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China/Africa: Development Lessons, 2

AfricaFocus Bulletin
Aug 29, 2011 (110829)
(Reposted from sources cited below)

Editor's Note

"The prospects for economic transformation have never been better in Africa. The higher growth performance in the last decade in Africa reflects an underlying trend towards improved economic governance in Africa and the resolution of many, if not all, conflicts. ... The new prospects also reflect the impact on natural resource demand of emerging economies. These prospects could speed up the resolution of remaining problems of fragility and conflict as the incentives to be part of the African growth story and regional infrastructure programmes become much stronger." - China-DAC Study Group

While the rising economic involvement of China in Africa has drawn wide attention in recent years, there has been significantly less attention to the impact of the Chinese model in thinking about development strategies in Africa. A new joint report from the International Poverty Reduction Center in China (IPRCC) and the Development Assistance Committee (DAC)of the Organisation for Economic Cooperation and Development, made up of the developed countries, is an index of the growing impact of such reflection.

The report excludes issues on which significant disagreement would be likely, such as the roles of democratic institutions and civil society. And it only touches briefly on "serious economic, social and environmental costs" in China. But the extent of consensus emerging from the study process is notable, and a clear contrast with the free-market "Washington consensus" that dominated "donor" involvement in Africa in earlier decades.

This AfricaFocus Bulletin contains extensive excerpts from the second half of the report, which focuses on development in Africa. Excerpts from the first half of the report, summarizing the Chinese experience, are available on the web at http://www.africafocus.org/docs11/ch-af1108a.php The full report, and additional background on the China-DAC Study Group, is available on http://www.iprcc.org or http://www.oecd.org/dac/cdsg

Excerpts from the first half of the report are available on the web at http://www.africafocus.org/docs11/ch-af1108a.php The full report, as well as additional background on the China-DAC Study Group, is available on http://www.iprcc.org or http://www.oecd.org/dac/cdsg

For a previous AfricaFocus Bulletin on the emerging consensus about the need for a developmental state, see http://www.africafocus.org/docs11/eca1103.php

For previous AfricaFocus Bulletins on economic issues, see http://www.africafocus.org/econexp.php

++++++++++++++++++++++end editor's note+++++++++++++++++

Economic Transformation and Poverty Reduction - How It Happened in China, Helping It Happen in Africa

The China-DAC Study Group

Development Co-operation Directorate

Organisation for Economic Co-operation and Development 24- Aug-2011

DCD(2011)4

Full text available as pdf at:
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DCD(2011)4&docLanguage=En

China-DAC Study Group information is available at: http://www.iprcc.org or http://www.oecd.org/dac/cdsg Contact: Michael Laird - Tel: + 33 (0)1 45 24 90 33 - Email: michael.laird@oecd.org

[continued from
http://www.africafocus.org/docs11/ch-af1108a.php]

Development Strategies and Development Co-operation in Africa

Economic performance and the state in Africa

Responsible development-oriented states with a national project for economic transformation are the key to Africa's progress and the reduction of poverty.

This was the main message that African participants conveyed throughout the China-DAC Study Group's four events.

Well-functioning states in Africa are also a common interest of Africa and its economic partners as more extensive economic linkages with Africa are created; and they are a common interest of the international community as a whole as it works on global public goods agendas, including peace and security, health, migration and climate change.

Africa Grows Fast when Policy Syndromes are Avoided

African research on the growth record and prospects presented at the China-DAC Study Group's events showed that in the period 1960-2000, four recurring problems had cost over 2% per annum in lost per capita income growth, accounting for almost all of Africa's shortfall, relative to successful developing regions: i) counter-productive economic incentive structures; ii) "boom and bust" public finances; iii) elite and ethnically-based income and wealth capture, sometimes involving large-scale corruption by a few; and iv) state failure or breakdown. Where these problems had been avoided or overcome, African country growth rates were among the highest in the world. The research showed that constitutions providing for a constrained executive, particularly with term limits, would largely work in resolving these problems.

Reference

[see full report]

The basic ambition of the African Union, widely supported by the international community, including China and OECD/DAC members, is to ensure that African countries become responsible development-oriented states, enjoying peace and stability.

Economic governance and regional integration: The evolving framework for African development

The strategic importance of economic governance and regional integration was a major message from African participants in the China-DAC Study Group's events.

