Transcript No Slide Title

AGOA CIVIL SOCIETY NETWORK
FOURTH US-AFRICA TRADE AND
ECONOMIC COOPERATION FORUM
AGOA AND PERSPECTIVES
FOR SUB-SAHARAN AFRICA’S
DEVELOPMENT WITHIN THE
INTERNATIONAL CONTEXT
DAKAR, July 19, 2005
Hippolyte Fofack
The World Bank
Acknowledgements
The Government of Senegal
The US Government and Congress for their
support and commitment to SSA’s
development
Mrs. Rosa Whitaker
Mr. Michael William
Mr. Fred Oladeinde
FDA Staff
State Department Staff
Outline
Objectives
Background and rationale
US-Africa economic cooperation
Historical trends: Characteristics and implications
AGOA: Objectives and Overview
AGOA & International Development Context
AGOA Development Impact and Achievements
Challenges ahead
Overcoming market segmentation (FDI Attraction)
Manufacturing and industrial development for
economic diversification and large scale production
Contribution from the Nelson Mandela Institution
Summary conclusion and recommendations
Objectives
Provide an overview of AGOA within the
international development assistance to SubSaharan Africa
Highlight key achievements under AGOA and
remaining challenges ahead
Discuss a number of potential areas of
intervention and actions which could enhance
effectiveness of development impact under
AGOA
Highlight the risks of the status quo
Summary conclusion and recommendations
Background and Rationale
Africa’s social and welfare indicators are
abysmal:
Almost half of Sub-Saharan Africa (SSA) 700
million people live on just US$0.65 a day (in PPP
terms)
Poverty has been growing steadily, causing the
Africa share of the poor to account for over 30
percent of the world poor in the 1990s
Predictions are not encouraging: by 2015, over
87 percent of people in SSA will leave on less
than US$2 a day, over twice the world average
and three times the average in MENA.
International Trade Context: Marginalization
of Sub-Saharan Africa
Although accounting for over 1/8 of world
population, SSA account for less than 2% of
world trade, and attract less than 1% of global
capital flows.
Over the last 2 decades SSA’s share of world
trade has continued to decline, while global
trade volume has tripled.
SSA countries highly isolated – trading neither
with the rest of the world nor between
themselves (SSA intra-regional trade well below
average for other regions of the world, partly as a
result of market segmentation, overlapping of subregional trade agreements, and infrastructural
constraints)
Sub-Saharan Africa's share of w orld exports of goods
4.5
All products
Agricultural products
4
3.5
3
2.5
2
1.5
1
0.5
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
0
International Trade Context: Marginalization
of Sub-Saharan Africa
Africa’s output has changed very little since 1970:
it continues to be overwhelmingly dominated by
few primary commodities, with low value added,
mainly agricultural products and natural
resources
As a result African economies are undiversified
and extremely vulnerable to terms of trade and
exogenous shocks
Capital flights, brain drain of skilled workers, and
lack of economic diversification are major
constraints with tremendous implications for
investment, employment creation, export
potentials and macroeconomic stability.
Illustration
Selected African Countries:
Agricultural Employment
(in % of total employment)
80
70
60
50
40
30
20
2000
Tunisia
1998
1996
1994
Zambia
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
Congo, Dem. Rep.
Illustration
Selected Countries: Agricultural Employment
(in % of total employment)
60
50
40
30
20
10
0
2001
1999
1997
1995
Korea
1993
1991
1989
United States
1987
1985
1983
1981
1979
1977
1975
1973
1971
France
South Africa
Technology level of products traded
at the international market
1996
1976
Other products
34%
Other products
High technology
Based on 13%
11%
Medium resources
technology 11%
22%
High technology
22%
Diverse
4%
Based onDiverse
resources 1%
11%
Low technology
21%
Low technology
18%
Medium technology
32%
International Trade Context: Marginalization
of Sub-Saharan Africa
Proliferation of regional trade agreements (RTA),
which now cover over one third of world trade
For non-members, discrimination in RTAs
adversely affects excluded countries, posing
systemic issues that require international
attention
Volume of trade between US and other
regions of the world rising systematically and
accounting for a sizable share of world trade
International Trade Context:
Marginalization of Sub-Saharan Africa
The rise in volume of trade reflects the
potential benefits in terms of economic
growth and development.
“Trade and investment, as the US experience
has shown, can represent powerful tools both
for economic development and for
encouraging broader participation in a
political process in which political freedom
can flourish” AGOA (2000)
International Trade Context:
Marginalization of Sub-Saharan Africa
Indeed international trade and commerce with the
rest of the world have been the cornerstones of
US economic growth and investment.
