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Introdução à Macroeconomia

Aula 30 Abril, 2013

International Development

( African Economic Outlook 2012)

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African Economic Outlook• Joint report by OECD Development Centre and African

Development Bank • Publication began in 2001 thanks to grant from European

Commission.

• Modeled on OECD Economic Outlook, includes overview

of 30 countries representing close to 90% of population and GDP and a statistical annex which includes socialindicators.

• Special themes: privatisations; energy; financing of smalland medium entreprises; transport infrastructure; youth

unemployment.

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AEO Message & NEPAD• AEO Message since 2002/2003 has been that economic

challenges are rooted in domestic governance rather than onexternal factors.

• Monterrey Consensus explicitly acknowledges the role of good governance and peer pressure. NEPAD does the same

as it based on the twin concepts of ownership and partnership, whereby Africans themselves are in chargewith the support of their development partners.

• NEPAD’s African Peer Review Mechanism (APRM), isreviewed by Kanbur (2004).

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APRM spread itself too thin• APRM provides a forum that speaks with an African voice

to African nations but Kanbur (2004) cautions it must notspread itself too thin to meet the three criteria of competence, independence and competition.

• There are 93 indicators in the 4 sub-areas listed of

governance. This cannot be covered competently, no matter how good the staff.

• The success of the APRM depends on the seeds of itsassessment of a country falling on the fertile soil of avibrant civil society dialogue in that country.

• Better links with other multilateral surveillance procedures(IMF, OECD and EU) would help.

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Kanbur’s criteria for peer review1. Competence

• Technical competence is essential.

• Academic peer review relies on the competence,authority and reputation of journal referees and editors.

• The OECD secretariat is central to the functioningof its peer reviews.

• The IMF is criticized more when it steps outsideof its basic competence in macroeconomics.

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2. Independence• Any suggestion of influence on the reviewers, either from

those reviewed or from forces extraneous to the review,would undermine the integrity of the review.

• In academic review, anonymity assures thisindependence, as well as the professional stature of thereviewers and editors.

• OECD peer reviews explicitly include a political phasewhere the reports and their conclusions are discussed, and negotiated, but there is independence of the technicalwork.

• The IMF’s independence from the interests of its major stakeholders is widely questioned by governments and civil society in poor countries.

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3. Competition

•

Peer review mechanisms work best when they are part of awide range of assessments. When a review is perceived to be the “only game in town”, the high stakes set up adynamic of pressures that can undermine trust.

• There are many academic journals to which authors rejected

from one journal can take their paper;• OECD peer reviews feed into a rich and ongoing policy

dialogue and debate in the reviewed country;

• IMF reviews work like OECD reviews in rich countries notusing IMF resources, but not so in poor countries dependenton them.

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Rising per capita incomes and MDGs• Maddison (2001) demonstrates that the development

process involves an increase in productive capacity as wellas rising per capita incomes, measured as GDP per capita in1990 international dollars.

• Rising per capita incomes are also reflected in progresstoward reaching the Millennium Development Goals

incorporated in the 2002 “Monterrey Consensus”.• The difference from Washington consensus of 1990s is

twofold

– the process of “mutual accountability” between donor and recipient, enhanced by 2005 Paris declaration and

favoring North-South-South cooperation – complementarity between globalization and regional

integration, includes interaction between globalizationand governance (G&G), with implications for freedomsand values

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Eight MDGs

1. halve extreme poverty and hunger;2. achieve universal primary education;

3. promote gender equality and empower women;

4. reduce under-five mortality and maternal mortality bytwo-thirds and three-quarters respectively;

5. reverse the spread of HIV/AIDS, malaria and other diseases;

6. halve the proportion of people without access to safedrinking water;

7. ensure environmental sustainability; and

8. develop a global partnership for development with targetsfor aid, trade and debt relief.

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Internationally agreed goals

• The emphasis on internationally agreed goals (first seven

started by OECD/DAC’s Shaping the 21st century: thecontribution of development co-operation; restated by the

Millenium and especially the Monterrey declarations)

should not obscure:

– essential failure of import-substituting industrialisation – demise of central planning

• Both factors influenced income divergence.

• But international organizations (UN, IMF, World Bank,

WTO) have been unable to work together (Monterrey wasexception).

