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THE THIRD AFRICAN DEVELOPMENT FORUM (ADF III) Opening Remarks by Omar Kabbaj, Addis Ababa, Ethiopia Introduction Your Excellencies, Permit me to express my sincere thanks for the kind invitation to address you today at this important gathering. As we are all aware, the African Development Forum seeks to mobilize African expertise for the purpose of addressing the continent's key development constraints. The recommendations of our deliberations on these issues are aimed at providing advice and guidance to our Heads of State and senior policy makers on the major development issues, including in the area of regional integration. In my address today, I would, therefore like to focus on the experiences of the African Development Bank Group in financing regional integration in Africa. Regional Integration: Bank's Mandate and Policy Your Excellencies As you know, at its establishment in 1964, the African Development Bank was mandated to promote regional integration on the continent. Among the specific mandates given to the Bank by its founders, two articles were specifically aimed at advancing the integration of the continent. First, the Bank was mandated to give special priority to projects or programs, which by their very nature or scope concern several members. Second, the Bank was also mandated to finance projects and programs designed to make the economies of its members increasingly complementary and to bring about an orderly expansion of their foreign trade. To operationalise its regional integration strategy, the Bank has developed a comprehensive Policy Paper on Economic Cooperation and Regional Integration, which our Boards of Directors approved in 2000. The Policy, via the operational activities of the Bank, aims at facilitating economic cooperation among member countries and deepening regional and the global integration of the African economies. Furthermore, the Bank Policy Paper on regional integration fully recognizes that Africa's development challenges demand a multi-faceted and flexible approach in a changing domestic and global policy environment Thus, in response to the reorientation of many African countries towards private enterprise, the Policy emphasizes the centrality of the private sector in the process of regional integration. It recognizes the role of the private sector as the main producer and trader of goods and services on the continent. This makes private investments not only the main engine for economic growth, but also a powerful vehicle for integrating the continent into a viable and prosperous economic body. The policy also emphasizes the need for pragmatism in selecting integration arrangements. At the same time, it recognizes the diversity of countries in terms of size, level of development, political situation and degree of commitment to integration. Finally, the policy affirms the necessity for member countries to rationalize and support the inter-governmental organizations, which they have established. To ensure impact of its interventions, the Policy requires the Bank to choose and support organizations, which can effectively foster its regional integration efforts, and to mutually align its efforts with those of other relevant development partners. Bank's Operations for Promoting Regional Integration Your Excellencies Let me now turn to the Bank's experience in financing regional integration. Based on the principle of selectivity and focus, and to ensure demonstrable ground-level -impact of its interventions, the Bank concentrates its activities in five areas. These comprise
These policies are pursued at several levels. First, there is the multinational level where Bank operations and their design, implementation and development impact have clear regional dimensions. Admittedly, so far, the proportion of funds that the Bank has approved for such multinational projects has been relatively low in relation to its total commitments. This is due, in part, to the legal complexities faced in such programs and the low priority given to such projects by some countries. The Bank has nonetheless made substantial funds available for such projects. Up to the end of2001, the Bank has committed close to US$ 821 million to finance projects and provide technical assistance grants to some 136 multinational schemes. Second, there is the country level, where Bank support, although aimed at a specific country, its development impact is envisaged to assist the recipient in achieving closer integration with its neighbors and members of its regional groupings. Literally, most of our operations at the country level, to which the bulk of our resources are now devoted, can qualify as projects and programs that enhance the capability of member countries for closer co-operation and integration with other countries in the region. To date, Bank cumulative approvals to such projects and programs at the country level amounted to US $ 41.3 billion. Third, there is the level of economic operators where assistance is provided directly to the private sector in recognition of their role as the prime vehicle for the promotion of trade and investment on the continent. Our commutative approvals for the private sector as of end 2001 amounted to US $ 747 million. It is encouraging to note in this regard that in 2001 there was considerable expansion in our private sector activities, which increased to US$ 240 million, a four-fold increase over the levels, attained in the previous year. Finally, there is the level of collaborative efforts with regional and international organizations to enhance the economic and political integration process. Permit me to provide