Ladies and Gentlemen,
It is my great pleasure to be part of this timely discussion given the current concerns about the slowing of the global economy. The interventions made over the course of this meeting provide us with some serious food for thought, as well as some solid recommendations about the way forward.
In my concluding remarks, I would first of all like to extend my appreciation to the UN Industrial Development Organization (UNIDO), the UN Conference on Trade and Development (UNCTAD) and the Alliance for a Green Revolution in Africa (AGRA)
for extending an invitation to me to participate in this event.
I must admit that the topic under discussion today is one that I am particularly interested in as it recognizes Africa’s remarkable economic progress in recent years as well as its potential to be an integral part of the world economy.
Ladies and Gentlemen,
All of the figures concur that economic expansion looks set to continue in Africa. Sub-Saharan Africa grew at a healthy pace in 2007, and the region is now enjoying its highest growth rates in decades. Real GDP expanded by about 6½ percent, fueled by growing oil production, and rising domestic investment and productivity. Solid global demand for commodities, greater flows of capital to Africa, and debt relief have helped lift growth.
It is also important to underscore that political instability has become less frequent and as a result, not only have investment and growth increased, but income volatility has fallen to near-30-year lows.
But as many of the distinguished panelists have pointed out, African policymakers now face the challenge of preserving hard-won macroeconomic stability.
Given the rapid rates of development in East Asia over the last three decades there has been a considerable amount of effort devoted to distilling the lessons from East Asia and their transferability to other developing countries.
The participants at this forum have articulated their ideas eloquently and clearly, noting the need for policies that are conducive to sustainable yet rapid economic growth.
The discussion has also highlighted what needs to be done at a global and regional level and the importance of industrial cooperation. I think we can agree that partnership programmes such as Aid for Trade need to be country-driven involving local civil society and local small and medium businesses in determining priorities. Moreover, programmes such as these should not demand that recipient nations implement economic policy changes which are harmful to people living in poverty or the environment.
I must say that I was particularly impressed that the issue of environmental protection versus economic growth was included in this discussion. Too often has the environmental issue been left off the agenda when we speak of Africa’s development?
In concluding this fruitful discussion, I would like to briefly highlight a couple of issues, which in my opinion, are amongst some of the lessons which the Asian Tigers has shown Africa.
The first is that East Asian economies have shown Africa and the world that the time-tested principles and fundamentals of economic theory and practice apply world-wide.
The Asian economies politely but firmly declined the prescriptive aid and instead set a clear time frame for the globalization of its domestic markets through the correct application of appropriate jobs-oriented monetary and fiscal policy.
Today, these Asian economies have climbed up and established not just a foothold, but a presence on ‘ladder of development’.
In this regard, what matters most is the correct application of monetary and fiscal policy signals to the domestic and foreign investors — and this applies whether you are in a developed or an emerging market.
As the Peruvian economist Hernando de Soto’s showed in his research, the ‘informal sector’, can be brought into the formal economy with appropriate monetary and fiscal policy signals.
A second important growth and development lesson Africa can learn from the Asian Tiger economies is the all-important ‘mandatory domestic savings regime’ signal to both households and state institutions. Such a regime must drive the engine of a typical comprehensive national development framework.
With no natural resources, but through a domestic code of discipline that stretched the boundaries of contemporary imperatives of ‘governance’ as we know it today, and combined with an education- and export-led growth strategy; Prime Minister Lee Kwan Yew rebranded Singapore. The prime minister captured the aspirations of Singaporean households with a vision of transforming Singapore ‘from a Third World to First World economy in 30 years’.
Today Singaporeans are net savers with 80% of exports being ‘globalized’ manufactured goods.
I would like to now turn to the issue of strategy.
In his book, The End of Poverty, Jeffrey Sachs lists six categories of capital that he considers the extremely poor lack: human capital, business capital, infrastructure capital, natural capital, public and institutional capital, and knowledge capital.
Like those in Asia, African countries have all combinations of Professor Sachs’s list.
For example, in the category of human capital, while Africa in the first three development decades sent students abroad, at times without a strategy, Asia deliberately developed its human capital by sending groups of students to targeted faculties in the best universities of the West. The principal driving force for the enormous economic development of the Asian tigers was the deliberate move to implement massive education with a heavy infusion of science and technology.
Clearly strategy is critical if Africa intends to maintain the economic momentum.
Accordingly, in the process of building the capital stock of a country the type of foreign direct investment an economy attracts is important, and this function is determined by what one does domestically. Any such FDI inflows must primarily be attracted and domesticated by high levels of quality Domestic Direct Investment (DDI).
The resilience of an economy is a function of such DDI. The Asian financial crisis of 1997 demonstrated that FDI, and even an entire national economy, can be the target of massive currency outflows, and that resilience can only be guaranteed by a positive ratio of domestic direct investment to foreign direct investment.
The lesson here is that while aid can help ‘jump start’ capital accumulation in Africa, the only factor responsible for quality household savings and government investment for the nation’s stock of capital is the old-fashioned savings instrument whose signals target both households and governments.
Let me end here by saying that despite the technological and economic challenges faced by Africa, the last ten years have been a beacon of hope. The continent is poised for a dramatic change in its economic prospects.
Maybe the dawn has arrived, as we see African countries finally develop from debt-laden, aid-financed, market-unresponsive commodity exporters to market-driven, prosperous, dynamic and diversified economies.
If it was the Asian tiger in the 1980s and 1990s, it is definitely the African lion that is ready to roar in this new century.
I thank you for your attention.