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Multilateral Surveillance Frameworks

• Importance of peer pressure

• Multilateral surveillance as yardstick competition

• Comparing IMF to OECD

• Comparing European and African Union

• OECD lessons for CPLP

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MDGs BEFORE CRISIS:Some impressive progress…

• World on track for halving poverty by 2015 (with a

1990 benchmark):

– 120 million people out of poverty between 2000 and

2005, or 2.4 per cent annual drop

• Between 2000 and 2005 :

– 2 million lives saved through reduced child mortality

– 30 million additional 6-12 children going to school

– 30 million additional families having access to

drinking water – Boys and girls in equal numbers in primary school

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… But progress was highly uneven,and still too slow in some areas

• Global poverty progress largely due to rapid growth

in giant Asian countries : China, India, Indonesia,

Vietnam

•

World still off track on child mortality, water and some other goals

• Strong disparities across regions and countries

• In effect, most developing countries are projected

not to meet most MDGs

• Despite recent up-turn in growth, Sub-Saharan

Africa lags very much behind

• Although necessary, growth alone cannot do the job

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Analyzing MDG progress at thecountry level

• Progress shaped by three factors

1. Global economic environment

2. Domestic policies3. For poorest countries: how much and how well aid

is delivered and used

• Causes for concern reinforced by recent development

in global economy (slow-down, oil and food priceincreases, climate change, .. ) even before crisis hit.

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Policy coherence key to theachievements of the MDGs

• The MDGs as agreed in 2000 remain a valuable framework

for development action to 2015.

• But there remain serious problems with monitoring

• No need to complement present MDGs with additionalgoals or targets,

• MDGs need to be integrated within a framework that

supports growth with equity and well-designed sectoral

policies

• Six recommendations from Bourguignon et al. (2008)

follow, with implications for all actors in the international

development community.

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Recommendation 1: The donor

community must deliver on promises

on aid volume and improved delivery• Despite commitments reiterated in several instances,

aid volumes have recently declined

• Current shortfall on commitments amounts to US$ 35

bn a year

• Delivery to be improved in terms of: predictability,

rapidity of disbursement, coordination, harmonization,

and bureaucratic demands.

• In countries with reasonably functioning institutions

more use should be made of predictable budget support

and results-based targets

• Monterrey, Paris, Accra,.. : donors need to deliver

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Recommendation 2: The crucial role of domestic policies in developing

countries• Link MDGs to the pursuit of shared growth:

– strengthening economic and political institutions,

governance, macro-economic management of

resource flows (particularly foreign flows) and

investment climate.

• One set of policies does not fit all countries

– But crucial dimensions include infra-structure,

management capacity creation, regional

integration…

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Recommendation 3: Policy coherence

at the global level more important

than ever• Trade agreement

• Better regulation of financial system

• Barriers to unskilled migration to be lowered in rich

countries• Mitigation of and adaptation to global warming

• Peace-keeping and conflict preventing interventions

• Global governance no less important than creation of

new global funds for health or education

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Recommendation 4: Social protection

and insurance to mitigate

uncertainty• Uninsured risk as an obstacle to efficiency and growth:the poorest needs to be protected from consequences of major shocks

• Social protection instruments and protection of MDG

progress to be developed both at national and international level

– Programs like Conditional Cash Transfer programs, public employment guaranteed employment schemesand new insurance products to be developed

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Recommendation 5: A special agendafor fragile states

• Particular problems in countries with weak

institutions (often due to actual or latent conflicts)

• Fragile states lag the most behind in all MDGs

• New aid model based on budget support and resultconditionality cannot be applied to these countries.

• Need for new and imaginative use of combined

political, technical, financial and sometimes military

resources

• Need to engage with civil society and non-state actors

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Recommendation 6: Sustainabledevelopment and sustainable MDGs

beyond 2015• Tackling chronic poverty will remain a priority after

2015

• MDG achievements will need to be sustained

•Implies to consider MDGs as part of an overallsustainable development strategy

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EU special role & comparative advantage

• EU is the world ’s largest donor and a major trading partner,

with commitment to improved practice in aid delivery &leadership role in peace-keeping and peace-building.

• EU brought particular strengths to deliver un MDGs, as

reflected in the European Consensus on Development . –

Its own history shows the advantages of regional cooperation, support for weaker members and joint action to secure public goods of value to all.

– Its development policy and implementation capacity provides a unique marriage of

political, economic and aid instruments, underpinned by a structure of mutual

accountability through treaties and joint political bodies.

• Based on its experience of economic integration, the EU can

play a specific role in helping poor countries, especially inSub-Saharan Africa, to reduce internal barriers to trade,

correct market failures and increase regional ownership of

reforms through peer-reviewing.

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6 Portuguese-speaking ACP & CPLP• PALOP share a strong linguistic and cultural identity, a

similar system of governance and a long tradition of contacts and exchanges amongst themselves. With Timor-Leste joining in 2005, the ACP Portuguese-speakingcountries have expanded to the Asia-Pacific.

• Cooperation under the 10th European Development Fund

covers these six countries: together with CPLP, they signed a cooperation agreement with the EC during the lastPortuguese presidency.

• The new framework for cooperation between the EC and the6 Portuguese-speaking ACP countries focuses future

activities on democratic governance (including political,economic and social governance and governmenteffectiveness) as a key determinant for poverty reduction.

