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Disclaimer
The policy brief is the product of research conducted by the Nations University (UNU).
Over the last two years, the UNU, in good cooperation with the African Diplomatic Corps (ADC) in Tokyo, has been
preparing its contribution to the Third Tokyo International Conference on African Development (TICAD III). In a
recently held workshop of experts in Tokyo a number of conclusions were drawn.
This work has been organized around priorities identified by the New Partnership for Africa's Development (NEPAD),
namely the triangle "infrastructure, regional integration and capital flows" and the possible synergies between the
NEPAD and TICAD III.

UNU ~ TICAD III
Policy Brief
How can TICAD III contribute to support
the grand design for Africa?

© United Nations University, 2003
The views expressed in this publication are those of the authors and do not necessarily reflect
the views of the United Nations University.
United Nations University
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Printed in Japan

Contents
・Part I
Policy brief ..................................................................................................................................... 2・Part II
Expert workshop working materials .............................................................................................. 9・Section 1: Infrastructures and development in Africa
1. George Mavrotas, UNU World Institute for Development Economics Research (UNU/WIDER):"Infrastructures and development in Africa: Issues and agenda for action" .................. 9
2. Comments by Wafula Masai, Director, African Centre for Economic Growth (ACEG)......... 17
3. Discussion ................................................................................................................................ 21
・Section 2: African institutions building and regional integration
1. Steve Kayizzi-Mugerwa, Independent Evaluation Office of the International Monetary Fund (IMF):"African institutions building and regional integration: Lessons from experience" ..... 24
2. Comments by Kazuo Takahashi, International Christian University and Visiting Professor,
UNU............................................................................................................................... 30
3. Discussion ................................................................................................................................ 32
・Section 3: Capital flows and risk management
1. Jean-Christian Obame, Ambassador to Japan of the Gabonese Republic: "Enhancing capital
flows, trade and cultural exchanges between Africa, Japan and Asia: The launching ofan Africa-Japan-Asia Centre" ....................................................................................... 34
1.2 TABLES AND FIGURES.............................................................................................. 39
2. Discussion ................................................................................................................................ 45
・Section 4: TICAD and NEPAD
1. Shinsuke Horiuchi, Japan Institute of International Affairs (JIIA): "Africa is big enough forboth NEPAD and TICAD" ............................................................................................. 48
2. Comments by Machiko Nissanke, Reader in Economics, SOAS, University of London, andMasanori Kondo, Associate Professor, International Christian University ............. 53, 55
3. Discussion ................................................................................................................................ 58
・Annexes
Annex 1: List of UNU Press Africa-related publications ........................................................... 61
Annex 2: Profiles of participants.................................................................................................. 62
Annex 3: Executive summary of the policy brief "Strengthening Africa’s participation in the
global economy," issued from UNU and African Economic Research Consortium(AERC) collaboration in regards to TICAD II .............................................................. 63

Part I

Policy brief

TICAD III: UNU policy brief
─ Policy considerations andsuggestions
Over the last two years, the United Nations University(UNU), in cooperation with the African Diplomatic Corps(ADC) in Tokyo, has been preparing its contribution to
TICAD III.1 In a recently held workshop of experts inTokyo, a number of conclusions were drawn. The main2

conclusions are summarized in the following sections on
policy considerations and policy suggestions.

Policy considerations◆Since TICAD II, two major initiatives have radicallychanged the African landscape: first, the formal
adoption of the New Partnership for Africa's
Development (NEPAD) by the African heads of statein July 2001 and, second, the creation of the African
Union (AU) in July 2002. The latter aims to strengthen
coordinated action in Africa, whereas the former
gradually provides a roadmap for such coordinatedaction. NEPAD provides Africa with a "grand design"and gives a perspective on where Africa should be 15
to 20 years from now. TICAD III might provide thesupport needed to implement the ambitions and plansdeveloped in the NEPAD process.
・Develop a "grand design" for Africa: look at the
global level as compared with the local level,linking together micro and macro aspects.
・Further strengthen synergy between NEPAD and
TICAD.
◆Also since TICAD II, a number of world summits andconferences have taken place that are relevant for the
future of Africa, such as the Millennium Summit, theUN conference on "Financing for Development" inMonterrey, Mexico (2002), the fourth WTO ministerial
conference in Doha, Qatar (in November 2001, soon tomobilize the financial resources needed to achieve theMillennium Development Goals, and especially thegoal "to halve poverty by 2015", while the Doha roundplaced at the heart of the negotiations development
issues and the concerns of developing countries. The
Johannesburg summit tried to put "words in action", inparticular by stimulating a large number ofpartnerships with the participation of civil society andprivate enterprises. TICAD III can draw the balance
and target the action.
・Place the concerns of developing countries at theheart of negotiations, and guarantee access toworld markets for the goods they produce.
・Put "words in action."◆In the preparations for TICAD II, UNU and the African

Economic Research Consortium (AERC) prepared apolicy brief on "Strengthening Africa's Participation in the
Global Economy"3, which can be summarized as follows:・ Participating in the global economy provides
immense opportunities, but it also entails
significant risks.
・ Successful participation entails a strategic
approach that is actively pursued.
・ A successful, outward-oriented development
strategy must:・ensure a stable macro-economic environment,・liberalize trade, but with care,・realize the opportunities of regional
dynamism,focus
on the primary sector, and・・offer some protection and selective promotion
policies that are helpful;but,these can be dangerous if the institutional
・
preconditions are weak.
・ Therefore, it is essential to reinforce theinstitutional preconditions for outward
orientation and growth at the political level, atbe continued in Cancun, Mexico), and the World
Summit on Sustainable Development in Johannesburg,

the public level and at the level of private agents.
・ Developed countries can help by radicallySouth Africa (August-September 2002). The
Monterrey conference aimed at identifying ways totransforming aid, reducing the debt burden andguaranteeing open markets.
2

Policy Brief

Even though some progress has been made in all theseareas since TICAD II, these recommendations are still
as relevant now as they were five years ago.
・Develop strategic approaches.
・Enhance African institutions as a way to enablebusiness, domestic or international, to flourish.
・Transform aid and reduce the debt burden.
◆The primary sector remains of crucial importance inAfrica. Most African economies rely, to a large extent,on their primary sector - hence, the importance ofremoving all obstacles that hinder African tradedevelopment. Tariff barriers on agricultural goods aswell as subsidies in developing countries are harming◆The HIV/AIDS crisis presents a threat to human healthand social and economic progress. In Africa, thedisease is already having a major impact on nutrition,
food security, agricultural production and ruralsocieties. HIV/AIDS impacts on the labour force arecausing great alarm: it is estimated that the HIV/AIDS
pandemic will reduce the labour force by as much as 26
per cent by 2020. It is also estimated that since 1985,
some 7 million agricultural workers have died from
AIDS-related diseases in 27 severely affected Africancountries.5
As a direct consequence, agricultural skills may be lost,
since children are unable to observe their parents
working.6 Besides, land rights may not enable widows

farmers in Africa; about two-thirds of the Sub-Saharanpopulation lives in rural areas, and 70 per cent of theand children to stay and cultivate the land after therural population consists of small holders farmers.

commonly strikes the most economically productive
members of society; HIV/AIDS is a problem of criticalimportance for agricultural, economic and social
development. The loss of able-bodied adults and

4

The issue of food security remains a daunting challenge
for both African governments and local communities.
The priorities for the African continent are to fighthunger and to ensure self-reliance in food production;
Africa has the natural and human resources to feeditself. Furthermore, it is possible for Africa's primarysector to create more capital, and this capital can beinvested in other sectors, such as health and education.
But, as long as the hunger issue remains unsolved, thewhole African continent's development is jeopardizedor put under threat.
The Asian experience showed that once production andproductivity of the agricultural sector are raised, growth
becomes sustainable. It is possible to reduce poverty in
Africa: African governments, with the support of thedeath of the head of the family. Moreover, the disease

experienced workers such as farmers, teachers,
engineers and doctors affects the entire society's ability
to maintain and reproduce itself. This loss, combinedwith the entry into the labour market of orphaned
children who have to support themselves, is a daunting
challenge for African development. The newgeneration entering the labour markets is characterized
by both a lower average age and a lower average levelof skills and experience. Clearly, Africa is in theprocess of losing its prime labour force to HIV/AIDS.

international community, must champion comprehensive

・Place education at the core of the fight against
HIV/AIDS.
・Combat the spread of HIV/AIDS by supporting
prevention campaigns.

rural community-based development schemes. They mustalso enhance extension services, such as credit, marketing・Address the issue of land access and land rights toprotect the widows and children of HIV/AIDS

and distribution. Governments must also promote reforms
that actively encourage small farmers' entrepreneurship.

victims.
・Reverse the impact of HIV/AIDS on the labour

・ Focus on the primary sector; enhance theprocessing industry and the marketing chain.
・Fight hunger: it is a priority for Africa to be able
to feed itself.
・ Support community-based rural developmentwith strong governmental support.

force by setting up systems that support affected
and contaminated working populations.
◆With an urban growth rate of 4.87 per cent, Africa is

the continent with the fastest rate of urbanization.7 In
the least developed countries, among which 34 are in
Africa, the population increase in urban areas will befrom 0.2 billion to 0.6 billion, three times as many, in

3

Policy Brief

only thirty years. African cities are not able, anymore,
to absorb recently urbanized populations; they have theleast capacity to cope with the problem, but they areespecially at the interface between the public andprivate sectors. African countries must, individuallyand collectively, strengthen their institutions. African

most directly confronted with it. As a directconsequence, slum areas are growing in Africa. Slumcountries must support "branding" and the development

Slum residents are left behind without any hope for
their future. The Millennium Development Goalof institutions that will enable African goods to directly
access world markets. It is important for Africancountries to become the ones who profit from trading
the goods they are producing, rather than having
intermediaries keep most of the benefits.

number seven, Target 11, aims to achieve a significant
improvement in the lives of 100 million slum dwellers
by the year 2020. In order to have productive andhealthy cities in Africa, a strong partnership between
African governments, donor countries and UN

・ Enable African countries to benefit fromglobalization by enhancing their position in world
markets; support profitable access to world
markets for African producers.

areas are characterized by the lack, or poor quality, ofbasic infrastructures such as health and education.

agencies (such as the UN HABITAT) is necessary.
African countries must be supported in their efforts todevelop healthy cities, where non-agricultural activities
can generate income (including services) that benefit

・Improve access to the world market and relieve
the debt burden.
・ Strengthen internal organization in Africancountries, with a focus on the interface between
the public and private sectors.

the population. These healthy cities can be developed
as small cities within large urban regions. It is
important for the African continent to develop an

Policy suggestions for TICAD III"urbanization strategy" that will enable the continent toaddress the issue of rapidly growing urbanizedpopulations.

Taking account of NEPAD's priorities and its
recommendations for TICAD III, UNU - in cooperation
with African Diplomatic Corps participants in Japan - has・ Take account of the fast urbanization of thecontinent and its implications.
・Achieve improvement in the life of slum residents
by mobilizing them and creating an enabling
environment.
・ Develop urbanization strategies that enable thedevelopment of productive and healthy cities.

been focusing on the triangle of "infrastructure, regional
integration and capital flows." In May 2003, the annual
Africa Day9 symposium elaborated these themes and theirinterlinkages.

the pace of globalization has been

Building on the success of this symposium, UNU
organized a workshop in July 2003 centred on the
preparations for TICAD III. A group of experts wasbrought together with members from the African
Diplomatic Corps in Japan (ADC), the international

accelerating over the past five years, most of theAfrican continent has not benefited from the process:"Most of Africa is not in the main stream.”8 Enabling

research community and UNU. Discussions focused onfour main themes: (1) infrastructure, (2) regional
integration and institutions development, (3) capital flows

the African continent to participate in and benefit fromthe global economy must be a priority. Measures suchand risk management, and (4) the possible synergies
between NEPAD and TICAD III.

as subsidies, high tariffs and export dumping have tobe reviewed in order to strengthen the participation ofdeveloping countries in the global economy.

◆Focusing on the triangle of "infrastructure, regional

However, it is not only international rules that need tobe reviewed, as the Doha Round intended to do withare all important elements of the African development
equation, as highlighted by NEPAD. Their importancethe international trade system. The internalorganization of African countries also needs reviewing,must be further emphasized.

◆ Although

integration and capital flows"
Infrastructure, regional integration and capital flows

4Policy Brief

The fact that infrastructures and poverty reduction areclosely interlinked stresses the importance of having an
accurate definition of infrastructure. In such a definition,neighbouring countries. Developed countries, such as
Japan, must support existing regional institutions to
overcome their weaknesses.

infrastructure includes not only hard infrastructure, suchas railways, roads and bridges, but also soft

NEPAD must be viewed as a framework within which

infrastructure, such as education, health, information andcommunication technology (ICT), organization and good

African integration, at different levels for different
purposes, can take place. It is important to note thatgovernance. The adoption of such a definition can help
reverse the tendency to allocate very low budgets tointegration can take different forms and processes, as
for example:

sectors such as education and health.

◇ integration of Africa in "one bloc," i.e., in its

The importance of good governance must be highlighted.
Good governance is not exclusively a government's
responsibility; civil society and the private sector are

relations with the WTO;
◇integration that focuses on "rims," according togeographical locations (for example, Northern
Africa with the Mediterranean region, or Eastern

important stakeholders and can make important
contributions, too. At the political level, good governance

Africa with India and Asia, etc.); or◇ integration that focuses on river basins, where

calls for effective states: states that are democratic,
legitimate and able to deliver basic services, such as
health and education. Effective states can play the role ofmost of the African population is concentrated(Nile, Niger, etc.).

a driving engine in order to sustain development.
Education and organization, including appropriate andstrong institutions, are crucial for good governance andRegional integration is a process, not a static concept,
and, as such, alternatives must be considered with their
possible benefits. In the integration process, attention
must also be given to the roles of different actors, suchas the private sector, professional associations, civilsociety, NGOs, etc.

development. Strengthening of the institutions needed forgood governance and participation in the global economy
must receive the highest priority. To achieve this, a welleducated population, at all levels and in all relevant
sectors, is needed.
・ Adopt a clear definition for infrastructure,stressing that infrastructures are "pro-poor" andthat "soft" infrastructures such as education,
health, ICT, good governance, organization, etc.
are important components.
・Pursue a policy of balanced development of hardand soft infrastructures in relation to the growth

5・Enhance the capacity, quality and credibility of
African institutions.
・Promote regional cooperation and integration indifferent sectors, and at various geographicalscales.
・ Promote institution building that supports
successful participation in globalization.
Capital flows are necessary to finance infrastructureof economic activities.
・Strengthen good governance (governance as aninternational responsibility).

development. Lessons must be learned from previous
experiences to avoid the replication of inadequate

The development of both hard and soft infrastructure isresources and, in order to attract capital flows, a newclosely related to regional integration and institutional
enhancement. The size of most African economies makes
regional integration a priority - in different forms, and on
different scales for different issues, to start with. In Africa,
regional integration and inter-country collaboration offer
opportunities to overcome weaknesses that can be found at

marketing approach must be adopted. The creation of

the national level. African countries must place a highpriority on trying to generate dynamism with theircontribution to the promotion of the African market.

financing that led to poor quality infrastructure.
Infrastructure development requires vast financial

an African Multilateral Investment Guarantee Agency(AMIGA), along the lines of the Multilateral
Investment Guarantee Agency (MIGA) of the World
Bank, can contribute to addressing the issue of risk
management. Such an agency can make a significant

Policy Brief

It is also of crucial importance to promote thedevelopment of sound financial institutions that can
support private sector entrepreneurship in Africa.
Financial institutions will play an important role inmaking Africa a more reliable partner for both Africanand non-African partners. They can also facilitate themobilization of private resources. Aid is important, too.
Technical cooperation can contribute to building fertile
ground for large-sized ODA projects, focusing both on
hard and soft infrastructure, that in turn can attract
foreign direct investment (FDI). AMIGA would be an
essential tool in creating that virtuous circle.
・Establish AMIGA (for risk management).
・Develop sound financial infrastructures, such as
banks, financial markets, etc.
◆Strengthening partnerships

Partnerships and the concept of solidarity have to bepromoted as guiding principles for South-North
cooperation, but also for South-South cooperation. The
latter may be even more crucial than the former. Within
the African continent, African countries must enhancecollaboration and go beyond the concept of national
interest.

◆Fostering social and cultural capital

The rapid urbanization of Africa is placing its traditions
and cultures under new constraints. African social
capital (i.e., the informal rules, norms and long-term
relationships that facilitate coordinated actions andenable people to undertake cooperative ventures formutual advantages 10 ) must not be neglected anddestroyed in the process. Increasing evidence showsthat social cohesion is critical for societies to prosper
economically and for development to be sustainable. It
is a shared responsibility for African governments,
regional institutions and donor countries to support thecommunity-based initiatives that tend to generate socialand cultural capital. The identification and mobilizationof cultural and social capital are crucial to the successof the development strategies of African countries.
・ Strengthen social capital as well as cultural
capital at the local, national and regional levels.
◆Establishing new forms of aid

Different dimensions of aid, such as humanitarian andproject-type assistance, must not be confused. Official
Development Assistance (ODA) has an important roleto play in financing both hard and soft infrastructure,and its effectiveness should be strengthened. If aid

The TICAD process focuses on the importance of SouthSouth cooperation, especially Asia-Africa cooperation. The
Ministry of Foreign Affairs of Japan announced its
intention with TICAD III to promote these approaches towere more stable and predictable, this would help
recipient countries to undertake sound budget policy

give dynamism and diversity to the African development
process. This is a very important decision. Partnerships canMoreover, it is a serious responsibility for both donor
and recipient countries to look for new forms of aid.

take different forms and contribute to original and creative
solutions to the challenges of African development.

Some creative suggestions must be developed; forexample, to think of schemes that combine several
priorities, such as: first, to develop sustainable hard andsoft infrastructure and, second, to strengthen regional
integration in Africa. In this hypothesis, aid is to beMoreover, in Africa the dimension of intra-partnerships
must be strengthened. The interactions among domestic
stakeholders (political elites, judiciary, legislature, theexecutive branch, civic organizations, religious

planning and priority settings.

allocated to a group of countries that implement a
common project, rather than to an individual country.

organizations, the business community, farmers, mass
media and NGOs) tend to be neglected. In this respect,

To cultivate partnerships within a group of recipient
countries will add value to the project by further

NEPAD could play a leading role in enhancing suchpartnerships among Africans.

enhancing integration and cooperation among the・Promote South-South partnerships.
・Strengthen intra-partnerships within the NEPAD
framework.

It is also possible to reduce the gap between demandand supply-driven projects; it must be possible topartners.

combine them and to create "win-win" solutions.

6Policy Brief

Supply-driven projects focus on the interests of donor
countries, which sometimes are not compatible with therecipient country's own needs (but, in other instances,

reliable partner, it is of crucial importance that African
governments promote good governance, enhanceare). It is necessary to look at the possibilities ofcombining donor and recipient country interests.

of the continent, with the support of developed

Furthermore, some thinking must be given to theconcept of ODA itself. It is absolutely essential to
move from a "development assistance" concept to a・Identify and advocate African's strategic "value"in order for developed countries, such as Japan, toconsider Africa as a reliable partner as well as a"solidarity for development" concept that encourages
the idea of "partnership."potential market.
・Take Africa seriously: develop confidence in true・Clarify the distinction between humanitarian andproject-type assistance, and close the gap between
the two.
・ Experiment with and promote new forms ofdevelopment assistance for Africa.
・Promote projects that enhance regional integration(such as, for example, when a group of countries
receive development assistance for a common
project).
・Support "true" partnerships based on "win-win"principles that overcome the gap between
demand- and supply-driven projects.
・Promote a concept of solidarity.

trustworthy institutions and accelerate the integration
countries.

partnerships between African and donor
countries.
◆A concrete measure: Launching of the Africa-Japan-

Asia Centre for Economic, Trade and Cultural
Exchanges (AJAC) in Tokyo, in 2003
UNU and ADC strongly believe that adoption of a newmarketing approach towards Africa's promotion will
help to reverse the impediments to trade andinvestment in Africa. In past years, constituencies havebeen developed in Japan, such as: the yearlycelebration of Africa Day, the organization of theAfrica Festa and the organization of an African movie
festival. For Japan to consider Africa as a more natural◆Taking Africa seriously and building constituencies

partner, more constituencies in Japan must be
developed.

"African pessimism" that reduces Africa to a hopelesscontinent must be reversed. Africa has much to offer interms of a cheap labour force, natural resources,

In line with the need to strengthen constituencies
between Japan, Asia and Africa, ADC and UNU have

unexploited markets and a possible production base. In
the twenty-first century, the concept of transnational

decided to launch an Africa-Japan-Asia Centre for
Economic, Trade and Cultural Exchanges (AJAC) in

production is becoming more relevant. Africa canbecome a new alternative production base for private

Tokyo before the end of the year 2003. The AJAC willcontribute to furthering African awareness within Japan

companies from Japan and other developed countries.

and the Asian community, particularly within theDeveloped country governments have an incentive roleto play: they must induce private companies to consider
Africa as a production base.

business community.

Developed and developing countries must show

vital to encourage investment in Africa. The AJAC canpolitical will and undertake a long-term vision that takeplay an important role in disseminating information,
data and investment opportunities in specific Africancountries and sub-regions. The centre will also aim tofacilitate communication between Africa and Japan in
the context of ODA and investment projects.

the African continent seriously and focus on its
potential. To take Africa seriously means to "develop
confidence in the capacity of African nations tomanage their economies successfully." 11 Such

The centre will promote the provision of information toinvestors, since we believe that accurate information isachievements and new initiatives as NEPAD pave theway for a change in the mentality of both African and
non-African actors. For Africa to be considered as a
7

The main missions of the centre will be to:・ Encourage trade and investment missions toPolicy Brief

Africa;・ Enhance Asia-Africa cooperation throughvarious schemes, including the formation of
investment agreements and the improvement of
economic infrastructure as well as the exchange

in projecting Africa as a continent of opportunity.

1

A number of projects and activities were undertaken, as reflected in the list of
publications in Annex 1.

2of human resources;
・ Eliminate trade barriers in order to promote

Participants in and contributors to this workshop can be found in Annex 2.

3

For the recommendations made at that time, see Annex 3.

African products in Japan and other markets; and・ Promote transfer of technology that is well

5 "The Impact of HIV/AIDS on Food Security," Report for Committee on World

4 International Fund for Agricultural Development, 1993-96.

Food Security, Twenty-seventh Session, Rome, 28 May - 1 June 2001;
http://www.fao.org/docrep/meeting/003/Y0310E.htm.

adapted to the African context.

6 Ibid.

A great asset for the partnership between UNU and
ADC is the dynamism of the African Diplomats inJapan. AJAC should be based, primarily, on
networking of their capacities and activities to provide
a more comprehensive promotion of Africa. It is to be
noted that most African Ambassadors to Japan also
represent their countries in other Asian nations, such as
China, the Republic of Korea, etc. Thus, it appears
possible for the AJAC to develop its network beyond
Japan.

7 "Facts and Figures about Conditions in Human Settlements," from UN-

HABITAT's State of the World's Cities: 2001; see
http://www.unchs.org/mediacentre/documents/backgrounder5.doc.
8 "Agriculture, Development and Human Rights in the Future of Africa," Former-

President Jimmy Carter, 6th U Thant Distinguished Lecture at UNU, 5
September 2003.
9 Jointly co-organized by the United Nations University and African Diplomatic

Corps in Japan.
10 Desai and Potter (eds.), 2002, The Companion to Development Studies,

London: Arnold, p. 139.
11

Ernest Aryeetey, 2002, "A Case for Enhanced Resource Flow to Facilitate
Development and Reduce Poverty," in the "Taking Africa Seriously" Feature,
Journal of African Economies, Vol. 11, No. 2, p. 286.