These trade relationships are governed under
three instruments:
Multilateral track (GATT, WTO)
Bilateral and regional agreements (FTA with Israel,
Canada, NAFTA, FTAA-2005, US-APEC-2010)
Unilateral track (Japan [1970-80], Adean Trade and
AGOA)
US-AFRICA ECONOMIC
COOPERATION
Historical Perspectives
In spite of its potential and historical
relationships with the US, SSA export to the
US has remained the lowest in the world
Over the 30 years following the postindependence era and prior to AGOA Act,
SSA exports to the US have remained
below 2.5% of global export to the US,…,
Moreover, these exports are largely
concentrated in primary products (largely
energy and oil, which account for about
80% of total SSA export to the US)
Historical Perspectives
Similarly, SSA’s import of goods and
services from the US has remained very
low
Compared to US global export, SSA’s
imports from the US have accounted for
about 1.5% on average over the 30 years
post-independence era up to the
negotiation of the AGOA
Illustration: Trend of US-SSA Trade
US Trade with SSA ($ million)
50,000
40,000
Imports
Exports
30,000
20,000
10,000
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
0
Illustration: Exports and Imports as Share of
Total US Trade
3.0
2.5
Exports
Imports
2.0
1.5
1.0
0.5
0.0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Historical Perspectives (FDI)
The level of trade between the US and SSA is a
mirror image of FDI
SSA is the lowest recipient of FDI in the world, and
its share has been declining steadily
Total FDI to SSA has remained almost constant, at
less than 1% of US direct investment abroad
The low level of FDI is not compensated by rising
domestic investments in SSA, especially during the
80s and most of the 90s
These periods are characterized by prolonged
economic downturns, rising unemployment and
poverty.
Historical Perspectives
SSA abysmal picture (from the standpoint
of international trade and FDI) reflects a
development strategy largely driven by:
Basic agricultural production and natural
resources
excessive reliance on international assistance
and foreign aid
Rising foreign and external debt
The cost of this development strategy has
been significant.
Historical Perspectives and Lessons
from US Experiences
Over the years, trade and investment have been
engines for economic growth and development in
US
A development strategy based on trade and
investment has worked for US, but also for EU
countries and emerging market economies from
the developing world
Indeed, historically, Aid alone has never developed
a country, the AGOA philosophy is to foster SSA’s
development through the promotion of investment
and trade between US and SSA.
THE AFRICAN GROWTH AND
OPPORTUNTITY ACT (AGOA)
OBJECTIVES AND OVERVIEW
AGOA: Objectives
AGOA is a unilateral (One Way) extension of
preferential access (duty and quota free market
access) to the US market for eligible products--agricultural commodities, petroleum, minerals and
manufacturing, apparel and footwear- from eligible
SSA countries.
AGOA is a landmark act in support of SSA’s
development through trade and investment
promotion, fostering of regional integration and
private sector development in SSA
It is a landmark act to foster SSA integration into
the global economy based on a strong partnership
with the US.
AGOA: Objectives
In Section 102 of the AGOA Act, the US Congress
recognizes that:
 “SSA represents a region of enormous economic potential
and of enduring political significance to the US”
 “Trade and investment, as the US experience has shown,
can represent powerful tools both for economic
development and for encouraging broader economic
participation in political process in which political freedom
can flourish”
 “increased trade and investment flows have the greatest
impact in an economic environment in which trading
partners eliminate barriers to trade and capital flows and
encourage the development of a vibrant private sector that
offers individual African citizens the freedom to expand
their economic opportunities and provide for their families”
AGOA: Objectives
In Section 102 of the AGOA Act, the US
Congress recognizes that:
“offering the countries of SSA enhanced trade
preferences will encourage both higher level of
trade and direct investment in support of the
positive economic and political developments
underway throughout the region”
“encouraging the reciprocal reduction of trade
and investment barriers in SSA will enhance the
benefits of trade and investment for the region
as well as enhance commercial and political ties
between the US and SSA”.
AGOA: Objectives
In Section 103 [statement of policy] of the
AGOA Act, the US Congress supports:
“Encouraging increased trade and investment
between the US and SSA”
“reducing tariff and nontariff barriers and other
obstacles to SSA and US trade”
Expanding US assistance to SSA’s regional
integration efforts”….
