“Accelerating National Development in the Framework of the New Partnership for African Development (NEPAD): the Role of, and Space for National Leadership”
Résumé de remarques, Kwesi Botchwey
Vingt sixième conférence des Ministres africains des finances, de la planification et du développement economique, 19-12 octobre, Johannesbourg, Afrique du Sud, 19 octobre 2002
The New Partnership for African Development (NEPAD) has been launched against the background of many failed international initiatives, some by Africa’s political leadership or institutions and others by the international community. The latter include the United Nations Programme of Action for African Economic Recovery and Development (UNPAAERD) in the 1980s and its successor programme United Nations New Agenda for the Development of Africa (UN-NADAF) for the 1990s. The NEPAD document itself underscores this primary responsibility and stresses that the NEPAD will maintain and rationalise existing partnerships including the World Bank strategic partnership with Africa and IMF/World Bank-led PRSPs.
By the end of the UNPAAERD Africa was more indebted than at the start of the programme and per capita GDP was lower. The successor programme UN-NADAF which, like UNPAAERD, was devised as a new partnership, sought to improve matters by setting specific goals a s well as the responsibilities of Africa on the one hand, and those of the development partners on the other in the achievement of the programme objectives.
The UN-NADAF, as is well known, had an overall target of a real average GNP growth of at least 6% per annum throughout the programme period of the 1990s, on the assumption of a minimum net ODA flow of US$30 billion in 1992 at the beginning of the programme, and, thereafter, an increase in these flows at an average of 4% per year. In the event, Africa’s growth rate for the period was about 3%, well below target.The key assumptions regarding ODA flows, improvements in trade access and debt reduction were not met. Instead of growing as the programme assumed, ODA flows actually declined by about 43%. Debt reduction programmes under the HIPC brought precious little relief and improvement in trade access proceeded painfully slowly. While some progress was achieved in some areas, including overall economic growth in the latter part of the 1990s and a modest upturn in primary and secondary school enrolment, the decade as a whole saw little progress in relation to the specific goals and targets of the new agenda.
Against the background of these failed initiatives and the understandable cynicism with which African initiatives have come to be regarded, and, in the face of the even more daunting challenges that the continent faces at the beginning of the new millennium, it is important that the analytical foundations of the NEPAD be anchored in rigorous research and the realization of its broad goals and objectives facilitated through appropriate action at the national levels where alone they can be realised.
It has long been recognized that the primary responsibility for African development rests with the Africans themselves; there is today even greater recognition of this self-evident truth. The most important condition for the success of this new initiative is for the role of the countries to be clearly understood and for the conditions under which this role can be most effectively exercised fully appreciated by Africa and its partners alike.
The background conference documents list a number of key elements that define these conditions. They include, a key focus on outcomes including the millennium goals which are adopted by the NEPAD programme itself; improvements in political and economic governance; the integration of annual budgets into medium term expenditure frameworks; strengthening of the domestic resource generation effort; acceleration of efforts to deepen regional integration as well as Africa’s integration into global markets, and, finally, the development and retention of national capacity for sound policy formulation and implementation.
My object in this presentation is to review Africa’s experience with existing partnership frameworks, in particular the poverty reduction strategy process that has come to define the broad framework of policies for economic and political and governance, and the relationship between African governments and national stakeholders on the one hand, and those between Africa and its external partners on the other. I also propose to discuss the factors that affect the development of capacity at the national level to help attain these desired outcomes.
Now although about two-thirds of current investment levels in Africa is funded out of domestic savings, the framework of policies that determine national development priorities and their accompanying macro-economic policy frameworks and expenditure programmes is driven by the poverty reduction strategy papers which trigger access to bilateral grants, concessional loans and debt relief. The PRSPs in other words, define the entire arena for national policy for economic and social development. The NEPAD documents itself duly acknowledges the central place of the PRSPs in the conduct of the new partnership for Africa’s accelerated development. At the same time the relationship between African countries and the donor community has a trenchant impact on policies at the national level that are designed to build capacity at the national level. Therefore, it is appropriate that we should focus at this early stage in the conference deliberations on a review of the PRSP experience and the extent to which it permits and facilitates the exercise of national ownership in policy making and implementation. The question is: how much space is there, in the real world, for African countries to devise their own national policies in the overall framework of the NEPAD guidelines and to exercise the required leadership in implementing them?
WHAT THE PRSP EXPERIENCE SHOW SO FAR?
