Implications of Doha, Monterrey and WSSD for Africa

Presentation to the

Committee of Experts

African Ministers of Finance, Planning and Economic Development

October 16, 2002

Manufactures

Agriculture

Energy & other

0

5

10

15

20

25

30

35

1970 1975 1980 1985 1990 19950

400

800

1,200

1,600

2,000

Source:WITS, World Bank

Developing countries have become major Developing countries have become major players in world trade...players in world trade...

Developing countries’ share (lhs)

Percent US$ billion

——but African countries remain but African countries remain dependent on sectorsdependent on sectors

0

10

20

30

40

50

60

70

1991-92 1998-99 1991-92 1998-99 1991-92 1998-99

Agriculture Labor-intensive manufactures

Sub-Saharan Africa

Low-incomeMiddle-income

Note: In % of total non-energy merchandise exports for each country group.

——that face the highest protection——

0

2

4

6

8

10

12

14

16

18

High-income countries Developing countries

Industrial products Agriculture Textile & clothing

Note: Average MFN tariffs (un-weighted, in %)

——which is most harmful to the which is most harmful to the poorest in these countriespoorest in these countries

0

2

4

6

8

10

12

14

16

Poor (<$2/day) Non-poor (>$2/day)

Effective tariff faced by each group (in %, 1997-98)

Africa has liberalized trade significantly

45

0

5

10

15

20

25

30

35

40

1980-85 1986-90 1991-95 1996-98

Average Nominal Unweighted Tariff (%) 1980-1998

Source: Global Economic Prospects

Economic Performance is weak

(Growth rates, % p.a.)

Middle Income Least DevelopedCountries

Least DevelopedCountries excludingcountries in conflict

[16 countries]

-1

0

1

2

3

4

5

6

7

8Merchandise export growth, average 1990-98

GDP per capita growth, average 1990-98

[26 countries]

Source: Global Economic Prospects

Doha AgendaLaunched negotiations in 7 specific areas to conclude by Jan 1 2005.Agriculture: reduce all farm export subsidies and reduce trade-distorting domestic supportServices: further liberalize all categories of servicesIndustrial goods: further reduce tariff peaks, tariff escalation as well as NTBsRegional trade agreements: clarify and improve procedures under WTO rules applying to RTAsAssure duty-free, quota-free access for LDCs

Stakes for Africa are high

Welfare gains from eliminating barriers are high: US$250-620b annually, up to 1/3 accruing to African countries—more than aid flows.

Growth from lower protection could lower poverty counts 13% by 2015---help in achieving MDG’s.

Policy Implications for Africa

Many constraints are country and sector specific.

But research so far indicates that:

Trade facilitation and transport have become important constraints

Gains from trade highly dependent on preferential market access in rich countries

Example: Mauritania

Cost of Transporting 40 Foot Container between U.S. and Mauritania

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Nouakchott,

Mauritania

Hong Kong

US

dol

lars

Source: Mauritania IF Study

Finance also critical for developmentCost of achieving the MDG targets ---is $50 billion of additional development assistance per year from 2001—2015. For the 30 African countries judged to be in a position to use external assistance effectively, it is estimated that an increase of $25 billion in ODA from the current $13 billion to $38 billion would be required to reach the MDGs. Only the North African countries on target to reach MDGsSSA not on target to reach poverty goals—though some countries are poised on social goals.

But aid flows down in all except 4 DAC countries

Figure 9: Aid Flows to Africa from All Donors(billions of US dollars)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Aid remains well below 0.7% target

Figure 12: Average Aid Flows to Africa from DAC Countries as a % of Donor's GNP: 1991-99

0.296

0.277

0.275

0.219

0.182

0.177

0.138

0.102

0.099

0.083

0.082

0.082

0.067

0.062

0.062

0.060

0.043

0.036

0.036

0.017

0.006

0.000 0.050 0.100 0.150 0.200 0.250 0.300 0.350

New Zealand

Australia

J apan

United States

Spain

Italy

United Kingdom

Austria

Canada

Ireland

Switzerland

Germany

Finland

Belgium

Luxembourg

Netherlands

P ortugal

Sweden

Denmark

France

Norway

Private Finance not flowing to Private Finance not flowing to AfricaAfrica

COMPOSITION, 1992-1999

0%

20%

40%

60%

80%

100%

Official Multilateral FDI Other Private

Low Income China Middle Income

BOND PRICES HAVE BEEN BOND PRICES HAVE BEEN VOLATILE...VOLATILE...