some examples of Bank interventions at these different levels. At the regional level, the Bank has put emphasis on enhancing economic cooperation and deepening integration through the promotion of economic reforms, institutional capacity building and investment promotion. The Bank has financed and co-financed several policy-based programs with regional dimensions. The regional issues addressed include: intra- and inter-regional trade liberalization which has led to considerable reductions in tariffs and non- ~ tariff barriers; exchange rate liberalization, including the removal of exchange controls and, the establishment of foreign exchange bureaus and inter-bank market for exchange rate determination. Among the operations approved in 2000 was the Tariff and Competitiveness Promotion Program in Senegal. An example of the projects approved in 2001, is the Public Procurement Reform Project for COMESA. Furthermore, several other policy-based operations of the Bank addressed human capital development and policy measures aimed at curbing the spread of the HIV / AIDS pandemic and other communicable diseases such as polio and tuberculosis. In 2001, several policy- based operations with regional dimensions were approved. Facilitation of regional trade, via regional tariff harmonization, is for example, a major component of Ghana's Economic Reform Support Operation. In 2001 the Bank has also approved the project for the Study on Higher Education in the Countries of WAEMU. Given the importance of improving the management of shared resources and their regional implications, the Bank has pursued several programs that directly addressed this issue. Some examples include the Integrated Pest Management for Subsistence Farming in the Lake Chad Basin, with Chad, Cameroon, Niger and Nigeria, as the beneficiary countries. Another example is the Regional Environmental Information Management project in the Congo Basin with Cameroon, Central African Republic, Congo Republic, Democratic Republic of Congo, and Equatorial Guinea being the main beneficiary countries. The Bank considers that effective regional institutions will be critical for the sustainability and effectiveness of any efforts at improving regional integration and economic co-operation. Therefore, the Bank has selectively supported a number of key institutions and programs, particularly those involved in the provision of global public goods. These include, among many others, the Capacity Building for Disability Rehabilitation in the SADC region, and Project Planning and Appraisal Strengthening scheme (ISTA) located in the CEMAC sub-region. The Bank is also facilitating integration through its sponsorship and participation in the former Cross Border Initiative, which has been transformed into the Regional Integration Facilitation Forum. Within this framework, the Bank, along with the other Co-sponsors has supported participating countries' efforts to liberalize trade through the removal of tariff and non-tariff barriers, facilitation of cross-border investments and reduction of external tariff on ~ trade with third parties. The relevant member countries have achieved greater integration and openness among them, while some, such as Uganda, Kenya and Zambia have enhanced integration into the global markets. At the country level, the Bank facilitates economic cooperation and regional integration by encouraging member countries to build relevant institutions and pursue policies, national and within the framework of the intergovernmental organizations to which they belong, that enhance economic cooperation and regional integration. Through its national intervention strategies and performance based resource allocation system, the Bank also strives to achieve synergy in the impact of its operational interventions and measures undertaken by member countries. To encourage member countries to undertake integration-enhancing measures, the Bank evaluates and rewards member countries according to performance using a number of measurable indicators. A quantitative evaluation conducted of member countries' performance in these areas in 1999 and 2000 showed that, on average, most countries are making reasonable progress in the integration areas in which they have been evaluated. Although the Bank does not evaluate member countries' performance in all regional integration-relevant areas, it nonetheless recognizes the importance of other policy reforms, which countries undertake to widen the regional economic space. These include reform of regulatory system in the Information Technology market, which enables member countries and the region to share the economic benefits of information technology revolution, licensing of new cellular phone carriers, which are rapidly facilitating telecommunication beyond national frontiers. The privatization reforms leading to the de-monopolization of certain state owned enterprises is another area where the Bank intervenes. As for institutional collaboration, the Bank is co-operating closely with ECA and OAU at the continental level, and with formal regional organizations at the sub-regional level. In this connection, a joint ADB/OAU/ECA committee has been established and the heads of the institutions meet on a regular basis to discuss and exchange views on continental issues, including regional integration and conflict resolution. At the sub-regional level, the Bank is collaborating with UEMOA in the revision of the regional investment code and collaborating with the World Bank to canonize the procurement system in the UEMOA sub-region. In the COMESA and SADC and EAC sub- regions, in addition to signing formal Cooperation Agreements with the regional