There have been calls for caution in reviewing the PRSP experience on the basis that that is has been rather short. While this is understandable and needs to be heeded, it is nevertheless important to distinguish between weaknesses and pitfalls that are systemic and those that are ‘teething problems’ so to speak. I would like to dwell on a number of problems that belong to the former category, that that are systemic and would need to be acknowledged even at this early stage and addressed since they are unlikely to go away as the process matures.
There is general agreement that the NEPAD must be founded on:
· national ownership of the development agenda, broadly defied as the leadership of the country on setting the agenda and implementing and sustaining it through the intellectual and political commitment of the government and the broad support of the stakeholders.
· The support of donors for the national development agenda through an adaptation of their programs to the national strategy and local conditions and,
· A rationalization and harmonization of donor administrative and other procedures to ease pressure on local capacity.
In furtherance of this new approach, the Bretton Woods institutions and partner IFIs have gone to great lengths to define the role of their staff in the design and implementation of the PRSPs. It is limited to the formulation of a broad framework for the thematic coverage of the papers, with the staff playing only a ‘supportive role’ in the preparation of the papers, and joint staff assessment of the interim and final PRSPs before their submission to the boards of the two institutions for approval. In spite of these caveats which are presumably meant to provide space for country leadership in determining the policy content and implementation plans for these strategy documents, a number of studies, including the most recent one by UNCTAD (2002), have concluded that the policy orientations of African PRSPs , including those that were prepared before these guidelines were set, have tended to follow rather closely, the macroeconomic policies of the pre-PRSP period. The UNCTAD study does in fact conclude that “.. the autonomy of the countries in designing their own growth and development strategies is circumscribed by the same considerations that dominated the structural adjustment programs over the past two decades” Whether this is attributable to the sheer force of habit or of pragmatism – doing what would please the donors- this finding suggests that much more is required beyond the imposition of limits on the extent of participation of FUND/Bank staff in the preparation of the PRSPs to create the necessary conditions for national leadership. Among the most important issues that require further reflection and clarification is the continuing tension between the competing objectives of short-medium term macroeconomic stability and long-term, employment-generating growth. This raises a host of other issues. These include:
· The division of labor between the Bank and the Fund established in the guidelines for the joint staff assessments of the PRSPs. How do we ensure that the PRGF does crowd out the space for real development and capital investment? Where there is a conflict – and let us not pretend that there are no such conflicts! – between the fiscal and monetary policy stance adopted by the PRGF (over the Minster of Finance’s protestations, or with is grudging acquiessence because the budget must be funded and passed) and the development goals adopted by the PRSC , how can this be resolved? Or better still, HOW can these conflicts be avoided and do these the existing mechanisms endow the country with the power to prevent them or to resolve them in favor of development if such conflicts should occur?
· Is it appropriate to pursue disinflation policies even in situations of low inflation as PRSPs and JSAs are tending to do now?
· The implications of stabilization policies for poverty alleviation. How can transitory effects of necessary macroeconomic stability measures best be addressed, and with competent poverty and social impact analysis?
· How do we ensure a satisfactory resolution of the trade-off between capital investment and increased social spending especially in conditions where non-discretionary spending - servicing of domestic and external debt - puts severe constraints on available resources?
These issues have been on the table so to speak for many years and are assumed to have been more or less resolved with the general consensus among the development partners on the central role of national ownership and leadership. However, the UNCTAD report shows, as many African Finance Ministers have said, that they are very much alive and would need to debated and resolved if the NEPAD core principles and goals are to be realized at the country level through appropriate and concerted national action. Indeed the excellent background papers circulated for this conference confirm this as well. We clearly are not going to make much progress if the space for sound policy- making and effective implementation for the achievement of the MDGs and overall national development objectives is curtailed by the policy framework and priorities adopted in the PRSPs.
The main problem underlying all these issues is what I have called the continuing tension between the considerations of short-term macroeconomic stability and those of long term growth. What is a issue is NOT, as some apologists of the ‘old paradigm’ tend to suggest, the need for macroeconomic stability, but rather HOW it is achieved and the need both to address transitory social costs of appropriately phased and country-specific stabilization policies where they are necessary, AND, at the same time, to ensure that these policies do not prejudice the more important goal of long-term growth. In this connection, it is instructive to note that the conference issues paper cites among the observed weaknesses of current PRSPs ‘the lack of a long-term growth strategy……and a tendency to focus on improved and pro-poor public expenditure management rather than private sector investment and employment generation’ while the UNCTAD study notes that disinflation continues to be a major focus of PRSPs even in countries that have achieved a reasonable measure of macroeconomic stability with low inflation rates of about 3-5 percent.
