7:46 AM Feb 20, 1996

AFRICA: MARGINALIZED, NEEDS INTEGRATION INTO WORLD ECONOMY

Geneva 19 Feb (Chakravarthi Raghavan) -- The risk of further marginalisation looms large before Africa, already bypassed by the positive effects of the globalization process and there is need for urgent actions to rapidly integrate Africa into the mainstream of the world economy, African Trade Ministers have said at their preparatory meeting for UNCTAD-IX at Addis Ababa (14-16 February).

The African views have been set out in a Declaration adopted by the African Ministers for Trade, Regional Cooperation, Integration and Tourism, at their preparatory meeting for UNCTAD-IX in Addis Ababa .

The Ministers said that among the most pressing development challenges facing the continent, were eradication of poverty, human resource development, and the transformation of the productive structures of their economies, including the horizontal and vertical diversification of the commodity sector.

Nowhere was the intensity of human deprivation more acutely felt than in the African region: many of the countries continue to be characterized by widespread poverty, high levels of unemployment and under-employment, lack of access to basic necessities of life, such as education, health services and clean water. Africa also continues to be affected by major diseases and perennial armed conflict and civil strife. Infrastructure, institutional and human resource development remained weak; terms of trade were not showing significant improvement; Africa's share in world trade has been declining, while commodity export earnings remain unstable; the debt burden continues to be an obstacle to economic recovery.

"As a result of this economic predicament, the problem of poverty is widespread and is sometimes worsened by conditionalities accompanying adjustment measures," the Ministers declared.

Most African countries continue to be highly dependent, for both employment and foreign exchange earnings, on production and export of a few commodities and the Ministers "are highly concerned by the increasing marginalisation of Africa on world commodity markets and by its failure to harness the growth potential of its rich commodity resources," the Declaration said.

African countries had demonstrated their determination to overcome problems of under-development and many of them had undertaken far-reaching political and economic reforms in the context of structural adjustment programs, and had implemented significant devaluation of their currencies.

Although some countries have achieved satisfactory growth rates, progress had been insufficient, economic growth rates remained far too low in many countries, often not exceeding population growth rates. The overall socio-economic situation of the least developed countries in Africa continue to deteriorate.

The accelerating pace of liberalisation and globalization in the world economy had increased opportunities for growth and development, but has also added new complexities and risks in managing global inter-dependence.

"Thus far, Africa has been largely bypassed by the positive effects of the globalization process and the risk of further marginalization of this continent looms large. Therefore a major challenge for the ninth session of UNCTAD is to take urgent actions which would rapidly integrate Africa in the mainstream of world economy."

The Ministers that while liberalization of economic policies, the globalization of production and markets and rapid technological advances had set the stage for enhanced international cooperation, "there is still a lack of coherence among different areas of economic policies at the global level which might reduce the positive effects of globalization and liberalization."

The commitments to liberalize and harmonize global trade practices had not been matched by similar commitments in other areas of global economic interest. Instability of exchange rates, interest rates and commodity markets continue to affect developing countries adversely.

The Ministers called on multilateral financial institutions, notably the IMF, to oversee the coordination of macro-economic policies and regulation of the monetary and financial markets of industrialized countries in order to reduce exchange and interest rate instability, while also promoting growth and employment.

The Ministerial Declaration added: "There is a crucial need for coordination in global economic policy with the full participation of developing countries. UNCTAD, which has the mandate and accumulated expertise in treatment of development and inter-related issues, would provide valuable inputs in this area.

"In this context, the analysis of global interdependence, in particular the global impact of macro-economic policies and of evolution of the world trade, monetary and financial system, should highlight the development dimension of interdependence. The Trade and Development Report remains the basis of discussion on interdependence."

On resource flows and debt, the Ministers expressed their concern at the recent declining trend, in real terms, of ODA and urged donor countries to increase ODA in accordance with their UN commitments and agreed ODA targets of 0.7% of GNP and for improved aid modalities. They also called for adequate funding of multilateral financial institutions and expressed concern over shortfalls in IDA-10 replenishment as well as seventh replenishment of the African Development Fund (ADF).