・Develop constituencies (in regards to TICAD and
African constituencies in Japan). It is important toexpand constituencies for Africa in Japan if Japan
is to take significant steps towards Africa. TICAD
has an important objective to cultivate Japaneseinterests in Africa, for which the proposed centre(AJAC) should be able to play an important role.
・Establish the AJAC.

Conclusion
NEPAD and the African Union raise some hope, both inAfrica and other parts of the world. It is a shared
responsibility for advanced and developing countries totake advantage of this situation. Investing in Africa's
future by supporting its infrastructure development (in abroad sense), promoting sustainable development, andbelieving in African capacities and in the vision offeredby NEPAD is an imperative that cannot be delayed
further.
Here in Japan, UNU and ADC are strongly committed tosupporting the dissemination of a positive image ofAfrica. Africa has to be seen as a continent with great
potential that has remained, for too long, underestimated.
In this sense, we believe the AJAC can play a major role8Part II

Expert workshop working materials

Infrastructures and development in
Africa: Issues and agenda for action1
Tony Addison and George Mavrotas
UNU/WIDER

improvements either as complements or as substitutes formore traditional models of service delivery. This seems tosuggest that there is a need to try and work backwards
from development objectives to infrastructure
requirements - an approach that has been adopted recently
in the context of the Poverty Reduction Strategy Paper for
Malawi (UNCTAD 2001, Koljonen et al. 2001).

Conceptual issues

Why a focus on infrastructure?

The traditional approach to the concept of infrastructure
is related to economic or physical infrastructure, which
includes public utilities (power, telecommunications,piped water supply, sanitation and sewerage, solid waste
collection and disposal, and piped gas), public works

Infrastructure is pro-poor. The intrinsic link between
infrastructure and poverty reduction is demonstrated by(roads, and major dam and canal works for irrigation anddrainage) and other transport sectors (urban and interurban railways, urban transport, ports and waterways, andairports). In view of this traditional definition,
infrastructure is regarded as an umbrella for many
activities referred to as "social overhead capital"- a term
associated with the works of Nurkse, Rosenstein-Rodan
and Hirschman (World Bank 1994).

the fact that access to basic infrastructure services is oneof the essential criteria for defining welfare (Hirose
2003). Furthermore, improved infrastructure can help
create jobs and raise worker productivity. It can also savetime (and human effort) in transporting water, crops,
wood and other commodities. Finally, it can substantially
improve health (by reducing indoor air pollution andemissions in urban areas, and making clean water
available) and education (by expanding access to schools,
ICT, etc.) (World Bank 2001).

broader definition of infrastructure, one that goes beyond

Infrastructure is a crucial determinant of FDI and
portfolio flows. A vast literature on the determinants offoreign direct investment (FDI) in developing countries"economic infrastructure" (public utilities, public works andother transport sectors) to include "soft infrastructure", suchclearly suggests the centrality of infrastructure, skills,
macroeconomic stability and sound institutions foras information and communication technology (ICT) 2,

attracting FDI flows. The importance of ICT has also
been documented in recent empirical work (see Addisonand Heshmati 2003). A recent United Nations Conference
on Trade and Development survey of the executives ofmultinational corporations (UNCTAD 2000) also

However, there is a clear need to move towards a mucheducation, health and governance. This is crucial in view of
the internationally agreed-upon Millennium Development
Goals (MDGs). Regarding the concept of "softinfrastructure", it is important to emphasize the distinction
between inputs and outputs in certain categories of soft
infrastructure, such as health and education, since it isquestionable whether education and health can be classified

suggests that the state of (physical) infrastructure is oneof the key inhibiting factors for undertaking FDI projects
in Africa.4 Causality issues are also important in the sense

as "infrastructure" in terms of outputs.3

that the direction of causation may run from FDI toinfrastructure, and not just the other way round. Finally,

A relevant issue is a tendency in the literature to focus too
narrowly on the extension of physical networks, withoutlooking at the broader picture. Within the social sectors

investment in infrastructure sends the right signal toforeign investors for mobilizing private capital in the(e.g., health and education), there is also a tendency toregard infrastructure services as given, and thus there isno effort to explore the value of integrating infrastructure
9

form of portfolio flows.
Infrastructure is a key determinant of the overall
growth process. Recent research suggests that the impact

Secton 1: Infrastructures and development in Africa
of infrastructure investments (physical infrastructure) on
growth generates very high rates of return, at least as far
as the industrial countries are concerned (up to 60 per

Africa's suffers from a "deadly triad of interlinked
crises," i.e., HIV/AIDS, food security and governance(see the UN Secretary-General's speech at the G8cent in some cases, e.g., the United States; see Aschauer
1989, Easterley and Rebelo 1993). Other studies have

Meeting in Evian, June 2003), that requires international
action in the areas of aid flows and infrastructurereported different results, though, in the case ofdeveloping countries regarding the relationship between

investment (broadly defined to cover health andeducation).

transport and communication expenditures and per capita
real gross domestic product (GDP) growth (see Devarajan

Infrastructure is one of eight priority sectors identified

et al. 1996, Miller and Russek 1997). These conflicting
results have been explained recently in terms of the rather
inappropriate econometric methodologies adopted inmost of the above studies, and neglect of the significant
heterogeneity across countries (Haque and Kim 2003).

in the New Partnership for Africa's Development(NEPAD), along with education, health, agriculture, newinformation and communication technologies, theenvironment, energy and access to the markets ofdeveloped countries (Wade 2003).

The neglect of the policy dimension in the empiricalanalysis may be also responsible for this conflicting

High-quality infrastructure (particularly soft

evidence.
Infrastructure development (broadly defined toinfrastructure, such as education, health, and clean watersupply and sanitation) is essential for attaining many of
the Millennium Development Goals. Substantial

include investment in skills) may affect significantly theoverall international competitiveness prospects of theAfrica region. The level (and quality) of skills is of

improvement of the volume as well as the quality of soft
infrastructure in Africa will have significant implications
for achieving many of the MDGs in the region (Yugeparamount importance for attracting foreign investors andlarge amounts of private capital in the form of FDI and
portfolio flows. Countries with a high degree of2003). It is notable that in developing countries as awhole, 20 per cent of the burden of disease is attributableto environmental factors (such as water-related diseases,

concentration in private capital flows have invested

malaria, and indoor and urban air pollution), which inheavily in education and skill creation, thus substantiallyreducing skill shortages which are usually associated withlow levels of private capital flows (e.g., the "East Asian
Miracle" example of the 1980s). Africa's investment inturn reflect inadequate infrastructure (UNCTAD 2001).

skills through education and training programmes,
however, is very low. (Education/GDP spending ratios do
not exceed 3 to 4 per cent, on average, in many Africancountries.)

Consensus strongly suggests that:
・ The proportion of people living in extreme
poverty has increased in sub-Saharan Africa.
・ Africa needs to accelerate progress to achieve
universal primary education.

This situation calls for massive investment in educationand training to improve the human capital base of theregion, with important implications for private capital
flows and capital flight reversal. Investment in education
may also have important positive implications for・Sub-Saharan Africa lags behind other developing
regions regarding progress in promoting genderequality and empowering women・ Only one country in Africa (Uganda) has
managed to reverse the spread of AIDS once it

investment in health, since schools may become centres
for a variety of programme interventions such as
HIV/AIDS awareness, food-for-work and feeding
programmes, as well as health interventions (Koo 2003).
At the same time, repatriating the African talent of the"diaspora" would further strengthen the prospects forreached crisis proportions.
・ According to the recently released "Human
Development Report" (UNDP 2003), of the 31
top priority countries - i.e., countries where
urgent action is needed to meet the goals - 25 arein Sub-Saharan Africa.

Recent evidence regarding progress in achieving the
MDGs towards the implementation of the Monterrey

growth in the region.
Furthermore, Africa lags behind the rest of the world in
10Secton 1: Infrastructures and development in Africa

almost all aspects of infrastructure. Indeed, a series ofWorld Bank reports on infrastructure seems to suggestthat Africa is well behind other developing regions

can be found in the African region. Indeed, the period
1990-2000 witnessed 19 major armed conflicts in Africa,
ranging from civil wars to the 1998-2000 war between

regarding infrastructure investment. The quality of
infrastructure services in Africa is also very low

Eritrea and Ethiopia (Addison 2003).

compared with other regions (see World Bank reports,
Obame 2003). Africa's telecommunications infrastructure,

Infrastructure can play an important role in the overall
transformation process for broad-based recovery (i.e., thatfor example, is the least developed in the world; in 1999,
Africa had less than 2 per cent of the world's telephonewhich is not simply of benefit to a narrow elite). Provided
that resources are available following the end of themainlines and only about 10 million telephones (Mugabe
2003, World Bank 2000). The transport problem is also
severe in the case of landlocked African economies,
where freight expenses can absorb as much as 40 per centof the value of traded goods, compared with 4 per cent inconflict, rebuilding shattered infrastructure is a rather
straightforward task. The same holds for reassembling
pre-war institutions. The real challenge, however, is how
to transform institutions and policies, since in many cases
these favour one social group over another. Thus,

the industrialized world (UNCTAD 2001).

transformation, rather than reconstruction, is thewatchword for broad-based recovery in post-conflict

At the same time, the relationship between public andprivate investment (domestic) is of crucial importance,
particularly in terms of potential crowding-in andcountries in Africa (Addison 2003).

crowding-out effects. The issue of infrastructuredevelopment is also related to the relationship between
public investment (through which most infrastructure

institutions as well as governance may have a strong
impact on the volume and quality of infrastructure. A
new modus operandi is needed in Africa for the publicprojects have been funded, at least until very recently, inthe case of developing countries) and domestic private
investment. High-quality infrastructure services may

sector to deliver on infrastructure development.
Obviously, a number of issues related to policy reform
and the strengthening of institutions in Africa - such asencourage (crowd-in) private investment projects, thus

political economy aspects of institutional reforms,

strengthening the partnership between the public andprivate sectors in developing countries. On the other
hand, lack of infrastructure or infrastructure services of
low quality discourage domestic private investors, withownership and incentives, among others - need to be reexamined in this case (see Kayizzi-Mugerwa 2003). At
the same time, improving governance in the region means
more active involvement of multiple stakeholders in thesignificant negative implications for private investment in
the region.

management of public affairs (see recent initiatives in thearea of governance and globalization, such as the"Helsinki Process" 2002/03).

Causality issues are also of relevance. The direction of
causation regarding the infrastructure-growth relationshipmay also run from growth to infrastructure. On theinfrastructure-growth nexus, it is worth emphasizing that
infrastructure investment is not sufficient on its own togenerate sustained increases in economic growth - in thesense that the demand for infrastructure services is itself

Even in the case of non-conflict scenarios, improving

Financing infrastructure development:
Issues and policy challenges
Major improvement and investment in infrastructures
implies vast financial resources. These may come fromdifferent sources, such as aid flows, private capital flows
in the form of FDI and portfolio flows, domestic resource

sensitive to economic growth, which is difficult to predict(particularly in the case of developing countries).
Furthermore, the economic impact of infrastructure varies
substantially, not only by sector but also in its design,
location and timeliness (World Bank 1994).

mobilization in terms of savings and domestic
investment, tax revenue and public borrowing.

Infrastructure in post-conflict scenarios is an issue thatis very relevant to Africa, since many war-torn economies

fiscal reforms can be undertaken by African governments
to expand the tax base in the region). Consequently, the11

For various reasons, the potential of tax revenue andpublic borrowing is considered to be rather limited in
Africa (although in the case of tax revenue, a number ofSecton 1: Infrastructures and development in Africa

focus should be on aid, private capital flows and domestic
resource mobilization.

new forms of development cooperation among

Infrastructure development requires substantial resourcesin terms of aid flows and private capital. Aid remains

・ For aid-recipient African governments, thechallenge is to make aid more efficient byachieving substantial progress in governance andreducing aid fungibility for infrastructure
investment.

an important source for infrastructure development(although during the 1990s, private capital flows
increased substantially in share regarding the funding of
infrastructure projects in the developing world). There isdonors regarding infrastructure development in
the region.

a growing concern in the international community in theaftermath of the Monterrey Consensus regarding the needto raise the additional US$50 billion a year that will be
required to meet the MDGs by the year 2015 (some ofthem strongly linked to infrastructure development, if we

In the 1990s, infrastructure for the developing world as awhole attracted substantial private capital flows,
reaching a peak of over US$120 billion in 1997 (and,thus, exceeding ODA flows to infrastructure that year).
The Asian financial crisis of 1997, however, had aadopt a much broader definition of infrastructures toinclude health and education). A number of innovative

dramatic effect on private capital flows to infrastructureduring the period 1997-99, reducing them by almost 50
per cent. For the whole decade, however, total private

proposals and ideas are on the table for discussion at the
moment, such as Tobin's tax, creation of new Special
Drawing Rights, a global lottery, global environmental
taxes, the International Finance Facility, increased private
donations for development and increased remittancesfrom emigrants, among others.5

investment in infrastructure (US$550 billion) was morethan three times as much as total ODA flows (UNCTAD
2001, PPI Database 2000).
Africa was not, however, the main recipient of thisAt the same time, it is becoming increasingly recognizedthat what is required is not just more resources forspectacular increase in private sector financing of
infrastructure; 80 per cent of private capital flows (in theform of FDI and portfolio flows) channeling todevelopment and infrastructure, but also more effective useof aid in view of the rather overall modest performance of
aid in the African region so far. In particular:
・Enhancing aid effectiveness and harmonizing
aid efforts (see the recent Rome Declaration on

infrastructure sectors went to just six upper-middle
income countries (Brazil, which received almost onethird of the total, Argentina, Mexico, the Republic ofKorea, Malaysia and Hungary). This means that ODA
flows remain the principal source of financing

Aid Harmonization, Feb. 2003) by understanding
how different types of aid operate in aid-recipient
countries (the aid heterogeneity issue), studying the
response to aid flows of the public sector of aid-

infrastructure in developing countries and, in particular,
in the Africa region (UNCTAD 2001).

recipient African governments (fiscal response)

FDI in Africa is concentrated mostly in the minerals sector.
It is notable that ICT or other soft infrastructure canand delving deeper into the institutional constraints
on aid effectiveness in aid-dependent African
economies (the institutional framework in which
aid operates) would substantially help to improve
the impact of aid on infrastructure in Africa

diversify FDI to other non-mineral sectors in the region.
Note, also, that FDI has potentially desirable features that
affect the quality of growth, with significant implications
for poverty reduction. It may reduce adverse shocks to thepoor stemming from financial instability and help to(Mavrotas 2000).

improve corporate governance. Furthermore, FDI generates
revenues that may support the development of a safety net
for the poor (Klein et al. 2001).

・Making aid more stable (i.e., more predictable
and less volatile; reducing uncertainty regardingaid) is crucial for designing and implementing
infrastructure projects in Africa. Unstable andunpredictable aid flows can undermine the whole

Domestic resource mobilization is equally important.
Policies that strengthen financial sector development byeffort to upgrade the level of infrastructure in theregion. Increasing the stability of aid calls for

improving the efficiency of the banking system as well as
sequencing and deepening financial sector reforms in the12Secton 1: Infrastructures and development in Africa

region may have a strong impact on savings mobilization(Kelly and Mavrotas 2003), which in turn raises domestic
private investment essential for infrastructure projects.

the poor in crafting and implementing infrastructure
solutions has been a successful practice in many
developing countries. Poor households in rural and semi-

Needless to say, the legal framework has an important roleto play in the overall financial sector development process.

urban areas are primarily dependent on small-scale
informal sector providers for basic infrastructure services.

There is a need to strengthen the public-private sector

The traditional approach to infrastructure provision thatgives a prominent role to state-owned enterprises neglects

partnership, going beyond traditional approaches infunding infrastructure projects through the public sector.

the significant contribution of small-scale providers inrural areas to poverty reduction and infrastructure

A new paradigm emerged in the 1990s regarding thefinancing of infrastructure in developing countries. It
called for market liberalization, private sector
participation and a radical redefinition of the role of thestate concerning the provision of infrastructure services

improvement. This clearly needs to be reconsidered.

(UNCTAD 2001).

informal tanker suppliers were legalized, andconsolidated themselves into three associations. The

Financing infrastructure development is also relevant to
the expansion of public-private partnerships by using
both traditional approaches as well as innovative schemes

agreement requires that tankers must submit themselvesto quality and hygiene inspections and agree to publicly
display information on agreed water prices (UNCTAD(including private financing of public facilities, joint
ventures, an "output-based aid approach" (World Bank
2002) and privatization, among others). West Africa,2001). Emphasis on infrastructure development in therural areas of Africa has also been given recently by theJapan International Cooperation Agency (JICA), in view

meanwhile, has considerable experience with the use oflease contracts or partial concessions for privates sector
participation in water and sanitation services. In this case,of its significance for pro-poor growth in the region(Azuma 2003).

the private sector takes full responsibility for operating

Dealing with the exchange rate risk involved in

the service while the public sector continues to financemajor investments, either partially or wholey. Countries
adopting this approach (Senegal, Cote d'Ivoire, Gambia,
Guinea and, most recently, Niger) have managed toinfrastructure projects is a crucial issue that needs to beborne in mind when designing and implementing
infrastructure development policies in the region. Indeed,over the life of a typical contract for an infrastructure

attract private operators into high-risk environments(UNCTAD 2001).

project (e.g., 20 to 25 years), the value of African country
currencies is likely to fall substantially. This inevitablyraises an important issue, namely, who should bear theexchange rate risk: the private investors (who can be local
or foreign), the host country government, or theBond markets can attract infrastructure financing bypension funds and insurance companies seeking long-

Ghana offers an excellent example. In Accra, about 25
per cent of residents have no access to piped water and,thus, must rely on tankers. Under a recent initiative,

term, stable returns - an established practice in industrial
countries and in certain countries in Latin America andAsia, but not in Africa. Accelerating the development of"municipal bond markets" (i.e., long-term bonds sold by
local governments and local government-owned

customers of the service?

enterprises) has also been an established practice in theprovision of infrastructure in emerging markets in Asiaand Latin America, but not in Africa (the only exception
being South Africa) (Leigland 1997).
Involving local communities (particularly in rural areas),that it is the host country government who should bear therisk, since it is responsible for the macroeconomic policies
that determine changes in the exchange rate. Finally, it may
be customers who should bear the risk, since they must
ultimately pay for the cost of the service. Recent work on
this important issue seems to suggest that the investors

small-scale local providers and entrepreneurs in theinfrastructure process may be very rewarding. Involving

should finally bear the risks created by the use of foreign
currency financing in infrastructure projects; however, not

13

It could be argued that the private investors should bear therisk because they can diversify away country-specificexchange rate risk. Alternatively, it could also be argued

Secton 1: Infrastructures and development in Africa

protecting investors from exchange rate risk may wellimply a need for higher tariffs, which in turn may result indebt volumes which will be lower than in the boom years

The NEPAD Secretariat is currently trying to secure
funding for two or three key infrastructure projects foreach of the five African regions. Possible candidates are a(Gray and Irwin 2003).

West African electric grid and power pool, regional gas
pipelines and transport corridors (Herbert 2003). NEPAD

African governments can play a central role bycreating policy and regulatory frameworks that safeguard

urgently needs to gain momentum by improving thequality of infrastructure as well as services andthe interests of the poor, improve environmental
conditions and coordinate cross-sectoral interactions -government management in Africa. This would involve,
inter alia, development of the necessary institutions forwhether the services are provided by public or private
providers.

designing, implementing and monitoring infrastructure
projects, adjusting trade and industrial policies, andinvolving the local community, business and academia in
the whole process.

Furthermore, improving governance and reducing
corruption in infrastructure remains an important
challenge. Infrastructure sectors are particularly
vulnerable to corruption in view of the large volume ofresources involved in these sectors and their traditionalorganization as state-owned monopolies. However,corruption has huge implications for infrastructuredevelopment, since it increases the cost of operations andreduces the rate of revenue collection (Lovei and
McKechnie 2000). International action is also needed toreduce the "supply" of corruption (e.g., by ending the tax
deductable status of "payments").

There is a need to "take Africa seriously."6 Even when
Africa governments do "everything right" they often failto attract foreign and domestic investment because of astrong negative perception (Aryeetey 2002). Not taking
Africa seriously has important negative implications forthe continent: the virtual absence of foreign private
investment, and failure overall of development aid toachieve tangible results in terms of sustainable growth. At
the same time, the emergence of the developmental state
has been stifled in Africa (Fafchamps 2002).
Furthermore, massive losses in terms of invaluable

Regional initiatives have an important role to play, too,in promoting regional approaches to infrastructuredevelopment (e.g., NEPAD). Linking up Africa with theglobal economy requires infrastructure investment that
goes beyond the individual capacity of most African

human capital (the "brain drain" issue) and financial
wealth (the capital flight issue) has further undermined
growth prospects in the region (Aryeetey 2002).
Recent years have witnessed significant policy reforms as

countries; regional or sub-regional approaches to thedevelopment of such infrastructure seem to be the right
response in this case.

well as initiatives undertaken by many countries inAfrica. At the same time, new international initiatives

Recent years have witnessed some progress in Africa

degree of collaboration has been achieved between

towards regional coordination in infrastructure projects.
A Transport Protocol was signed recently in southern
Africa to promote harmonization of transport policies
between countries in the region; 23 states in West Africa
agreed to liberalize air transport in the region. breaking

donors and recipient governments in the region. Finally,
the Monterrey Consensus reflects inter alia a growing

up the 40 year monopoly of Air Afrique: and a project
adopted under the auspices of the UNU Transport Decade(1990-2000) is currently linking nine trans-African
highways with a view to connecting major cities in theregion, including Cairo to Cape Town on the north-south
axis and Lagos to Mombassa on the east-west axis

that Africa needs now to be taken seriously by both
Africans and the donor community, with important
implications for the development prospects of the region.
This is an opportunity that must not be missed.

(UNCTAD 2001).

What are the key messages arising from the previous
discussion? It is becoming increasingly clear that:(e.g., Highly Indebted Poor Countries) have been
embraced by many African governments, and a highrecognition in the developed world that its future isincreasingly tied to the fortunes of the poorest part of theworld. These new positive developments seem to suggest

Concluding remarks ─ key messages

14

Secton 1: Infrastructures and development in Africa

・ infrastructure (broadly defined to include soft
infrastructure) is pro-poor;
・ is a crucial determinant of FDI and portfolio
flows;
・has an important impact on the overall growth
process;・is essential for attaining the MDGs; and・has important implications for the international
competitiveness prospects of the region.
At the same time, a number of key challenges seem to be
emerging in the area of infrastructure development. These
include, inter alia:
・There is a need for additional resources (both aid
and private capital flows) to support major
infrastructure projects in the region.
・Resources directed to infrastructure development
must be made more stable and predictable, and at
the same time more effective and harmonized.
・ Mobilization of domestic resources (savings,
private investors, local communities and local
talent) can help improve dramatically the qualityof infrastructure in Africa.
・ Strengthening of the public-private sector
partnership by developing and undertaking new
funding schemes in infrastructure could be very
rewarding.
・Addressing issues related to the exchange raterisk involved in infrastructure projects is of
crucial importance for designing andimplementing infrastructure development
policies in the region.
・ Building the right institutions and making
significant progress on the governance front are
prerequisites for infrastructure development.
・Linking together the micro and macro aspects ofinfrastructure is crucial for building the rightinfrastructure in Africa. This calls for a "granddesign approach" regarding infrastructuredevelopment in the case of Africa - i.e., looking
at the global picture as compared to local
infrastructure.7
・Recent regional initiatives have an important roleto play in the development of a high-quality
infrastructure for the region.
・There is a need to take Africa seriously.

