T Manuel: UNDP-World Bank Retreat

9 February 2006

Thank you very much for inviting me to share with you at this very important
retreat on Collaboration in the Field. I want to express my sincere
appreciation to both Kemal Dervis and Gobind Nankani for the initiative –
Africa needs the strongest collaboration between the United Nations Development
Programme (UNDP) and the World Bank, in the field, and the strongest possible
co-operation with governments and other development partners, in pursuit of
common objectives.

Just 12 months ago, policy-makers across the continent were exceedingly
optimistic – 2005 was to be the watershed year in respect of development in
Africa and the mobilisation of financial resources in support thereof. Three
major international events would assure us of the centre-stage – the G8 Summit
at Gleneagles, the Millennium Plus 5 Summit in New York, and the grand finale
in the Doha Round was to be sealed at the World Trade Organisation (WTO) Hong
Kong Ministerial meeting. So confident were we, that in drafting the Commission
for Africa Report, we started with the words, “This year is of great
significance for Africa. In 2005 the world will review progress on a remarkable
commitment it made in 2000.” (1)

We described both the moment and its challenges very forcefully. We
wrote,

Growth and globalisation have brought higher living standards to billions of
men and women. Yet it is not a wealth, which everyone enjoys. In Africa
millions of people live each day in abject poverty and squalor. Children are
hungry, their bodies stunted and deformed by malnutrition. They cannot read or
write. They are needlessly ill. They have to drink dirty water. Those living in
Africa’s mushrooming shantytowns live by stinking rubbish tips and breathe
polluted air.

And then, the eyes of the world may be averted from their routine suffering,
but the eyes of history are upon us. In years to come, future generations will
look back, and wonder how could our world have known and failed to act? (2)

As we gather, we should confirm that 2005 failed to live up to our
expectations of it – indeed the world knew, and the world failed to act. So,
one of the key tasks of this retreat will be the reinvigoration of the global
conscience – which means asking whether we really do share common objectives,
and a clear understanding of how these should be met. Allied to that task, is a
second important task – the practical and humbling project of climbing down
from the comfort of our analytical chairs to forge real, tough, engaged
partnerships to get things done.

Whilst recognising the centrality of the Millennium Development Goals (MDGs)
as a global metric for development, we should pause to consider the adequacy
thereof.

Roy Culpeper argues,

The MDGs are not ambitious enough. The MDGs address the symptoms of
development failure whereas the real challenge is to tackle the underlying root
causes. The real challenge is not only to achieve the MDGs up to 2015, but to
go beyond them to the issues of transformation in the productive structure.
(3)

Culpeper’s views are not fundamentally different from those articulated by
Jim Wolfensohn and Francois Bourguignon, who write

First, development efforts should be rooted in a long-term, holistic vision
of a country’s needs, not just macroeconomic but also social and structural.
Second, it should focus on results rather than inputs. Third, it should be
based on country-owned strategies. And fourth, development actors should foster
partnerships to support the country-owned strategy. (4)

But what is the content of such “country-owned strategies”? The short answer
is that they are articulated in Poverty Reduction Strategy Papers (PRSPs). We
should all acknowledge that in terms of design, the PRSPs lay a strong basis
for both participation of a cross-section of a country, as well as policy
choice that can be exercised through the process. Well, do they? There are
several problems.

Last week we conferred with African statistical agencies in Cape Town. There
we confirmed that statistics on the continent are seriously deficient. Nineteen
of the 53 African States were unable to conduct even a population census in the
last 10 years, nearly twice as many as in the previous decade. We then agreed
that factual country-level data in a number of cases has been replaced by
estimates produced by international organisations on the basis of inferred
information. Since the PRSPs are designed to rest on a strong statistical base,
their status is weakened by such shifting foundations.

As an aside, the Human Development Index (HDI) is dependent on much the same
data sources. If the statistics are not available, how the HDI would be
computed, since it is premised on life expectancy, an educational index, and a
GDP index, adapted to PPP. My submission is that in the absence of reliable
data, the veracity of the HDI must surely be at least as precarious as that
which informs the PRSPs. The critical point is that this undermines
country-owned policymaking, and perpetuates mistrust and divergent perceptions
about both goals and achievements.