But the country’s or the Minister of Finance’s space for determining an appropriate policy stance for development and employment generation may be curtailed not only by inflexibility in the macro framework imposed in the PRGF but by the policy agenda emanating from a host of international agreements and declarations and by the structure and composition of public finances. What space does a Minister of finance of a HIPC African country really have in a situation in which non-discretionary expenditures including domestic and foreign debt servicing alone takes up 50% of available resources while targeted poverty reducing expenditure requests exceed total national revenues even with optimal revenue mobilization policies and systems in place? In these circumstances, there clearly will be precious little space for manouvre unless the adequate and predictable external resource flows are available.
Without such flows, the chances are that neither the objectives of poverty reduction or long-term growth will be achieved. Not surprisingly, the UNCTAD study finds that “in general, the papers (ie the PRSPs) do not address the trade-offs involved in allocating resources between current social spending and investment outlays, their growth impact, or the distributional and poverty impact of tax measures”
Finally, the space for country ownership and leadership in fashioning and managing the development policy agenda can also limited by the pre-emption of scarce administrative and analytical capacity by the multiplicity of donor programs and procedures as well as by the effects of structural conditionalities embedded in pre-PRSP covenants.
To the extent that the issues of space discussed above affect a host of countries, raise important matters of jurisdiction and division of labor between the Bank and the Fund as well as those of institutional culture and attitude, and the size, quality and predictability of ODA flows, the NEPAD has an important role to play in addressing them through the NEPAD political leadership’s interaction with the G-8.
In making the above analysis, I do not mean to suggest, of course that there is no space whatsoever for determined national action. On the contrary, even the resolution of the above issues will depend on concerted, competent and informed action and advocacy by countries both individually and collectively. We must first and foremost take steps to fully acquaint ourselves with what little space there is and to exhaust this fully, and we must do so on the basis of a sound analysis of our national situations and a determination of the policy choices that we can sustain. The agenda here includes optimal policies and measures enhance domestic resource mobilization and its most efficient mobilization, sound expenditure programming and the elimination of waste and corruption, and the establishment of an economic and political governance environment that provides incentives for production and savings and stems capital flight. It must also include credible and mostly painless measures aimed at reducing transaction costs and enhancing competitiveness. It is only when we have exhausted the available space that our quest for greater space will be credible. And the extra space will not be created if we do not VOICE these concerns through informed and rigorous argumentation as opposed to polemical denunciation. Moreover we have a responsibility to ensure that we do not allow the dynamics of the ODA and external partner relationships to determine the form and content of our development policies. This in turn raises the related and vexed matter of capacity building, retention and utilization, which I propose to raise last.
NATIONAL CAPACITY
By most accounts, national capacity is a major constraint in the unfolding PRSP experience. While this no doubt true of many countries, it is important nevertheless to put matters in the proper perspective, and to recall, especially, the following:
· The decision to adopt the PRSP, initially, as the trigger mechanism for access to HIPC resources, and now for all development assistance, was not taken through a credible process of consultation with the countries affected. Neither were the decisions on the structure-form and content- and timeframe for submission of the PRSPs.
· The PRSP process was introduced in situations of already ongoing and active aid relationships with all their complexity and their call on existing capacity. It was not introduced in conditions of what we may call ideal partnerships. Thus, the objective conditions prevailing in the countries did not inform the launching of the new process, at least not sufficiently.
· In these circumstances, it is hardly surprising that constraints on capacity have emerged as a problem in getting the country-led process to take root.
· Even so, it pertinent to observe that little space and time was allowed for the countries to digest the full import of the PRSP process and to mobilize available capacity to lead it. In many cases, a torrent of donor-funded consultants and instant experts descended on them even before they had had time to catch their breath!
To the extent that capacity the first order of business is for the country to mobilize and utilize such national capacity as there is – both locally and in the diaspora – and then to put in place a medium to long term strategy for building capacity through national research and training institutions and networks with international bodies. Donors, on the other hand, must support coordinated country driven programs for capacity building. In this connection, a gradual folding of donor technical assistance programs currently averaging about a full quarter of all ODA flows into the African Capacity Building Foundation (ACBF) which is a partnership of African countries and donors – it is supported by the World Bank, the IMF, UNDP,ABD and a host of bilateral donors – and whose mandate has recently been expanded to cover just about every aspect of development policy and implementation.
Notes: References to the UNCTAD report are to ‘UNACTAD: Economic Development in Africa- From Adjustment to Poverty Reduction: What has changed? UNCTAD, 2002