References
Addison, T. (ed.), 2003a, From Conflict to Recovery in Africa,
Oxford: Oxford University Press.
Addison, T., 2003b, "Africa's Recovery from Conflict: Making
Peace Work for the Poor," UNU/WIDER Policy Brief No. 6,
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Facilitate Development and Reduce Poverty," Journal of
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Devarajan, S., V. Swaroop and H. Zou, 1996, "The Composition of
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Easterly, W. and S. Rebelo, 1993, "Fiscal Policy and Economic
Growth: An Empirical Investigation," Journal of Monetary
Economics, vol. 32, pp. 417-58.
Fafchamps, M., 2002, "Taking Africa Seriously: Introduction,"
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Gray, P. and T. Irwin, 2003, "Exchange Rate Risk: Reviewing theRecord for Private Infrastructure Contracts," Public Policy for
the Private Sector Note No. 262, June, Washington, DC: WorldBank.
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and Communication and Growth: A Dynamic Panel
Approach," Discussion Paper 03/24, School of Economic
Studies, University of Manchester.
Herbert, R., 2003, "Implementing NEPAD: A Critical
Assessment," in Africa Report: Assessing the New Partnership,
Ottawa: North-South Institute.
Hirose, H., 2003, "Private Financing on Infrastructure in Africa,"
paper presented at the Africa Day Symposium, UNU, Tokyo,
13 May.
Kayizzi-Mugerwa, S. (ed.), 2003, Reforming Africa's Institutions:
Ownership, Incentives and Capabilities, Tokyo: UNU Press.
Kelly, R. and G. Mavrotas, 2003, "Savings and Financial Sector
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Foreign Direct Investment in the 21st Century, Mexico City,
26-27 November.
Koljonen, P., K. O'Sullivan and R. Lamech, 2001, "Malawi Preparing the PRSP: Draft Guidance Note on Energy," mimeo,
Washington, DC: World Bank.
Koo, S., 2003, "Education: The Infrastructure for Children in15

Secton 1: Infrastructures and development in Africa

knowledge-sharing, new ways of learning, information-driven economies withincreased services of research institutions, business start-ups, venture capital
mobilization, etc. Passive postures towards ICT (which is the case with SubSaharan Africa) are likely to lead to erosion of competitiveness and increased
economic marginalization.

Africa," paper presented at the Africa Day Symposium, UNU,Tokyo, 13 May.
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3

We are grateful to UNU Rector Prof. Hans van Ginkel regarding this point.

4

Along with limited access to finance, other key inhibiting factors are highadministrative costs, the tax regime, poor access to global markets, a low levelof skills, and the regulatory and legal framework governing FDI, among others.

5

There is an ongoing UNU/WIDER-DESA project on "Innovative Sources forDevelopment Finance." directed by Sir Anthony Atkinson, Nuffield College,
Oxford.

6 See Journal of African Economies, special issue, vol. 11, No. 2, 2002
7 We thank Prof. Hans van Ginkel on this point.

Mavrotas, G., 2002, "Foreign Aid and Fiscal Response: Does Aid
Disaggregation Matter?," Weltwirtschaftiliches Archiv (Review
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1 We are most grateful to our two discussants, Prof. Hans van Ginkel, UNU

Rector, and Prof. Wafula Masai, for their constructive comments andsuggestions, which benefited this paper substantially. Comments received fromother workshop participants are also gratefully acknowledged. All remaining
errors and omissions are our own responsibility.
2 ICT can play a vital role for infrastructure development and growth in Africa,

since the ICT revolution is related to productivity investment, increased16Secton 1: Infrastructures and development in Africa

Comments on "Infrastructuresand development in Africa: Issues
and agenda for action"
Wafula Masai
African Centre for Economic Growth andUniversity of Nairobi

especially in relation to low-income developing countries.
In this first section, information and communication
technology (ICT) and governance are mentioned as
aspects of "soft technology." These, together with thetraditional economic and social infrastructure, cover(hopefully) the full range of the stock of infrastructure at
the national level. There is no doubt that ICT andgovernance are important, and one wishes to hear a lot
more about them in the paper.

Introduction
The paper is intense and well focused, and provides a lotof useful information on the subject of infrastructure. I
was greatly privileged to read it and also to listen to the

ICT refers to technology that facilitates communicationand the capture, processing and transmission of
information by electronic means. The full range of ICT

presentation. In my comments, I will avoid repeating
what the authors have ably presented, and mostly
concentrate on improving our understanding of the issues.
The paper contains four sections that focus, respectively,

includes modern applications of radios, televisions,
telephones, computers and the Internet. All these aspects
are becoming increasingly interfaced and networked.
There are many ways in which this ICT is likely to affectsocial and economic development.

on conceptual issues, a justification for focusing on
infrastructure, the issues and policy challenges offinancing infrastructure development in Africa, and aconcluding set of key messages. The authors correctly
observe that:・both physical and social infrastructures have a

The ICT revolution is associated with productivity
improvement, increased knowledge-sharing, new ways oflearning, information-driven economies with increased
services of research institutions, business start-ups,
venture capital mobilization, etc. Passive postures

pervasive impact on economic and humandevelopment;
・there is an urgent need to improve their provisionand quality; and・good government policies and a multiplicity of

towards ICT (which is the case with Sub-Saharan Africa)
are likely to lead to erosion of competitiveness andincreased economic marginalization. It is in such acontext that a spotlight needs to be pointed at this aspectof infrastructure, in terms of more research on the rolefinancial arrangements (aid, FDI, portfolio flows,
domestic savings and investment, tax revenues
and public borrowing) can promote efficient andICT can play and for purposes of avoiding inactive,
reactive or sceptical approaches to ICT.

responsive service delivery that involves
commercial management, competition and users.

There is also a need to understand the winning policies
and strategies for the Internet in Africa: enabling

As is evident from the title of the paper, the authors seek to
identify leading issues and a possible agenda for action.

Conceptual issues
Infrastructure - just like capital, institutions, technology
and entrepreneurship - is a critical factor in the growthand development of nations. A lack of infrastructure
explains Africa's poor economic performance in thecourse of the past four decades. A variety of eclectic
views are presented in economic literature that imply
evolving conceptualizations of the nature of these factors
and modified perceptions of their underlying dialects,
17

regulatory environments, rural and marginalized area
coverage, increasing awareness and computer literacy,
engaging of countries in an information technology
agenda, piloting technologies, inter-connecting
institutions and so on.
In addition to ICT, biotechnology seems to hold a key tosolving the continent's food-shortage problem, despite arising backlash against genetically modified organisms.
The mention of governance also calls attention to theneed to clarify issues of "global governance" andpolitical, national economic, corporate and civil society

Secton 1: Infrastructures and development in Africa

governance. Such governance may be reflected upon interms of accountability, participation, predictability,transparency and so on. Global governance is associated(due to inadequate budgetary outlays) and ineffective
macroeconomic policies, among other reasons, helped toerode the quality and adequacy of infrastructurewith looking at the world in a more integral manner, interms of interdependence and assertion of the values ofprovision. Starting from the late 1970s, governmentsinternationalism and the global neighbourhood. Good
global governance calls for better management of

became increasingly unable to meet infrastructure needs,
and a sharp regression in infrastructure service delivery
and quality set in.

survival, better ways of sharing diversity, organization ofinternational civil society, and collective responsibility to

When the public sector fails to provide an adequate level

ensure security and the protection of the rights of people.
Governance is the sum of the many ways in which
individuals, institutions, public and private organizations,and civil society organizations manage their common
affairs, both formally and informally. Issues ofgovernance exist at many levels, including political,
national, economic, corporate, civil society and global(involving international authorities and global corporate
alliances). At all these levels, there are many voices andinstitutions that advance agenda with considerable local,
national, regional and global impacts. Good governancehelps to broaden democracy, avoids nepotism, eliminates
pervasive corruption, is committed to peace and social
justice, and creates an environment conducive toinvestment and business.

of services, private businesses devise coping mechanisms,
such as changing production techniques or supplying
their own infrastructure aggregates. Such selfprovisioning for water, energy and security, among
others, ensures a regular supply of the services but also
increases production costs for the businesses. Selfprovision also is not possible for infrastructures such as
roads, railways, harbours and (until recently) telephones.
For these, firms are unable to safeguard against
malfunctioning infrastructure.
Classified roads are few, have heavy traffic, and require
frequent costly repair and rehabilitation. There are no
meaningful highways in most parts of Sub-SaharanAfrica. Unclassified roads often fall under control of local
authorities that lack revenue, and so end up being in very
poor state.

Unfortunately, good governance in Sub-Saharan Africa isthe exception rather than the rule. Where governance ispoor, economic performance has also tended to be poor.
The introduction of governance as soft infrastructureoffers an opportunity to explore new ideas, to develop
new visions, and to devise new governance arrangements
such as NEPAD and regional integration, in the context
of globalization.

Very few railway lines have been built in the postindependence years. With serious lapses in maintenance,
railway transport is prone to frequent accidents, and theservices are inefficient compared to those offered byprivately owned transport companies. Railway services
could soon cease to exist in many African countries.
Most seaport facilities suffer from inadequacy of existing

The focus on economic and social
infrastructures

capacity to handle and clear cargo. The quality of services islow, with high pilferage and long turn-around rates.

Traditional economic and social infrastructures havebecome increasingly deficient for meeting economic andsocial needs. In many African countries, former colonial

Air transport, where it still exists, is subject toprivatization or amalgamation with better performing(often foreign) companies, or is under foreign
management.

powers built the economic infrastructure to facilitate
exportation of raw materials from Africa and importationof manufactured goods into Africa. The postindependence governments inherited functional roads,
railway lines, airports and harbours in most of SubSaharan Africa.

Traditional postal and telecommunication services formany years failed to innovate, and continued to rely on
fairly old and inefficient technology. The general picture

A combination of population pressure, poor maintenance

was one of a lot of laxity in maintenance, high fault
occurrence and low fault clearance rates. New technology
18Secton 1: Infrastructures and development in Africa

products associated with wireless and open source
software (the Internet, electronic mail and cellular
phones) are helping to introduce competition, to broaden

fighting the epidemic.

the choice of services for consumers, and to lower costsof accessing the services.

behind the rest of the world in almost all aspects ofinfrastructure, in terms of both volume and quality of

The provision of water and related sanitary services

infrastructure services. Poor infrastructure implies alegacy of weakened, highly disarticulated,

has been severely affected by the rapid expansion of theurban population, as well as of the overall population.

undercapitalized and uncompetitive economies. If Africa
had the same basic infrastructure as developed countries,

This has created high levels of unmet demand, a backlogof repairs, a shortage of new investments, and so on.
The supply of energy offers another pathetic picture. In
East Africa, 70 per cent of households' fuel needs are met

it would be in a more favourable position to focus on
production and on improving productivity forinternational competition. The structural gap in
infrastructure, therefore, constitutes a serious handicap toeconomic growth and poverty reduction. Investors preferusing wood. This has severe environmental implications
for the countryside. Petroleum products help to meet(when other factors are equal) to invest in countries
where the supply of infrastructure services is good.

about 80 per cent of commercial needs of transport,
industry and agriculture. Hydroelectric power remains
inadequate and expensive. Part of the solution is in theIssues and policy challenges offinancing infrastructure development

privatization and increasing the number of power
producers and distributors.
At the social infrastructure level, a lack of amenities foreducation contributes to low enrolment, high dropout
rates, low completion rates and poor transition rates.
Access, retention, equity and quality, therefore, remaincompromised. The priority in this area is to improveaccess to basic education by ensuring affordable andequitable access as well as improving attendance andretention. Underlying this is training of teachers,
availability of in-service courses, school inspection
activities and ensuring supporting facilities and services.
Current trends in health indicators are less thanpromising. Mortality rates and life expectancy, for

Based on the above, there is no doubt that Africa lags

The approaches discussed in this section - concerning aid
flows, FDI, portfolio flows, domestic savings andinvestment, and tax revenues and public borrowing - cango a long way in financing the maintenance andexpansion of infrastructures in Africa.
In terms of the way forward, a lot of attention needs to be
paid to mastery of the fundamentals of infrastructure
project financing, as well as development andmanagement. The changing face of infrastructure service
provision demands increased understanding - by hostgovernments, project promoters and creditors - of theroles of competition and choice, regulatory structures,modes of financing and new technologies in shaping theevolution of markets for infrastructure services.

example, imply a major decline in health standards in the
recent past. Past policies and resources focused on
curative health and neglected preventive and, especially,rural health. The key issues include enhancing equity,
quality, accessibility and affordability. Shifting resources

Increased knowledge and capacity building are required

from curative towards preventive and rural heath care
may constitute better targeting of resources.

・policy frameworks associated with fiscal costs(tax incentives, direct financing, and guarantees
in face of issues of credit worthiness and risk

AIDS is a major health problem and is the number one
time bomb of the continent. African communities need to
do more to prevent the epidemic from spreading further.

return profiles);・ use of bank loans, syndication, securitized

The private sector, civil society and governments, as wellas the international community, need to join forces in・strategies for risk mitigation in connection withregulatory and currency risks, and mechanisms

19

at the levels of:・ regulatory frameworks for private sector
participation (including private sector provisionof public services);

financing, cross-border leasing, etc.

Secton 1: Infrastructures and development in Africa

for risk management (including derivatives suchas swaps and forwards);
・roles of multi-lateral development agencies fortariffs at levels that ensure they will continue to haveservices now and in the future. Such tariffs should be set
to meet current costs of supplying the service andguaranteeing, financing (loans and bonds) andinsuring against risk;

requirements for expansion to meet higher future demand.
If this is done carefully, excellent utility-related services

・ capital market financing opportunities for
economically sound infrastructure projects;

could continue to exist.

・ strategies for concession awards that include
transparent competitive bidding; andCost-sharing possibilities need to be explored, especiallyin the provision of road, education and health services.

・government incentives.
In addition to the above, several comments (highlighted
below) are worthy noting.

Communities and consumers are often able and willing to
pay substantially for improvements in service provision.
Free-rider problems are formidable only among thepoorest when it comes to implementing cost sharing.

Excessive dependence on donors should not be
encouraged. Africa has experienced more than a decade

The need for regulation of telecommunication andenergy sectors arises because investments in productionof less-than-harmonious relations with donors that havemeant delays in many projects, including major road andwater project rehabilitation.

capacities are difficult to unbundled, and privatization
still accords a monopoly to the purchaser. Regulations
then take care of service standards, tariffs (which favour

At the level of global trends, it is important to understandwhere FDI is flowing to, and why. There always arecost minimization and price discipline), competition andthe long-term needs of both consumers and the industry.

(primary) factors that attract foreign investments towards
particular regions, and towards particular types ofinfrastructure. What concrete steps can be taken bySome of the problems faced at levels of water supply,
electricity supply, road transport maintenance, irrigation
projects and disruption of human settlements can bebusiness and governments to increase FDI flows to

associated with changing climate patterns. It is, indeed,

infrastructure in Africa?

true that climate patterns are changing. There is a need tounderstand and better track these changes. Infrastructure
providers need to integrate this new factor into corporate
strategy. (Centres of Environmental Studies and Inter-

Blueprints exist for developing an integrated energy planfor the southern Africa region with private sector
involvement. The potential of the Congo, Nile, Zambezi
and Limpopo Rivers, and of other smaller rivers, has beenassessed and is deemed to be great. Success, however,will depend on agreements (often tripartite) concerning
pricing or tariffs, the structure of the grid, and the rational

governmental Panels on Climate Change need to becalled upon to provide more technical information on
this.)

use of energy that excludes pilferage. It will also depend
on institutional capacity building that allows training andretention of competent technical personnel to manage
production and distribution.
Urbanization in Africa, with large proportions of the
population living in high-density slums, creates an urgent
need to develop new infrastructure and to improvesecurity in affected urban areas. It is my view thatinvestment in such areas has a high impact on theeconomy.
In the case of utilities, consumers are often willing to pay
20Secton 1: Infrastructures and development in Africa

Discussion of "Infrastructure anddevelopment in Africa: Issues andagenda for action"
In "Infrastructure and development in Africa: Issues andagenda for action," Drs. Addison and Mavrotas highlightthe importance of infrastructure with regard to thedevelopment and integration of Africa. They emphasize
the need for a broader definition of infrastructure that
includes both "hard" and "soft" infrastructures (public
utilities and works as well as education, health,
governance, etc.). They also emphasize that
infrastructures are "pro-poor" and are of crucial
importance in regards to eradicating poverty andachieving the Millennium Development Goals (MDGs).
Infrastructures are also a crucial determinant of FDI,
capital flows and, more generally, economic growth. But
Africa lags behind the rest of the world on almost all
aspects of infrastructure (low quality and quantity), which
affects the overall competitiveness of the African
continent.

The discussion that followed the presentation stressed thefollowing issues:

Infrastructure: definition, nature andAfrican reality
A broader definition of infrastructure
Workshop participants stressed the importance of having"a clear, comprehensive concept of infrastructure," onethat includes both hard and soft infrastructures rather thanconsidering exclusively the economic and physicalinfrastructure aspects (hard infrastructure). The definitionof infrastructure should include not only hard-type
projects, such as railways, roads, bridges and the like, butalso soft-type infrastructure or (social) institutions, suchas education, health, organization, ICT (i.e., technologies
that facilitate communication) and "global governance"(governance at all levels, including civil society, NGOs
and the private sector (corporate responsibility)).
Furthermore, infrastructures have to be considered intheir political, economic, physical and social dimensions.

Infrastructure development and maintenance require vast

NEPAD identifies infrastructure as one of its eightpriority sectors. The adoption of a broad definition of
infrastructure can help reverse the tendency to allocate

financial resources. Taking account of the lack ofreliability of tax revenues and public borrowing in Africavery low budgets to sectors such as education and health(which dangerously impedes African development).

enforces the importance of external financing sources,
such as aid, private capital flows, domestic resource
mobilization and the public-private partnership.

The nature of infrastructure

Innovative approaches are also needed to strengthen aid
effectiveness and avoid its "disintegration."
Looking at the aid heterogeneity issue - i.e., how different
types of aid (project aid, programme aid, technicalassistance and food aid) affect key macroeconomic
variables in aid-recipient countries in Africa – is crucial
for our better understanding of aid effectiveness and for
improving further the effectiveness of aid in the region.
This will have significant implications for infrastructuredevelopment in Africa.
The authors also underline the challenges faced by
African governments (namely, corruption and fraud), therole to be played by regional frameworks (regional

Four main characteristics define infrastructure projects:
they are "pro-poor," they are set up to last on a long-termbasis and, therefore, require maintenance, and thebuilding and development of infrastructure require vastfinancial resources.
・"Pro-poor": Infrastructure and poverty reduction
are closely interlinked; basic infrastructureservice is an essential criterion for defining
welfare. Furthermore, access to basic
infrastructure appears as a sine qua non condition
for production to become competitive.
・Long term: Infrastructures are established with
provision for their continuing existence.
・ Maintenance: Infrastructure sustainability
requires maintenance.
・Vast financial resources: To set up and maintainintegration), the need to link Africa to the global level

infrastructure requires vast financial resources,

and, most of all, the need to take Africa seriously.

while the infrastructure itself does notnecessarily lead to rapid growth delivery

21

Secton 1: Infrastructures and development in Africa

following on investment.

African infrastructure
African infrastructure is of poor condition in both quality
and quantity. There was a broad consensus among
participants to acknowledge the fact that African
infrastructure lags behind the rest of the world. At boththe economic and social levels, there are serious problems
of infrastructure adequacy. Hard infrastructure (such as

integration. For example, aid might be allocated to agroup of countries that implement a common
infrastructure project.
Recipient countries also have responsibilities: African
governments must attract other investments, such as FDI
and private savings, in order to finance infrastructuredevelopment. And, Africa has to overcome thedependency syndrome associated with aid: infrastructures

motorways, railways and sea harbors) as well as softare neither "given" nor "due.”infrastructure (such as health, education, communicationand global governance) are barely satisfactory or
sufficient. Furthermore, poor maintenance of existing
infrastructure results in its rapid erosion. Building,

The role of the private sector, and possible
partnership with the public sector

developing and maintaining infrastructure are priorities
that can stimulate African development.

Sound financial infrastructures, such as banks, bondmarkets and stock exchanges, have to be developed forthe private sector to actively participate in thedevelopment and financing of infrastructure in Africa.

Challenges for developing African
infrastructure: Financial resources?

Public-private sector partnership is another potential

The issue of financing infrastructure is central. African
governments cannot presently provide the finances
needed to build and maintain African infrastructure. In
Africa, the weakness of both tax revenue and publicborrowing capacities tend to exclude the public sector asa major source of investment. Therefore, the mostsource of financing for infrastructure. However,workshop participants voiced their concerns regarding theconsequences of infrastructure's privatization. The effects
of privatization will have to be closely monitored to limit
the negative aspects: the poor being dropped out, priceincreases, poor maintenance due to the absence of long-important sources of financing for infrastructure areexternal donors (aid), the private sector and possible
private-public partnerships.

term policy, etc. For the costs and benefits ofinfrastructure's privatization to be better balanced, someefficient regulatory frameworks must be set up to limit
these negative impacts. Private companies are profit
driven; therefore, their involvement in public utilities

The role of aid in regard to infrastructuredevelopment: strengths and weaknesses
Aid has an important role to play in financing
infrastructure. Its effectiveness should be strengthened tomake it more stable and predictable.
The issue remains that donor countries allocate ODA
according to their national interest(s) or agenda. Hence, it
is difficult for recipient countries to undertake soundbudgetary policy planning and priority setting. The
versatility of aid highlights the responsibility for donor

financing shall be closely monitored.
It was generally agreed that people are eager to pay forthe use of functioning infrastructure, as long as the priceis fixed on the basis of the infrastructure's real cost,
including maintenance. Prices fixed by the private sector
tend to reflect their interest in rapid profit, and thus to be
rejected by users.
Regarding the case of people who can not afford to pay

countries to assert their political will and commitment tosupport African development. When donor countries
allocate aid, priority must be given to the sectors that do
not attract the interest of the private sector (as, forexample, health and education).

for basic infrastructure - the poorest of the poor suggestions were made about setting up systems thatwould enable them to have free access to infrastructure inorder to cover their basic needs. For example, in the caseof fresh water, they would have free access to the numberof liters required on sustain human life on a daily basis.

In addition, new forms of aid must be developed that

The implication of involvement of the private sector ininvestment in or financing of infrastructure projects

support sustainable infrastructure development and22Secton 1: Infrastructures and development in Africa

requires a strategy and mechanism for risk hedging andmanagement.

such as NEPAD pave the way to such a change ofmentality.

The role of African governments

Furthermore, the workshop participants stressed thenecessity to explore Africa's unused possibilities andcapacities. For example, Africa is a great reserve of an
inexpensive work force that remains largely
underexploited. Other assets that remain underexploited
are the possibility for the African continent to strengthen

The fact that African governments do not possess theresources needed to finance infrastructure does not meanthat they should not actively participate in building anddeveloping infrastructure. On the contrary, they must
look actively at how they can integrate infrastructure inorder to maximize efficiency and benefits for all.
Besides, central governments must promote a sense ofownership within society. Local communities should
become more involved, both at the implementation andmaintenance stages of infrastructure. Their involvementin the infrastructure process may be very rewarding.

New challenges and reasons for optimism
Urbanization and slums
Workshop participants pointed out the dramatic
acceleration of urbanization in Africa. Its implications are
grave: within the growing slum areas that absorb a largepart of the new "urbanized" population, the absence ofbasic infrastructure must be addressed as a first priority.
People living in these areas must not be forgotten, normust we forget that they do not have access to the mostbasic infrastructure of fresh water, basic health care,education, etc. Finally, the privatization of infrastructurein slum areas must be conducted with extreme care, so as
to limit its negative impacts on the poorest and more
vulnerable population.