Africa's leaders have been creating the policies and structures for peace and stability and economic transformation across the continent. In the last decade, African countries have made very significant progress in improving economic policy, at both macroeconomic levels and at sectoral and microeconomic levels. Progress has also been made in reducing civil and regional conflicts, but there are remaining challenges of elite and ethnic capture of resources, corruption and state breakdown.

For some decades following independence, most African countries relied on long-term external support for policy analysis and advice, whether from international organisations or professional consultants. And the small population size of many African countries means that the cost of creating their own policy analysis and research capacities is high.

Progressively, however, African institutions have created shared capacities for policy analysis and review, across a range of fields, including political development, regional integration, infrastructure, gender issues, agriculture, science and technology, and information and communications technologies.

The regional economic communities are working to enlarge and integrate the economic spaces in Africa. In conjunction with the African Union and other institutions and processes, they are developing plans and programmes to join up the vast continent, so that its human and natural wealth can be fully but sustainably turned into widespread prosperity for Africans.

Africa's pathways ahead: Some key orientations

The prospects for economic transformation have never been better in Africa. The higher growth performance in the last decade in Africa reflects an underlying trend towards improved economic governance in Africa and the resolution of many, if not all, conflicts. The African Union and its structures and agreed policy frameworks on political and economic governance, supported by the UN Economic Commission for Africa (UNECA) and the African Development Bank (AfDB), have made a large contribution to this.

The new prospects also reflect the impact on natural resource demand of emerging economies. These prospects could speed up the resolution of remaining problems of fragility and conflict as the incentives to be part of the African growth story and regional infrastructure programmes become much stronger.

In the light of the discussions at the China-DAC Study Group's events, some key orientations for African states and organisations and their development partners to share include:

  • Make a green economic transformation within a generation to flourishing middle-income modern economies with low poverty rates, the key framework for thinking about Africa's future.
  • Support the emergence of responsible development-oriented states and address risks of state capture, conflict and breakdown, by ensuring, through transparency and national and international accountability systems, that income and natural wealth is harnessed for national projects of economic transformation.
  • Exploit the opportunities at hand now for agricultural modernisation, both small and large scale, to generate a widespread growth dynamic with supply chains and economic linkages that integrates the national and regional economies and joins up with global markets. Small farmers, men and women, take on the character of entrepreneurs in this modern sector, generating incomes and helping to correct high malnutrition rates.
  • Support the development of African regional knowledge platforms and centres of excellence as a means of speeding up the acquisition of technology in agriculture and in other areas.
  • Think and work in terms of increasing the momentum on regional integration and the creation of regional and continental economic dynamics and infrastructure.
  • Adopt the dynamic capacity development approach to enterprise development, starting with current strengths/advantages, with on-going adaptation and interaction between the state and enterprises to promote fast learning and capacity building in both the public and private sectors.
  • Take trade, investment and aid as opportunities to speed up learning processes, acquire technologies and management models and skills that can be adapted to the African context.
  • Support the emergence of a creative middle class through upward mobility and attracting expatriate talent to return home in the context of the national economic project for economic transformation, to provide the entrepreneurial skills and the well-educated human resources needed to manage a more complex, more organised economy that engages in regional and global markets.

Dynamics of development co-operation in Africa

The rapidly evolving multidimensional role of China in African development was widely welcomed at all of the China-DAC Study Group's events as providing new scope and new diversity in Africa's external economic relations.

China and OECD/DAC countries all have long traditions of providing aid and wider economic co-operation to Africa. Their enterprises, both state and private, play large roles in African development.

While OECD/DAC countries have accounted for the major share of trade, investment and aid flows with Africa, the current dynamics of Chinese trade and investment and aid are making it a key driver in African development.

The Chinese government's "Going out" policy encourages Chinese enterprises to invest abroad, partly to help diversify China's large reserves of foreign exchange. Many Chinese aid projects are being structured on an enterprise basis to generate sustainability. And China, along with OECD and other countries, is investing to expand oil and mineral resource supplies.

There is major scope for China to increase further the scale of its trade, investment and aid to Africa. This will depend on the effectiveness and the sustainability of the growth trajectories of its African partners. It will also involve working with the larger agendas for regional integration and on the successful functioning of the architecture for peace and stability in Africa.

