This is an edited version of the formal response made at last night's colloquium by Mr Peter Sutherland SC, chairman and managing director of Goldman Sachs International. A former EU Commissioner, he was director general of GATT and became the first director general of its successor, the World Trade Organisation. He recently became chairman of the Overseas Development Council
THE state of Africa and particularly subSaharan Africa, demands urgent and effective action from the world community.
Africa is a striking case of relative failure at a time when the global economic environment is uniquely benevolent. The period of colonialism in Africa and its aftermath has left a legacy of structural problems that partially explain current difficulties. This legacy has been adverted to by President Mugabe in his address.
However, there is little point in continuing to focus exclusively on past imperialist wrongs, nor has he. This can sometimes be a distraction from the need to develop policies for today. We need to focus on the successes and failures of the international community but also of the African states themselves. This has to be two way traffic it would be simplistic and incorrect to suggest otherwise.
Also it needs to be said clearly and unambiguously that economic liberalisation, democracy and human rights go hand in hand. Even leaving aside the fact that assistance is more likely to be forthcoming to countries that demonstrate good government in stamping out corruption and complying with fundamental human rights one must emphasise that such societies are also ultimately more likely to succeed economically. Concern for individual rights can and must exist in harmony with a sense of community.
The statist closed economy model previously favoured by some developing countries is now widely discredited in intellectual terms if not always in practice. The remarkable potential of opening an economy rather than protecting it has been demonstrated in various former communist states.
Although tile benefits of a rapidly globalising world economy, have been quite widespread, noticeably in east Asia, central and eastern Europe and Latin America, we cannot ignore that other regions, particularly sub Saharan Africa, have experienced unprecedented decline.
While per capita GDP ha grown by more than 5 per cent annum in many emerging economies in Asia and Latin America, in sub Saharan Africa it declined by over 1 per cent a year throughout the 1980s, as its population increased, and has recorded only modest rates of growth in recent years.
In 1995 sub Saharan Africa attracted just 3 per cent of the flow of foreign direct investment to the developing world, compared with 20 per cent in Latin America and the Caribbean and 40 per cent in east Asia and the Pacific. Moreover, most of the 476 countries of sub Saharan Africa find themselves grouped at the bottom of the United Nations Human Development Index, which means not only income but also education, longevity and living standards.
Following the end of the ideological conflict between East and West, there has been a disturbing tendency to look with indifference on the widening gap between rich and poor. Redistribution or development programmes are openly condemned by some as inherently ineffective, benefiting only a small proportion of the populations of less developed countries and never the poorest.
This attitude is morally and pragmatically wrong. Developed countries have a shared responsibility for the wellbeing of the poor on this planet.
Throughout my entire career I have been deeply committed to promoting the market system. Yet it seems obvious that market forces alone are insufficient to solve the problems of world poverty and inequality. At present the poorest nations of the world, particularly in Africa, are not yet in a position to benefit fully from the increase in trade and international capital flows.
Foreign aid is still necessary to create an enabling environment for development through investment infrastructure and human capital, principally education, nutrition and health. Only when an environment that is attractive to foreign direct investment has been created can we expect inflows of private capital to begin to reduce the need for aid.
ALTHOUGH donor countries have frequently and accurately attributed some blame for the failure of past development programmes on the poor politics and policies of African governments or the lack of local ownership of reforms, in truth some of the responsibility lies also with the international community. Adjustment, programmes have sometimes overloaded Africa's weak institutional systems with too many reforms in an inappropriate sequence.
Adjustment strategies cannot be detached from the need to develop local human resources and economic institutions and will increase productivity and improve - the capacity of African governments to design and implement their own poverty eradicating - growth policies.
Certainly to achieve this African countries require greater political stability and effective government capable of running a prudent fiscal policy and of prioritising public expenditure to develop human resources and infrastructure. Sustainable development will always be elusive in Africa if the civic structure in African countries is not organised so that governments are held accountable for their actions.
Driven by the realisation that it is beneficial for individual countries to cooperate, and pool their resources in a rapidly globalising world economy, there has been a sharp increase in the number of regional trade agreements around the world, notably in Europe, Latin America, North America and the Asia Pacific region. Besides enhancing intraregional trade and economic cooperation, these agreements have helped considerably to build greater political stability and consolidate peace.
Regrettably, however, relatively little in terms of regional integration has been achieved in sub Saharan Africa. Indeed, Africa is the only region where regional trade has declined, from 10 per cent of the total in the 1920s to about 6 per cent today.