Grand design for Africa, and the necessity to take
Africa seriously
Workshop participants stressed the importance of having
a "grand design" for Africa that goes beyond the projectlevel and takes into consideration global-scale issues.
Linking together the micro and macro aspects ofinfrastructure is crucial for building the rightinfrastructure in Africa.
The negative perception of Africa must be reversed; both
Africans and the rest of the world share the responsibilityof taking Africa seriously. As Dr. Aryeetey wrote, taking
Africa seriously means "developing confidence in thecapacity of African nations to manage their economies
successfully."1 Recent achievements and new initiatives23

its relations with other continents or regions. The
example of Mauritius, which has developed relations with
the Asian continent, and most notably with India, has thepotential of being replicated with other countries andregions.
1

Ernest Aryeetey, 2002, "A Case for Enhanced Resource Flow to Facilitate
Development and Reduce Poverty," in the "Taking Africa Seriously" feature of
Journal of African Economies, vol. 11, No. 2, p. 286

Section 2: African institutions building and regional integration

African institutions building andregional integration: Lessons fromexperience
Steve Kayizzi-Mugerwa
International Monetary FundIntroduction

・ Conclusions.

African integration: Too big a concept,
or too little commitment?
Since this discussion is about African integration, let me
begin with an African saying: "If you want to catch acreature that dwells in the skies, lay the trap on the
ground, because even the great eagle does not eat clouds it must come down to earth to look for food." The moral ofthis saying is twofold: first, that simplicity and innovation

Since the era of independence in the 1960s, regional
integration has been the "big idea" in African
development. Over 100 regional organizations have been
initiated since the 1960s, with the goal of promoting

are often more effective than grand schemes and, second,regional cooperation and establishing the institutions

Seek ye first the political kingdom

required for rapid economic development.

Like all great ideas, African integration was, in the firstthat goals which ultimately cannot be grasped or founduseful by ordinary people are of little use.

instance, promoted by a learned elite. Until recently, itInstead of movement towards economic and politicalunity, however, the proliferation of regional integration
projects has led to the balkanization of Africa. Today,
many regional organizations are poorly funded bymember states and must depend on donor support to meet
operational needs. The goals of regional integration,
including achieving self-reliance and raising the welfareof the population, have not been achieved.
The past five years, however, have seen a revival of thedrive for African integration, exemplified most recently
in the presentation of NEPAD as a strategic blueprint for
African development - advocating a more open andinclusive process and introducing the idea of peer review.
The economic and political environment is decidedly
different from when integration was first embarked upon,four decades ago, and there is optimism that the economic
and institutional impacts will be more beneficial.
This paper discusses institutions building and regional
integration in Africa on the basis of recent experience.
Following recent work on Africa’s institutions (seeKayizzi-Mugerwa 1999, 2003), the paper touches on theissues of ownership, incentives and institutional
capabilities as they relate to regional integration. The
discussion is grouped under the following headings:
・ African integration: Too big a concept, or too
little commitment?
・Do African regional institutions measure up?
・Institutional demands on African integration
・Future prospects

has been seen as the preserve of government bureaucrats,
with little participation of civil society in decisionmaking and strategy formulation. Regional integration
was, initially, not an expression of the desire for
economic prosperity and improved welfare (for example,
via enhancement of the economies of scale and pooling ofresources for development); the focus was on politicalunion. In Dr. Kwame Nkrumah's famous expression, thegoal was: "Seek ye first the political kingdom, and allother things shall be added unto you."African integration was born of the pan-Africanist
movement, already active in the 1950s, which, while
giving African integration a global following, also madeit difficult for post-independence African governments tobuild a national consensus for integration. Political unity
was, thus, the institutional point of departure for African
integration. Though exciting for the new Africancountries, it proved elusive.

Temptations of nationhood: some examples
National politics were to become the most serious
impediment to African integration. Mwalimu Julius
Nyerere of Tanzania referred to this as the "temptationsof nationhood." In East Africa, Tanganyika was the very
first country to gain independence (1961). In the hope oftaking a unified East Africa to independence (that is,along with Kenya and Uganda), Nyerere had offered todelay Tanganyika's independence by a few years, if
necessary, fully knowing that power and the politics ofpatronage would dissuade even the most fervent post24

Section 2: African institutions building and regional integration

independence leader and put national politics andinterests ahead of regional unity. Thus, from the very
beginning, the "big idea" of regional integration was

implementation. Policies have tended to fail because they
were imposed by donor or multilateral agencies, with acircumscribed by national politics and the rivalry of theemerging leaders.

domestic stakeholders. It is only when leaders andbureaucrats are in a position to defend their policies, inpublic debate, that they will generate the support required
from their constituencies (sometimes, even for painfulmeasures).

The subsequent history of regional integration in East
Africa is illustrative. Under the East African Community,
launched in 1967, Tanzania, Kenya and Uganda retained

number of conditions but with little real participation bymost of the regional institutions established in the colonialera - including transport and communications, broadcollaboration at university level (via the Inter-University
Council of East Africa), a central bank, a regional
parliament, the East African Development Bank and a

To what extent have the policies adopted at the regional
level been owned by African member governments, letalone their populations? Regional organizations havebeen constrained in their policy-making by the failure of

Court of Appeal, among others. However, the East African
Community had no mechanism for resolving politicalcooperation. Even where such conditions exist, lack ofmember discipline makes it difficult to implement them.
In turn, regional organizations have failed to impose
sanctions for non-compliance. They are thus forced toinhabit an institutional vacuum, where little real power ismisunderstandings. Political differences that had set in theearly 1970s made it almost impossible for the highest
authority (the three presidents) to meet. The economic
basis for collaboration, a common currency, had long beenabandoned, while the idea of free movement of factors,
goods and services was severely constrained.
With three members, and none seeming to agree with theothers on the goals of cooperation, breaking up thecommunity and dividing the assets among the members
seemed to be the only remaining option. This was done in
1977.
Many regional organizations in other parts of the continent

member countries to agree on minimum conditions forexercised.

Credibility
This lack of ownership and of the power to formulate andimplement policies raises the issue of credibility. The
credibility of an institution arises from the belief that its
promises and commitments will be met. Where individual
member countries have pursued non-credible policies in
the past - typically failing to pursue reform programmes
or domestically pursuing restrictive economic policies,and generally not encouraging domestic participation -have collapsed or turned moribund under similar politicalpressures. Notably, the "temptations of nationhood" havebeen much more of a problem for the smaller regionalorganizations, while the bigger groups have been more
resilient. The establishment of the African Union (AU) andthey will not necessarily achieve credibility by joining a
regional body.

adoption of NEPAD are thus important steps inovercoming the parochial tendencies of the past.

community. Thus, ironically, successful African regional
projects such as the African Development Bank havesucceeded by preserving an arm's-length relationship with
their founding member states and, crucially, by
encouraging membership from beyond the continent.

Do African regional institutions
measure up?
In this section, we assess the degree to which African
regional institutions and their bureaucracies are able toaddress the challenges confronting institutions in the eraof globalization and economic reform.

In turn, the regional body will fail to enjoy credibility
among regional populations and the international

Incentives and behaviour of institutional
bureaucracies

Policy ownership

Governments have sometimes demanded that civil
servants should show patriotism by working for lower
pay than their colleagues in the private sector. However,In recent studies of reform in Africa, policy ownershiphas been identified as key to successful programme

civil servants and other institutional bureaucracies soon
find ways to compensate themselves - by indulging in

25

Section 2: African institutions building and regional integration

rent-seeking activities. The remedy is often said to bebetter remuneration and increased supervision.

African integration, where the sensibilities of individual
countries are paramount, precludes any form of sanction,
however. Indeed, because of this, conflicts have been

However, at the regional level, other incentives might be
at work: bureaucrats might see themselves as principallydifficult to resolve regionally, and help is invariably
sought from outside the region. Thus, ironically, theweaknesses of individual member states make thethere to meet the goals of their political principals backhome (for example, by maximizing benefits derived by
the home country). Thus, while the problems ofintegration are always seen from the more abstract view

regional organization unable to perform the role of agentof restraint.

of countries trying to cooperate and maximize benefits forthe region, how bureaucracies of the regionalorganization perform and the incentives required tomaintain their efficiency are important factors as well.

Institutional demands on African
integration

The role of international partners

after regional integration. In this section, we discuss
briefly a number of institutional demands on African
regional integration.

Donors have played a very prominent role in funding
African regional organizations. More recently,
multilateral agencies are beginning to offer aid at theregional level (for example, the Lake Victoria Basin

The above discussion can leave no doubt that African
integration is a complex subject. However, it also
indicates that African countries will continue to strive

Democracy and popular participation

initiative). In the case of the West African Economic andMonetary Union, France, the former colonial power, hashelped in maintaining the convertibility of the regional
currency, the CFA franc. Donors thus help countries tomaintain a level of credibility on the market that theywould not have had otherwise.

Most African governments now emphasize the need for
democratic governance. It is seen as the basis forbroadening popular participation and ensuring thatcitizens take part in making decisions about issues that
affect them. In this regard, many countries in SubSaharan Africa have embarked on programmes linked to

In some cases, however, donor dependence has gone too
far: donors are now routinely requested to beef up thebudgets of regional organizations (since members areinvariably in arrears with their payments to thethe Poverty Reduction Strategy Papers, whose
formulation and implementation are premised on broad
participation. The ideas of popular participation anddemocracy have also been underlined in the New
Partnership for Africa's Development (NEPAD), which isorganizations, while it is politically difficult to exclude
them from the proceedings). Donor dependence has comeseen by many as a new and more authoritative beginning
for African regional integration.

at a cost. While aid is known to be temporary,organizations and member states do not behave as if it is.
There is very little preparation for the day when donor

However, with regard to implementation, the reality on
the ground shows a different picture. The establishment

assistance will end.

of democratic institutions, once seen as having taken root

Agents of restraint

in many African countries, has suffered considerable
setbacks in recent years. Participation has also had a

It can also be argued that the most important service that
regional organizations can provide to regional

hollow ring, especially when those expected to participate
lack the means to do so. There is also the dilemma thatgovernments is to act as "agents of restraint" and as
umpires in resolving the frictions that are inevitable indemocracy, on its own, in no way guarantees that

regional cooperation. To do this properly demands thatsome sovereign powers be surrendered to the regionalorganization (for example, that the regional body be in aposition to impose sanctions on errant members).
The political (as opposed to the economic) focus ofregional integration will flourish.
The new East African Community, however, has been
established through a more democratic process. Hearingsand debates were held in each country with theparticipation of a broad range of stakeholders, andsubsequent debates have been held between similar
26

Section 2: African institutions building and regional integrationgroups, such as businessmen, on the merits (and demerits)
of renewed cooperation. Via this more participatory
process, the product seems to be on more solid ground.

Regional security
Civil strife is one of the most serious impediments toregional integration in Africa. As previously noted, many
regional development projects have been disrupted or
populations displaced, and investors have withdrawn theircapital and postponed their investment. Above all, regional
conflicts have had serious impacts, via contagion effects, on
the whole region. Investors, even domestic ones, sometimes
find it difficult to distinguish between the policies ofcollaboration for enhancing technical and administrativeskills in the region. At the university level, there has notbeen much attempt to unify curriculums or to conduct
student exchanges. In the 1960s and 1970s, student
exchanges between the universities of the East Africancountries were important in cementing a sense of "East
Africaness," which was crucial for the integration of theregion. When the student exchange ended, the countries
drew further apart. The resumption of student exchanges
in the 1990s, now also including private universities in
the region, is proving to be a crucial input in the newcollaboration.

Zimbabwe or Zambia. The Great Lakes crisis has had

In this regard, two institutions are pointing the way

effects that have been felt all over the continent, while theZimbabwe crisis has affected all the other SADC countries.

forward: the African Capacity Building Foundation(ACBF), based in Harare, and the African Economic
Research Consortium (AERC), in Nairobi - both
embarked on in the 1980s. ACBF funds many researchorganizations in Sub-Saharan Africa, while AERC

However, while African countries have been willing tointervene on opposite sides of the conflict in the
Democratic Republic of the Congo, for example, to"protect their interests," they loathe having to discipline aneighbour or attempt to stop a civil war in a neighbouring
country. An important part of the international relationsof African countries is based on the principle of noninterference in each other's internal affairs. It is only the

focuses on training of economists. Apart from training,
the organizations have held (or financed) meetings ofbigger countries like Nigeria and South Africa that havethe resources and the political muscle to enforce their will

embarked on in the abstract. A future challenge will be toensure that the approach enabled by the two institutions
will endure even when donor funding has ceased.

on neighbours, or to attempt to quell regional
disturbances (although this is not always successful).

African academics from various parts of the continent,
thus raising the understanding of Africa's development
challenges. As a result of the work of these two
institutions, integration projects will no longer beInternational banking and financeTrade policy
The expansion of regional trade is a key factor in regional
integration. However, African economies lack synergies,
and trade between them remains small. In the Economic
Community of West African States (ECOWAS), forIn the area of banking and finance, African countries havemanaged to establish strong institutions that have been able
to make a strong impact on regional economies. Examples
include the African Development Bank, the PTA Bank, theSouthern African Development Bank and the East African

example, it is estimated that less than 10 per cent of total

Development Bank. It is significant that the success thetrade is within the region.

organizations have had is because they operate at arm'slength from the regional organizations. They are able to

Still, Africa's share of international trade has been fallingsince the 1960s. Overall, lack of policy harmonization, in

operate on the basis of international business norms, andcan solicit capital from the international markets on theareas such as infrastructure development andtelecommunications as well as the development of roads
and utilities, has, until very recently, not been given theemphasis it deserves.

basis of their own reputations (partly thanks to capitalsubscriptions from rich countries).

Future prospects1

Education and skills development

In contrast to past decades, the pressures for economic andpolitical integration in Africa are decidedly different today.

African integration has focused on the "commandingheights," and not much emphasis has been put on regional

Many countries are now concerned about the effects of"poor neighbourhoods" (note, for example, the situation in27

Section 2: African institutions building and regional integration

the Great Lakes region, where they would like to have"safer addresses"). In light of this, many West African states
have, for example, been willing to support military

regional prosperity. The "big idea" of the past needs to betransformed into a "grand design" of the future so as toguide countries towards viable institutional development

intervention in countries such as Liberia, Sierra Leone andCote d'Ivoire, in order to ensure that they do not sink intoand regional integration.

political anarchy with serious consequences for the region.

Let us end with some points of emphasis:

In terms of regional economic integration, many countries
have been willing to give up some sovereignty in key

Gaps

areas in order to ensure more effective institutional
collaboration. There are also a number of examples from
East and West Africa, where countries have undertaken
regional investment ventures, including the ChadCameroon oil pipeline.

・ Not enough emphasis was put on creating
mechanisms for conflict resolution.
・ Integration projects were not sufficiently
inclusive of the views of domestic groups.
・Regional organizations have little prestige (andcredibility).

new light. It has been demonstrated, over and over again,that approaching international negotiations as a regional
block, notably on trade issues, is more effective than・ Poorly developed infrastructure prohibits the
movement of people and goods, and raises thecost of production.
・Parochial politics impede unity.
・ Efforts at harmonizing the macroeconomic

when issues are negotiated bilaterally or on an individual
basis. However, in a recent paper, Murithi (2003) argues
that the AU's most important contribution to African

framework were weak.
・ Weak members make for weaker institutions;collective weakness leads to conflict.

The creation of the African Union can also be seen in adevelopment will be peace promotion. Since the past has
shown that lack of peace is Africa's biggest development
challenge, the Peace and Security Council established by
the AU's inaugural meeting in Durban, South Africa, in
July 2002 might well be among the most important
initiatives undertaken so far by the continent's leaders inefforts to erase past trends.

Promising changes
・Integration is no longer seen as a preserve of the
public sector.
・ Private sector initiatives (for example, stock
exchange collaboration in East Africa) are boundto put the process on a more sustainable basis.
・Following reforms, policies are better aligned inConclusions
Why did this "big idea" for African development bear solittle fruit? The failure has been blamed on poor politicalcommitment on the part of African governments as wellas on entrenched colonial legacies: the division ofcountries into small, nonviable entities, and a lack of
economic diversification. However, the policies pursued
by African governments must also bear some of themember countries.
・ Some regional institutions have real power inregional policy (SADC, EAC).
・Interregional trade is increasing in some regions.
・We can expect results from NEPAD and a moreaggressive UNECA.

Threats

In more recent years, however, regional institutions haveundergone a number of reforms, institutional

・Contagion effects (Great Lakes, for example)
・ Donor dependence by regional members (forexample, conditionality might not tally: Tanzania
agreed with IMF/World Bank to lower its highest
external tariff from 25 percent, but agreed with
Uganda and Kenya to keep it there)
・Asymmetry in economic recovery anddevelopment

accountability and good governance, and there are signs

・Discovery of natural resources

blame. Rigid controls made it difficult for economies toadjust to shocks, while failure to contain the internalpressures arising from shrinking economies often led tocivil war. Countries that focused on resolving domestic
problems tended to adopt insular policies.

of attempts to return to the earlier goals of creating
28

Section 2: African institutions building and regional integration

References
Abraham, K., undated, "The Challenges and Prospects of PanAfrican Economic Integration," paper presented at theConference on Economic Integration and Transboundary
Resources organized by the Ethiopian International Institute for
Peace and Development.
Akonor, K., 1996, "African Economic Integration: The Search forCommon Ground," Sankofa, Vol. 2, No. 1.
Amponsah, A.W., 2001, "African Regional Integration: A PreCondition Toward Multilateral Liberalization," paper read at
the African Development Forum, United Nations Economic
Commission for Africa, Addis Ababa, October.
Asante, B.S.K., 1995, "The Need for Regional Integration: A
Challenge for Africa," Review of African Political Economy,
Vol. 22, No. 66, pp. 573-7.
Bajusz, D.W. and P.K. O'Prey, 1996, "An All-African Peace Force:
An Immediate Option or Long-Term Goal for the Region?,"Strategic Forum, Institute for National Strategic Studies, No.
86, October.
COMESA, 2003, "The Nairobi Declaration on Preparations for
EPA Negotiations and the 5th WTO Ministerial Conference,"
Nairobi.
Danielson, A., 2003, "Economic and Institutional Reforms in
French-speaking West Africa: Impact on Efficiency and
Growth," in S. Kayizzi-Mugerwa (ed.), Reforming Africa's
Institutions - Ownership, Incentives, and Capabilities, Tokyoand Paris: United Nations University.
Harsch, E., 2002, "Making African Integration a Reality," African
Recovery, Vol. 16, Nos. 2-3, September.
Hazlewood, A., 1975, Economic Integration: The East African
Experience, Nairobi and Oxford: Oxford University Press.
Kayizzi-Mugerwa, S., 1998, "Africa and the Donor Community:
From Conditionality to Partnership," Journal of International
Development, Vol. 10, No. 2, pp. 219-25.
Kayizzi-Mugerwa, S. (ed.), 1999 The African Economy: Policies,
Institutions and the Future, London and New York: Routledge.
Kayizzi-Mugerwa, S. (ed.), 2003, Reforming Africa's Institutions Ownership, Incentives, and Capabilities, Tokyo and Paris:
United Nations University.
Lyakurwa, W., 2001, "How Can Research and Training Enhance
Regional Integration in Africa?," paper presented at a
UNCTAD-sponsored meeting on research and training needs
for regional integration, Mauritius, October.
Mndeme-Musonda, F., G. Mjema and A. Danielson, 1997,"Tanzania 1997. The Urge to Merge: The Revival of East
African Cooperation," Macroeconomic Report 7, Stockholm:
Swedish International Development Co-operation Agency(Sida).
Murithi, T., 2003, “The African Union and NEPAD: Viable
Projects for Peace-building and Development?," The Geneva
Forum: An International Dialogue on World Affairs, JuneSeptember, pp. 15-34.
Nagaoka, S., 1994, "Does Regional Integration Promote Global
Liberalization? A Case of Endogenous Protection," Journal of
the Japanese and International Economies, Vol. 8, No. 4, pp.
551-64.
Rwegasira, D., 1997, "Economic Co-operation and Integration in29

Africa - Experiences, Challenges, and Opportunities," in H.
Kifle, A.O. Olukoshi and L. Wohlgemuth (eds.), A New
Partnership for African Development, Uppsala: Nordic Africa
Institute.
UNECA, 2002, What NEPAD Implies for African Policy Makers,
Addis Ababa: United Nations Economic Commission for
Africa.
UNECA, 2003, Economic Report on Africa 2003: Accelerating thePace of Development, Addis Ababa: United Nations Economic
Commission for Africa.

1 Workshop participants noted that it is necessary to put Africa's integration

problems in proper context - that is, to take account of the adverse international
political economy, and to also look at the future.

Section 2: African institutions building and regional integration

Comments on "African institutions
building and regional integration:
Lessons from experience"
Jean Monnet vs. Kwame Nkruma
Kazuo Takahashi
United Nations University and International
Christian University

Regional integration is basically a political process
wherein political games are gradually overtaken bycooperative relations (although political considerations
never disappear completely). This process has beenstudied intensively by international relations experts andinternational organization scholars since the 1960s, in thewake of the progress of West European integration.

aimed at domestic consumptions as well as at theinternational community. However, these approaches find
it difficult to continue to provide tangible materials forpolitical leaders who need to use them constantly fordomestic political purposes. Therefore, political
approaches, when taken alone, have problems withsustainability.
Communication approaches have been conceptualized
as such by scholars rather than by political actors. When
analyzing NATO, Karl Deutsch thought it useful to apply
cybernetics to the complex processes of the Westernalliance. He suggested that the NATO frameworkcontributed to enhancing communication across the
Atlantic Ocean so significantly that a security community
emerged in this region over time. He analysed it in theearly 1960s and foresaw sustainability of NATO beyond
the cold war. The major parameters of the communication
approaches to regional integration were cultural

Regional integration has become an important subject forpolitical leaders and scholars in recent years yet again, inthe context of globalization, which has become apredominant feature in the past two decades. Steve
Kayizzi-Mugerwa's paper is an important contribution to
the understanding of African experiences in integration

proximity and communication infrastructure.

attempts in the light of the recent interests.

the rivalry between France and Germany was that it was
best to develop a community of common economic
interests among stakeholders in Western Europe.

There have been thee major approaches to regional
integration.
・ political approaches,・communication approaches, and・ phased approaches emphasizing economic
cooperation at initial stages.

Phased approaches have been taken in a number ofcases, with the most prominent one being the European
Union. The starting point was the initiatives taken by Jean
Monnet in the early 1950s. His assumption in overcoming

Putting together bright whiz-kids from around Europe,
Jean Monnet worked out a plan to start with pooling of

Political approaches have been attempted mainly in thecoal and steel between West Germany and France, with avision of creating a European Community. Each step ofEuropean integration has been promoted by material
needs and economic interests since then. Thus the processsecurity area. Strategic considerations were expected towas, while often turbulent, sustainable and progressive.

be important enough to integrate a certain number ofcountries. In the context of the cold war, we witnessedsuch attempts as SEATO and ANZUS. In the context ofregional politics, cooperation of countries against a

It is clear from Steve Kayizzi-Mugerwa's paper that theAfrican experiences are based on political approaches.
Against the background of powerful market-based

regional super power has often been promoted by security
considerations, including in such regions as South Asiaand southern Africa.

globalization, which is characterized by dramatically
opposing forces of integration into and marginalization

Political approaches have been characterized by highprofile initial stages and by low levels of sustainability.

with the phased approaches.

