 1990 at the Second United Nations Conference on LDCs to increase the aid flow level. The LDCs have also suffered because the purpose of aid flows has shifted towards short-term emergency relief projects, away from longer-term development programmes.

The LDCs' external debt burden continues to be a constraint on their capacity to accelerate development. It limits imports and dampens prospects for larger private capital inflows. In almost half of the LDCs, outstanding debt continues to exceed GDP.

The most important recent development in debt relief for LDCs came at the annual meeting of the World Bank and International Monetary Fund (IMF) in September 1996, with the endorsement of "the HIPCs initiative" -- the heavily indebted poor countries initiative. Unfortunately, few LDCs appear likely to benefit from the initiative in the first instance. This delay will represent a lost opportunity for the revival of output growth in many of them.

...

Cautious Optimism

In light of the complex factors noted in the report, "there is reason to be cautiously optimistic about the prospects for the majority of the LDCs". Growth in the world economy is expected to remain steady during 1997, and the current sharp rise in tropical beverage prices will benefit many LDCs.

The UNCTAD adds, however, that internal factors are likely to be at least as important as the external environment in determining the economic performance of most LDCs. In this regard, it notes that reform programmes have been successfully implemented and savings and investment performance has improved, which suggests that the present LDC growth rates will be sustained for some time to come.

The report draws attention to the fact that many African LDCs have experienced higher growth rates since 1994. Nineteen African LDCs have had growth rates in excess of 4 per cent, and 10 of those have had GDP growth rates higher than 5 per cent. The UNCTAD foresees that "this trend is set to continue ... at least for those countries which are able to avoid civil strife and political instability". In many countries, export production has been increased, inflation rates have been reduced and reform has been constantly well implemented since the 1990s. Their future, therefore, is looking decidedly brighter.

However, the most significant reservation to these generally optimistic facts, is that many of the LDCs have suffered civil strife leading to the regress of their economies. In large part due to this conflict and the collapse of State structures, one quarter of the 48 LDCs suffered falls in per capita GDP of over 20 per cent between 1980 and 1994, while 22 suffered declines of over 10 per cent.

Problems of State Collapse Require Urgent International Attention

"Urgent action by the international community to help least developed countries (LDCs) tackle the widespread problems of economic and social regress, State failure and internal conflicts in LDCs should be a priority", UNCTAD states in its report. ...

A significant number of LDCs have suffered a serious retardation of development over the last decade -- a phenomenon the report terms "economic and social regress". Their economies have declined, social conditions have worsened markedly, and they have become increasingly marginalized from the mainstream of the world economy. Regress is not the result of a temporary cyclical economic downturn but is a chronic process with important structural characteristics, particularly the degradation of State and social institutions. In the worst cases of regress, the entire State apparatus has disintegrated amid civil strife.

Some of the countries in the Great Lakes region of Africa (Burundi, Rwanda, Democratic Republic of the Congo), together with Somalia, Liberia and Afghanistan, provide the most extreme and well-publicized examples of regress. The phenomenon is not confined to these cases, however. Over one third of the countries in the LDC group have experienced some form of violent civil strife since 1980, with high predominantly civilian mortality, the displacement of large numbers of people from their homes and livelihoods, and the destruction of infrastructure and productive assets.

Regress involves varied and often complex processes. There are important differences between individual LDCs in terms of the nature of regress, its scale and its causes, which means that generalizations are not always appropriate. Regress is best understood as a process in which the deterioration of State capacities, the weakening of civil society and economic decline interact to reinforce one another, fueling a downward spiral of economic, social and political decline. ...

Regress Not Irreversible

Analysis of regress is essential, states UNCTAD, in order to devise appropriate policies for halting and reversing it. Just as we have learned from the experience of successful development in developing countries, so it is important to draw lessons from those developing countries in which development has been retarded.

While recognizing that many of the problems faced by economies in regress are highly complex and intractable, UNCTAD stresses that the international community cannot afford to ignore the problems of regress. Nor can it afford to delay effective action until regress has degenerated into a humanitarian crisis. The experience of several LDCs, such as Uganda, has demonstrated that peace can be restored and that economies and State structures can be rebuilt, even after prolonged and devastating civil war.

Providing support for the building and strengthening of institutions is clearly an important area in which the international community can play a positive role. Where institutional deterioration is not too advanced external assistance can help to prevent State collapse in LDCs.

In countries afflicted by internal conflicts, the regional and international community can play a vital role in brokering peace and supporting the reconstruction of social and economic structures necessary for development. The reconstruction of war-torn economies will require the international community to provide major financial and technical assistance programmes.

