8:54 AM Jan 26, 1996

AFRICA: STRENGTHENED NATIONAL POLICIES ADVOCATED

Geneva 25 Jan (Chakravarthi Raghavan) -- African response to the critical situation facing the continent demands fundamental changes in policy and perspective, and the central feature of the response should be a strengthening of national policies for increased international competitiveness and improved attractiveness to Foreign Direct Investment, according to a study done for UNCTAD by Prof. H.M.A. Onitiri.

An African economist, Onitiri was Director of the Nigerian Institute of Social and Economic Research and project manager of the UNDP/OAU project on "the Implementation of the Lagos Plan of Action". The study was presented at an UNCTAD seminar last week on Regional Economic Arrangements and their relationships with the Multilateral Trading System.

The combination of increasing regionalism, globalization of world production, rapid changes in technology and continued liberalization of world trade, Prof Onitiri says, has created a critical situation for Africa and demands fundamental changes in policy and perspectives.

The expansion of large economic spaces, in particular, poses three major concerns for African countries: concerns about markets for traditional and new exports, concerns about their capacity to attract foreign investment, and concerns about possible sharp reductions in exchange levels of foreign aid.

Because of Africa's heavy dependence on the EU market, and the special relationship under the Lome Convention, these concerns are felt most specially in relations with the EU.

However, relations with other blocs also pose some concern, particularly in the context of Africa's current plans to diversify the structure and geographical pattern of its foreign trade.

These concerns, Onitiri says, have been made graver by the failure of African countries to tackle successfully some of the major problems impeding rapid growth and structural transformation -- failures manifested in continued slow growth of GDP and uncertainties about the future, little progress in manufacturing industry, relatively static trade structure and limited progress in diversification, and declining shares in world trade.

All this has retarded Africa's efforts to participate effectively in growing globalization of world production and share significantly in the recent upsurge in flow of private capital to developing countries.

With little progress in promoting subregional and regional integration, substantial losses and few gains expected from the implementation of the Uruguay Round and poorer prospects for ODA receipts in future years, the task of development and structural transformation in Africa promises to be even more difficult.

Africa's policy responses, the Nigerian economist, says must be conceived in the context of the current trend towards globalization of world production. Such responses would be easier to pursue to the extent African countries are able to participate effectively in this globalization process.

The new situation calls for measures for rapid improvement of productivity, backed by a massive expansion of infrastructure and major improvements in the facilities for human resource development.

"An intensification of Africa's efforts on regional and subregional economic integration could make a substantial contribution to these responses if it focused on the rapid liberalization of intra-African trade and factor movements, the rationalization of integration institutions, coordinated improvements in investment climate,, and more intensive cooperation with other developing regions which have succeeded in building more competitive economies."

A central feature of Africa's responses must be the strengthening of national policies for increased international competitiveness and improved attractiveness to FDI. Other responses should develop specific support for a wide range of domestic industries including textiles, footwear, food products, plastics etc, which have shown some promise in developing competitiveness in domestic and foreign markets.

Such support should target specially measures to assist local industries to gain a foothold, and explore new trading opportunities on the strength of confirmed international competitiveness and that even in the expanding regional blocs in Europe, Americas and the APEC.

The relations with existing blocs and trading areas also need to be re-examined and restructured in various forms, in the light of current developments, in particular, to take advantage of opportunities in the large and strengthening economic integration systems.

Prof Onitiri also calls for strengthening Africa's own sub-regional and regional integration schemes so as to achieve, as planned, the goal of a continental community by year 2000.

In the final analysis, he says, Africa must respond to the expansion of open spaces by making the vast African space a single market for goods, services and factors of production, and establish on a continental scale, a framework for the development, mobilization and utilization of the human and material resources of Africa to achieve a self-reliant development.

In this context, he says, a new arrangement should be conceived to replace the existing Lome convention when it expires. This new arrangement should emphasize much more development of infrastructure relevant to improved productivity, the promotion of industry linkages between Africa and the EU, human resources development and promotion of foreign investment.

More formal links with Latin American and Asian groupings should also be explored.

Finally, Africans should insist that further multilateral negotiations for liberalization and strengthening of the rule based system should include: a further round of progressive liberalization of agricultural and food industry products; establishing a relationship between immigration policies and international trade; trade and competition policy, including rules on export financing and restrictive business practices; and international between trade policies and development policies, including financial flows, debt relief and stabilisation of commodity markets.