Security being always a top priority for political leaders,these attempts are important political gestures that are

The Kwame Nkruma approach cannot be sustainable
when standing alone. It needs to be supported by a Jean

from the world economy, it is essential for the integration
attempts in Africa to compensate the political approaches

30Section 2: African institutions building and regional integration

Monnet approach. While NEPA and TICAD should be
useful to provide a political highlight to the challenges ofAfrican development, a strategic approach based onphased actions for regional integration as an integral partof African innovation should be attempted in order tostrengthen these efforts further. A Jean Monnet should
emerge in Africa to compensate for Kwame Nkruma - a
combination that would invite a Karl Duetsch to apply his
communication approach to the African experience in due
course.
Jean Monnet's approach was based on social democracy,
in which significant roles of government in the
management of national economies were assumed. Thisapproach was highly relevant in the 1950s. At a time ofmarket-based globalization, though, the ideologicalpersuasion of Jean Monnet cannot be an effective basis
for regional integration. Expansion of market forces,
however, may not be a good basis of regional integration
either, due to the powerful forces of market integration
into the world economy neglecting regional frameworks
when they are weak.
A sophisticated and highly strategic approach is requiredin order to promote regional integration. Can we find a
Jean Monnet of Africa for the twenty-first century, when
the forces of market-based globalization will bestrengthened further? Or is it more pragmatic to organize
African task forces for a number of sub-regions, toarticulate phased approaches to regional integration as amajor instrument for African development?

31Section 2: African institutions building and regional integration

Discussion of "African institutions
building and regional integration:
Lessons from experience"

On the issue of institutional development, it is important

This presentation was meant to stimulate debate with afocus on African institutions and regional integration.
More specifically, the paper tackles three questions:・ Is African integration too big of a concept?

important. Some NGOs participate and make significant
changes in business law (for example, in terms of leading

・ Do African regional institutions measure up?
・What are the institutional demands on African
integration?

already exist are perhaps institutions that could help
achieve progress towards more integration.

to note a number of quite recent developments. For
example, today we see West African countries getting
together to intervene in regional conflicts. In addition, therole of private initiative (NGOs) has become increasingly

the fight against child labour). The different associations(engineers associations, business associations, etc.) that

The presenter pointed out that African unity was based on

Institutions include financial institutions, which are vital to
the success of regional integration. The lack of strong

an idealistic political economy which does not work forthe purpose of integration. He stressed the issues of"policy ownership" by member states; stakeholders'
participation; and the credibility of regional institutions,both regionally and internationally. He also discussed thefinancial institutions can explain, to a great extent, why
Africa is an unattractive place for portfolio investments.
Moreover, the volatility of the exchange rate is a big
challenge for African economies. Who will bear theexchange rate risk under trade integration (export orrole of donors and incentives to inspire regional loyalty.
He finished by arguing that maybe Africa needs a country
to do for it what Japan did for Asian countries.

import)? Integration is seen to require financing, and it
seems that no matter how strong African institutions are,

The discussion that ensued emphasized the following
major points.

they will not be able to lead to a successful integration. In
the case of Africa, there will still be need for FDI and ODA.
There are plans to have a central bank and a stock

Looking at institutions may help us to understandregional integration (and why it did or did not work).
Much of the export sector is in the hands of non-Africans,exchange. In the central African region, countries havestarted institutions leading to stock exchange creation
with the help of Mauritius. Could African stock list in
African stock markets? (Kenya Airlines has listed its
shares in Dar Salam (Tanzania) and in Uganda). But for

who also do the "branding." So, profits of such exports gooutside Africa.

Tanzania, now, there is fear of "Dutch disease" andexchange rate appreciation.

The extent of integration is often decided from outside
the continent. An illustrative example from anotherForm and process of regional integration

region is that of Costa Rica, where United Fruit Company
owned banana plantations (export sector). When facedwith union strikes, United Fruit decided to leave theAfrica to go the EU way. Would a strategy such as theone articulated by Jean Monnet at the inception of theEuropean Community work in Africa in current times?
Or, is it more practical to set up task forces for subregions in order to "articulate phased approaches to

The role of institutions

country. Costa Rica struggled for several years to
restructure the banana plantations and ensure access toworld markets.
It was suggested that countries may benefit from setting
up private-public partnerships to guarantee branding andmarket access. NEPAD may be the framework within
which African integration at different levels could takeplace.

There is debate as to whether it would be pragmatic forregional integration"? There seems to be agreement thata united Africa does not intend to be like the EU.
Still, being united will allow Africa to negotiate as one
bloc with, for example, WTO. This seems to be aninteresting area to look at. We can take what has worked
in the EU and see if we can adapt it to Africa, similar towhat Japan has done with different institutions. It may be
32Section 2: African institutions building and regional integration

more practical to start like the EU started, instead ofstarting with 53 countries all at once and with politicalunion. This would require a grand design, and a country

Africa is becoming very difficult. (Visas are now required
for most inter-country travel within Africa). The
existence of borders is one of the main reasons forto lead the movement.

smuggling. However, some regions (e.g., ECOWAS) aretrying to abolish intra-region visas.

The Millennium Development Goals can be linked to thisgrand design. Can South Africa become what Japan has
become for Asia? Does it have the resources? A very
interesting scenario for enhancing integration in the world

Another type of migration that needs addressing is that of
the brain drain that many African countries are facing.
Ghana, for example, loses about 80 per cent of its highly

economy would be to focus on the different rims
according to geographical locations. For example, some
African countries might focus on the Atlantic rim, otherson the Indian Ocean rim, and yet others may want to looktowards Australia.

educated population to other countries (according to Prof.
Aryeetey). Remittances do not compensate for the brain
drain. It has been suggested that those countries (in the
North) which benefit from "Africa’s brains" should bear
the cost of education and training that were subsidized by
the countries of origin.

It is important to keep in mind that river-based
development is very relevant. It is important to cite casestudies to show what is happening around rivers. Some 80
per cent of Africa's population lives along international

Study/working groups

rivers; if we target river areas, we would cover four-fifthsof the population.

up an independent study group on the issue of regional
integration. This group might look at past and present
attempts at integration, and look at other experiences in
Europe, East Asia and so on. It was noted that putting inplace a group is a good idea, but we already have the UN
commission on Africa.

Furthermore, most of the regional entities are dictated bygeographical characteristics. There is need to enter agrouping because of small markets. A country is faced

Several suggestions were made regarding theorganization of a series of regional meetings and settingwith the question of how best to proceed. What does
belonging to different organizations mean for anindividual country? Some of these organizations are ad
hoc; is the substance there? What is the organizationalarchitecture?
The partnership between Africa and donors is just words
so far. We should insist on giving this concept "content."
It should be complemented with the concept of solidarity,
and TICAD should add to the concept of solidarity. It wassuggested that the introduction of a credit line - one thatwould require the recipient country to buy from a third
country in Africa, for example - would be one way to
encourage regional integration.
Finally, it was noted that there are five main groupings in
Africa: ECAS, COMESA, ECOWAS, AMU and SADC.
These groupings will constitute the foundations of theAfrican Union. TICAD should help these groupings tostrengthen what they are doing.

The issue of migration
The movement of people from country to country within
33

However, one could identify a fairly large number ofissues that need tackling, so an independent study groupshould not be viewed as a hindrance to the UN
commission on Africa or other groups. There is a need foran action plan. Perhaps a good start would be to look at
the NEPAD action plan, and examine the question of how
to implement what has been set out sector-by-sector.

Section 3: Capital flows and risk management

Enhancing capital flows, trade andcultural exchanges between Africa,
Japan and Asia: The launching ofan Africa-Japan-Asia Centre

infrastructure in place, the expansion of trade, in turn,was facilitated owing also to the export-oriented
strategies followed by these countries.

Jean-Christian Obame

Africa lags behind the rest of the world in all mostimportant aspects of infrastructure, as can be seen fromtables 1 and 2.

Ambassador of Gabon to Japan

Preamble
It is, again, my great honour and pleasure to participate inthis workshop at the United Nations University, inconnection with the preparation for the forthcoming
Summit of the Tokyo International Conference on
African Development (TICAD III), to be held here inTokyo, during the period from 28 September through 1
October 2003.

Inadequate financing has contributed to poor
infrastructure in Africa.

Africa needs both hard and soft infrastructure. Recent
estimates from multilateral institutions indicate that in the
period 1980-2000, investment collapsed in most Africancountries. In aggregate numbers, investment to GDP has
been reduced by half, from about 13 per cent of GDP in
the 1970s to about 6 per cent of GDP in late 1990s. (Bycomparison, the investment rate in Europe and Central
Asia has averaged 30 per cent of GDP.) This decline
resulted mainly from a combination of several factors,

My presentation will center on three main areas:
・First, I will give an overview of investment andtrade flows in the world and towards Africa.
・ Second, I will present some of the main
perceived impediments to investment and tradeflows to Africa.

including the reduction in both Official Development
Assistance (namely, the share devoted to infrastructure)and Foreign Direct Investment (FDI).

・Third, I will propose two initiatives that appear
to be missing links for the promotion of
investment, trade and cultural exchanges
between Africa, Japan and Asia. Those initiatives
are the African Multilateral Investment

The distribution of the world's Foreign Direct Investment
flows by region/country, as indicated in figures 1 and 2
and table 3, shows, unfortunately, that Africa is a region
receiving very little. In 2001, according to OECD data,
FDI to Africa represented 2.3 per cent of the world total,

Guarantee Agency (AMIGA) and the AfricaJapan-Asia Centre (AJAC).
(For tables and figures, please refer to pp. 39-44)

compared with 12 per cent in the Latin America/Caribbean
region, 14 per cent in Asia and 46 per cent in Western
Europe.

Overview of investment and trade flows in
the world and towards Africa

Japanese FDI inflows to Africa have remained,
so far, marginal.

Capital flows are important for financing
development.
The important contribution that capital flows - bothTwo periods have to be considered in assessing Japanese
FDI inflows to Africa:・ the period up to 1993, corresponding to thelaunching of the TICAD process (TICAD I), andpublic (aid flows, namely ODA) and private (investment
flows) - can play in financing development and・the period from 1998 up to 2003, corresponding
to TICAD II.

accelerating growth on the African continent cannot be
overemphasized. It has been widely recognized that bothtypes of these financial resources, which have helped
finance economic and social infrastructure in Asian

Available data point out that in the period 1989 to 1993
(as shown in figure 3), Japanese FDI inflows to Africa
were rather limited (negligible) compared to those tocountries, have indeed been instrumental in accelerating
growth in this part of world. With such an economic

Africa receives less FDI compared withother regions.

other regions. The average percentage of FDI outflows toAfrica during that period was 1.9 per cent. Then, from34

Section 3: Capital flows and risk management

1997 to 2000, there was a drastic decline in FDI outflows(as shown in figure 4).

More recent data, corresponding to the period of TICAD II(1998-2003), show that the declining trend has continued.

More recent data do not point to any drastic improvement.
As can be seen from figure 5, total FDI from Japan to

Trade flows between Africa and Asia need to beenhanced.

Africa did not exceed 21 billion yen (or about US$200
million) in 2001. The share of Japanese FDI inflows to

While Africa's share in world (including Japan) exports is
declining, Asia remains, nonetheless, a fast-growing
market for African exports. According to the IMF, in2001 Asian imports from Africa represented 1.4 per centAfrica by sector shows that transportation and mining are
the more important recipients.
From the evidence of figures 6, 7 and 8, one can only
conclude that:・ Japanese share of ODA is the most importantamong major DAC countries, and Asian
countries are the largest recipients (more than 50
per cent) while Africa receives, on average, 10of total Asian imports (US$1,434 billion), while African
exports to Asia for the same year represented 13.4 percent (US$17 billion) of total African exports (US$126
billion) (see figures 12, 13, and 14). Thus, Africa may besmall for Asia, but Asia is large for Africa, and the traderelationships between them need to be enhanced.

per cent of Japanese ODA.
・ The current investment relationships between
Africa and Japan are still in an infant stage.

Impediments to trade and investment toAfrica, and the new "marketing approach"towards Africa's promotion

・FDI is important because, together with domestic
savings, it can promote economic growth and social
development, thereby reducing poverty in Africa.

What are the reasons behind the presence ofimpediments to investment and trade?

Africa's ranks near the bottom in world trade.
Foreign trade and FDI are complementary. In the longer
run, increasing inward investment boosts exports as wellas imports. The benefits of FDI are, therefore, equivalent
to those that arise from increased openness to trade.

Several reasons are typically put forward to justify why
Africa does not attract enough FDI and why trade flows
are still limited. Most of these reasons are related to the

Unfortunately, as for FDI, trade flows between Africa andlack of a conducive environment to promote investment
in Africa. The main impediments include:・political instability in some African countries;
・lack of good governance (political, economical
and institutional);

the rest of the world (including Japan) are still very limited,as shown in figures 9 and 10. In a broader perspective, the・lack of information on Africa and the distance(for some investors, including Japanese, Africa isAfrican share in both world exports and imports has beenless than 2.5 per cent.

too far away); and・the high economic and financial risks attached toinvestments in Africa.

Trade flows between Africa and Japan are still
limited.
In connection with the TICAD process, which started in
1993, two periods have to be examined for assessing
trade flows between Africa and Japan: the period before
TICAD, and the period after the launching of the TICAD
process. Available data indicate that from 1960 to 1996,
trade flows between Japan and Africa had been on aconstant downward trend (see figure 11). In 1996,
Japanese exports to and imports from Africa represented
around 1 per cent of the total Japanese international tradeflows.

35

While some of these reasons are valid, they sometimes
simply constitute excuses for the so-called "afropessimists" and others.
A new marketing approach for the promotion of Africa isneeded.
What should be known about Africa in order to promotetrade and investment? Africa is endowed with:・vast resources (minerals, crude oil, natural gas,hydropower, agriculture, etc.);・abundant human resources, ready to be trained
and utilized;

Section 3: Capital flows and risk management

・a large potential market (With some 800 million
consumers, Africa is a big market, and apotential niche for the development of small andmedium-size enterprises.); and・a vast demand for infrastructure projects (which
can easily accommodate the excess capacity ofJapanese construction and engineering
companies. These companies should be
encouraged, outside of ODA schemes, toparticipate in bidding on infrastructure projects(roads, ICT, etc.) in Africa and contribute to thetransfer of technology).

The road map for promoting investment to Africa
and mobilizing financial resources shows several
challenges ahead.
African countries are aiming to make the following
efforts to attract foreign investment:・ensure political and social stability;
・improve legal frameworks;
・upgrade socio-economic infrastructure at the subregional and regional levels (roads, energy,
telecommunications, ICT, ports), which is vitalfor economic development and regional
integration in Africa; and・strengthen financial systems to promote domestic
savings and alleviate funding constraints for
local businesses.
Japan can contribute a lot to this process. As we arepreparing for TICAD III, which is the Tokyo
International Conference on African Development, what
Africa expects to achieve in partnership with Japan forencouraging investments to the continent are thefollowing:
・ Promoting the provision of information toinvestors through the creation of an "AfricaJapan-Asia Centre for Economic, Trade andCultural Exchanges" (AJAC). Information isvital to encourage investment to Africa. JETRO,JBIC, JICA, the chambers of commerce andKeidanren can be sponsors of such a centre,
which can play an important role indisseminating (in Japanese) information, dataand investment opportunities in specificcountries and sub-regions. It is becoming
obvious that the main problem with Japan's
Official Development Assistance lies not in its

quantity, but in its lack of expertise (namely, alack of effort by the Japanese to communicate in
the language of the recipient countries and a lackof overall knowledge about the needs of the local
people). The Africa-Japan-Asia Centre would
have to facilitate communications between
Africans and Japanese, in the context of ODA orinvestment projects.
・ Encouraging trade and investment missions to
Africa.
・ Enhancing Asia-Africa cooperation throughvarious schemes, including the formation of
investment agreements and improvement of
economic infrastructure as well as exchange ofhuman resources.
・Eliminating trade barriers to promote the sale of
African products in Japan and other markets.
・ Promoting transfer of technology that is well
adapted to the African context.
Moreover, in the areas of resource mobilization, NEPAD
identifies as a critically important action the urgent
alleviation of Africa's debt, as most of Africa's scarcefinancial resources are still largely devoted to repaying
this debt. Given the scarcity of domestic resources andthe easy borrowing mechanisms prevailing in capital
markets in the 1970s, debt financing was the major tool
used by most African countries for investment andconsumption. This process has led to unbearable debt
burdens for which, unfortunately, the current debt
alleviation schemes, including the so-called "Highly
Indebted Poor Countries (HIPC)" initiative, have notproduced tangible results. Only 6 out of about 40 eligible
countries have so far received debt relief.

Road map for risk management of investment in
Africa.
What are the investment risks perceived in Africa? Fromthe viewpoint of investors, three potential risks areusually perceived in Africa:・the risk of political instability or unrest, which
can well affect ownership and lead to
expropriation or nationalization, and (in somecases) to contract or debt repudiation;・the risk of non-transferability of funds generated
locally - namely, when the central bank refuses
to or cannot convert and transfer funds in local
currency into foreign exchanges (dollars, euro,36Section 3: Capital flows and risk managementyen); and・the risk of non-payment of a legitimate debt to acreditor by the government or a state-owned
company.
There are different schemes that actually exist to coversuch risks, which are known as sovereign risks. They

covered by existing institutions, there may be another risk
dealing with the problem of good governance.
Weaknesses in the administrative, legal and judiciary
systems, as well as corruption, are perceived as
impediments to the relationship between the private
sector and public authorities.

have been applied to many syndicated loans extended to
African countries. For export credit, some countries -To address these problems, NEPAD's plan of action has
placed the establishment of a credible and effective Africansuch as France (through "COFACE"), the USA (through"EXIMBANK") and Japan (through "JBIC") - havedeveloped schemes to deal with the risks associated withcommercial contracts and investment in developing
countries, including Africa.

Peer Review Mechanism (APRM) as a top priority in theagenda. African leaders have already adopted the APRM,
which includes the implementation of principles for goodpolitical governance as well as codes and standards for
economic and corporate governance. Presently, it is being
ratified by the individual countries.

Moreover, multilateral institutions such as the WorldBank have set up an institution called the Multilateral
Investment Guarantee Agency (MIGA), which deals withvarious country risks associated with investments in

Strengthening of the human, legal and institutional
capacities in Africa emphasized in the APRM is indeed to
be viewed as an additional tool for promoting investment

member countries.

towards Africa, both in quality and quantity. As such, it
could well be conceived that the APRM be supported by

MIGA provides the following guarantees to developinga MIGA-type insurance institution, which would becomeits backbone. This African Multilateral Investment
Guarantee Agency (AMIGA) could be a subsidiary of thecurrent MIGA of the World Bank or of the Africancountries:
・insurance for investment;
・ protection for investors against the risks oftransfer restriction; and・further protection against the risks of
expropriation, war or civil disturbance, andbreach of contract.
MIGA does not seem to be well known by investors,
perhaps including those in Japan. Through its website,1Development Bank, one especially designed for
promoting investment in Africa. It would have agencies
in the headquarters of all the African economic
groupings, with its main correspondents being theinvestment promotion agencies in individual country.

one can notice that 161 countries are now members of

The main missions of AMIGA would be (1) promoting
investment in Africa (investment guarantee services and

MIGA - the latest being, ironically, Gabon, my own
country, which became a full member on 8 April 2003

marketing of investment opportunities) and (2) promoting
and covering various commercial and non-commercial risks.

after completion of its membership requirements.
Japan is also member of MIGA, among the 22
industrialized countries.

Two new initiatives for promoting
investment and trade between Africa,
Japan and Asia
The African Multilateral Investment Guarantee
Agency (AMIGA)
For many potential investors to Africa, it seems thatbesides the risks indicated above, which are already37

The Africa-Japan-Asia Centre for Investment, Tradeand Cultural Exchanges (AJAC)
Promoting economic, trade and cultural exchanges
between Japan and Africa. as well as with Asia as awhole, is one of the key objectives to be achieved underthe expected synergy between TICAD III and NEPAD.
The proposed Africa-Japan-Asia Center aims at achieving
the three main objectives shown in figure 15.
Japanese policy towards Africa

・Food, agriculture and rural development; and・Infrastructure for boosting regional cooperation,

Section 3: Capital flows and risk management

promotion of trade and investment (for which
US$300 million has been committed).

Japanese: Former staff of agencies and NGOs
Funding of the centre

Enhancing mechanisms for Japanese initiatives
towards Africa

As we are preparing for TICAD, the current proposal forestablishing an Africa-Japan-Asia Center for economic,
trade and cultural exchanges is aimed at helping in:・providing useful information through an up-todate database on African countries andinvestment opportunities;
・facilitating market access information on African
products, and the Japanese market requirements;and・ promoting cultural exchanges, tourism andimprovement of the communication channels
between Africa and Japan, with emphasis on
language facilities, and enhancing positively theimage of Africa in Japanese society.
Context for the implementation process of the centre

There is a general consensus among the African diplomatic
corps and Japanese on a missing link for better and more
efficient cooperation between Africa, Japan and Asia. Thismissing link appears to be the need to create the proposed

A menu of various options for financing the center isindeed possible to put in place. The financing issue
hinges only on the political will for setting up such acentre. For instance, from this menu of options, five main
sources can be contemplated:
1. Government of Japan;
2. African Countries (through Embassies in Japan);
3. Asian Countries;
4. Sponsors (Japanese companies established or
having business interests in Africa);
5. Others (donations).
In a spirit of partnership, an equitable burden-sharing
mechanism could be applied to the three main partners bywhich each of the said partners could bear 1/3 of theoperating costs of the Center.

Conclusion
To conclude, let me say that strong economic growth isessential for ensuring sustainable development in Africa,
and invigorated investment is critical to achieve thisobjective.

investment, trade and cultural exchanges centre.
TICAD III is the appropriate framework for
implementing such an initiative, which will enhance thesynergy between TICAD and NEPAD. The politicalconsensus for such an undertaking is being built among
African leaders, both in Japan and in Africa, within theframework of the preparatory sub-regional meetings in
Africa. While a feasibility study is being conducted, it isexpected that this initiative will be launched during the

It is our strong view that the proposed centre will be
instrumental in enhancing the synergy between TICAD
and NEPAD and a contributing factor to the mutually
beneficial partnership between Africa and Japan and theirrespective peoples.

1 http://www.miga.org

TICAD III Summit in September/October 2003.
Management of the centre

Consultative Council: The centre shall have a
Consultative Council consisting of representatives of theAfrican-Japan Parliamentary League.
Executive Board: The Executive Board shall consist ofrepresentatives of national partners appointed by members.
It shall supervise the activities of the centre, which will be
carried out by the Director General and his staff.
Composition of the staff

African: Former Students in Japan and professionals
38Section 3: Capital flows and risk management

Table 1. Position of Africa's infrastructure development in the world (part I)

Source: The World Bank, "World Development Indicators database," April 2003.

Table 2. Position of Africa's infrastructure development in the world (Part II)

Source: The World Bank, "World Development Indicators database," April 2003.

39

Section 3: Capital flows and risk management

Figure 1. Distribution of world FDI flows by region/country（1990-2001）
Source: UNCTAD

Table 3．Trends of global investment inflows

Source: UNCTAD, based on UNCTAD FDI/TNC database (for FDI), UNCTAD secretariat(for GDP) and United Nations Population Division (for population).

Figure 2. Africa's share of total FDI, 1992-2001 (US$ billion by region)
Source: OECD/OCDE

40

Section 3: Capital flows and risk management

Figure 3. Trends in Japan's FDI outflow,1989 to 1993 (%)
Source: JETRO, 2003

Figure 4. Trends in Japan's FDI outflow, 1997 to 2001 (%)
Source: JETRO, 2003

Figure 5. Inflows from Japan to Africa (by country)
Source: UNCTAD

41

Section 3: Capital flows and risk management

Figure 6. Trends in major DAC countries' bilateral ODA, by region

Figure 7. Trends in the distribution of Japan's bilateral ODA, by region

Figure 8. Distribution of Japan's bilateral ODA, by region42Section 3: Capital flows and risk management

Figure 9. Africa's share in world exports, 1990 to 2000 (%)
Source: WTO, 2000.