Higher Priority Needed for Agriculture

The world's most impoverished nations will have to prioritize their often neglected agricultural sector if they want to attain and then sustain high growth rates, UNCTAD stresses in its report. Agriculture is the most important economic activity in the LDCs. It provided about one third of their collective GDP and employed two thirds of the labour force at the start of the 1990s, but its performance has failed to keep pace with population growth.

"A strong and well-developed agricultural sector is a means to broader developmental ends", Rubens Ricupero, Secretary-General of UNCTAD, says in an overview of the report. A dynamic agricultural sector will make for healthier populations with higher nutritional intakes. By increasing rural incomes, it will also lead to an expansion of domestic markets. A robust agricultural policy is also a key to an integrated poverty alleviation strategy, given that the poorest people in LDCs tend to live in rural areas.

The report focuses on five issues of importance to the 48 LDC countries: the causes of agricultural sector stagnation; the impact of the Uruguay Round Agreement on Agriculture; the question of food security; environmental aspects of agriculture in the LDCs; and rural credit markets.

Agricultural Stagnation

The long-term problems of LDC agriculture are partly explained by historical factors. Traditional production relations, rudimentary technology, the mode of access to and ownership of land, and low and unreliable rainfall (particularly in African LDCs) have all played a part in the underdevelopment of the sector.

The primary weakness of LDC agriculture, however, lies in an interlocking set of government policies that have been inimical to the development of a strong agricultural sector. These include overvalued domestic currencies, State intervention in agricultural marketing, the over-taxation of agricultural exports, and an urban bias -- the consequence of which has been poor rural infrastructure and lack of basic facilities in rural areas. ...

Impact of Uruguay Round Agreement

The Uruguay Round of the General Agreement on Tariffs and Trade negotiations, which initiated a programme of agricultural trade liberalization, was predicted at the time to have significant consequences not only for the resolution of the problems mentioned above, but also for more general agricultural development in LDCs. However, analysis of the impact of the Uruguay Round on traditional export commodities, which represent the bulk of LDCs' agricultural exports, suggests that the effects are likely to be modest. This is mainly because the Uruguay Round Agreement on Agriculture proved to be less comprehensive than had been expected when negotiations began. While significant reforms of the rules governing agricultural regimes in developed countries have been carried out, the degree of overall trade liberalization achieved has been limited.

Food Security

Although food security is primarily a problem of access by individuals or households to food (entitlements), agricultural growth -- and especially food production -- has a significant impact on food security in LDCs. This is because the majority of populations affected by food insecurity live in rural areas, earn a substantial share of their income from agriculture, and obtain at least some of their nutritional requirements directly from their own food production.

Based on the most widely available measure of food security at the national level -- the daily per capita energy supply, or calories per day -- very few LDCs are able to provide even the barest minimum level of food necessary for ensuring that all of their populations have access to adequate nutrition. Daily energy supplies are very low in more than half of the LDCs for which data are available. In many LDCs, access to food has become more difficult since the mid-1980s.

The main reason for chronic inadequate nutrition is widespread poverty, household or individual incomes being insufficient to enable people to command access to their daily food needs.

Equitable income growth is essential for the reduction of chronic food deficiencies in LDCs. As the majority of the poor are rural farmers, policies that promote agricultural and rural development will also enhance food security by raising incomes and reducing poverty. This is demonstrated by Burkina Faso, which has made significant progress in improving food security through rural development.

The LDCs should put in place mechanisms to protect the food security of individuals and households in the event of adverse shocks, such as droughts, by protecting the productive assets and livelihoods of vulnerable groups. Recently, however, the most significant threat to the food security of the populations of LDCs has come not from deficiencies in agricultural policy, but rather from complex emergencies caused by internal conflict.

The most effective policy to increase food security in certain LDCs is therefore the promotion of peace.

Environmental Aspects

Sustainable agricultural development in LDCs is inextricably linked not only with food security issues but also with environmental concerns. The greatest level of environmental degradation in LDCs is to be found in those areas where population pressure, poverty and food insecurity are intense.

The absence of any simple solution reflects the complexity of the problem. A traditional response to agricultural land degradation has been to increase the area of land under cultivation, thus increasing the extent of environmental destruction. Unless resources can be used more intensively and sustainably, environmental degradation will almost certainly continue in many LDCs, particularly in the more densely populated areas of Ethiopia, Madagascar and Uganda and in the Sahel.

Rural Credit Markets

A serious impediment to innovation in LDC agriculture is the limited supply of formal agricultural credit. Despite extensive policy efforts to enhance rural credit supply in LDCs, rural financial markets remain very poorly developed, with the majority of the rural population, including small farmers, having very limited access to formal sector credit. The UNCTAD report calls for the establishment of sustainable rural financial institutions, in contrast to existing policies whereby governments attempt to control directly resource allocation in financial markets.