China's institutions for planning and delivering aid and other official financial resources have evolved significantly since the mid-1990s, with the creation of special financial institutions and the development of coordination systems among Ministries. The financial institutions are capable of putting together large packages of financial support for infrastructure.

The China-DAC Study Group was impressed at the readiness of the Chinese authorities to be involved in transformative investment and infrastructure packages. The readiness of China to be involved in inter-regional infrastructure was also welcomed and encouraged, building on China's engagement in the co-operation on African infrastructure. How Chinese financing terms might affect the competitive position of African investors and construction companies was a question raised for consideration. And providing more opportunities for local companies by relaxing its tied aid practices would be a significant contribution by China to helping African enterprise development.

There are questions on sustainability and transparency, which are important for the full ownership and accountability of the developing countries concerned. In order for African countries to be fully in the driver's seat in their relations with development partners, it will be important for them to have more complete information about levels and conditions of assistance and on the effective terms of various commercial deals that partners are bringing to the table.

DAC countries are rebuilding their development support for Africa in the fields of agriculture and infrastructure, after two decades of decline in these areas. They are also focusing in the context of the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action, in partnership with African countries and other development partners, on supporting strong developing country ownership, country public management systems, resultsfocussed approaches and local accountability. Providing more predictability in aid flows and working in longer time frames remain challenges in this context.

Africa's external economic linkages are also being enriched by the activity of other emerging market economies. A new set of comparative advantages and complementarities is emerging in Africa's foreign economic relationships and it is important that African countries are able to shape these interactions in terms of their own development frameworks and determine their own development paths.

Assisting African countries to have independent development capacities is a basic, shared objective of China and OECD/DAC countries. Current developments in Chinese and DAC co-operation policies which promise to improve the coherence and quality of the support for African development include:

  • The publication by China of two government White Papers.
  • The agreement that the African Union will now be a full member of the FOCAC.
  • A public statement by the DAC welcoming the increasing role of emerging countries as providers of development assistance.
  • The preparations for the Busan High-Level Forum on Aid Effectiveness.

Transparency and corporate social responsibilities

Enterprises, African and foreign, will have a key role in shaping the future development path for African countries. Against this background, corporate social responsibilities and green growth challenges and opportunities are important areas for co-operation among all development partners. The China-DAC Study Group linked into relationships between Chinese and African employers, enterprises and experts in the area of labour standards and supply chain management. An African platform for discussing corporate social responsibility issues could play a role in this context.

China, OECD and other countries whose enterprises are active in Africa have a major interest in contributing actively to the development of African economic governance arrangements in these areas.

Lessons for Development Co-operation

What China can learn

China has devoted much high-level attention to African development over the decades, with regular visits by top leaders and, in the last decade, has created the FOCAC and associated processes for articulating and implementing its assistance to Africa. A new China-Africa Research Centre has been set up. China participates in UN peacekeeping missions in Africa. It has also created financial institutions and instruments for official development financing. The special advantages of Chinese aid in speed and cost, especially in infrastructure and construction, and its responsiveness to local requests are appreciated in Africa. In the last few months, China has published two significant White Papers:

  • On trade and economic co-operation with Africa which expressed China's desire to work with others to jointly promote peace, development and progress in Africa.
  • On foreign aid, which provided an overview of China's aid efforts and policies over the past decades and announced a new interministerial co-ordination system for managing its foreign aid and plans to increase aid quality and to work and learn with international development partners in this respect.

The China-DAC Study Group found that China could contribute further to African development by:

  • Bringing more of its transformational thinking into its policy dialogue with Africa.
  • Helping to show how the learning model of development can work to build the capacity for diversified participation in the global economy, including through learning from foreign aid and investment.
  • Supporting African Union structures and policy frameworks and working more at the regional and subregional levels, including to develop interregional infrastructure and knowledge platforms.
  • Helping African countries to learn from the ways China successfully managed aid and foreign investment, particularly through integration of aid project management into regular ministry structures.
  • Being more transparent in its aid programming and the terms of its financing, and assisting African countries in the assessment of financial sustainability issues.
  • Helping to implement African and international codes on corruption, resource revenues and corporate social responsibility.
  • Strengthening knowledge about African conditions among aid staff working on and in Africa.
  • Working on its aid quality agenda and introducing a systematic approach to its aid management systems, including planning, monitoring and evaluation systems.
What OECD/DAC members can learn