Figure 10. Africa's share in world imports,1990 to 2000 (%)
Source: WTO, 2000.

Figure 11. Japan-Africa trade, 1960 to 1996 (% of total exports - imports markets)
Source: Ministry of International Trade and Industry.

43Section 3: Capital flows and risk management

Figure 12. Value of Japan's exports to and imports from Africa
Ministry of Public management, Home Affairs, 2003.

Figure 13. Value of Asia's imports from Africa

Figure 14. Imports from Africa among total Asia imports

Figure 15. The main objectives of AJAC

44

Section 3: Capital flows and risk management

Discussion of "Enhancing capital
flows, trade and cultural exchanges
between Africa, Japan and Asia:
The launching of an Africa-JapanAsia Centre"

vast demand in infrastructure projects. He subsequently
suggested the following policy guidelines for promoting
investment to the region. More precisely, and as far as

The session began with a presentation by Dr. Jean
Christian Obame, Ambassador to Japan of the Gabonese

・upgrading socio-economic infrastructure at the
sub-regional and regional levels, andRepublic. Initially, he emphasized the importance ofcapital flows for financing development, and noted that
inadequate financing has contributed to poor

・ strengthening financial sector development tomobilize domestic savings and alleviate funding
constraints for local businesses.

infrastructure in Africa. This was documented by a seriesof tables and figures based on recent data in the region.

In addition to the above, the Ambassador strongly

African countries are concerned, the key challenges
according to Dr. Obame are related to:・ensuring political and social stability,
・improving legal frameworks,

The Ambassador also discussed in detail the inflows fromJapan to Africa, as well as Africa's place in world trade.
The overall conclusion of this very interesting first part ofthe presentation was that:
・The Japanese share of ODA to Africa is the mostsuggested that Africa's debt should be urgently alleviated,
and that Japan can contribute in a number of ways to theimportant among major DAC countries.
・ The current investment relationships between
Africa and Japan are still at an infantile stage.
・FDI flows and foreign trade are complementary.
・ However, regarding FDI flows, trade flows
between Africa and the rest of the world(AJAC). He also indicated that the investment risks
perceived in Africa need to be taken into account in the
new marketing approach by creating an African
Multilateral Investment Guarantee Agency (AMIGA),
along the lines of the Multilateral Investment Guarantee
Agency (MIGA) of the World Bank.

(including Japan) are still limited.
・Africa may be small for Asia in terms of imports,
but Asia is large for Africa in terms of exports;
thus, the trade relationships between the tworegions need to be enhanced.

In the remaining part of his presentation, Dr. Obame
presented in detail the structure of both the AJAC andAMIGA (with detailed organization charts for both).
Regarding AMIGA, he emphasized that the African Peer

In the second part of his presentation, Dr. Obame focusedon impediments to trade and investment in Africa and theneed to adopt a new "marketing approach" towards
Africa's promotion. He explained the reasons for the low

promotion of Africa in the world markets - mostimportantly, through the creation of an Africa-Japan-Asia
Centre for Economic, Trade and Cultural Exchanges

Review Mechanism (APRM) recently adopted by
NEPAD needs to be supported by AMIGA, so thatinvestment is promoted in the region and the various
commercial and non-commercial risks are covered. On
the AJAC front, he suggested that promoting economic,

levels of both FDI and trade flows to the region (i.e.,political instability, lack of good governance, lack of
information on Africa, location factors and the higheconomic and financial risks associated with investmentsin the region). He underlined that although some of the

trade and cultural exchanges between Japan and Africa,

above reasons may be true, they sometimes constituteonly excuses for the so-called "Afro-pessimists."

Along these lines, Dr. Obame underlined that the
proposed centre can contribute substantially to the

Building on this observation, the Ambassador
emphasized the need to take a fresh look to Africa byintroducing a new "marketing approach" to promote

promotion of the region by:・ providing information through an updated
database on African countries and investment
opportunities,

Africa in the world markets in view of the region's vast
resources, human capital base, large potential market and・facilitating market access information on African
products and Japanese market requirements, and45

as well as with Asia as a whole, should be one of the key
objectives to be achieved under the expected synergy
between TICAD III and NEPAD.

Section 3: Capital flows and risk management

・ promoting cultural exchanges and tourism, as
well as improving the communication channels
between Africa and Japan.

Summary of the discussion

appropriate framework for implementing such an

The Ambassador's paper was received extremely well by
all the workshop participants. Part of the discussion
focused on the two proposals presented by Dr. Obame
during his presentation - namely, AJAC and AMIGA but a number of related issues (see below) were also
discussed.

initiative - which, in turn, will enhance the synergy
between TICAD and NEPAD. The Ambassador

One issue that attracted much attention was related to therecommended that the above initiative could be launchedduring the TICAD III Summit in September 2003.

recent and current focus of Africa on exporting primarycommodity products. One of the participants stated that

Finally, he suggested that there is a clear need for
creation of the above centre, and that TICAD III is theAfrica should focus on manufacturing products in view ofComments by commentator 1(Prof. Ernest Aryeetey)
Prof. Aryeetey welcomed the paper as an important
contribution to the workshop and the overall TICAD III
process. He focused on the new marketing approachsuggested by Dr. Obame, and on his proposal for the new
initiatives. He emphasized the need to distinguishbetween issues related to marketing and structural issues
as well as the role of institutions in Africa.
Moreover, he pointed out that there is a clear need to deal
directly with a number of structural issues in the region(such as malaria, AIDS/HIV and the low level of skills),
and not necessarily indirectly through a marketing
approach. Having said this, the commentator concluded
that the two proposals presented by Dr. Obame need to beconsidered seriously in view of their importance.

Comments by commentator 2(Dr. Steve Kayizzi-Mugerwa)

the deteriorating situation in primary commodity markets
in recent years. The participant also commented that an
analysis by product would be more revealing andparticularly rewarding regarding the precise structure of
the trade relationship between Africa and Japan, and hesuggested that we need to address the issue of theparticular types of FDI which are appropriate for Africa.
Another participant raised the issue of public vis-a-vis
private provision of infrastructure in Africa (alsodiscussed in detail in previous sections); it was argued
that certain types of investment (e.g., education, health)should be provided by the public sector. The same
participant also underlined the need to deal directly withstructural issues in the region. Finally, it was argued thatthe issue of residual risks (i.e., risks that cannot becovered by MIGA or other bodies) needs to be addressed,
too.

The paper was also very well received by Dr. Kayizzi-

An important observation by one of the participants was
related to the fact that the existence of too much diversity

Mugerwa, who found both the paper and the presentation
very interesting and stimulating. He welcomed Dr. Obame'sin Africa makes the establishment of a political/economic
union difficult. Such a union seems to be much moresuggestions of the need to adopt a new marketing approachfor Africa's promotion in world markets.

feasible at a regional level within Africa (East Africa
region, West Africa region, etc.). The need to focus also
on domestic resource mobilization (boosting domestic
savings and domestic private investment) beyond external

He structured his comments on "the four Ps," to use
marketing terminology: namely, price, place, packaging andpromotion. He talked about the need to place particularemphasis on the role of institutions in Africa, in view of theimportance of institutions for the adoption of a newmarketing approach in the region. He expressed somereservations regarding the data figures on investment in
Africa, which according to the paper has collapsed to thelevel of 6 per cent of GDP in recent years.

financing was a key comment by the same participant.
The centrality of geography was also emphasized.
Furthermore, it was argued that there seems to be a clear
need to develop new forms of development cooperationin the case of Africa. These may take the form of joint
ventures among donors (i.e., group(s) of donors acting
together by harmonizing aid in the region, thus improving
substantially aid effectiveness. Finally, it was argued that46

Section 3: Capital flows and risk management

it is important to realize that the African market is a "newmarket" for Japan, compared to an "existing market" as itis the case in Asia. This may have significant implications

promotion of the African region in international markets.
Some of the participants underlined the need to undertake
further work towards the establishment of the proposed

for the design and implementation of export promotion
policies in the region.

new centre in terms of feasibility studies.

Yet another participant pointed out that ODA and private

The speaker, Dr. Obame, thanked the participants fortheir useful and constructive comments, and he expressed

capital flows can undoubtedly play an important role forthe region, but not necessarily a key role - not without ahis overall agreement with most of the suggestions madeby the participants. Finally, he emphasised the need to

strategy in place that can justify more ODA and private
capital flows from Japan to Africa. The issue of strategic
considerations in the area of capital flows and trade wasemphasized by other participants. It was argued that, inmany cases this is also related to the role of institutions inpromote financial intermediaries in Africa, since they are
crucial for the proposed AMIGA.

the region.

by concluding the following:
・We need to be extremely careful in our effort to

The chairperson of the session, Prof. Takahashi,
epitomized the very interesting and stimulating discussion

The issue of primary commodity markets was also picked
up by another participant, who referred to the collapse ofcoffee prices in recent years to illustrate the need forunderstand a rapidly changing reality in the caseof Africa.
・ FDI needs to take into account the investors'

Africa to diversify in order to compete in international
markets. The same participant also raised the issue of aid
allocation in Africa and the problems related to the rather

concerns.
・The region is characterized by extreme diversity;
the positive as well as negative implications ofrestrictive analysis of the determinants of aid flows to theregion, which focuses on either donor interests orrecipient needs. He argued that an eclectic approach -this diversity for the region's prospects need to befurther analysed.
・Export diversification is important; this seems towhich would link together aid effectiveness and aid

pose a significant challenge for the region.

selectivity by focusing also on the important issue of aid
heterogeneity (that is, different types of aid may havedifferent impacts) - would be essential for a better
understanding of aid issues in the region.

・ Understanding the overall ODA-FDI-export
promotion nexus is equally important.
・ The aid question is absolutely central to thediscussion; however, there does not seem to exist

Some of the participants expressed doubts regarding therole of openness in the overall growth process, arguingthat the available empirical literature on the subject is far
from conclusive. Another participant argued that Japan isa clear consensus regarding aid allocation issues
at the moment.
・ Structural and institutional issues need to behandled and analysed both separately andeffectively; different approaches need to be

currently focusing on aid allocation issues, and thecurrent trend is to mobilize more aid to Asia but not toAfrica. Opening up markets in the region, it wasobserved, may crucially affect the above trend.

adopted for different problems.
・ The two proposed initiatives are extremely
promising; however, implementation issues are
crucial and will need further discussion.

The centrality of national export strategies for promotionof the region in the world markets was also underlined by
one participant. The same participant also raised the issueof standards in exports from the region, and of the need topromote new products.
Overall, it was felt that both of the initiatives proposed by
the session speaker are of paramount importance for47Section 4: NEPAD and TICAD

Africa is big enough for both
NEPAD and TICAD
Shinsuke Horiuchi
Japan Institute of International Affairs

African issues.
Second, political leaders in Africa have launched theAfrican Union and, concomitantly, have prepared
NEPAD to contain their vision for sustainable
development and strategies. A development plan preparedand owned by them has been a long-time wish for African
politicians, bureaucrats and intellectuals. Donors certainly

Since announcement of "The United Nations

welcome the initiative, since it is a demand-driven plan

Development Decade: Proposals for Action" in 1962, ahost of development proposals has been presented bymany international organizations, regional organizations,and bi- and multi-lateral cooperation organizations,and not a supply-driven plan prepared by donors.

including the Tokyo International Conference on African

Independence was expected to bring about political andeconomic reforms, which would be beneficial to thegeneral African population. Instead, it turned out to be a

Development (TICAD). Since its announcement, the New
Partnership for Africa's Development (NEPAD) has
received unprecedented attention from African
politicians, businessmen, academics, civil organizations
and mass media, as well as from G8 and other donors and"revolution without reforms." In addition, Africa has had
a number of developmental proposals, including theLagos Plan of Action, but they have not brought about theinternational organizations. In general, it has received

that this time things may change.

overwhelming support from official and businessorganizations, but mixed reactions from labor unions,civic organizations and academic circles.
The main ideas of the Millennium Partnership for Africanreforms that the African people have longed for. In somequarter of the population, though, there is earnest hope

Third, the strategies and goals of NEPAD are nothingnew; they have been extensively discussed in many
international forums and are the accepted goals ofinternational conferences, including MDG and TICAD.

Recovery Programme (MAP), which is one of two basic
documents of NEPAD, were presented by President
Mbeki of South Africa at the Davos Conference (World
Economic Forum) in January 2001, where they received
favourable responses from the participants. MAP was not

Essentially, the strategies and central concepts of NEPAD

shown to any African organizations before the Davosthe existing economic system or the donor-recipient
relationship.

Conference, however. While this may be a minor
incident, it seems to me that it is indicative of the nature

coincide with those promoted by donor countries, theWorld Bank and the IMF since the 1980s. This probably
is the main reason why donors enthusiastically welcome
NEPAD: that is to say, NEPAD does not propose to alterof NEPAD.

Fourth, five presidents of major African countries havepersonally endorsed NEPAD. Especially, President

A number of reasons for favourable global responses
could be pointed out. First, economic stagnation andpolitical instability in many African countries are sourcesof great concern for the world, to which NEPAD
responded. After half a century of independence, many

Mubeki of South Africa is the original architect of MAP,
and the success of NEPAD is essential for demonstrating

African countries are still not able to solve the very basic
problems of survival of their people. Per capita income
has declined, the proportion of population in dire poverty
has increased, and the gap between the "haves" and the"have-nots" has widened. Extensive assistance efforts bydonors to the region have not shown an impact. African
pessimism is openly discussed. So, the international
community realizes that it has to squarely cope with

political leadership among African countries. Given thepolitical dynamics in Africa, NEPAD is at a diplomatic
stake for South Africa.
NEPAD is welcome by donors as a development
initiative by Africans themselves, but it is not the firstinitiative prepared by Africans. There have been others:
・ the Lagos Plan of Action for the Economic
Development of Africa, the Final Act of Lagos(1980),
・ Africa's Priority Programme for Economic48

Section 4: NEPAD and TICAD

Recovery 1986-1990 (APPER),
・the African Alternative Framework to Structural
Adjustment Programme for Socio-Economic

framework are neo-classical economics and liberal
democracy. Individual freedom and human rights areprotected. Under a democratic system, transparency in

Recovery and Transformation (AAF-SAP) (1989),
・the African Charter for Popular Participation for

decision-making, accountability in implementation ofpolicies and the rule of law are guaranteed. The right ofengaging freely in economic activities is assured, andeconomic competition based on individual property andopen markets will decide value and distribute resources
most efficiently. The fittest in competition survives, andDevelopment (1990), and・ the United Nations New Agenda for theDevelopment of Africa in the 1990s (UNNADAF, 1991).
The Lagos Plan was a detailed elaboration of principles forpromoting economic and social integration of African
economies to enhance self-reliant and sustainable
development; to create national, sub-regional and regional

efficient production will enable the accumulation of
wealth and capital.
The idea that Africa must be an active participant inglobalization is strongly reflected throughout NEPAD.

institutions in pursuit of self-reliance; to ensure self-reliancein food production; to guarantee the African people fair

The Plan of Action adopted at TICAD II shares goals andstrategies with NEPAD.

distribution of income though the reduction ofunemployment and poverty; and to promise a democratic
process of development. According to Mr. Adedeji, who was

In sum, NEPAD is the expression of collective political
will for development by African political leaders. A

the head of UN Economic Commission for Africa until 1991:"All of these (plans) were opposed, undermined
and jettisoned by the Bretton Woods institutions,and Africans were thus impeded from exercising
the basic and fundamental right to makedecisions about their future. This denial would
have been ameliorated if African leaders haveshown the commitment to carry out their own
development agenda. But given their excessive
external dependence, their narrow political baseand their perennial failure to put their money

vision, goals and strategies are presented to eliminate
poverty, to launch African economies on a sustainablegrowth path and to contribute positively to the process ofglobalization. This political will must be respected andsupported by the international community.
Let me make a few comments about the major strategiesof NEPAD, and explore the possibility of TICAD being
complementary.
First, poverty reduction: The proportion of population inwhere their mouth is, the implementation ofthese plans has suffered from benign neglect." 1poverty exceeds 50 per cent in Sub-Saharan Africa, and is

It seems that the acceptance and strong endorsement of
NEPAD by donors and international organizations is not

small holders and households headed by a woman in rural
areas constitute the majority of the population in poverty.

necessarily due to the fact that it was prepared by

But poverty does not stand only for lack of available
goods and services and low income; the other side ofpoverty involves isolation, prejudices, dependency,
discrimination, alienation, and non-participation incommunity decision-making and other social relations.

Africans. Rather, the principles and strategies in NEPAD
are congruent with their idea of the world economicorder, and their principles and strategies of development.

concentrated in rural areas, where 60 to 80 per cent of the
population could be classified as "in poverty." In general,

The 207 paragraphs of NEPAD offer political andeconomic analyses of African situations, an overall
strategy centred around poverty elimination and good
governance, sectoral objectives and strategies, and amechanism of monitoring (the Peer Review). It became
an amalgam of different ideas, analyses, facts, strategies

Poor people have little opportunity to participate in themarket system, and I would say that they are an

and - occasionally - contradictory statements. But it is

In a social sense, poverty should be recognized as a serious
human rights issue. NEPAD proposes to use the Poverty

clear that the basic economic strategies and political49"uncaptured population" of the market system. In otherwords, they are outside of the market system, or their
voice in the market system does not count for much.

Section 4: NEPAD and TICAD

Reduction Strategy Papers (PRSP) framework to grapple
with the poverty issue. This is no place to discuss thevalidity of PRSP programmes tailored to each country, but

numerical targets is not an important aspect of poverty
reduction. The central concern of poverty reduction
efforts is that farmers are able to perceive that this year

it is obvious that the market system in Africa would beunable to cope with poverty, which is an economic andwas better than the last year, and that next year could bebetter than this year. I believe that NEPAD and TICAD

social issue. In the case of Asian experiences, rural
economic development preceded industrialization andcan be effectively complementary in poverty reduction,emphasizing rural community development.

general economic growth, not vice versa.
Second, development resource flow and governance:
Learning from Asian experiences is one of TICAD's mainfeatures. When the production and productivity of the
agricultural sector are raised, and the growth becomessustainable, that is a definite trigger for reduction of poverty.
I believe that a comprehensive rural community-based

NEPAD states that "Africans are appealing neither for thefurther entrenchment of dependency through aid, nor for
marginal concessions" (paragraph 5), but "Africa needs tofill an annual resource gap of 12 per cent of its GDP, or
US $64 billion... [and] the bulk of the needed resources

development scheme is the key to poverty reduction in SubSaharan Africa. It has to be comprehensive, involving

will have to be obtained from outside the continent"(paragraph 147).

revival of extension services, rural small credit facilities,
marketing information and facilities, rural roads andtransportation facilities, crop diversification, new livestock,

Where do these figures come from? ODA from all
sources amounted to $16 billion in 2001. It is hard toadditional classrooms for primary schools, and simple
clinics to provide basic health care.

expect that $64 billion could be annually financed. DoesNEPAD take the position that the input produces the
proportional output? I am quite sure that authors of

It must be community based, because the traditional
community retains a sense of cooperation, initiatives andleadership in Sub-Saharan Africa. When the opportunity

NEPAD realize that the enormous amount of ODA
reaching 10 per cent of GDP was supplied for Africa(whereas other developing regions received around 1 per

is given, the traditional community could be the centre ofcent), under various aid schemes including the structural

self-reliance and sustainable development. Instead of a
top-down approach, an approach that encourages
community-based initiatives will lead to poverty
reduction with economic growth.

adjustment policy programme. Yet, sustainable growth
was not materialized. In fact, negative growth was
registered for Africa.

A community-based rural development scheme does not
require a huge amount of resources, simply mobilizationof community leadership and community resources,
including manpower. Instead of supply-driven assistance

It is evident that we cannot assume a linear positive
relationship between the resources inputs and the outputs.
Why is this so? There is a plethora of analysis andrecommendations, and both donors and recipients have toshare the blame.

schemes, demand-driven approaches could be formulated
through direct dialogue with donors and people in thecommunity. (One caveat is that the relationship should
not degenerate into a patron-client relationship that will
not be associated with productive activities, as we have

It is too simple to place all the blame on "badgovernance," including leadership quality and ineffective
bureaucracy, but this is an issue that must be dealt withsquarely. It seems that the root cause of the governanceobserved on so many occasions.) Unless the rural sector
becomes an independent primary mover of the economy,
instead of a secondary dependent sector, sustainablegrowth in Sub-Saharan Africa is a remote possibility.
The agricultural sector is, by its nature, not a sector for

issue is the neo-patrimonial political and economic
system, which is the combined product of pre-colonial
traditions, colonial administrations and nationalist
governments after independence. Unless the issue ofgovernance is resolved, no amount of resource flow nor
any series of economic policies will be effective.

which a 7 or 8 per cent annual growth rate can be
expected over an extended period. But meeting precise

NEPAD is quite right to state that good governance,
50Section 4: NEPAD and TICAD

peace and security are preconditions of development.
Although TICAD, in its Plan of Action, indicates theimportance of democracy and good governance, actual

partially true, but the reality is that - intentionally orunintentionally - the policies of developed countries andcommercial policies of multi-national corporations are incooperation in this area has been severely limited.
TICAD III is the time when good governance, in various

favour of not changing present pattern of production. It is
the way they can have higher returns on their investments

forms of programmes, should be vigorously promoted.

and, accordingly, accumulate further capital.

No government has as much resources as it wishes tospend. The authors of NEPAD do not have the view that,

Under various schemes of economic reforms, policy
measures such as trade liberalization, open markets andif the $64 billion is not available annually, nothing will
work. The crux of the matter is the priorities on the
expenditure side and on the supply side; the mobilizationof domestic resources and foreign investments in various
forms are essential, in addition to ODA. NEPAD expects

removal of subsidies in African countries have been
adversely affecting African economies. Less expensive
imports are replacing domestically manufactures goods.
Since the market is small, one multinational corporation caneasily dominate the market. Or, since the number ofa significant flow of foreign investments inindustrialization and infrastructure.

enterprises in a sector is small, competition among them is
not realized as expected, and they go for restricting trade

I am not going to go into the merits and demerits offoreign investments here. But it is indispensable to havepractices. African economies have not essentially changed
since the colonial times. As long as African countries
depend heavily on exports of primary commodities, thethe domestic capacity to utilize foreign investments;
otherwise, introduction of foreign investments may leadto domination by foreign firms, and the benefit to hostsystem does not allow any alternative growth path.

countries could be very limited. Again, Asianexperiences, including those of Japan, and various
policies related to foreign investments would be useful

responsible for African situations; the political elites inAfrican countries also gain benefits from maintaining thecurrent system. This pattern of governance has deep roots

for implementation of NEPAD, and under the TICAD

in the neo-patrimonial system. Although NEPAD

framework they can be made available.

analyses and criticizes the global system, the various
proposals do not go beyond the famous framework of the
Washington Consensus.