bodies, the Bank has financed the COMESA telecommunications interconnectivity feasibility study. The Bank is also finalizing the process leading to the financing of the COMESA public procurement reform project, which aims at canonizing the procurement systems in the sub-region. In recognition of the critical and ascending role of the private sector in promoting growth and sustainable development, the Bank has upgraded its private sector unit to a full department with enhanced functions, which would have for regional integration. The Bank's activities to promote and foster the private sector's role in the integration process focus mainly on Investment Projects, Regional Initiatives and Business Networks. Indeed, some of the projects undertaken by the Bank's private sector window have direct and indirect benefits for regional integration. The investments in the infrastructure sector in various countries, both directly by the Bank and through the Bank's participation in the African Infrastructure Fund, strengthen the recipient countries' infrastructure capacity and ultimately enable their individual economies to better integrate with each other. For example, the Azito Power Project approved in December 1998 (US$14.0 million) will help Cote d'Ivoire meet its commitments for exporting electricity to neighboring countries. Similarly, the Bank's participation in investment funds helps to promote cross-border investments among African countries. For instance, the South Africa Infrastructure Fund is envisaged to invest up to 30 percent of its resources in SADC countries. The Bank has assisted in the founding of two major regional initiatives namely the African Management Services Company (AMSCO) and the Africa Project Development Facility (APDF). The former provides management services and training to African companies while the latter assists small and medium-sized enterprises on the continent prepare market, technical and other feasibility studies needed to source project financing. Regional business organizations bring together private entrepreneurs from different countries, disseminate investment and trade information and lobby for business-friendly policy and regulatory reforms. They facilitate the exchange of business practices and the interactions among African enterprises, thereby promoting cross-country investment and trade. They can, therefore, be important mechanisms for promoting grass-root and enterprise-level economic cooperation and regional integration. The Bank was also instrumental in setting up the African Business Round Table (ABR), a continent-wide organization of African entrepreneurs aimed at enhancing the role of the private sector in the economic development of Africa, In addition, the Bank is involved in the Global Corporate Governance Forum and the Public- Private Infrastructure Advisory Facility (PPIAF). The GCGF aims to raise awareness in good corporate governance and improve the institutional framework and practices of corporate governance. The GCGF is expected to have some regional projects for Africa. The PPIAF is a multi-donor technical assistance facility aimed at improving the quality of infrastructure through private sector involvement, with favorable implications for regional integration. Lessons from Experience Your Excellencies Our experience with intervening at these several levels to promote regional integration points to some useful insights, which should guide our regional integration policies and the design and implementation of future multinational projects. The first lesson we have learnt from Bank post-operation assessments is that infrastructure projects, especially those in the transport sector, with few exceptions, have performed relatively better than projects in other areas. I should note at this juncture that the Bank, because of its demonstrated comparative advantage in infrastructure projects has been assigned a coordinating and facilitating function under the umbrella of NEPAD. The NEPAD, as you all know, is a long-term development initiative centered on African ownership and management of the agenda, strategy and process. Furthermore, it is a regional framework for interaction and partnership with the rest of the world, including industrialized countries and multilateral organizations. I should also point out that a central aim of NEPAD is the strengthening and deepening of intra-African and global integration of Africa through investments, macroeconomic and trade policy reforms, promotion of peace and security, democracy and political governance. The Bank is, therefore, proud of role it has been assigned under NEP AD and will take all the necessary I measures to answer the call of African leaders in this respect. Our analysis indicates that the Bank's better performance in infrastructure is partly due to the nature of infrastructural projects, where project location, choice of technology and means of implementation can be readily and clearly identified and agreed upon. Success in this area was also partly due to the demonstrable and provable benefits that can be drawn from regional infrastructural projects for communities on both sides of the boarder. Such visibility is instrumental in creating supportive constituencies, at both the community and political levels, which bodes well for successful identification, design and implementation of projects in infrastructure. The second lesson, which is closely related to the first, concerns the political commitment and community support for regional projects. Since integration initiatives involve two or more countries, both individually and collectively, the relevant countries must demonstrate commitment to and