Creating a Viable Strategy

According to UNCTAD, a viable long-term agricultural strategy would include at least six main components: -- Sound macroeconomic policies, which stress the need for liberalization and a realignment of exchange rates to realistic levels;

-- The development of appropriate agricultural technology, to facilitate productivity increases in an environmentally sustainable, socially and economically sensitive way; -- Removal of structural constraints on agricultural innovation, such as credit shortages and weak rural physical and social infrastructure; -- Reduced direct taxation of agricultural output, particularly of export crops; -- An efficient agricultural marketing system, including well-functioning markets for inputs and outputs; and -- Strengthened institutional support.

These policy measures are interdependent and react synergistically with each other. While private investment may be required in areas such as marketing of inputs and outputs and credit provision, LDC governments must take the lead in providing other facilities such as research and extension services. Such services are public goods and, moreover, are unlikely to be provided by the underdeveloped private sector in the LDCs.

However, UNCTAD recognizes that almost all LDCs lack the necessary skills and resources to undertake the huge investments involved in the agricultural development strategy outlined above without external assistance. Hence the need for enhanced financial and technical assistance by the international community.

The 48 least developed countries [33 of them in Africa] are: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People's Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Sierra Leone, Solomon Islands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania, Vanuatu, Yemen and Zambia.

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Africa: UNCTAD Documents, 2
Date distributed (ymd): 971125
Document reposted by APIC

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
At its October meeting, the UN Conference on Trade and Development (UNCTAD) considered recommendations on ways to sustain Africa's fragile recent economic progress.The recommendations stressed the need for a significant increase in public investment in physical and human infrastructure, export promotion in non-traditional sectors, and a balanced agricultural policy.

+++++++++++++++++end profile++++++++++++++++++++++++++++++

For additional information on UNCTAD and UNCTAD studies
related to African development, see
http://www.unicc.org/unctad or contact:
Office of Secretary of the Board
Tel: +4122-907-4815
Fax: +4122-907-0056
E-mail: awni.behnam@unctad.org

Press Release
TAD/INF/2727 21 October 1997

UNCTAD SECRETARY-GENERAL CALLS FOR ACTION TO SUSTAIN AFRICAN ECONOMIC RECOVERY

Is the current recovery in Africa sustainable? What are the prerequisites? These questions are being addressed, yesterday and today, at the intergovernmental level, by the UNCTAD Trade and Development Board which is holding its annual session in Geneva from 13 to 24 October.

After many years of stagnation and decline, Africa has registered three successive years of improved economic performance, beginning in 1994, engendering much optimism. But caution rather than complacency is warranted, the UNCTAD Secretary-General, Mr. Rubens Ricupero, warned in an address to the Board today, as cyclical and transitory factors had been important in the recent economic upturn. There was no reason to underrate the amount of difficulties still laying ahead. He saw a need for a balanced approach both in assessments and solutions to Africa's economic problems.

Agricultural development was a key component of the solution to development in the continent. But, the green revolution for instance which had helped in bringing about food security in other regions, could not easily be replicated in the African continent due to problems related to climate and soil. It was already anticipated that after a few years of improved weather conditions, agriculture could suffer a setback this year, especially in sub-Saharan Africa, owing to "El Nino". Similarly, because of its geographic location, African countries had not benefitted from the 'flying geese' pattern, as had Asian developing countries from spill-overs from rapidly growing neighbouring economies.

Mr. Ricupero saw a growing willingness to take up the challenge of African development, demonstrated by initiatives taken within the United Nations, by the European Union, Japan, the United States, and political commitments as expressed by the G7 at the Denver Summit. These various initiatives directed towards African countries needed appropriate coordination.

The call for non-complacency was shared by Ambassador Agnes Yahan Aggrey-Orleans of Ghana, who is chairing the debate, within the Board's Sessional Committee II. Africa's recovery was fragile and prone to the vicissitudes of the weather and commodity markets. "Now that Africa seems to be on the way to recovery, it would indeed be regrettable", she stated, "if the international community were to miss the opportunity of placing growth and development on a firm footing in Africa."

The view emerged clearly from statements made, not only by African countries, but also from other developing and developed countries, that a long-term recovery in Africa would be within reach only if there was a significant reduction of the debt burden which absorbed funds that would otherwise be available for investing in productive capacity. Much emphasis was placed also on the need for vertical and horizontal diversification in the commodity sector. It was also stressed that for African countries, Official Development Assistance (ODA) needed to be increased, as foreign direct investment (FDI) was not a substitute but only a complement to ODA.