Although it is ultimately up to African governments to enhance integration in the region, external financing can contribute significantly to improving trans regional infrastructure and liberalising trade and financial restrictions. However, as Africa critics pointed out, development programmes funded by the Bretton Woods institutions and other donors have tended to focus mainly on individual countries and, therefore, have neglected the development of regional trade and infrastructure that would benefit greatly Africa's many land locked countries.
According to Jeffrey Sachs, director of the Harvard Institute of International Development, excluding humanitarian aid, foreign assistance has made little difference in Africa and has sometimes even delayed reforms. The failure or modest success of development programmes, although not the only cause, has contributed to the recent decline in Western aid to Africa.
However, disillusionment should not be used, as it is by some, to justify a reduction in foreign aid. Instead, Sachs argues that foreign aid should be used more selectively, limited in time and, most importantly, made part of an overall market driven growth strategy. A broader strategy would produce more substantial improvements and would reduce considerably Africa's dependency on foreign aid.
HOWEVER, donor countries must realise that such a strategy must begin with the deep reduction or even cancellation of foreign debt to give bankrupt African states the chance of a fresh start. Debt relief has been an important part of successful development strategies in other regions in the past and this opportunity should not be denied African states. Although progress with the IMF World Bank initiative to address the problem of heavily indebted countries has been slow, there have been some encouraging signs from donor countries that they are prepared to finance debt relief operations.
Finally, there is a need to increase Africa's access to developed country markets through the greater liberalisation of agriculture and textiles trade. Besides being a cheap form of support, it would help considerably to integrate Africa into the world economy. Instead, developed countries have used their economic dominance effectively to liberalise trade in manufactured goods and services in which they have a comparative advantage, but have been reluctant to reduce barriers to trade in agriculture and textiles, sectors in which African countries can offer competitive products at competitive prices.
According to the World Development Report by the World Bank (1986), for sugar and beef alone, the loss of revenue to developing countries due to protection in the European Union, the USA and Japan was estimated to be the equivalent of about half of total international development aid.
Special arrangements such as the Lome Convention under which the EU grants Africa, Caribbean and Pacific (ACP) countries development aid and duty free access to EU markets could contribute positively to the integration of Africa into the world economy.
However, so far the Lome Convention has failed in its objectives of eradicating poverty, promoting social and economic development and diversifying African exports. Both aid and trade provisions have restricted African countries to the export of certain primary commodities, while the EU's Common Agricultural Policy has continued to deny preferential treatment to certain agricultural goods.
Paradoxically, too, while the strong agricultural lobby in rich countries has managed to maintain a high level of subsidies on agricultural products, governments in poor countries have tended to promote agricultural imports either through import subsidies or by taxing domestic production and subsidising the food consumption of the urban population. As a result, in a continent where food accounts for a large share of total household consumption, per capita food production actually fell by 12 per cent, between 1961 and 1995.
IN THE future, efforts to increase food productivity and diversify agricultural exports should avoid the error of replacing the African model of smallholder farmers which are generally efficient producers with large scale capitalist farms through the concentration of land ownership.
It is believed that agricultural development based on small holder producers can initiate rapid growth in other sectors. Rising agricultural incomes will stimulate demand for manufactured goods and services and the establishment of non agricultural activities, while specialisation of smallholder production and improved marketing and distribution will stimulate greater inter regional trade.
However, this requires African governments to remove subsidies on food imports and taxes on agricultural exports, and lift price controls on food. In addition, currencies should be depreciated to prevent overvalued exchange rates from becoming what is in effect a subsidy for farm inputs and a handicap for exports.
Now that the end of the Cold War has taken the emphasis off the security rationale for foreign aid, greater attention can be focused on bringing about long term, poverty eradication growth in Africa. Although complicated by the recent decline in foreign aid from the developed world, it might be said that there are some reasons to be optimistic about the future.
Most importantly, there is considerable agreement among African governments, international agencies and donor countries concerning the underpinnings of a successful development strategy, namely macro economic stability, market oriented economic policies, integration into the world economy, investment in human capital and infrastructure, stable and efficient government and sustainable environmental policies.
In addition, some progress has been made in terms of political stability in the region. This will help to increase the capacity of African governments to design and implement their own development strategies. Finally, there is hope, following the end of apartheid, that South Africa will emerge from isolation to provide leadership in the region and promote integration.