With Africa's debt at end of 1994 totalling $317 billion or an average 231.3% of Africa's export of goods and services and 71.6% of GDP, the external debt problem of African countries is far from being resolved, the Ministers said and urged actions for a durable solution to the debt problem. They expressed their concern at the slow implementation of the Naples Terms by the Paris Club (of official creditors) and urged the revision of eligibility criteria to include among beneficiaries all low-income African countries with debt-servicing difficulties.

The Ministers also called for priority attention to the problem of Africa's multilateral debt and said reducing this burden must be based on additional resources and not diverting already scarce development assistance. The Bretton Woods Institutions were "encouraged" to expedite ongoing consideration of ways to address this issue.

On African debt, the Ministers called for improved terms by:

* an 80% reduction in total non-concessional debt of all African countries, including accumulated arrears,

* cancellation of concessional debt rescheduled in the Paris Club,

* innovative measures to reduce multilateral debt,including buybacks with proceeds from sale of part of the IMF gold reserves, without prejudice to gold producing countries, and the commercial debt through improved Brady plan mechanisms and the enhanced IDA Debt reduction facility.

On Environment and Sustainable Development, the African Ministers stressed that eradication of poverty and economic and social development remained the foremost priority for Africa. Consideration should be given to provide African countries with appropriate levels of resources and providing on favourable terms environmentally sound technology. International cooperation, partnership and transparency should be the basis of a comprehensive approach to sustainable development.

The Addis Ababa declaration reaffirmed African commitment for regional economic cooperation and integration and establishment of the African Economic Community envisaged in the Abuja Treaty. They also called for enhanced South-South cooperation and for early conclusion in this regard of the on-going second round of Global System of Trade Preferences (GSTP) among developing countries.

The Ministers called for an intensified policy commitment by the international community to help the LDCs reverse the decline in their economic and social conditions. They also reaffirmed the continuing importance of the UN's New Agenda for Development of Africa.

On trade, African Ministers said implementation of the Uruguay Round Agreements would impose significant transitional difficulties and costs on African countries, particularly the LDCs and net food-importing countries.

These would arise among others from erosion of trade preferences enjoyed under the Lome Convention, the GSP and other preferential arrangements, high import prices for foodstuffs (under agricultural reform policies) and other products, especially pharmaceuticals and agro-chemicals arising from the implementation of TRIPs and the higher costs of notification requirements and other obligations of the WTO.

Referring to the higher import costs on food for net food-importing developing countries (NFICs), the Ministers said it was urgent to make operational the Marrakesh decision in this area. The relevant organizations should clarify quickly the nature of assistance (food aid, financial assistance, export credits, technical assistance), adequacy of existing facilities and terms of access to them; variables to be monitored (e.g. food import price levels); trigger mechanisms for assistance (adequacy of food supplies, changes in import price levels).

UNCTAD, the Ministers said, should closely follow implementation of the decisions and assist the NFICs in developing strategies to deal with adverse effects on them of the agriculture reform process. There was also a need to define a mechanism to monitor prices of basic food products, notably wheat and milk, with a view to stabilizing their prices.

The African Ministers also called for speedy implementation of the Marrakesh decisions favouring LDCs and the special provisions relating to LDCs in the various agreements and asked UNCTAD to formulate proposals to translate the decisions into concrete actions.

Africa would also need international adjustment assistance including trade adjustment assistance, BOP assistance, technical and human resource development for capacity building in trade-policy formulation, trade management and effective participation in WTO activities. Since such participation would be an important determinant of their further integration into the international trading system and appropriate technical assistance should be extended to both members and non-members of the WTO.

UNCTAD should also closely followup the implementation of the Uruguay Round Agreements and provide policy-oriented recommendations from a development perspective including:

* identification and assessment of new trading opportunities,

* analysis of implementing legislations and subsequent trade policies and practices in major trading countries and their impact on trade opportunities for developing countries,

* analysis of problems of implementation of UR Agreements in developing countries, and

* analysis of how developing countries could utilize various transitional periods available to them and how they could be assisted to comply with their multilateral obligations.

UNCTAD's its technical cooperation programmes should be refocused to raise substantially the institutional capacities of weaker trading partners to participate effectively in the international trading system and the WTO negotiating process.

