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Financing Africa’s Rural Infrastructure: A New Approach. Michael R. Taylor School of Public Policy University of Maryland March 17, 2006. Rural Infrastructure and Trade. Trade policy is important – at national, regional and international levels
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Financing Africa’s Rural Infrastructure: A New Approach Michael R. Taylor School of Public Policy University of Maryland March 17, 2006
Rural Infrastructure and Trade • Trade policy is important – at national, regional and international levels • Technical assistance for farmers and agribusiness can be valuable • BUT neither will pay off for Africa’s rural poor without the physical infrastructure needed to produce goods and access markets • Aid for trade initiatives should emphasize infrastructure
Public Investment in Infrastructure • Substantial “public goods” investment is needed for irrigation, electrification, transport, and market infrastructure • Public investment is justified to foster private investment and entrepreneurship • Maputo Declaration reflects commitment of African leaders to agriculture-led growth • External public capital remains essential
Infrastructure Financing Gap • CAADP calls for public and private investment of $25 billion per for 10 years • Africa’s poorest countries have little capacity to mobilize local resources for infrastructure projects • Private investors have little incentive to invest in infrastructure, especially absent public goods • Donors doing little now to fill the infrastructure financing gap
The Gap in Donor Financing of Infrastructure • World Bank is the largest external source of infrastructure investment, but total 2005 commitments to Africa were only $3.9 billion • Of which, less than $1 billion related to rural infrastructure • USAID generally doesn’t “do” infrastructure; MCA promising but still modest scale • US and other OECD donors generally still give priority to health, education and other social sector spending
The Donor Effectiveness Gap Much external assistance for African agriculture and rural development is: • Donor driven • Fragmented • Inefficient • Undermining of local ownership and accountability
One Solution: A New Africa-Led Financing Facility An African Rural Infrastructure Facility, housed at the African Development Bank, could: • Attract and pool significant new donor resources • Build African capacity to design and manage infrastructure projects • Focus on capital-intensive physical and market infrastructure • Be the primary pan-Africa vehicle for prioritizing, coordinating and managing external public investment
To Be Successful…. An African Rural Infrastructure Facility should: • Respond to local assessments of need and be accountable to Africans • Be market-oriented and collaborative with the private sector • Be transparent and provide leadership in fighting corruption • Work closely with the World Bank and other international financial institutions • Have a clear compact with donors
Conclusion • Doha “Development Round” is hollow without infrastructure • More of the same on development assistance is not the answer • Africa’s development rests on what Africans do • An Africa-Led finance facility can give Africans the means to do it