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Mark Tomlinson Cape Town 24 February 2005 WBG COOPERATION IN ACCELERATING NEPAD IMPLEMENTATION: REGIONAL CONSIDERATIONS.

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Presentation on theme: "Mark Tomlinson Cape Town 24 February 2005 WBG COOPERATION IN ACCELERATING NEPAD IMPLEMENTATION: REGIONAL CONSIDERATIONS."— Presentation transcript:

1 Mark Tomlinson Cape Town 24 February 2005 WBG COOPERATION IN ACCELERATING NEPAD IMPLEMENTATION: REGIONAL CONSIDERATIONS

2 CHARACTERISTICS OF AFRICAN ECONOMIES African economies mostly very small. Average $2bn. 15 economies growing at > 5%pa in 2004 But more than 30 economies growing at < 5%pa Average across continent about 3% pa Net of population increases, per capita growth only 1-2% pa in most countries Much too slow to reverse rising poverty in many countries

3 GROWTH, POVERTY AND MDG PROSPECTS Conclusion: Problem with level and quality of growth. Too slow and not sufficiently broadly based for poverty reduction. Conclusion: Africa will miss most MDGs by wide margin. Africa marginalization increasing not diminishing in many areas. Conclusion: If countries continue present development track and if we (WBG) continue ‘business as usual’ little prospect of dramatic increases in growth. Do we understand the reasons? Are we focusing on these in our business models? What are we doing about this?

4 NEEDED: PRIVATE SECTOR DEVELOPMENT Accelerated growth will be driven by additional private business activity (much less so by additional public consumption and investment.) This requires additional trade (domestic markets mostly small) and once productive slack is taken-up, additional investment - domestic and FDI. (NB: Over last 20 years Africa’s share of world markets has slipped from 3.5% to about 1%. Loss is equivalent to 25% of Africa’s present GDP.) Additional private sector activity requires: (i) removal of restrictive trade barriers to enlarge demand at existing competitiveness; and (ii) improvements in competitiveness.

5 CAPITAL OUPUT RATIOS AT COMPARABLE STAGES OF DEVELOPMENT CountryGDP rangeTime period Average Capital Output Ratio Thailand$520-$6091963-19660.45 China$440-$6031993-19960.32 Indonesia$500-$6001980-19850.28 SS Africa (w/o SA)$540-$5901990-20030.14

6 FOUR DIMENSIONS TO COMPETITIVENESS Better country business conditions Improved trade facilitation Cheaper products Better products

7 FOUR DIMENSIONS TO IMPROVED COMPETITIVENESS 1. BETTER COUNTRY BUSINESS COUNDITIONS Peace and security, macro stability, governance, fiscal predictability, simpler business registration and regulation, better national infrastructure, deeper financial sector. Conclusion: Most acted upon nationally. Regional co-ordination important.

8 FOUR DIMENSIONS TO IMPROVED COMPETITIVENESS 2. IMPROVED TRADE FACILITATION Better transport and communications infrastructure, trade policy reform and harmonization, customs reform, international financial instruments. Conclusion: Mixture of national and regional actions required.

9 FOUR DIMENSIONS TO IMPROVED COMPETITIVENESS 3. CHEAPER PRODUCTS Economies of scale through market integration to rationalize supply, production and distribution, cheaper and more reliable power, better communications, better trade logistics, more skilled and healthier labour force. More competitive financial sector. Conclusion: some acted upon nationally, but most regionally.

10 FOUR DIMENSIONS TO IMPROVED COMPETITIVENESS 4. BETTER PRODUCTS Improved access to knowledge - improved tertiary education, world class research and commercialization, improved application of technology, more reliable input supply and power, fuller range of financial instruments. Conclusion: Mixture of national and regional actions.

11 OVERALL CONCLUSION 1 Bank Group work on competitiveness and growth must have two dimensions: national and regional. Work on either is not likely to be fully effective without the other. Regional dimension especially relevant when dealing with mostly very small economies, lacking much international comparative advantage in their own right (outside petroleum and other mineral resources.) Working mostly nationally (‘business as usual’) is working with one hand tied behind our back.

12 OVERALL CONCLUSION 2 Bank Group national approaches well developed; regional approaches much less so. Need Country Teams to focus on complementary regional approaches to deliver additional CAS growth impact. Professional families in Bank, IFC and MIGA have key role in delivering this innovation – don’t expect it to develop unaided within all Bank CMUs.

13 REGIONAL OPPORTUNITIES Larger markets technical economies of scale more intensive utilization of plant, structures and equipment hedging of supply chain risks Diversification of political risk internal peer country pressure Improved consumer credit risk broader, more diversifies base of manufacturing consumers hedging of risks posed by natural vulnerabilities Enlarged pool of skilled human resources = better returns, more impact, more growth

14 REGIONAL CHALLENGES Creating and maintaining political alignment Creating impartial, effective regulatory structures Trade issues. Financial reporting and fiscal arrangements more complex Project financing structure likely to be more complex = more difficult, WBG uniquely placed, special role, special responsibility

15 WAY FORWARD Identify small number of flagship projects which enjoy a political constituency 'Hands-on' capacity building of concerned regional bodies to deliver political alignment on specific project issues. Funding to expedite project preparation Present flagships to emerging investor groups when developed sufficiently for risk mitigation strategies to be clearly set out.


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