“strengthening and expanding the private sector
in SSA, especially enterprises owned by women
and small business”
AGOA: Objectives
In Section 103 [statement of policy] of the AGOA
Act, the US Congress supports:
 “facilitating the development of civil society and
political freedom in SSA”
“Encouraging joint ventures between small and
large businesses”
“establishing the US-SSA Trade and Economic
Forum” and
“the accession of SSA’s countries to the
Organization for Economic Cooperation and
Development (OECD) Convention on
Combating Bribery of Foreign Public Officials
in International Business Transactions”
AGOA WITHIN THE
INTERNATIONAL
DEVELOPMENT CONTEXT
AGOA & International Trade
Arrangements (WTO)
The AGOA Act is consistent with global
approach to trade, as it is expected to result in:
Reduction of tariff barriers
Reduction of nontariff barriers
Trade Arrangements of this nature have been
used elsewhere and are in force in a number of
regions
AGOA is a Trade Promotion Act to expand the
volume of SSA export, and hence global export.
AGOA & International Development
Trade arrangements of this nature are expected
to:
Help improve macroeconomic management,
including through economic growth and
diversification, mitigation of growth volatility
Contribute to private sector development, including
through establishment of joint ventures, reduction of
capital flights and hence increased savings and
investment prospects
AGOA & International Development
Trade arrangements of this nature are expected
to:
Increase productivity, especially in export sectors
Foster SSA economic integration, including through
collaboration and exchange between countries, and
Contribute to increased per capita income
Help empower civil society
Mitigate HIV/AIDS effects on SSA workforce
Reduction of gender disparities
AGOA could contribute to reduction of poverty,
and gender disparity, improvement of life
expectancy. From this standpoint, it is an MDG
Enhancing Act.
AGOA: EARLY
DEVELOPMENT IMPACT
AND ACHIEVEMENTS
Development Impact and Achievements
Statistics from US Commerce Department shows
that:
 SSA imports from the US increased markedly during the
post-AGOA period; by over 53% between 1999 and 2004
 SSA exports to the US increased significantly during the
same period as well;
 between 1999 and 2004, they increased from US$14805
to US$37828 millions
 However, these imports are still largely confined in
primary products, natural resources. Energy-related
products accounted for about 80% of US imports from
SSA
Figures seem to suggest that SSA exports have
grown more rapidly.
Development Impact and Achievements
US Trade with SSA ($ million)
40,000
30,000
Exports
20,000
Imports
10,000
0
1999
2000
2001
2002
2003
2004
Development Impact and Achievements
The following countries appear to have benefited
the most from the post-AGOA export boom in
nonenergy-related products (textiles and
apparel):
 South Africa
 Mauritius
 Kenya
 Botswana
 Tanzania
The common denominator of these countries is
the strength of their manufacturing industry and
prospects of diversification of their economies.
Development Impact and Achievements
The US Congress finds that
“It is in the mutual interest of the United
States and the countries of SSA to promote
stable and sustainable economic
development in Sub-Saharan Africa”
Access to energy and oil is particularly vital
to US strategic interest
US imports from Africa reflect that strategic
interest
Development Impact and Achievements
Issues:
Are the countries of SSA fully benefiting from the AGOA
Act?
Are these countries at their full potential in this
partnership?
Does the current pattern of SSA imports from the US
reflects Africa’s strategic interest, economic
empowerment and sustainable development?
It is central and critical for countries in SSA to
have a clearly defined and articulated strategic
vision to guide their trade relationships in
order to fully benefit from the AGOA Act.
CHALLENGES AHEAD
Key Challenges for SSA
Developing and strengthening local private sector
and domestic capitalism, which requires:
Strengthening links between real and financial
sectors
Promoting the development of sound domestic
financial institutions and curbing capital flights–
This could be enhanced by speeding up SSA
countries access to the OECD Convention on
Combating Bribery of Foreign Public Officials
in International Business Transactions
Organizing and strengthening civil society
organizations and the media, a powerful force for
checks and balances
Key Challenges for SSA
Strengthening links between industry and
academia
Overcoming of the challenges of market
segmentation, which constitute major
constraint to:
FDI attraction (SSA received the lowest share of
FDI to developing countries– 6.3% of total)
Regional integration and increased prospects
for economies of scale and large scale
production.
Overlapping African agreements…
AMU
Nile River Basin
COMESA
ECCAS
IGAD
CEMAC
Somalia
Sao Tomé & Principe
Algeria
Libya
Morocco Mauritania
Tunisia
ECOWAS
Conseil de
L’Entente
Ghana
Nigeria
Egypt
Cameroon
Central African Rep.