Third, the African economy: Let me revisit a very classic
issue of African economy, focusing on a dependence on

It is not the global economic system alone that isexports of primary commodities. After 1974, the terms oftrade of primary commodities deteriorated and,concomitantly, many African economies suffered. Since
then, the trend has not been reversed. The majority of
African countries have been exporters of one or two

I would hasten to add that there is nothing wrong with the
Washington Consensus, neo-classical economics, market
mechanisms and competition, trade liberalization,
removal of various restrictions, etc. We have seen theother side of the coin, and a huge wastage of resources

primary commodities, a pattern that has not changed fromthe colonial era. Why so? Why can they not add higher
value to their commodities?

under government control, in many African countries.
But these rules of the game must be applied among
economies of equal strength, not among economies
standing on a steep slope. What I am suggesting here isthat the issue cannot be resolved by government policies

Some may dismiss this subject as an old, much-discussed
and defunct thesis. I do not intend to repeat the endless
discussion on the subject, but it is obvious that the
manufacturers of these primary commodities in advanced
countries are not willing to transfer their production bases
to African countries. You may argue that manufacturing
technologies, small markets and the lack ofof developed countries; resolution rests on the corporate
policies and behaviours in which so-called liberal market
economies have their roots, and on which the livelihoodsof millions of people in developed countries depend.

infrastructures have been impediments for Africancountries to engage in their own manufacturing. That iscommunity-based economies of African countries
become self-supporting, sustainable economic units, then51

The system will not change overnight. But when theSection 4: NEPAD and TICAD

dependency on exports of primary commodities can be
reduced (and, accordingly, dependency on advanced
economies). Here, TICAD proposals on community-

governments alone; it must be a national effort. The
responsibilities of each stakeholder are different, but all
sections of the nation must be involved as equal partners.

based rural development and Asian experiences ofdiversification of production and economies could

And such a partnership is only possible under ademocratic system. So, again, good governance is thecomplement NEPAD proposals.

issue here.

Fourth, ownership and partnership: Since TICAD I in
1993, the expressions of ownership and partnership have

The partnership between African countries and theinternational community must be a relationship of demand-

been so well received by the international community thata wide variety of meanings are given to them. I believethat these two words underscore the proper ways andmeans of domestic and international development efforts.
No international assistance can develop Africa; only

driven cooperation. African countries must decide on theplans, and implement them by their own resources, (which
may not be sufficient). When serious commitments byowners are demonstrated, then it is the role of partners toextend a hand. Donors should not pull recipients forward,

Africans can achieve African development.

but rather push their backs as they advance.

Africans must own the development efforts, i.e., thevisions, plans, policies, implementations andcommitments to stakeholders. This much is obvious. But

In conclusion, NEPAD and TICAD are both frameworksof African development. The goals are clear: to reducepoverty, to diversify economic activities and to reduce

what do we see in the field? Bi-lateral aid agencies,
multi-lateral organizations, NGOs and "development
merchants" who are literally "peddling" hundreds ofdependency on exports of primary commodities. There
are many areas in which NEPAD and TICAD could
complement each other. The Plan of Action of TICAD II

projects. No developing country has enough resources toproperly examine those proposed projects and monitor
their implementations. For obvious reasons, thedoes not limit TICAD activities as a developmental
framework for Africa. TICAD III must go beyond
TICAD II.

dependency syndrome has been formed in the minds ofpoliticians, administrators and the people. Assistancebecomes an easy way out of immediate difficulties.
No one questions that African countries need assistance -We have not yet seen the implementation of NEPAD atnational, sub-regional and regional levels, which will not
be an easy task. In the framework of TICAD, there aremany schemes being implemented, and I hope that

additional resources, technology and manpower, at thisstage. But no matter how good the intention, supplydriven aid is no aid as long as the dependency syndrome
dictates. Aid becomes "consumption," not investment. It
may give you a strange impression, but I say that the

TICAD III will add new schemes of cooperation thathave already been suggested by African countries at the
TICAD preparatory meetings.

mind-set of the political leadership and the people of
Africa must be clear of the dependency syndrome. Only
then can ownership of the development process truly
belong to Africans.

activity which would render rich returns. Communitybased rural development is another area. And governanceis an area that has not been much exploited in TICAD, yet
it offers plenty of scope for cooperation. NEPAD and
TICAD, together, could reexamine the way in which

The term "partnership" is often used to describe to therelationship between African countries and donors. But
the vital partnership in African development is therelationship among domestic stakeholders: the politicalelite, judiciary, legislative and executive branches, civicorganizations, religious organizations, the businessassistance is rendered for establishing true ownership andpartnership.

community, farmers, mass media and NGOs. Nationbuilding is not an endeavour by the political elite andSharing and learning from Asian experiences could be the1 "The Lagos Plan of Action to the New Partnership for Africa's Development

and from the Final Act of Lagos to the Constitutive Act: Wither Africa?," inPeter Anyang' Nyong'o, A Ghirmazion and D. Lamba (eds.), NEPAD, a New
Path?, Heinrich Boel Foundation, 2002, pp. 35-6.

52

Section 4: NEPAD and TICAD

Comments on "Africa is big enoughfor both NAPAD and TICAD"
Machiko Nissanke
School of Oriental and African Studies,
University of London

part of African political leaders to achieve good political
governance (democracy, peace, political stability, aconstitutional state, human rights and sound managementof public affairs) and good economic governance (goodpublic and private governance with an emphasis on
private-sector development by providing secure
investment environments and eliminating corruption). On
the basis of these commitments, it calls for partnershipand more resources, both official aid and private

NEPAD is widely seen as an exciting initiative taken by
key African leaders in appealing for a genuine partnershipwith the developed world (in particular, the G8) for Africa's
future. As Schmidt suggests, the key to this new partnershipis Africa's assertion of responsibility for its own

investment.

development, and its determination to set the development

to achieve these objectives in light of the reality Africa
faces today, domestically, regionally and globally.
Probably, it has deliberately avoided engaging in thelong-running debate, among academics and policy
makers, on the appropriate development strategy for theagenda. According to the documents posted on its official
1

web site, NEPAD is defined in the following terms:
・NEPAD is a vision and a programme of action
for the redevelopment of the African continent.

However, NEPAD is not yet a coherent development
strategy or policy programme. While the goals are clearlyspelled out, not addressed is the critical issue of how best

・NEPAD is a plan that has been conceived anddeveloped by African leaders.
・NEPAD is a commitment that African leaders aremaking to the African people and to theinternational community to place Africa on apath of sustainable growth.

African continent.

・NEPAD is a commitment that African leaders aremaking to the African people and to theinternational community to accelerate integrationof the African continent into the global economy.
・NEPAD is a framework for a new partnership

could be achieved. Real ownership and partnership is noteasy to attain on the basis of the existing donor-recipient
aid relationship, in which the balance of power (andfinancial resources) has been on the side of international
financial institutions and bilateral donors. Schmidt poses,with the rest of the world.

Nevertheless, NEPAD cannot leave several critical issues
aside. For example, African policy makers inevitably
have to face the hard question of how real partnership andownership of development strategy and economic policies

in this regard, such key questions as:
・ Will donors allow unorthodox, but reasonable

Furthermore, NEPAD is also claimed to be:・a comprehensive, integrated development plan

economic policies?
・Will donors submit to independent monitoring ofthat addresses key social, economic and political

their performance, or set up a reverse

priorities in a coherent and balanced manner, and・ a call to the rest of the world to partner with

consultative group where individual donor
agencies will meet with African partners for

Africa in its own development on the basis of its
own agenda and programme of action.

review?
・How can the issue of aid conditionality (ex-anteand ex-post) be handled in the context of the new

The goals of NEPAD in these documents are set as
promoting accelerated growth and sustainable
development, eradicating widespread and severe poverty,
and halting the marginalization of Africa in the
globalization process.
Indeed, NEPAD is clearly an initiative that spells out avision and aspiration on the basis of commitments on the
53

partnership?
Furthermore, to claim real ownership, African leaders
have to mobilize and gain the support of the African
people. Currently, NEPAD is more of a bargain forum
between African leaders and G8 leaders. Hence, in orderto achieve real partnership and ownership, it is necessary
to replace the current donor-driven processes governing

Section 4: NEPAD and TICAD

policy design, programme implementation and aid
delivery with partner-driven processes in a democratic
context, and in an accountable and transparent manner. It

These four areas in Dr. Horiuchi's list are all very criticalfor Africa's development. Indeed, I would like to join him
in emphasizing the following critical issues that TICAD

is also imperative to anchor development strategy andpolicy in a rigorous analysis of the context andand NEPAD should address:

constraints facing each partner country.

1. Poverty reduction - In designing a strategy forpoverty reduction, it may be useful to examine

In this context, Dr. Horiuchi's paper can really beappreciated. He points sharply to one of NEPAD's

the institutional and structural conditions (bothdomestic and international) under which poverty

features (and weaknesses), suggesting that NEPAD's
economic strategies and political framework represent
neo-classical economics and liberal democracy. From thisperspective, he suggests a way forward to make TICAD
complementary to NEPAD. His suggestions in the areas

has been deepened and trapped in Africa. It canbe argued that the prevailing institutional
environments are not suitable for managing therisks associated with globalization as well as
benefiting from positive dynamic forces ofof complementarity between TICAD and NEPAD can besummarized as:

globalization in Africa. 2 This has a critical

1. Poverty reduction - On the recognition that thepoor are an uncaptured population of the market
system, there are several important lessons to belearned from Asian experiences forcomprehensive rural community-based
development schemes and demand-driven
approaches.

bearing on designing a set of policies forstrategic participation of African countries in
globalization.
2. Structural transformation strategy - Here, again,
there is a critical incongruity between the models
embedded in Structural Adjustment Programmes(SAPs) and the African economies on ground.
There is an urgent need for working up fresh
comprehensive economic strategies in light of

2. Development resource flow and governance There is an annual gap of $64 billion envisaged,
instead of the currently availlable $16 billion.
Given the problems with the neo-patrimonial
political and economic system found in Africa,

the prevailing conditions found in Africa. PRSPin the HIPCs appears to be just an add-on to the
SAP framework, rather than a coherent new
framework based on a critical reappraisal of the
Washington Consensus. As Dr. Horiuchi's paper

more prominence should be placed on raising thedomestic capacity to utilize foreign investments.

argues, the need for addressing the fragility ofthe external and fiscal balances stemming from

3. Structural characteristics of African economies Africa's dependence on commodity exports hascommodity price volatilities is paramount for
Africa's future. A new strategy is required for
dealing with Africa's commodity dependence

to be tackled. There is an urgent need for policies
that will facilitate structural changes andtransformation of African economies away fromthis commodity dependence. Here, again, Africa
could draw some lessons from Asian experiences

through various risk management mechanisms,
such as state-contingent debt contracts and aidof diversification of production and economies.

In this regard, it is imperative to examine
critically the framework of ex-ante and ex-post
conditionality, and to assess the donor-driven
selectivity principle discussed in the recent
debate on aid allocation and aid effectiveness.

4. Ownership and partnership - There must be ashift from the dependency syndrome to demanddriven cooperation. In the new aid relationship,partnership with domestic stakeholders should bemuch more emphasized.

allocations contingent upon on terms of trade(TOT) and other shocks.3

3. Partnership and governance - For all the urgent
tasks ahead, strong, efficient and capable African
54Section 4: NEPAD and TICAD

states and regional organizations are a criticalcondition, as they need to mobilize and sustain
strong support and new energy from hitherto

Comments on "Africa is big enoughfor both NAPAD and TICAD"

disfranchised communities and populace.

How is NEPAD different from regional
institutions in Asia?

In conclusion, I would like to emphasise that Africa
should not be an experimental battlefield of different
economic models and paradigms. One of the mostvaluable lessons to be drawn from Asian development

Masanori Kondo
International Christian University

experiences is the explicit recognition, on part of allparties involved, of the need for adaptation ofdevelopment strategies in light of local conditions.

Introduction

1

See Rodney Schmidt, 2002, "Ownership and Partnership in Africa's
Development Strategy," Ottawa: The North-South Institute.

NEPAD is one of the most interesting initiatives everproposed by African nations. Dr. Horiuchi's paper
conducts an outstanding analysis of NEPAD, and all the2

For a more detailed discussion on this subject, see Machiko Nissanke, 2003,"Rural Poverty and Institutions in a Globalising Economy," an overview reportbased on six country case studies in Sub-Saharan Africa submitted to theFoundation for Advanced Studies on International Development (FASID),
Tokyo, August.

3

For a more detailed analysis of this issue, see Machiko Nissanke and Benno
Ferrarini, 2001, "Debt Dynamics and Contingency Financing: Theoretical
Reappraisal of the HIPC Initiative," WIDER Discussion Paper No. 2001/139,
forthcoming in T. Addison, H. Henson and F. Tarp (eds.), Debt Relief for Poor
Countries, Palgrave, 2003

points he has raised in his paper will have to be discussed
intensively at the TICAD III Conference. In this shortnote, I wish to supplement his work by comparing theAfrican initiative with regional institutional arrangements
in Asia. By making such comparisons, I do not intend toargue that Africa should learn from whatever Asia did,but instead hope to try to identify key issues for successand failure in different regional institutions.
The regional institutions I will examine are NEPAD,
ASEAN, SAARC (South Asian Association for Regional
Cooperation), and what I tentatively call "JCK" (Japan,
China and Korea). I include "JCK" here because, whilst
there is no official regional institution between Japan,
China and Korea, business interaction is perhaps moreadvanced than in other regional blocs. For this reason,such informal arrangements are compared alongside moreformal, Asian and African institutional arrangements.

Differences between Asia and Africa
Before comparing these regional arrangements, I shall first
identify the major differences between African nations andother developing nations. According to a study by Collier
and Gunning, 1 crucial factors that hinder African
development are lack of social capital, closed economies,
inadequate social services, geographical disadvantages,
inadequate financial deepening and high aid dependency.
At the UNU workshop on 24-25 July 2003, however, it
was pointed out that contrary to the opinions of Collier
and Gunning, the real obstacle to achieving African
development is not the lack of social capital, but the lackof efforts to utilize existing African social capital in the55Section 4: NEPAD and TICAD

process of national development and ODA. This is an
important point, and has to be addressed at theforthcoming TICAD III.

The strategic focus of ASEAN shifted from the initialinternational politics against communism to tradeliberalization. The "JCK" countries (as there is no official
institution, there is no official strategy) have continuously

Varying initial impetus for regional
institution building

placed emphasis upon on business matters. The strategic
focus of SAARC is not clear - which is one of the

Hereafter, I shall compare NEPAD with the Asian
institutional arrangements and informal arrangements
previously mentioned. First, in terms of the initial

weaknesses of the association.

impetus for creating them, NEPAD and SAARC are
similar. Both were set up in response to an increasing
sense of crisis in terms of economic stagnation and

What major challenges do these institutions and informal
arrangements face? The major potential danger for
NEPAD is a conflict of differing interests among politicalleaders in African nations. In fact, in the case of NEPAD,
the number of the countries involved is much larger thanpolitical instability in their respective regions. In contrast,
ASEAN was initially formed to hold back the spread ofcommunism from Vietnam into Southeast Asia. Also, theeconomic relationships within "JCK" stem from Japanese
war reparations to China and Korea.

Different driving forces
What were the driving forces behind the creation of these
institutions and informal relationships? As NEPAD has
just been created, it is too early to identify them at thisstage. However, it is probable that the future success of
the initiative will depend upon the future commitment
and cooperation of African political leaders.
In the case of ASEAN, it is quite well known thatJapanese investment took a major role for the economic
development of the ASEAN region and its economic
integration. It is also the same in the case of "JCK." In

Challenges to regional institution buildingthat in Asian regional arrangements.
ASEAN faces obstacles to further regional integration in
the shape of similar trade and industry structures (withthe exception of Singapore) among member nations. Thishas made intra-regional trade less attractive for ASEAN
countries. However, here again, Japanese investment in
the manufacturing sector has contributed to overcoming
these problems, creating new opportunities of intraregional trade.
In the case of SAARC, the diplomatic relationshipbetween India and Pakistan has been a major challenge. It
is unfortunate that people in Pakistan drink tea imported
from Kenya. Likewise, the "JCK" area has faced similar
diplomatic challenges; Japanese import restrictions on

both of these arrangements, foreign investment byoverseas Chinese also played a similar and crucial role.

agricultural commodities have been one of the major

In comparison, there is no strong driving force for further
integration within the SAARC organization. This is partly

cause diplomatic rifts from time to time.

due to the fact that for India, doing business with other

Different approaches to poverty reduction

South Asian countries is less profitable than doing
business with the developed world and Southeast Asia.

Poverty is a serious problem in Africa, so it is natural that
NEPAD has identified poverty reduction as one of its toppriorities. Quite interestingly, however, poverty reduction
has not been such a major agenda item in ASEAN

Another reason is that foreign direct investment into theregion is fairly limited.

Different strategies
The main strategic focus of NEPAD is in line with
development strategies proposed by the international donor
community, in that poverty reduction and "goodgovernance" are key priorities. In comparison, neither
ASEAN nor SAARC (nor "JCK") focused upon such issues.

obstacles for "JCK" integration. Also, war memories (ofthe Japanese invasion in China and Korea) continue tocountries. For example Thailand did not have a national
poverty reduction strategy until it was hit by the Asianfinancial crisis in 1997. Similarly, the concern of the
Malaysian government was income redistribution from
Chinese to Malays, rather than nationwide poverty
reduction per se. Moreover, ASEAN has not identified
poverty reduction as a common agenda. Similarly, none of
the countries of "JCK" have defined poverty reduction as a56

Section 4: NEPAD and TICAD

national policy objective, even when they were very poor.
ASEAN countries have achieved rapid poverty reduction
through growth-oriented strategies rather than specificpoverty reduction strategies. In contrast, India, the mostimportant country of SAARC, which has pursued poverty
alleviation for a very long period (especially during theIndira Gandhi administration), did not achieve muchpolicy success, and hence has changed towards a more
growth-oriented strategy since the early 1990s.

taken place successfully. The International Rice ResearchInstitute (IRRI) in the Philippines has played a pivotal
role in this agricultural revolution.
Many studies on South Asia, however, suggest that
communities in SAARC countries tend to be weaker, andthat the success of the Green Revolution is limited to asmall area such as Punjab. In "JCK," agriculture is (withthe exception of China) not competitive; and, as
mentioned previously, import restrictions on agriculturecommodities by Japan has created major problems.

Different approaches to "good governance"
Along with poverty reduction, improving governance is ahigh priority for the NEPAD agenda. NEPAD's attempt to

The challenge of making links with otherregions

achieve governance through a "peer monitoring" strategy
has been successful so far, and it is thought that improved
governance is key for the future development of Africa.
SAARC is also interested in governance, and some useful
research comparing the governance of SAARC countries

In today's age of globalization, it is inevitable for any
regional association to seek positive economic linkages
with other regions and countries. So far, however, thelinkage between Africa and the rest of the world islimited (with the exception of some bilateral

was recently conducted at the Haq Development Centre
in Pakistan.2

arrangements with the EU). If NEPAD is to be
successful, this challenge must be addressed.

It is interesting, however, that neither ASEAN nor "JCK"have included "good governance" in their common
agendas. One small exception is that shortly after the

ASEAN, in contrast, has attracted and is seeking trade
expansion with not only Japan, but also the USA, China

Asian financial crisis in 1997, ASEAN proposed peer
monitoring of the financial statements of governments.
Given their authoritarian government systems, China or
Malaysia may not particularly welcome the concept of
freedom of speech or civil participation, and this could

India, a main country within SAARC, is also trying tocreate links with the rest of the world. It is hoped that not
only intra-regional free trade promotion within Africa,
but also inter-regional free trade agreements between
Africa and other parts of the world, will be further

therefore be one of the reasons that ASEAN and "JCK"
regional agreements are unwilling to address governanceenhanced. Certainly, the NEPAD initiative is a positive
step, and the AJAC, which is proposed by Dr. Obame,issues.

will be needed to enhance economic linkages among
Africa, Japan and the rest of Asia in the future.

and India as well as many other countries and regions.

Different approaches to agricultural policy
Agricultural development, which is extremely importantin Africa, has not been considered to be a major issue ofconcern for either ASEAN or "JCK." I will briefly touchupon some differences between agricultural sectors in
Africa and Asia.
Several studies by economists have suggested that many
African countries are abundant in land, but tend to lack
communities compared with Asia. It is also pointed outthat African farmers' decisions to not invest in agriculture
is rational, because of the high risk associated with output
fluctuations. In contrast, sharecropping arrangements arecommon within ASEAN, and the Green Revolution has
57

Lessons and key factors
The key prerequisite for the success of any regionalorganization is to carefully examine and develop its
strategic value as an organization and what policy
strategies should be pursued. Strategic value issomething, which African nations can emphasize forstrategic purposes, that attracts other countries andencourages them to think of NEPAD as an importantorganization with which to interact.
In the case of ASEAN, it was an investor-friendly
environment. In the case of Africa, for example, it can benatural resources, which are lacking in Japan and someSection 4: NEPAD and TICAD

other developed nations. ASEAN developed its strategic
value by inviting both Japanese and Chinese investment.
Without formal arrangement, "JCK" has undertaken
similar efforts. Roles of foreign direct investment are
critical, and these nations have tried their best to invite
foreign capital by working together. Also, successful
arrangements have come from the initiatives of individual
member countries.
It is noteworthy that little emphasis is placed on poverty
or governance in any of the arrangements in East Asia.
The influence of leading countries in the region seems to
be more important here. Japan, for example, played amajor role in shaping East Asian development. The
creation of ASEAN originated in member countries
sharing a similar political interest against Vietnam. While
this was central to creating the initial success ASEAN
experienced, the similar economic structures of ASEAN
countries (except for Singapore) have retarded progress
towards inter-regional economic cooperation.
In contrast, the political conflict between India andPakistan has made SAARC rather dormant (although
recently things have been slowly improving). The similar
economic structures of SAARC countries have madeDiscussion of "Africa is big enoughfor both NEPAD and TICAD"
Since TICAD II, African leaders have expressed theirpolitical commitment to alleviate poverty in Africa and tointegrate its economy within the global economy throughthe adoption of NEPAD as their framework fordevelopment. As opposed to previous development
programmes prepared and owned by Africans, NEPAD
has received an unprecedented, overwhelming
endorsement from the G8. This is due to the fact that
NEPAD essentially supports donors' positions.
So far, NEPAD's ambitious objectives of self-sufficiency
in food, good governance, indigenous growth andpartnership have not been achieved. In this respect, the
TICAD III Summit will be a unique opportunity toextend partnership and solidarity with Africa andcontribute significantly to the identification of acomprehensive strategy for the implementation of
NEPAD. Some of the general areas in which TICAD and
NEPAD should be concerned include:

Poverty alleviation

India less interested in trading with them. From thisPoverty, which is concentrated in rural areas, is not only aobservation, we can conclude that political interests in theregion do not conflict, but economic structures must
become more different in order to maximize the benefitsof trade.

lack of assets. It is cultural and institutional as well as
material. It results from (1) a lack of resources andcapacity to satisfy basic needs of daily subsistence (goods,
services and income) and (2) isolation, dependency,
alienation and discrimination in the form of non-Finally, having made all these comparisons, we have tonote that the lessons learned in Asia cannot be directly
applied to NEPAD. However, we can learn that the global
environment is different from ten years ago; hence, at theparticipation in community decision-making. The poor
represent populations uncaptured by the market system.

forthcoming TICAD III conference in Tokyo, we have to
discuss about NEPAD's strategic value and possible
future policy strategies.

unable to cope with poverty unless the issue of self-

1 Paul Collier and Jan Willem Gunning, 1999, "Why Has Africa Grown Slowly,"

Journal of Economic Perspectives, Vol. 13, No. 3.
2 Mahbub ul Haq Human Development Centre, 1999, Human Development
Report in South Asia 1999: Crisis of Governance.

Poverty Reduction Strategic Programmes (PRSP) will be
sufficiency in food is resolved. The role of African
governments as well as communities is to create thenecessary conditions and help in planning and budgeting
food security. Therefore, there is a need to enhance
productivity through the establishment of ruralcommunity-based development as a platform to provide
training and skill-building in agro-diversity as well as inimproving self-irrigation and drainage. Governments
should also actively encourage small farmers and support
micro-projects, especially in the field of industrial foodprocessing. It is also worth mentioning that landownership structure still serves as an obstacle to58Section 4: NEPAD and TICAD

benefiting from the use of modern technology andincreasing productivity. Further reforms are needed inthis area.
Sharing in and learning from rural success stories, such as
Asia's experiences in comprehensive rural communitybased development schemes, is of enormous importance.