So, the capability of the state to collate statistics, and exercise policy
choice is vital, in each instance, for the production of country-owned
strategies. Failing which, we remain dependent on the behest of the
multilateral organisations to determine the content of our policies, and these
policies are unlikely to enjoy the support that they need. This contradiction
is worthy of the attention of this retreat.

Alongside the statistical problem, there is a strategic dilemma. To place a
country on a sustainable development path requires of its government to
frequently address itself to two divergent sets of “partners” – the managers of
Official Development Assistance (ODA), on the one hand; and foreign investors
on the other. Of course, these should be complementary sources of development,
but life is not so simple. In a recently published paper, Ernest Aryeetey,
describes these as the Soft and Hard Options respectively.

Of the Soft Option he writes,

The literature on aid to Africa suggests that there have been two main
constraints to an expansion in aid to the region. These are (a) doubts about
the effectiveness of aid to a number of countries, and (b) related to that,
“aid fatigue” which is reflected by the perception in donor countries that
Africa may have a bottomless pit for drawing aid. (5)

So, convincing donors of the competence of the state and the veracity of
policies selected is clearly much more difficult than at first glance.
Moreover, we are reminded that the notion of untied aid is profoundly naïve. In
a paper published by the Centre for Global Development entitled,” The Global
War on Terror and US Development Assistance: USAID allocation by country, 1998
to 2005”, the authors argue.

The United States (US) has always used foreign aid strategically. The
Marshall Plan, the first major US foreign aid programme, was motivated largely
by concerns over national security and the desire to prevent Soviet expansion
in Europe. During the Cold War, aid was allocated to anti-communist allies with
South Korea, South Vietnam and Zaire among the largest recipients. Aid has also
been used to promote regional security agendas, such as for Egypt and Israel in
support of the Camp David Accords. But, in recent years, aid may have taken a
broader strategic significance, as US policymakers drew links between security,
global poverty and weak states. (6)

Their research shows that there has been little increase to Africa over the
period. Interestingly, the Democratic Republic of the Congo (DRC) receives
$0.82 per capita, Ethiopia receives $2.11 per capita, Egypt $ 7.26 per capita,
and after significant cuts, Israel receives $ 71.88 per capita.

So is Africa insufficiently poor, and not enough of a security threat?
Perish the thought – are we so naïve as to believe that policymakers will be
moved by the sense that “the eyes of history are upon us”? Could we be so wrong
in expressing the hope that, at least the MDGs will be funded, or that the
partnership expressed in the Monterrey Consensus has a hope, or that, at least
New Partnership for Africa's Development (NEPAD) should be supported? Is the
quality of verbiage in the summit declarations the only recall that future
generations will have? What needs to be done before we will see properly
structured, long-term, efficient and coordinated budget support replacing the
chaotic bureaucratic clutter that we call ODA today?

But let’s return for a moment to what Aryeetey described as the “Hard
Option”. He writes,

While quite a lot has been written about how to attract foreign private
capital, with emphasis on country risk minimisation, the development of
infrastructure, appropriate macroeconomic policies with particular reference to
stable exchange rates etc. there are also opportunities for African states to
do a bit more beyond the standard recommendations. (7)

This is much easier said than done. One of the greatest weaknesses facing
too many countries on the continent is the very capacity of the state to design
and deliver on policies. There have to be huge changes in creating an
investment climate, in rolling out infrastructure, in developing sound policies
for human resource development, and the nurturing of an indigenous private
sector.

In his seminal book, A Better Globalization, Kemal Dervis writes

As hard as it is to achieve, the world urgently needs a combination of
substantial foreign aid in the form of grants, perhaps at least twice the
amount that is currently available, with a mechanism to ensure that these
resources are actually put to good use. There is really nothing that
automatically leads to the inclusion in the world economy of countries that
have been marginalized by history, geography, civil war, governance failures,
and/or foreign power struggles on their soil. Globalization does not “work” for
these countries.