Gabon
Equat. Guinea
Rep.Congo
Chad
Cape Verde
Gambia
Djibouti
Ethiopia
Eritrea
Sudan
Burundi*
Rwanda*
DR Congo
Benin
Togo
Cote d’Ivoire
Guinea-Bissau
Liberia
Sierra Leaone
Niger
Burkina Faso
Mali
Senegal
EAC
Guinea
Tanzania*
Malawi*
Zambia*
Zimbabwe*
SACU
WAEMU
Mano River
Union
Kenya*
Uganda*
Angola
CLISS
AMU:
Arab Maghreb Union
CBI:
Cross Border Initiative
CEMAC: Economic & Monetary Community of Central Africa
CILSS:
Permanent Interstate Committee on Drought Control in the Sahel
COMESA: Common Market for Eastern and Southern Africa
EAC:
East African Cooperation
ECOWAS: Economic Community of Western African Studies
IGAD:
Inter-Governmental Authority for Government
IOC:
Indian Ocean Commission
SACU:
Southern African Customs Union
SADC:
Southern African Development Community
WAEMU: West African Economic & Monetary Union
South Africa
Botswana
Lesotho
Mozambique
SADC
Mauritius*
Syechelles*
Comoros*
Madagascar*
Namibia*
Swaziland*
Reunion
*CBI
IOC
Key Challenges for SSA
Promoting manufacturing and industrial
development for:
Economic diversification and growth
Diversification of SSA exports to the US to
increase non-energy-related exports, which
currently account for less than 20% of total
Employment creation and growth of per capita
income
Large scale production within international
standards and norms to meet the requirements of
global demands and fully take advantage of
economies of scale.
Key Challenges for SSA
Promoting science and engineering in support of
manufacturing and industrial development
The Nelson Mandela Institution for Knowledge
Building and the Advancement of Science and
Technology in Sub-Saharan Africa could play a
key role in this area
Indeed, long-term studies of the US and other
advanced countries show that science and
technology have been responsible for at least half
of long-term economic growth, through:
Improvement in capital and labor productivity
The creation of new products, services and
systems
Examples of the US Economy
For instance, in the field of
biotechnology, the original investment in
basic research delivered incredible
dividends in industrial countries:
Creation of thousands of highly skilled jobs
Contribution of billion of dollars to western
economies
Potential applications for improvement of
health and agricultural yield and
productivity.
What is said about biotechnology is also true
about other fields of science and engineering, in
particular, the IT sector where thousands of jobs
were created in the 1980s and 90s.
For instance in 2002, the US Department of Labor
Statistics showed that computer software
engineers held about 675,000 jobs, and
about 21,000 computer software engineers were
self-employed
A 1994 study shows that MIT graduates have
created over 4000 major companies and
corporations with total sales of $232 billion
Contribution of S&T to Income Growth
Regression KEI 2002 and GDP per capita 2002
40,000
35,000
GDP per capita 2002 (1995 constant US$2002)
2
R = 0.66
Finland
USA
Ireland
30,000
25,000
UK
20,000
Taiwan
15,000
Korea
Slovenia
10,000
Brazil
5,000
Turkey
Ethiopia
0
0.00
South Africa
India
Ghana
1.00
2.00
China
3.00
Poland
Jordan
4.00
5.00
Russia
6.00
Knowledge Economy Index 2002
7.00
8.00
9.00
10.00
Vision of the Mandela Institution
The Nelson Mandela Institution envisions the
transformation of SSA’s industrial and
economic landscape and the strengthening of
its socio-cultural foundation
It is a global effort to foster Sub-Saharan
Africa’s economic growth and diversification,
industrial development, and employment
creation through:
the promotion of excellence in science,
engineering and,
their applications based on competitive
processes, transparency and accountability.
Pillars of the Institution
• the African Institute of Science and
Technology (AIST), a world-class institution
based on the very successful model of Indian
Institute of Technology (IIT), the US and other
leading institutions of excellence in science
and engineering around the world;
• the Sub-Saharan African Learning Network
(SSALN) to improve and promote the creation
of, and flows of knowledge across SubSaharan African countries and encourage
continuing learning.
Objectives of the AIST
Providing the best facilities for undergraduate,
graduate and post-graduate studies and research;
At full capacity, the four regional AIST will produce
about 5000 world-class scientists and engineers
every year, …,
 These engineers will have the mission to create and
adapt knowledge to transform local communities
and improve the human condition across Africa.
bridge between research and industrial development
enhanced through strong link with industry for
technology transfer and the creation of technology
parks around the AIST for seeding innovations.