own the initiatives and be integrally involved in all phases of the project or program cycle. Our experience shows that the more the different parties are committed and the more this commitment is backed by public support, the greater is the probability and the speed of successfully identifying, designing and implementing regional integration projects. Perhaps, the best way to illustrate the importance of such precepts is with reference to the utilization of the 10 percent of ADF resources earmarked for financing regional integration projects. Presently, the Bank is experiencing extreme difficulties in utilizing this portion of resources. This is not because viable regional projects are difficult to come by. It is, frankly, because committed, motivated and consenting regional partners are not coming forth. The third lesson is that the performance of lines of credit has, however, been mixed, thereby pointing to the need to be more selective in the choice of national development banks as on- lending institutions. In the industrial sector, regional projects have experienced such problems as capacity underutilization, uncompetitive ness, and high production costs, not because of inadequate design but rather because of poor managerial know-how. Thus, to ensure success and sustainability of regional projects, there is a need for the Bank to collaborate closely with the relevant regional and sub-regional institutions in the areas of capacity building and training particularly in areas concerning the management of productive I. entities and private sector operations. It is also important for the Bank to incorporate the integration features of regional groupings and their mandates into project loan agreement and implementation modality. The fourth lesson is that, given the complexity of multinational projects, there is a need for good governance and a strife-free environment, as well as an appropriate regulatory environment. All of these ingredients are fundamental for establishing enabling environments and market-based integration initiatives. It should be obvious to all of us that there can be no meaningful development, national or regional, in the absence of enduring peace and security. It is also obvious that the best-designed projects cannot succeed if the sect oral environment is not conducive or if the macroeconomic environment is hostile. . Finally, since multinational projects tend to be large and involve high sunk costs, an important lesson is the need to intensify the Bank's efforts to lock in co-financing arrangements that involve external financiers and the beneficiary countries. However, for the Bank to be more effective in doing this, the prevalence of good political and economic governance in recipient countries is paramount. In this connection, the need for the Bank to pro actively promote the creation of the enabling environments in which the private sector can play its role as the primary engine of integrating the continent through increased private initiatives and investment cannot be overemphasized. There is also a pressing need for the Bank, as well as other institutions concerned with regional integration, to develop close partnership with other facilitators of economic co- operation and regional integration. Apart from the formal regional integration organizations, the reference here is to organizations and programs with relatively narrow, technical objectives and a wide range of regional activities designed to give practical expression to integration. These must include national and regional chambers of commerce, private industry associations, research institutions and civil society organization with interest in promoting economic co-operation. In a nutshell, the lessons learned from Bank financing of regional integration projects point to the need for selectivity in the choice of areas of intervention and the need to develop a more comprehensive criterion for selecting multinational schemes. Underpinning all these is the cardinal importance of peace, security and political commitment for the mobilization and utilization of resources as well as the implementation of regional integration projects. Conclusion Your Excellencies Permit me to conclude my remarks by noting that the African Development Bank's mandate to promote economic cooperation and regional integration in Africa has been re-affirmed. The Bank has adopted and is implementing a reinvigorated policy on economic integration. This policy aims at strengthening the macroeconomic, physical, and human foundations of regional integration and at advancing the role of the private sector as the prime engine for promoting growth and enhancing regional trade and investment. Although the Bank has made some progress in promoting economic integration, it must be acknowledged that our involvement has not yet reached the level that we would like. Admittedly, in carrying out its regional integration mandates the Bank has faced several constraints, which have limited the impact of some of its interventions. Nevertheless, the progress made so far, the bottlenecks encountered and lessons learnt implementing the Bank's regional integration mandate have informed a number of recommendations for the way forward. This is more the case as NEPAD has given new impetus to our projects and programs, particularly those aimed at attaining economic co-operation and integration at the regional and continental levels. I would like to assure you that the Bank Group will continue to make available its technical and financial resources to foster the integration of the continent. I wish you fruitful deliberations, and I thank you for your kind attention. Thank you. |