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Culture-based multilateralism• Potential of European headquarters, of strengthening

secretariat and of Portuguese presidency of the council2008-2010

• Decisive contribution of Brazilian diplomats not only for itscreation but also in the remarkable joint presidency of thesecretariat and of the council in 2003/2004

• Yet, like Portugal as a tourist destination in the early 1970s,CPLP remains a “well kept secret” of culture-based multilateralism:

• “the mutual friendship among members” mentioned in thetreaty is not enough to build a global partnership for development (goal 8).

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The economic and business dimension

• The two more advanced members feared that an economic

dimension would trigger expectations of larger developmentassistance towards PALOP.

• Plans for a business council were not drawn until 2003 and

its visibility has been even smaller than that of the

intergovernmental body.

• GDP shares of the 4 larger CPLP countries (Figure 1): the

combined share of the 4 others is never greater than 25 basis

points. Except for B, the maximum is 1950, with P@15%,

Moz@6%, A@4%. Averages are dominated by Brazil, like

the US dominates NAFTA, the difference being that the US

share has declined 5 pp from 1950 to 85% in 2001, whereas

the share of Brazil rose 10 pp to 85% in 2003.

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Figure 1 GDP 1990$ shareslarger CPLP countries in 1950 (max year , 1977, 2006)

Brazi l (75%, 85%, 85% )

Portugal (15%, 11%, 11%)

Mozambique (6%, 2%, 3%) Ango la (4%, 1%, 1%)

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CPLP Divergence, dispersion, MDGs• Figure 2 shows higher volatility in PALOP GDP per capita

(in thousands of 1990 dollars) than in SSA with catching up

now being observed. Figure 3 compares two Africandevelopment successes: Cape Verde and Mozambique.

• Since1950 Portugal’s GDP per capita has grown faster thanworld average while CPLP overall has grown slower thanthe world average.

• The average distance between capitals illustrates thegeographical dispersion of CPLP member states (Figure 4).

• The Bissau declaration aims at monitoring progress withrespect to reaching MDG, especially 1 through 6, seen asimplying MDG 7, sustainable development. Its emphasis on“mutual knowledge” is original and suggests governanceinnovation.

• Table 5 provides a snapshot of MDG in CPLP.

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Figure 2 Volatile PALOP (1990$K)

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

1,8

1 9 5 0

1 9 5 2

1 9 5 4

1 9 5 6

1 9 5 8

1 9 6 0

1 9 6 2

1 9 6 4

1 9 6 6

1 9 6 8

1 9 7 0

1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

PALOP

SSA

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1. GDP per capita growth rates ten year averages: CaboVerde and Mozambique relative to ECOWAS and SADC

-5

-3

-1

1

3

5

7

1950 1960 1970 1980 1990 2000

CV/EC MZ/SA

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Figure 4 Average distance betweenCPLP capitals or main city

5

6

7

8

910

11

12

13

14

STP AGO GNB CPV PRT MOZ BRA TMP

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Table 5 MDG in CPLPIndic 1 pov 1 hg 2 schl 3 rat 4 <5m 5 mm 6 dis 7 wat

A ƒ ¾ ¾ ¾ ¾ ¾ ƒ ¾

B● „ ● ● ¾ ¾ ¾

CV ƒ „ ● ● ¾ ● „GB ¾ „ ¾ ¾ ¾ ¾ ●

M ¾ ¾ ¾ „ ¾ ¾ ¾

STP ƒ ƒ ¾ ƒ ¾

TL

„ „¾ ¾

●„

% sat 28 42 14 42 0 14 28 42

Note: satisfactory=achieved+on course Source: IICT (2007a)

key

1 pov % people whose income < $1/day (goal 1)

1 hg % children <5 who suffer from hunger (goal 1)

2 schl net primary schooling rate (goal 2)

3 rat ratios of girls to boys in primary education (goal 3)4<5m <5 mortality rate (goal 4)

5 mm maternal mortality ratio (goal 5)

6 dis prevalence of malaria (A, STP), HIV (GB) or tuberculosis (TL) (goa

7 wat % population using an improved drinking water source (goal 7)

achieved ● on course „ weak progress ¾ regressing ƒ

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Governance indicators• In spite of their deficiencies, the governance indicators of

the World Bank Institute have been widely used in the

allocation of Official Development Assistance.

• Table 6 reports six usual ones, relating to

– freedom and accountability (FREE),

– stability and absence of violence (STAB),

– government efficiency (EFFIC),

– quality of regulation (QUAL REG),

– quality of justice (JUST) and

– control of corruption (CORR).

• Data are centered in 0, very few values > 2,5 in abs. value.

• Table 7 confirms recommendation 5 about fragile states.

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Brazil

(BRIC)

Angola

(SSA)

CVerde

(SSA)Guinea-B

(SSA)

Moz

(SSA)

STPrínc

(SSA)

Timor(APacific)

Portugal

(EU)

Q REG JUST CORR FREE STAB EF GV

Table 6 Governance indicators in CPLPcountries (compared to benchmark)

Note: Blue above, Green below, Yellow positive; Source: IICT (2007a)

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