The Sub-Saharan African Learning
Network (SSALN)
The SSALN will provide infrastructure
and incentives structures for:
– the creation of knowledge,
– life-long learning,
– flows of knowledge and dissemination
across SSA
 Improving understanding of African
issues and challenges, and preparing
future generations of leaders.
African Scientific Committee
The Board will be advised by a multidisciplinary
African Scientific Committee, consisting of scientists
from a wide range of disciplines, including
engineering, biology, chemistry, medicine,
mathematics, physics, finance and economics.
The Scientific Committee will also play a leadership
and catalytic role in:
Promoting research in SSA and supporting the AIST
vision
Ensuring timely transfer of technology in SSA, through
collaboration between African scientists in the Diaspora
and Africa-based scientists;
promoting the diffusion and assimilation of technology.
Resources and Financing
To support the AIST and the SSALN, the Foundation
will establish an Endowment Fund for Excellence
(EFE).
The endowment model will allow dual funding
from public and private, hence mitigate the
dependence on one country.
Hence the Institution will seek contributions to this
EFE from private and public sources worldwide.
Harvard has an endowment fund of over US$20
billion, and our expectation is to raise about US$5
billion by end-2012 to ensure:
– long-term financial sustainability;
– Equity and access to all
– Sustained quality of education.
Expected Development Impact
the prospects for improving the quality and
performance of primary and secondary
education through a state-level competitive
process.
The institution of the AIST to which access is
conditioned upon meeting the requirements of
the CEE and AGATE will provide a benchmark
for assessing the performance national
education systems, secondary and postsecondary, and even tertiary educations in a
cross-country comparative setting.
Increased access to knowledge and human
resource-based
the promotion of science, knowledge creation,
assimilation and diffusion continent-wide within the
context of the proposed Foundation, which involves
pooling resources together, will limit the costs for
a given country, especially for the small low-income
countries, and increase the benefits for all.
In addition, the smaller states, which may not have
enough resources, including human resources to
sustain a performing higher learning institution may
greatly benefit from the institution of the AIST, and
increased collaboration and flows of information and
knowledge across SSA.
The production of a relatively large number of
homegrown engineers on an annual basis and
over time, the establishment of a platform for a
fruitful collaboration between African-based
scientists and the Diaspora, are likely to reduce the
costs and negative impact of brain drain.
Welfare improvement, prospects for
economic development and employment
creation, through linkages with industries,
and choice of appropriate and practical
technologies, FDI, technology parks,
economic diversification.
Reduction of growth volatility and exposure
to terms of trade shocks, and other risks
Bridge the knowledge gap and digital divide
between SSA and the rest of the world.
Support and contribution to the realization of
the AU vision, and its economic platform, the
NEPAD and the objectives underlined in the
AGOA Act, including:
economic integration
Private sector development
Reduction of gender disparities
Employment creation and increased per capita
income
Risks and Sustainability
Reforms and Infrastructure Development:
– Curriculum reform and harmonization to
emphasize the teaching of sciences at
primary and secondary school level.
The benefits will greatly depend on a significant
improvement in the state of existing
infrastructure (transport and telecommunication
networks) across Sub-Saharan African
countries.
Brain drain, to be weighted against the
prospects of remittances from migrants,
increased trade, and cycling of knowledge.
Risks of Status Quo
Significant, including:
– Persistence of widespread poverty and
vulnerability to endemic diseases
– Debt-Poverty Trap;
– Continued widening gap between SSA and
the rest of the world;
– Continued dependence and vulnerability to
macroeconomic shocks and other risks
– uncertainty about the future
Some Illustrations.
Summary and Recommendations
The AGOA is a landmark Act to enhance the
development of Africa.
In spite of initial success in terms of exports boom,
the realization of full potential by SSA countries
remains a challenge for most if not all countries,
and will require:
stepping up the development of manufacturing
industry, and
efforts to diversify the sources of growth and exports
to mitigate vulnerability to terms of trade shocks and
exposure to exchange risks
Summary and Recommendations
Some key recommendations include:
Accelerating SSA’s countries access to the
OECD Convention on Combating Bribery of
Foreign Public Officials
Supporting the establishment of the AIST for
economic diversification, industrial development,
growth and employment creation and expansion of
SSA’s exports
Supporting the organization of SSA civil society
organization
Gradual elimination of overlapping models of
regional integrations in favor of a uniform
integration path a la EU