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Implications of Doha, Monterrey and WSSD for Africa

Implications of Doha, Monterrey and WSSD for Africa. Presentation to the Committee of Experts African Ministers of Finance, Planning and Economic Development October 16, 2002. Developing countries have become major players in world trade. US$ billion. Percent.

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Implications of Doha, Monterrey and WSSD for Africa

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  1. Implications of Doha, Monterrey and WSSD for Africa Presentation to the Committee of Experts African Ministers of Finance, Planning and Economic Development October 16, 2002

  2. Developing countries have become major players in world trade... US$ billion Percent Developing countries’ share (lhs) Source:WITS, World Bank

  3. —but African countries remain dependent on sectors Middle-income Sub-Saharan Africa Low-income Note: In % of total non-energy merchandise exports for each country group.

  4. —that face the highest protection— Note: Average MFN tariffs (un-weighted, in %)

  5. —which is most harmful to the poorest in these countries Effective tariff faced by each group (in %, 1997-98) Non-poor (>$2/day) Poor (<$2/day)

  6. 40 35 30 25 20 15 10 5 0 1980-85 1986-90 1991-95 1996-98 Africa has liberalized trade significantly Average Nominal Unweighted Tariff (%) 1980-1998 45 Source: Global Economic Prospects

  7. 8 Merchandise export growth, average 1990-98 7 GDP per capita growth, average 1990-98 6 5 4 3 2 1 0 -1 Economic Performance is weak (Growth rates, % p.a.) Middle Income Least Developed Least Developed Countries Countries excluding countries in conflict [26 countries] [16 countries] Source: Global Economic Prospects

  8. Doha Agenda • Launched negotiations in 7 specific areas to conclude by Jan 1 2005. • Agriculture: reduce all farm export subsidies and reduce trade-distorting domestic support • Services: further liberalize all categories of services • Industrial goods: further reduce tariff peaks, tariff escalation as well as NTBs • Regional trade agreements: clarify and improve procedures under WTO rules applying to RTAs • Assure duty-free, quota-free access for LDCs

  9. Stakes for Africa are high • Welfare gains from eliminating barriers are high: US$250-620b annually, up to 1/3 accruing to African countries—more than aid flows. • Growth from lower protection could lower poverty counts 13% by 2015---help in achieving MDG’s.

  10. Policy Implications for Africa • Many constraints are country and sector specific. But research so far indicates that: • Trade facilitation and transport have become important constraints • Gains from trade highly dependent on preferential market access in rich countries

  11. 8,000 7,000 6,000 5,000 US dollars 4,000 3,000 2,000 1,000 0 Nouakchott, Hong Kong Mauritania Source: Mauritania IF Study Example: Mauritania Cost of Transporting 40 Foot Container between U.S. and Mauritania

  12. Finance also critical for development • Cost of achieving the MDG targets ---is $50 billion of additional development assistance per year from 2001—2015. • For the 30 African countries judged to be in a position to use external assistance effectively, it is estimated that an increase of $25 billion in ODA from the current $13 billion to $38 billion would be required to reach the MDGs. • Only the North African countries on target to reach MDGs • SSA not on target to reach poverty goals—though some countries are poised on social goals.

  13. But aid flows down in all except 4 DAC countries

  14. Aid remains well below 0.7% target

  15. Private Finance not flowing to Africa

  16. BOND PRICES HAVE BEEN VOLATILE... • 200 • 190 • 180 • 170 • 160 • 150 • 140 • 130 • 120 • 110 • Jul-97 • Jul-98 • Jul-99 • Oct-97 • Oct-98 • Oct-99 • Jan-97 • Apr-97 • Jan-98 • Apr-98 • Jan-99 • Apr-99 • Jan-00 • Apr-00 Source: JP Morgan

  17. …AND CONTAGION IS EVIDENT -210 -190 -170 -150 • Bond Prices • 130 -10 • 90 • Jul-97 • Jul-98 • Jan-97 • Jan-98 • Mar-97 • Mar-98 • Sep-97 • Sep-98 • Nov-97 • Nov-98 • May-97 • May-98 • América Latina • Asia • Africa • Europa Source: JP Morgan

  18. ..AND DEBT REMAINS A DRAG • Relief approved for 26 (of 38) countries • 6 have reached completion points • 20 have reached decision point, and are receiving interim relief • Total relief US$25b NPV, or US$41b nominal • Average NPV debt cut by 2/3 • Debt service indicators down by half • Social service spending rising, from <2x debt service to >4x

  19. Debt stock reduction in NPV of debt(US$ billion at decision point)

  20. Debt service reduction & social spending(percent of fiscal revenue)

  21. MONTERREY CONSENSUS • Creates architecture of mutual responsibility • Developing countries take primary responsibility for implementing policies, improving governance and strengthening institutional capacity • Partners support these efforts through better harmonized and more comprehensive support through aid, market access, debt relief and technical assistance

  22. Yet no long-term debt sustainability • Global slowdown, falling commodity prices raise concerns about deterioration in HIPC external debt indicators • NPV debt/export ratios higher in 2001 than decision point projections for 15 of 23; larger deterioration (>15%) in 11 • No pattern or consensus on whether export fall or debt rise is to blame, domestic policy or shocks, temporary or permanent impact

  23. Implications for African Debt • Encourage more realistic projections: high/low scenarios • “Topping up” of completion point relief in exceptional cases based on clear evidence of changed exogenous conditions • Encourage better debt management, sound policy programming through PRSPs • Improve export prospects

  24. Implications for Africa • Financing for development initiatives are only one aspect of poverty reduction efforts • Potential gains from faster export growth and improved market access dwarf HIPC • Even with access, other issues matter: standards, domestic conditions, infrastructure

  25. Need to Strengthen • Financing to countries that have no access to private capital markets • Lower the cost of access to private capital markets for those who have access • Promote Innovative financing of investments • Venture capital funds • Franchising

  26. urgency… poverty is increasing

  27. Sustainable development requires more • WSSD reaffirmed the agreements reached in Doha and Monterrey • Stresses the importance of the quality of growth • Clarified that poverty is at the heart of LR sustainable development • Reconfirmed the MDGs as the pillar for sustainability • Identified agriculture and water as key sectors • Called for elimination of OECD agric subsidies

  28. Specific Targets • Halve people without sanitation by 2015 • Reduce by 25% HIV prevalence by 2005 • Restore collapsed fish stocks by 2015 • Food strategies for Africa to be developed by 2015 • Energy services to 35% of African households by 2012

  29. WSSD identified Africa and NEPAD for special attention and support by the international community to better focus the development needs of Africa

  30. Thank you!

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