Business Daily (Nairobi)
Bingu Wa Mutharika
24 October 2007
opinion
Africa does not sit well on the global economy. The African view is that globalisation has never been designed to enable all countries, rich and poor, to have a piece of the pie.
This is because the industrialised countries continue to be driven by greed and lust to dominate Africa. In the process, the continent has been marginalised and indeed impoverished.
Here, the main challenge is to ensure that Africa achieves a quantum leap in the access to, acquisition and application of science and technology to solve the crisis of poverty facing the continent does not get poorer while the rest of the world gets richer.
Globalisation has created a lopsided trading and financial system that leaves Africa short-changed. The policy framework of the International Monetary Fund (IMF) and the World Bank has, for a long time, been at variance with the plight of Africa. In essence, the multilateral institutions are seen to be condoning the unbridled and unethical exploitation of the poor by the rich.
In addition, the global trading arrangements have not brought about prosperity for Africa. Take, the trade negotiations, they have hardly resulted in a fair distribution of the benefits of financing, investment and liberalisation.
Fundamentally, African policy makers are looking for a global system that is non-discriminatory, in the areas listed here. These should result in improved access for their manufactured products in markets of developed countries.
Agricultural negotiations within the World Trade Organisation (WTO) are of special interest to Africa. Besides providing food security, agriculture is the backbone of most African countries.
But the Doha Declaration framework has failed to ensure that agricultural processing helps to substantially improve market access for African nations. It has also failed to reduce all forms of export subsidies and trade-distorting domestic support measures by industrialised countries that hurt the continent.
To help Africa escape poverty, the Doha negotiations on agriculture should aim at achieving at least three goals.
First, it should allow African governments to provide subsidies to poor farmers in order to increase their competitiveness in global markets for agricultural products. As an example, Malawi has successfully produced a surplus of 1.4 million metric tonnes largely due to fertilizer and seed subsidies.
Second, industrialised countries must respond by phasing out the tariff peaks and tariff escalation against processed and semi-processed agricultural goods from African and other developing countries. These hinder industrial development and prevent value addition to raw materials and primary products.
Third, industrialised countries should provide financial and technical assistance to the poor countries aimed at improving food production, agro-processing, marketing, storage and distribution.
A major bone of contention is that developed countries with powerful manufacturers of patented medicines, want to limit the type of medicines that their developing brothers can make under the third party compulsory licensing.
With regard to foreign direct investment (FDI), the WTO Doha framework has significant implications on Africa's development policy, especially in freeing the financial sector.
Activities of multinational companies prevent African governments from regulating investment, thus curtailing the latter's option to assist or give preferences to local firms. Ironically, the industrialised countries regulate the flow of FDI as well as science and technology to protect their industries.
It is for this reason that if the flow of financial resources into Africa is not regulated, adverse consequences may result, such as money laundering, flight of capital, financial instability and worsening balance of payments problems.
Many African policy makers feel that trade and competitive policy within the WTO framework is crucial for growth and development. African governments need to assist and promote local manufacturing firms to see them viable and able to compete with foreign firms.
Unfortunately, industrialised countries are demanding uncontrolled and free market access for their technologically more advanced firms into the developing countries.
This would give such foreign firms undue advantage and intensify disparities between the rich and poor countries.
Trade facilitation is another unresolved issue, especially in regard to the objectives of customs administration. African countries generally use customs tariffs for revenue generation whereas the developed world use them for trade regulation and restriction.
This calls for careful assessment of the impact of customs administration on the economic development of Africa.
Some customs facilitation proposed by the First World such as electronic validation, may compel Africa to purchase and maintain expensive equipment for customs clearance and safety testing of goods whose value is not commensurate with the cost of acquisition.
The lack of progress in the negotiations for reduction of tariff and non-tariff barriers on industrial goods originating in the poor nations is a source of concern.
Whereas the developed countries want one-sided tariff reductions by the poor countries, the former achieved rapid industrialisation under heavy tariff protection. It is unfair that the same countries are now pushing poor countries to open up their markets to well established North.
In fact, poor countries that have liberalised too fast have suffered rapid de-industrialisation in terms of lost competitiveness, closure of firms, massive unemployment, and resultant poverty.
Three key pillars could give Africa strength in global trade, technology development and industrialisation.
That developed nations should support in access to technological innovations, increase investment in technologies for industrial manufacturing and agro-processing, and allow use of debt cancellation proceeds to investment in science and technology. This should be backed by training in science and technology.
Technical assistance to Africa, should take care of growth, development and poverty reduction. In this regard, WTO should offer a new platform for such technical assistance and technological innovation, bearing in mind the negative impact of the "technology divide" between Africa and industrialised countries.
The challenge is for the industrialised countries to help Africa train its people fast enough to acquire, assimilate and apply science and technology to create new wealth, promote sustainable growth and to fight poverty.
Part Two TOMORROW: How Africa is responding to globalisation
Wa Mutharika is President of the Republic of Malawi.
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