The African Ministers welcomed the ongoing cooperation between UNCTAD and WIPO for considering the overall implications of the TRIPs Agreement for developing countries, in particular the social, economic and technological aspects. Developing countries would need advice and technical assistance in implementation of the TRIPs agreement, they added. On the GATS, the Ministers called on UNCTAD to identify appropriate measures at national and international levels to assist developing countries to take full advantage of the opportunities available to them including measures to strengthen their services sector and domestic services capacity and expansion of their services trade.

The pursuit of the built-in future work programme in the UR Agreements, the African Ministers said, must take fully into account the interests of developing countries -- substantial liberalisation in service sectors of export interest to developing countries including in movement of natural persons, on tariff liberalisation in products of export interest to developing countries including problems of tariff peaks and escalation of tariffs.

The European Union was called upon to implement its commitment to compensate loss of preferences by ACP countries, as stipulated in Articles XXVII and XXIX of the Lome Convention.

As stipulated in the UN General Assembly resolution, UNCTAD should convey to the Singapore Ministerial Conference of the WTO, the assessment of the Uruguay Round by UNCTAD-IX and its further elaboration by the Trade and Development Board.

On Commodities, the African Ministers called for ways and means to achieve better supply-demand management, including through "an international commodity observatory" in UNCTAD, to facilitate exchange of information and voluntary cooperation among producers of commodities, particularly those in recurrent excess supply.

They also called for financing mechanisms to deal with instability and risks faced by commodity export-dependent developing countries, for a reduction of conditionalities in the IMF Compensatory and Contingency Financing Facility and a significant expansion of bilateral schemes such as the Lome Convention's STABEX. There should be binding commitments for special financial assistance to promote commodity diversification, the Ministers said.

On Trade and Competition Policy, the Ministers said while government restrictions on trade have been substantially reduced in recent years, little had been done to address the restrictive business practices (RBPs) of private firms. Binding multilateral rules should be developed to address them.

On Trade and Environment, the Ministers said environmental problems with cross-border effects should be addressed through Multilateral Environmental Agreements (MEAs) and measures should be anchored on principles of necessity, non-discrimination, least trade restrictiveness and transparency.

The need to comply with externally imposed environmental concerns might divert resources from immediate development needs of developing countries. Since the costs of compliance are relatively more onerous for developing countries, while their contribution to global environment problems had been lower than that of the developed countries, special efforts must be made to include positive measures in the MEAs in accordance with the (UNCED) Rio Declaration's Principles and Chapter 2 of the Agenda 21.

UNCTAD should also continue to work on trade and environment including efforts to build international consensus on principles and modalities regarding interface of trade, environment and development.

Focusing on promoting enterprise development and competitiveness in African countries, the Ministers noted the importance of Foreign Direct Investment (FDI) and need by their countries to create an enabling environment. At the same time, they expressed their concern that despite efforts of many African governments to attract FDI, such flows had largely bypassed the continent, and most FDI were directed to a few countries and were negligible for LDCs.

Governments of the industrialized countries were urged to adopt positive policies and measures to ensure that the dynamism, global resources and vast capabilities of TNCs were harnessed and directed towards indigenous technological capacity building in African countries, for the expansion of their export opportunities and for measures to ensure access to new technologies and structures.

In terms of future work of UNCTAD, the African Ministers said that UNCTAD should continue to focus on global economic trends and inter-related issues of trade, investment, finance and transfer of technology from a development perspective.

The process launched at Cartagena (UNCTAD-VIII) -- for revitalization, reorientation and consolidation of the institutional machinery and substantive work programmes -- should continue through a dynamic and flexible sequence involving identifying relevant issues; carrying out high-quality analytical work; conducting intergovernmental consultations, dialogue and interaction for consensus-building and, when appropriate, negotiations. UNCTAD activities should also technical assistance to support efforts of developing countries to modernize and integrate their economies into the global economy.

The institutional reform of UNCTAD should enable it to play a more pro-active role in assisting developing countries, especially those in Africa and the least developed and land-locked countries, to participate more effectively in the global economy.