The linkages that exist between them and growing parts of the world are
insufficient. Some optimists seem to think that global growth will eventually
“reach” these countries as it will reach the poorest parts of India and China.
Unfortunately there is nothing inevitable about this. To make an extreme
comparison: there is no reason for the growth of the world economy to benefit
the moon! China and India can use the apparatus of the nation-state to “create”
linkages between their own prosperous regions and their poor regions. Somalia
and Sierra Leone can do very little on their own to create equivalent linkages
between themselves and the dynamic parts of the world economy. (8)

Hard hitting truths. “There is really nothing that automatically leads to
the inclusion in the world economy of countries marginalized by history,
geography, civil war, governance failures and/or foreign power struggles on
their soil.”

Your mandate, as employees of the two multilateral bodies represented here
is to make the linkages. You can do so, if you collaborate in the field, and if
you understand better the nature of the challenges of building capable states
and facilitating the appropriate policy choices, and if you build strong,
lasting partnerships with the countries and organisations who are your
partners.

Professor Dani Rodrik published a paper very recently entitled, “Goodbye
Washington Consensus, Hello Washington Confusion?”

In many respects the paper is a gift to a retreat such as this. In it, he
writes:

Life used to be relatively simple for the peddlers of policy advice in the
tropics. Observing the endless list of policy follies to which poor nations had
succumbed, any well-trained and well-intentioned economist could feel justified
in uttering the obvious truths of the profession: get your macro-balances in
order, take the state out of business, give markets free rein. “Stabilise,
privatise and liberalise” became the mantra of a generation of technocrats who
cut their teeth in the developing world and of the political leaders they
counselled. (9)

He proceeds to evaluate the World Bank’s “Economic Growth in the 1990s:

“Learning from a Decade of Reform”. He writes of this publication there are
no confident assertions here of what works and what doesn’t – and no blueprints
for policy makers to adopt. The emphasis is on the need for humility, for
policy diversity, for selective and modest reforms, and for experimentation.
“The central message of this volume, Gobind Nankani, the World Bank
vice-president who oversaw the effort writes in the preface of the book, “is
that there is no unique universal set of rules… [W]e need to get away from the
formulae and the search for the elusive ‘best practices’. (10)

Further, he writes

Telling poor countries in Africa or Latin America that they have to set
their sights on the best-practice institutions of the US or Sweden is like
telling them the only way to develop is to become developed – hardly useful
policy advice! (11)

Your work during this retreat and beyond has just become so much more
challenging, and so much more interesting. I have no doubt that the two giants
who are leading this venture – Kemal and Gobind – are in the vanguard of
thinking deeply about these changes. You will have to partner with them,
experiment with new approaches and constantly remind yourselves that your task
is to empower policy-makers with the information that allows them to take the
decisions. It is the least that you should offer in recognition that the
policymakers take the risk of governance; they remain accountable to their
electorate.

But first, you shall have to answer what it is that we Africans should ask
of governments of the North and from the Bretton Woods Institutions, and then
what you, in the multilateral agencies should ask of us.

1. Commission for Africa Report, p1.
2. Commission for Africa Report, p22.
3. “Helping the Poor?” The IMF and Low Income Countries, Fondad, p232.
4. Development and Poverty Reduction, Looking Back, Looking Ahead, World Bank
p10/11.
5. New Finance for African Development, Ernest Aryeetey, in “Helping the Poor?”
supra, p219.
6. The Global War on Terror and US Development assistance: USAID allocation by
country, 1998 – 2005 by Todd Moss, David Roodman, and Scott Standly. Centre for
Global Development, July 2005.
7. New Finance for African Development, Ernest Aryeetey, in “Helping the Poor?”
supra, p221.
8. A Better Globalization, Kemal Dervis with Ceren Ozer, Centre for Global
Development, 2005, p144.
9. Goodbye Washington Consensus, Hello Washington Confusion? Dani Rodrik,
January 2006 p1.
10. Goodbye Washington Consensus, Hello Washington Confusion? Dani Rodrik,
January 2006, p3.
11, Goodbye Washington Consensus, Hello Washington Confusion? Dani Rodrik,
January 2006, p13.

Issued by: Ministry of Finance
9 February 2006
Source: National Treasury (http://www.treasury.gov.za)