Daunting financing challenge
NEPAD's estimate of an annual resource gap of $64
billion to be financed from outside the continent is not arealistic expectation. This figure represents 12 per cent ofAfrica's combined GDP, as compared with the MarshallPlan for Europe, which was only 2.5 per cent of bothFrance and Germany's GDP. It is hard to expect that sucha resource gap could be financed annually.
Furthermore, there is reluctance towards budgetary
support as opposed to project support. Budgetary support
is often assorted with conditionality and too muchmonitoring. It also tends to result in "aid addiction."market size and the lack of infrastructures, whichhave been impediments for African countries toengage in their own manufacturing;・European and multinational policies that did notallow Africa to develop manufacturing(Domestically manufactured goods are often
replaced by less expensive goods produced bymultinational enterprises.); and・A huge wastage of resources under government
control in many African countries.
Therefore, there is a vital need for structural changes andtransformation Asian experiences of diversification of
production, value-added upgrading and community-based
economies can hold valuable lessons for Africancountries in their efforts to become self-supporting and,accordingly, achieve sustainable economic growth.
Moreover, domestic capacity building is essential toattract and utilize foreign investments and to protect
indigenous enterprises from multinationals' domination.
Otherwise, the technology and management learningbenefit to host countries will be very limited.

Effective state
Unless the issue of governance is resolved, neither
sufficient resource flows nor effective economic policies
will be possible. The challenge for Africa, at its actuallevel of development, is not less state but rather an
effective state - i.e., a democratic and legitimate state able
to deliver basic services (health, education and security)and to play the role of leadership (or act as a locomotive)

Social/cultural capital: is it lack or neglect?
Most rural-born Africans forget quickly about their ruralroots as soon as they move to cities. Social infrastructures
are completely neglected and destroyed in the process.
Given the fast-growing rate of urbanization, it is therefore
important to use "community based initiatives" tomaintain all social infrastructures.

to sustain development.
In this respect, NEPAD should take into account theto promote good governance in various forms ofgovernance arrangement programmes.

social and cultural capital and characteristics of Africancountries. In other words, one has to ensure theadaptability of NEPAD concepts to local culture andconditions. Countries are supposed to develop their own
strategies within NEPAD. NEPAD should be fleshed out

Structural reforms of African economies- i.e., adapted to regional, national and sectorialconditions in order to respond to African common

Economic growth cannot be realized in an environment

challenges, common threats and common goals.

still heavily dependent on primary commodity, low valueadded exports. The past three decades have been marked

The identification and mobilization of their cultural andDue to the complex diversity of Africa and the sensitivityof this issue, however, it is desirable to focus on how tocreate regional effectiveness. TICAD III is an opportunity

by four concerns:
・ A drastic decline in the purchasing power ofAfrican countries due to deterioration of theterms of trade of primary commodities and raw

social capital are crucial to the success of Africancountries' development strategies.

material prices;・ Constraints (but not inefficiencies) created by

No one questions that African countries need assistance.
However, only Africans can achieve African

59

Ownership, partnership and solidarity

Section 4: NEPAD and TICAD

development. Africans must own the development efforts,
i.e., visions, plans, policies, implementations andcommitment to stakeholders. Therefore, Africa must findMoreover, there is an increasing demand for basic
infrastructure in Africa. With appropriate financing andrisk engineering, the demand for infrastructure in Africa

a balance between supply-driven and demand-driven
cooperation.

can become important business opportunities for JapanesePartnership has to be implemented in two dimensions:intra-partnership and inter-partnership. The former, whichreflects the interaction among domestic stakeholders (theand other donor countries' companies. The reinforcementof existing institutions, such as the African Development
Bank, and the creation of new institutions similar to
MIGA to manage risk can greatly contribute to thematerialization of opportunities. Eventually, this will help

political elite, judiciary, legislative and executive
branchs, civic organizations, religious organizations,business community, farmers, mass media and NGOs), isalmost completely neglected in Africa. In this respect,
NEPAD could easily contribute to and play a leading rolein distributing the benefits of globalization among
concerned parties.

in enhancing such partnerships among Africans. The
latter, in contrast, must be a relationship of demand-

taking into account Africa's specific interests andadvantages as well as donors' specific interests. However,
our efforts will remain hollow unless we build aconstituency for Africa in Japan. The creation of theJapan-Africa Parliamentary League, the annual

driven cooperation; Africans have to have demand-driven
plans. No developing country is endowed with enoughresources to execute its development plans alone.
Therefore, we urge Africans to demonstrate serious
commitment to their agendas in order to win the backup
and assistance of international partners.

Therefore, in order to make Africa more attractive andstrategic, we need to identify new forms of cooperation,

Ownership and partnership have already been welcomed
during TICAD I and TICAD II as fundamental principles

organization of the Africa Day Symposium as well asother cultural events and exhibitions can be regarded as"advertising" to create such a constituency. The TICAD
III framework could endorse the idea of African
constituency. Also, the example of building a
constituency for Indonesia through technical cooperationthat should guide ODA. What is urged now is

is a good case to learn from.

"solidarity," a concept which should govern humanitarian
aid and international cooperation. This new form forcooperation is of tremendous importance to reach policy
harmonization between demand-driven and supply-driven
projects in a domestic context, and in an accountable andtransparent manner. Furthermore, Africans should cometogether to evaluate donors' policies, and to understandthe nature of the conditionality (i.e., the balance between
donors' interests and recipients' needs).

Market information channel
There is a real need to learn, share information andenhance technical cooperation with Asia. One of the mosteffective mechanisms to promote Africa in Asia, andparticularly Japan, is the AJAC centre initiative. Such acentre could promote investment, trade and tourism aswell as covering various cultural exchanges between thetwo continents. Furthermore, information-sharing
processes through the Africa-Asia Business Forum andStrategizing Africa to Japan and other donors
Africa's strategic value to its development partners,
including Japan, can be significantly enhanced. Indeed,from a geo-economic viewpoint, Africa could become an

ASEAN's successful experience in promoting exports tothe triad (Japan, USA and EU) can be of value.

additional market for Japan and other donors in terms ofboth demand and supply. Africa's endowment with acheap labour force, mineral resources, raw materials,
water, and land could encourage the relocation of somemanufacturing production to Africa and could
systematically help Japanese companies to become morecompetitive and more effective in markets around thecontinent.
60Annexes

Annex 1: Recent UNU Press Africa-related publications
States, Markets, and Just Growth
Development in the Twenty-first Century

Atul Kohli, Chung-in Moon, and Georg Sorensen, editors

Enhancing Global Governance
Towards a New Diplomacy?

Andrew F. Cooper, John English, and Ramesh Thakur, editors

Researching Violently Divided Societies
Ethical and Methodological Issues

Marie Smyth and Gillian Robinson, editors

Reforming Africa's Institutions
Ownership, Incentives, and Capabilities

Steve Kayizza-Mugerwa, editor

Conflict Prevention
Path to Peace or Grand Illusion?

David Carment and Albrecht Schnabel, editors

International Waters in South Africa
Mikiyasu Nakayama, editor

Financing for Development
Proposals from Business and Civil Society

Barry Herman, Federica Pietracci, and Krishnan Sharma, editors

Peacekeepers, Politicians, and Warlords
The Liberian Peace Process

Abiodun Alao, John Mackinlay, and 'Funmi Olonisakin

Agrodiversity
Learning from Smallholder Farmers Across the World

Harold Broofield, Helen Parsons and Muriel Brookfield, editors

Agricultural Biodiversity in Smallholder Farms of East Africa
Fidelis Kaihura and Michael Stocking, editors

Perspectives on Growth and Poverty
Rolph van der Hoeven and Anthony Shorrocks, editors

Asia and Africa in the Global Economy
Ernest Aryeetey, Julius Court, Machiko Nissanke and Beatrice Weder, editors

Integrating Africa
Perspectives on Regional Integration and Development.

Hans van Ginkel, Julius Court and Luk Van Langenhove, editors

For more information, please contact the UNU Press.
United Nations University Press
53-70, Jingumae 5-chome
Shibuya-ku, Tokyo 150-8925
Japan
Tel: +81(3)3499-2811
Fax: +81(3)3406-7345
E-mail: sales@hq.unu.edu
http://www.unu.edu

61Annexes

Annex 2: Profiles of participants
Hans van Ginkel, Rector, United Nations University
Rector of the United Nations University (UNU) since September 1997, Prof. Hans van Ginkel was elected President of the International
Association of Universities (IAU, Paris) in August 2000. He is Vice-chair of the Board of Trustees of the Asian Institute of Technology(AIT, Bangkok), and former Rector of Utrecht University in the Netherlands.

Shunji Yanai, Adviser to the Rector, UNU
Professor Shunji Yanai of Chuo University, former Japanese Ambassador to the United States and former Vice-Minister of Foreign Affairsof Japan, was appointed Senior Adviser to the Rector of the UNU in April 2003.

Kazuo Takahashi, Visiting Professor, UNU
A visiting Professor for UNU since February 2002, and Chairperson of the Society of Researchers of International Development, Japan,
Kazuo Takahashi is a Professor at International Christian University (Japan).

Salah Hannachi, Ambassador of the Republic of Tunisia
Currently Ambassador of the Republic of Tunisia to Japan and Australia, Dr. Hannachi was Director General of the Tunisian Institute ofStrategic Studies from 1994 to 1997.

Jean-Christian Obame, Ambassador of the Gabonese Republic
Mr. Obame has served as Ambassador of Gabon to Japan since 2001. He was Deputy Director in Charge of Financial Institutions, Gabon,from 1980 to 1983, and Technical Advisor to the International Monetary Fund from 1983 to 1999.

Shinsuke Horiuchi, Japan Institute of International Affairs
Shinsuke Horiuchi is currently Adjunct Research Fellow of the Japan Institute of International Affairs (JIIA) and President of International
Development Associates, Ltd. He served as Special Assistant to the Minister of Foreign Affairs, Japan, in charge of the follow-up of TICAD II.

George Mavrotas, UNU/WIDER
Dr. George Mavrotas is a resident Research Fellow at UNU/WIDER in Helsinki, Finland. He taught for over 10 years at the Universities ofOxford and Manchester before joining UNU/WIDER in January 2003. He has extensive experience in working with governments indeveloping countries.

Steve Kayizzi-Mugerwa, Independent Evaluation Office of the International Monetary Fund
Steve Kayizi-Mugerwa is currently attached to the Independent Evaluation Office of the IMF in Washington, DC. He directed the study on
Reforming Africa’s Institutions at UNU/WIDER during 2000-2001.

Mina Baliamoune, Faculty of the Economics Department, University of North Florida
Mina Baliamoune is Assistant Professor of Economics in the Coggin College of Business at the University of North Florida. She was a
Fulbright Fellow (1997) and a sabbatical fellow at UNU/WIDER (2002).

Ernest Aryeetey, University of Ghana
Professor Ernest Aryeetey is Director of the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana,Legon. He is a member of the Board of UNU/WIDER and a Member of the Advisory Committee and Resource Person of the African
Economic Research Consortium, Nairobi.

Wafula Masai, Director, African Centre for Economic Growth (ACEG)
Wafula Masai is Consulting Manager at the African Centre for Economic Growth as well as Associate Professor at the Department of
Economics of the University of Nairobi. He serves on national committees for manpower development, trade and private sector development.

Machiko Nissanke, Reader in Economics, SOAS, University of London
Dr. Machiko Nissanke is Reader in Economics at the School of Oriental and African Studies (SOAS), University of London. She has served
as consultant/advisor to many international organizations (UNCTAD, UNIDO, UNDP, UNU, World Bank, African Development Bank,OAU, EEC, AERC) and Japanese government agencies (MITI and MOFA).

Masanori Kondo, Associate Professor, International Christian University
Masanori Kondo is Associate Professor of development economics at the International Christian University (ICU) in Japan. Before joining
ICU in 1998, he worked as an economist for the Asian Development Bank (ADB) and World Bank.

Wassim Slama, Embassy of the Republic of Tunisia, Advisor to the Ambassador
Wassim Slama, Ph.D., is Advisor to the Ambassador of Tunisia in Japan and Lecturer on global business and corporate finance at Chiba
University of Commerce, Japan.

Nairimas Ole Sein, Embassy of the Republic of Kenya, First Secretary, Political Division
Nairimas Ole Sein was posted to the Kenyan Embassy, Japan, in 2002 as Political Attache. Prior to that, he worked for the Ministry ofForeign Affairs.

Stephen Raphael Garama, Embassy of the Republic of Kenya, First Secretary, Consular Affairs
Stephen Garama joined the Kenyan Government services in 1978 as an Immigration Officer. He is currently First Secretary, Consular
Affairs, at the Kenyan Embassy in Tokyo.

Soisik Habert, UNU Office of the Rector, Programme AssistantSoisik Habert was appointed Programme Assistant in the Office of the Rector in September 2002. Before joining UNU, she worked for four
years in China for Save the Children, UK.

62

Annexes

Annex 3: Executive summary of
the policy brief from UNU and
AERC regarding TICAD II─
"Strengthening Africa's
participation in the global
economy"3. Successful participation requires a strategic
approach that is actively pursued.
It is vital that African countries actively engage the forcesof globalization. The specific nature and scale of thebenefits and costs, however, depend on the forms ofintegration, so a strategic approach is needed.
First, integration must be multidimensional involving,This policy brief is intended to assist African
governments in efforts to strengthen their participation in
the global economy in ways that bring widespread andsustainable benefits to their peoples. It stems from two
issues. First, the forces of globalization are perhaps themost important factors that affect the current environment
for economic development. Second, there are lessons
from South-East Asian experiences that policy makers in
Sub-Saharan Africa could adapt to their own contexts.
These lessons stem both from South-East Asia's era of
rapid growth as well as from the current economic crisis.

among others, the aspects of trade, investment, capital
flows and technology. The optimal level of openness may
differ for each aspect, which itself depends critically on
the stage of development in each particular market. This
leads to questions regarding the best policy mix (towards
trade, foreign direct investment and capital flows) toachieve optimal integration.
Second, there seem to be certain prerequisites forcountries to successfully manage the risks and to ensure

eight key lessons.

orderly liberalization. This has significant implications
regarding the most appropriate pace, sequencing and timeframe for reforms.

Underlying issues

Third, international economic interactions are currently

In this report, we highlight three underlying issues andcharacterized by fractured globalization. In particular,

1. Participating in the global economy provides
immense opportunities.
This has been shown by the success of countries with an
outward-oriented strategy. By contrast, inward-looking
development strategies lead to marginalization and condemn
countries to slow growth. Pursuing an outward-oriented
strategy is even more crucial for most African countries,
because their domestic markets are particularly small.

2. Participation also entails significant risks.
Participating in the global economy also poses significant
challenges for the economic management of fragile
economies, and can lead to major problems. In particular,
as shown by the recent South-East Asian experiences, therisks of liberalization are particularly high for capital
accounts due to the massive size and fluctuating nature offinancial flows. Although few countries in Africa arefacing the scale of inflows relative to the size of theireconomies that precipitated the Asian crisis, key lessons
concern the importance of developing sound financial
systems and appropriate sequencing, avoiding overly
rigid exchange rate regimes, and exercising caution in
financial opening.

trade is concentrated in regional blocs. Therefore, Africancountries should place a high priority on trying to
generate economic dynamism with neighbouring
countries. Another implication is that countries' strategies
towards trade and towards attracting investment should
be targeted towards those non-African regional blocs withwhich the country has the strongest potential
complementarities.

Key lessons for a successful outwardoriented development strategy
1. Ensure a stable macroeconomic environment.
Macroeconomic stability is an old lesson, but one thatremains fundamentally important. Africa's growth"tragedy" is partly attributable to governments' failure toachieve stability on key macroeconomic issues, such as
maintaining low inflation; keeping budget deficits
manageable; maintaining an appropriate and stable realexchange rate; and maintaining stable and appropriate
real interest rates. Although many African countries havemade significant improvements in these areas, there is aneed to consolidate and further improve macroeconomic
fundamentals.

63Annexes

2. Liberalize trade, but with care.
In order to participate more in international trade, Africancountries will need to further liberalize their trade
regimes. But liberalization has fiscal and balance of
payments implications stemming from the difficulty offinding alternative secure sources of revenue. Also,premature de-industrialization could set in if tradeliberalization is carried out without regard to thecompetitiveness of otherwise successful domestic
enterprises. Therefore, in designing credible andsustainable trade reforms, more care will need to be taken
regarding the sequencing, pace and phasing of tradeliberalization. Countries should start with export
liberalization and promotion, while import liberalization
should be implemented steadily over a longer period.

5. Some protection and selective promotion policies
may be helpful ...
Governments could also intervene to promote upgradingof exports and encourage inward investment. Selective
promotion measures for consideration include exportprocessing zones (EPZs), bonded warehouses, and duty
exemption and drawback schemes. Also, protection canbe justified in order to promote infant industries. Thus,
temporary and strictly time-bound protection andpromotion for certain industries can be justified if
industries are selected in view of a country's evolving
comparative advantage.

6. ... But, such policies can be dangerous if theinstitutional preconditions are weak.

Africa's market is equivalent in economic terms to that ofHowever, in addition to the importance of sound policy
foundations, selective measures can only be effective if
the necessary institutional foundations exist. In fact,

Belgium, yet it is fragmented into over forty different
countries. Bearing in mind that much international
economic interaction is regional rather than global innature, there would seem to be great potential for Africancountries to promote regional interaction and markets as a

attempting selective measures without the appropriate
foundations can actually be harmful. Therefore, Africancountries should concentrate on building sound policy
and institutional foundations, including government
commitment to economic development, communication

stepping stone towards participating more actively inglobal markets. The first step is to work towards tradeand payments liberalization between neighbouring
countries, in order to generate regional dynamics.
Building regional infrastructure networks (roads andbetween the public and private sectors, an effective
bureaucracy and low risk of corruption.

telecommunications) would also help.

There is increasing acceptance of the value of
institutional reform in improving Africa's economic
performance in general, and its external performance in

3. Realize the opportunities of regional dynamism.

4. Focus on the primary sector.

7. Reinforce the institutional preconditions foroutward orientation and growth.

The performance of the primary sector will be crucial,because it is this sector that provides Africa's main sourceof foreign exchange earnings. A crucial, immediate task

particular. By institutions, we refer to the formal andinformal "rules of the game" that govern the behaviour offor most countries in Africa is to rebuild the primarycommodity export sector, while also proceeding with

Institutions are vital, among others, at four levels:・ At a political level, it is important to haveinstitutions that lead to commitment andcredibility. There are two key lessons here: First,
shield top economic agencies from politicalstrategies to promote export diversification. A vitalconsideration is that the primary sector should not be
penalized.

state and market agents as well as their interactions.

pressures and follow their advice. Second,
Governments could also actively intervene in expanding
and diversifying primary exports. Creating or supporting
institutions for research and development as well as
education and training in this sector should be given
priority. Infrastructual investments to overcome power
failures, water shortages and poor rural road networks arealso essential.

develop sub-regional free-trade agreements as ameans of demonstrating commitment as well asof realizing other benefits.
・ At a public level, it is desirable to haveinstitutions that lead to an efficient and noncorrupt public service. Important measures
include merit-based recruitment and promotion;
appropriate wages; limits on political64

Annexes

appointments, and insulation from politicalpressures; streamlined structures andbureaucratic practices; and efforts to combat

reductions in the external debt of debt-distressedcountries would improve growth prospects in
Africa, particularly if the resources provided arecorruption (most managers identified corruption
as the number-one obstacle to doing business).

additional.
・Guaranteeing open markets - One of the most・Regarding the interaction between the public andprivate levels, it is important to have aeffective mechanisms to help African countries
integrate into the global economy would be forbureaucracy that is responsive to the business
community but still independent. Information-

OECD countries to guarantee open markets for
African exports, and commit themselves to help

sharing through business councils is one usefulmechanism to improve this responsiveness.
・At the level of private agents, the importance of
secure property and contract rights cannot be
overstated. There is a real need to improve thestrengthen Africa's participation in the world
economy.
The policy brief is the product of research collaboration
between the United Nations University (UNU) andindependence and effectiveness of the judiciaryand to establish the rule of law.

African Economic Research Consortium (AERC). In
particular, the issues were discussed at two conferences:

Overall, there is substantial evidence that institutional
failure in Africa is a critical obstacle to better growth andComparative African and East Asian Development
Experiences, and Asia and Africa in the Global Economy.
The work has been organized around the priorities of theexternal performance. In particular, surveys identifying
local entrepreneurs' views on the obstacles to business inAfrica highlight the unpredictability of changes in laws
and policies, the unreliability of law enforcement, theimpact of discretionary and corrupt bureaucracies, and thedanger of policy reversals due to changes in governments.
Unless governments eliminate these kinds of obstacles, it
is unlikely that business - domestic or international - will
flourish in Africa.

8. Developed countries can help in several ways.
Developed countries can help Africa along the path by:・Radically transforming aid - Aid will have to be
substantially transformed if it is to serve as a
useful instrument for mediating Africa's future
relationship with the world. The key challenge is
how to facilitate the effective transfer ofownership to countries in Africa. Donors could
help through substantial reduction in donor
procurement restrictions and inappropriate
intrusion into domestic affairs, as well as bytaking longer-term perspectives. They should
also be more selective in concentrating their aid
towards countries that demonstrate ownershipand commitment - countries that have, or are
actively moving towards, the economic policy
and institutional foundations for development.
・ Reducing the debt burden - There is an
overwhelming case that significant further
65

Second Tokyo International Conference on African
Development (TICAD II). The brief focuses on one of themain messages of the Agenda for Action, the output of
TICAD II, namely "effective integration of African
economies into the global economy." In addition, theconferences primarily involved researchers from East
Asia and Africa, thereby reflecting the theme of AsiaAfrica collaboration that is at the heart of the TICAD
process.

Acronyms

ACBF
AERC
AJAC
AMIGA
AMU
ANZUS
APRM
AU

African Capacity Building Foundation
African Economic Research Consortium
Africa-Japan-Asia Center for Economic, Trade and Cultural Exchanges
African Multilateral Investment Guarantee Agency
Arab Maghreb Union(Security Treaty between) Australia, New Zealand and the United States of America
African Peer Review Mechanism (NEPAD)
African Union

COMESA

Common Market for Eastern and Southern Africa

DAC(OECD) Development Assistance Committee

ECAS
ECOWAS

Economic Community of Central African States
Economic Community of West African States

FDI

Foreign Direct Investment

GDP

Gross Domestic Product

HIPC

Highly Indebted Poor Countries

ICT
IMF
IRRI

Information and Communication Technologies
International Monetary FundInternational Rice Research Institute

JBIC
JETRO
JICA

Japan Bank for International Cooperation
Japan External Trade Organization
Japan International Cooperation Agency

MDG
MIGA

Millennium Development Goals
Multilateral Investment Guarantee Agency

NATO
NEPAD

North Atlantic Treaty Organization
New Partnership for Africa’s Development

ODA
OECD

Official Development Assistance
Organisation for Economic Co-operation and Development

PRSP

Poverty Reduction Strategy Papers

SAARC
SADC
SAP
SEATO

South Asian Association for Regional Cooperation
Southern African Development Community
Structural Adjustment Programmes
Southeast Asia Treaty Organization

TICAD
TOT

Tokyo International Conference on African Development
Terms of Trade

UNCTAD

United Nations Conference on Trade and Development

WTO

World Trade Organization

66