OECD/DAC members provide a wide range of support to African countries, including project, sector and budget support. They have been working with African countries in a variety of forums to improve aid effectiveness, and the DAC hosts the Paris Declaration follow-up process, which now has a developing country co-chair, and a Task Team on South-South Co-operation. There is now an explicit effort, focused on developing countries' own concerns, to correct the excess costs and perverse incentives of an extensive aid system with multiple delivery channels and conditions and complex processes. Large declines in aid to agriculture and infrastructure in the 199Os, as aid levels fell and social development and governance assistance rose, are now being reversed as the growth, agriculture and aid-for-trade agendas receive new attention. Aid to Africa has grown significantly over recent years, though remaining some distance from the announced target of doubling aid by 2015. A number of other important OECD work areas are also generating co-operation with Africa, notably on taxation administration and international tax integrity, investment and public expenditure management. And the OECD helps support the African Partnership Forum which maintains a dialogue process associated with the G8. The DAC has recently issued a statement welcoming the special contribution of development experience and co-operation capacities from emerging countries and a new openness to their participation in DAC activities.

The China-DAC Study Group found that OECD/DAC members could contribute further to African development by:

  • Framing their co-operation in terms of the economic transformation process, going beyond aid effectiveness to a wider development effectiveness concept applied to Africa.
  • Doing more to help build science and technology capacities, higher education systems and knowledge platforms, with the potential for creating regional and continental networks kept in view, drawing on their experience in these fields with China and other emerging countries.
  • Supporting African Union structures and policy frameworks.
  • Helping to implement African and international codes on corruption, resource revenues and corporate social responsibility.
  • Maintaining the recent momentum of support for agriculture and infrastructure development, working in relevant forums with emerging countries with special knowledge and expertise.
  • Examining how aid reporting can better capture the technical co-operation activities of emerging countries in terms their impact, and not just their monetary cost.
  • Reviewing how comparative advantage, cost structures and complementarities may be shifting among assistance providers as emerging partners build up their aid activities.
  • Exploring how trade, investment and aid linkages and financing packages can mobilise additional actors and capital for economic transformation processes in Africa.
What African countries can learn

African participants in the China-DAC Study Group's events were determined that their countries should define their own futures. They stressed that political and economic fragmentation made regional integration essential. And they looked to African leaders to take up the task of creating a responsible development-oriented state able to bring together ethnically complex societies and ensure peace and progress in their neighbourhoods. In fact, African institutions and policy analysis and review processes have been getting stronger over the last decade. Policy frameworks and economic management are clearly improving. Regional economic communities are complex and overlapping and regional economic linkages are growing only slowly, but there are new impulses. Agricultural development has become a high priority with an active, continental agenda. Communication technologies and business models have been found that work with great success in Africa. But competitive elites and ethnicities are still a major problem in a number of countries. The African Union has the difficult task of facilitating solutions to such problems. It has to be recalled, however, that many emerging economies of today began their success stories from situations of conflict and turmoil, which transformational leadership was able to resolve. There are clear examples of this in Africa which can serve as an inspiration for sustainable political settlements in the remaining troubled parts of the continent.

The China-DAC Study Group found that African countries could contribute further to development at home by:

  • Fostering the emergence of a responsible, developmentoriented state with a political consensus that reaches across competitive elites and ethnicities.
  • Taking the economic transformation paradigm, working through dynamic capacity processes as the framework for development strategies, nationally and regionally. Bringing development partners to think in these terms also, and presenting strategies and operational programmes and projects in this context.
  • Pushing ahead with the regional integration agenda and finding creative solutions to the development of interregional infrastructure.
  • Reinforcing the priority for agricultural modernisation and its role in creating a broadly based growth dynamic, nationally and regionally.
  • Leveraging the communications revolution in Africa to exploit its potential for leapfrogging in knowledge acquisition and enterprise creation and global economic linkages.
  • Developing further the policy analysis and review capacities and processes now in place in Africa for pragmatic policy making and performance review. Ensuring that the civil service is performance oriented.
  • Creating close interactions between the state and market enterprises in a forward-looking performance-based mode and promoting learning and technology acquisition capacities.
  • Taking inspiration from successful emerging countries, including securing the maximum benefit from international assistance by strengthening ownership, capacity development and mutual learning.

...


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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