Presenting a report to the Board on "African economic performance, prospects and policy issues" (TD/B/44/12 -- a version in Wordperfect is available at http://www.unicc.org/unctad/en/special/pdfs/tb44d12.exe), Mr. Kamran Kousari, UNCTAD Coordinator for Africa, attributed the improvement in external indicators to growth in export revenues and a reduction in current account and trade deficits. Export growth went from -4.2 per cent in 1993 to 3.3 per cent in 1994 and 16.2 per cent in 1995. This was largely due to higher prices for commodity exports, improved weather conditions and better management of national economies. However, investment ratios appeared to have fallen in more than half of the countries in which export earnings increased between 1993 and 1995, representing only 17 per cent of GDP for sub-Saharan Africa as a whole.

The report puts forward three main conclusions on policies to be pursued for sustaining growth in African countries.

The first calls for a significant increase in public investment in physical and human infrastructure. This would, through spillovers if accompanied by the right policies, help lay the basis for recovery of private investment and a process of diversification.

The report explains that investment in infrastructure has been constrained by balance-of-payments considerations, which have been negatively affected by the servicing of external debt which is a major burden for the economies of sub-Saharan Africa (SSA). SSA's debt represents 10 per cent of the total debt owed by developing countries to official creditors, but the region has the highest debt-to-exports ratio of any developing region: 270 per cent! There is a huge stock of debt arrears which is the fundamental problem underlying SSA's debt overhang. Only through a major debt relief and an increase in ODA could resources needed for investment in physical and social infrastructure be released, the report stresses. In the context of the IMF/World Bank Initiative for the highly indebted poor countries (HIPCs), added flexibility in eligibility criteria, time frame and interim financing is required.

The second policy recommendation aims at export promotion in non-traditional sectors through increased competitiveness and exchange rate stability. The possibility for the adoption of selective and temporary incentives for exports in non-traditional sectors should be considered.

Many African countries have virtually eliminated, or reduced, their non-tariff barriers, and many have also reduced their tariff rates. However, the report notes, rapid import liberalization will create difficulty in enhancing productivity when the industrial structure is weak. Furthermore, with respect to Africa's competitiveness, there are significant financial and foreign exchange constraints impeding capacity-building and raising productivity of the existing capacity. Real wages have already been considerably depressed. Hence there is little scope for reducing wages in the interest of competitiveness. Finally, the scope for an active exchange rate policy is being narrowed by financial liberalization.

The third policy recommendation focuses on agriculture: a balance should be struck between food self-sufficiency, surplus extraction, price incentives and income security for producers. Policy instruments and institutions should be reformed rather than dismantled to achieve these objectives. Agriculture requires substantial investment in, and maintenance of, infrastructure, which cannot be undertaken by the private sector.

On agricultural price policies, while world terms of trade for food and agricultural raw materials have fallen, domestic terms of trade in SSA countries have generally improved. However, contrary to expectations, UNCTAD findings suggest that in recent years, farmers in countries where the liberalization of prices and marketing institutions has been slower have, in general, fared better than farmers in countries where agricultural markets have been liberalized. Policies designed to remove price distortions appear to be insufficient to provide greater incentives. In short, any benefits accrued have been to the benefit of traders as price-based reforms have left untouched severe market imperfections and shortcomings.

Delegations also heard the views from experts invited to speak on the subject: Mr. Rashad Cassim, Director, Trade and Industrial Policy Secretariat, International Development Research Center (IDRC), South Africa; Mr. Louis Amedee Darga, StraConsult, Mauritius; and, Mr. Gerry Helleiner of the University of Toronto, Canada.

Informal discussions on Africa will continue today in preparation for the Board's High-Level Segment on "Globalization, Competition, Competitiveness and Development", which will be held on Thursday 23 October (see TAD/INF/2722). Ambassador Aggrey-Orleans will report the outcome of these discussions to the High-Level Segment. (The afternoon of the High-Level Segment will be an interactive session through video-conferencing with the Second Committee of the United Nations General Assembly.) For more information, please contact: Kamran Kousari, UNCTAD Coordinator for Africa, Telephone: +41 22 917 5800, Fax: +41 22 907 0043, e-mail: kamran.kousari@unctad.org or Carine Richard-Van Maele, Press Officer of UNCTAD Telephone: +41 22 917 5816/28, Fax: +41 22 907 0043, e-mail: press@unctad.org

Message-Id: <199711251635.LAA28982@server.africapolicy.org> From: "Africa Policy Information Center" <apic@igc.org> Date: Tue, 25 Nov 1997 11:33:02 -0500 Subject: Africa: UNCTAD Documents, 1/2

Editor: Ali B. Ali-Dinar

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