–110

–120

–130

–140

–150

–160

–170

–180

–190

–200

– Jan

-97

– Ap

r-97

– Ju

l-97

– Oct

-97

– Jan

-98

– Ap

r-98

– Ju

l-98

– Oct

-98

– Jan

-99

– Ap

r-99

– Ju

l-99

– Oct

-99

– Jan

-00

– Ap

r-00

Source: JP Morgan

……AND CONTAGION IS EVIDENTAND CONTAGION IS EVIDENT

–90

-10

–130

-150-150

-170

-190

-210– J

an-9

7

– Mar

-97

– May

-97

– Ju

l-97

– Sep

-97

– No

v-97

– Jan

-98

– Mar

-98

– May

-98

– Ju

l-98

– Sep

-98

– No

v-98

– Bo

nd

Pri

ces

–América Latina –Asia –Africa –Europa

Source: JP Morgan

..AND DEBT REMAINS A DRAG

Relief approved for 26 (of 38) countries 6 have reached completion points 20 have reached decision point, and are receiving

interim relief

Total relief US$25b NPV, or US$41b nominal

Average NPV debt cut by 2/3

Debt service indicators down by half

Social service spending rising, from <2x debt service to >4x

Debt stock reduction in NPV of debt

(US$ billion at decision point)

Debt service reduction & social spending

(percent of fiscal revenue)

MONTERREY CONSENSUS

Creates architecture of mutual responsibility

Developing countries take primary responsibility for implementing policies, improving governance and strengthening institutional capacity

Partners support these efforts through better harmonized and more comprehensive support through aid, market access, debt relief and technical assistance

Yet no long-term debt sustainability

Global slowdown, falling commodity prices raise concerns about deterioration in HIPC external debt indicators

NPV debt/export ratios higher in 2001 than decision point projections for 15 of 23; larger deterioration (>15%) in 11

No pattern or consensus on whether export fall or debt rise is to blame, domestic policy or shocks, temporary or permanent impact

Implications for African Debt

Encourage more realistic projections: high/low scenarios

“Topping up” of completion point relief in exceptional cases based on clear evidence of changed exogenous conditions

Encourage better debt management, sound policy programming through PRSPs

Improve export prospects

Implications for Africa

Financing for development initiatives are only one aspect of poverty reduction effortsPotential gains from faster export growth and improved market access dwarf HIPCEven with access, other issues matter: standards, domestic conditions, infrastructure

Need to StrengthenNeed to Strengthen

Financing to countries that have no access to

private capital markets

Lower the cost of access to private capital

markets for those who have access

Promote Innovative financing of investments• Venture capital funds

• Franchising

urgency… poverty is increasing

0

50

100

150

200

250

300

350

400

450

1987 1998 2015

People liveon $1/day

Projectionwith lowgrowth

Sustainable development requires more

WSSD reaffirmed the agreements reached in Doha and MonterreyStresses the importance of the quality of growthClarified that poverty is at the heart of LR sustainable developmentReconfirmed the MDGs as the pillar for sustainabilityIdentified agriculture and water as key sectorsCalled for elimination of OECD agric subsidies

Specific Targets

Halve people without sanitation by 2015Reduce by 25% HIV prevalence by 2005Restore collapsed fish stocks by 2015Food strategies for Africa to be developed by 2015Energy services to 35% of African households by 2012

WSSD identified Africa and NEPAD for special attention and support by the international community to better focus the development needs of Africa

Thank you!