Global Development: Views from the Center
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June 15, 2007
Has the G-8 Got It Right At Last? The Communique on Africa from Heiligendamm
Posted by Vijaya Ramachandran at 11:10 AM
This time it is different. The G-8's statement on African development is focused largely on an often-neglected area--the private sector. Previous G-8 statements have focused mostly on aid to Africa and have immediately generated a large volume of commentary on whether or not funding levels from rich countries are adequate, reflect prior commitments, etc. This time around, the statement has a refreshing new tone--one that will hopefully change the course of discussion on the development dialogue between Africa and the rest of the world.
In particular, the G-8 statement focuses on some key issues for private sector development, including the need to develop infrastructure, reduce the regulatory burden, improve the functioning of financial markets, rule of law and enforcement of property rights. Research based on enterprise survey data shows that these are the very areas in need of real reform (see my CGD working paper with Benn Eifert and Alan Gelb on the business environment in Africa (pdf). The statement makes some crucial points--that it will support national and regional efforts, endorse and support the efforts of the Africa Peer Review Mechanism, and facilitate the transfer of appropriate technology from its member countries to Africa. Rather than attempt to drive the African agenda, the focus is on helping local, national and regional efforts in several areas, including the Dar-es-Salaam based Investment Climate Facility, which facilitates dialogue between government and the private sector in many African countries.
The message from the G-8 is clear and not unlike that of the often-heard slogan from Home Depot--"You can do it. We can help."
What is left out of the G-8 statement? It could, for example, urge more caution about how aid is used. A recent paper by Nancy Birdsall points to the difficulties of institutional development in poor countries, including those in Africa (see Do No Harm: Aid, Weak Institutions, and the Missing Middle in Africa). Birdsall argues that high and unpredictable aid flows can in fact make life harder for Africa's small and medium-sized businesses by, for example, inflating wages and making governments less reliant on domestic revenue--and hence less accountable to taxpayers. She urges that donors systematically monitor such impacts in aid-dependent countries in order to ensure that the private sector is not impeded by aid flows. It is worthwhile to think about this message in the context of the emphasis on the private sector.
Overall, we must encourage the new dialogue on African growth and its accompanying focus on the private sector. We must also understand how to engage effectively with the private sector itself--this includes small- and medium-sized firms, large corporations and foreign multinationals that invest in the region. Development in Africa is not just about levels of aid but how that aid can be used most effectively to generate growth that is sustainable in the long term. The G-8 statement is a good start.
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Comments
The G8 is an old colonial order hangover, like the board of governors of the old Pretoria Gymkhana Club in apartheid South Afrca circa 1980. With the "honorable white" Japanese keeping his mouth shut and wallet open.
Asia from the Levant to the Pacific is now a permanant goods and capital exporting region that is funding both the EU and the US with it savings. From implementing indegenous policies that replaced those previuosly imposed on it by the "Washington Consensus" which were/are so harmful and retrograde.
Look down 5-10 ywar and wonder why the status quo held on so long.
Posted by: Mohamed Cassamn at June 18, 2007 11:13 PM
This is a refreshing sign that western governments are realizing the significant limitations to (and unintended harm) from the charity model of foreign aid. It is also encouraging to see that the focus is not on making financial commitments but on finding the right strategies. Nuturing the private sector is critical to development in all sectors. Sometimes it takes low cost policy changes and sometimes it requires major investment in infrastructure.
Posted by: Jeffrey Barnes at June 19, 2007 10:12 AM
No, the G8 hasn't gotten it right. I'm no great fan of the current aid structure, which is a model that's long overdue for a complete overhaul.
But, faced with the HIV/AIDS pandemic, how exactly are small businesses going to stem the massive sweep of death on the continent? Will the private sector provide the over 1 million doctors, nurses, and healthcare workers needed on the continent? Will the private sector be providing the treatment or prevention programs? The idea that the private sector can replace the public sector is one that's been devastating on the continent of Africa--just ask the Kenyan health ministry these days.
On the list of ideas we don't need more of has to be this kind of free market fundamentalism.
Posted by: Matthew at June 19, 2007 12:01 PM
G 8's Statement on African Development has really touched me, looking critically on the key issues of Private Sector Development which will be focusing on support of National and Regional efforts. This should be harnessed with Nancy Birdsall's views, that Donors should take more responsibility for reporting and monitoring aggregate inflows of aid to recipient countries; again Donors need to ensure that increases in aid inflows do not discourage restructuring of tax systems to make them less reliant on the trade sector. I have got a soft spot on the Private Sector which organization acts as a cornerstone on economic growth. The reason why donors should focus on this sector is because the organizational culture is clearly defined hence highest productivity due to self reliance and appropriate reporting, including proper monitoring and evaluation and these impact on life of communities in Africa. My advise therefore is that G8 should please nurture NEPAD this will lead to the goal achievement.
Prepared by: Francisca 'Mapitso Matsoha
Posted by: Francisca 'Mapitso Matsoha at June 20, 2007 05:50 AM