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"Can Africa Claim The 21st Century?" Press Briefing

Washington, D.C., May 30, 2000

PROCEEDINGS

MR. HAY: Good morning, everyone, and welcome to our press launch this morning of the new report, "Can Africa Claim the 21st Century?" It has been compiled by a wide range of agencies, from the World Bank here this morning to the African Development Bank, the Global Coalition for Africa, just to mention some of the agencies involved.

Let me remind you of the report's embargo. It is embargoed until tomorrow afternoon, Wednesday, at 2 p.m. Eastern here in Washington.

Let's kick off with some brief introductions up here. On my immediate left is Callisto Madavo, the World Bank's Vice President for Africa. On his left is Dr. Ould-Abdallah, the Secretary-General of the Global Coalition for Africa, whom we are very pleased to have with us this morning.

On his immediate left is Alan Gelb, the World Bank's Chief Economist for the Africa Region; and on his left is Ibrahim Elbadawi, a lead economist in the World Bank Africa Region's Research Department.

And I am Phil Hay from the World Bank's Media Relations Department.

So, without any further ado, let me ask Callisto to kick us off with a few brief remarks.

MR. MADAVO: Thanks, Phil.

Good morning, ladies and gentlemen, and thank you for coming today. Our main purpose today is to present the findings of the study, "Can Africa Claim the 21st Century?" and to answer any questions that you might have.

My colleague Alan Gelb will introduce you to the report for about 10 minutes, and then we'll take your questions. But first, I would like to say that this report is a product of Africa, not just the World Bank, and we are proud of the fact that this has been prepared in that way. It has been prepared in conjunction with the African Development Bank; the African Economic Research Consortium, the Global Coalition for Africa, whose Executive Secretary, Ambassador Ould-Abdallah, is on my left; and the United Nations Economic Commission for Africa.

All five partners in this research share the confidence that Africa is moving in the right direction despite the fact that the first few months of the new century have been deeply troubling.

Although 20 percent of Africans are affected by conflict, 80 percent of them are fighting poverty rather than each other. We tend to focus on the 20 percent and tend to overlook the other 80 percent.

Economic growth is taking hold. Political systems are much more open. The press is freer in Africa today than it was 10 years ago. Countries are shrugging off outdated solutions while drawing continued strength from their special cultures and traditions, i.e., development that is rooted in African cultures.

Regional institutions are growing stronger. Large countries like Nigeria and South Africa are setting an example of democratic renewal and exerting an influence beyond their own borders.

That is not to say that Africa's development challenges are not gigantic--they are. But there is a way out of Africa's continuing poverty. We believe that that is so, and Alan will suggest four major ways in which this can be done, first by improving governance; second, investing in people; third, accelerating investment and diversification of African economies; and fourth, by reducing aid dependency.

Alan, may I ask you now to present the study?

MR. GELB: Thank you, Callisto, and thank you for the opportunity to be here and present the study to you today.

When we began this collaborative project, we aimed to do certain things. We wanted to look back to review Africa's performance and understand the factors which had influenced it. We wanted to understand better what reforms have accomplished and what they have not accomplished. We wanted to look forward to identify what was needed in the future to accelerate growth and poverty reduction and to pull together some evidence of how countries are addressing development problems. There are many problems that are common to many countries even though countries always have their own peculiarities.

As Callisto said, there has been a lot of gloomy news out of Africa recently, a nd there are grounds for concern, and the study lays these out I think quite clearly. Almost half of Africans, as you may know, live on under $1 a day, and despite improvements in the second half of the 1990s, quite substantial improvements in performance, on average, income levels are still lower than they were at the end of the 1960s. So there is a big task to go.

But as we show in the study also, there are actually many good examples of where things are going well, and there are many valuable development initiatives that need to be known better and need to be copied, scaled up, and replicated in Africa. So this is the balance which the study tries to provide.

Let's go back to the first point. Many countries have undertaken reforms in Africa in the last decade or so, and these have been controversial both inside Africa and outside Africa. They are focused on restoring macroeconomic balance, which has improved a lot in many countries; in opening up to trade, and in opening up to private initiative.

What we find is that where these reforms have been sustained, and also where they have been underpinned by civil peace, there is a favorable impact which is clearly visible in the last few years--the impact on growth, on exports, on investment.

Another important point is that what we also see is that when African countries do grow, when consumption rises over a sustained period, we find that, as best we can tell, there is an effect in reducing poverty. I think that is a positive finding that was not well enough known before.

The growth response is not enough. The median country in Africa now is growing at around 4 percent. Some are growing higher--the better-managed countries are growing much higher--but the median country, about 4 percent. A typical African country needs to grow at about 7 percent to halve poverty by 2015. But it is a lot better than it was before the mid-1990s, so there has been quite a substantial response.

Growth is not enough. The quality of growth matters a lot as well, because one feature of Africa that we find is that there is quite a wide dispersion in income distribution. Incomes are fairly unequally distributed in most countries, rather like Latin America, in fact--more like Latin America than Asia. So the quality of growth is quite important, and for that reason, we have a special chapter on agriculture.

Clearly, macro reforms are not enough, and as we look froward, we saw four areas where progress was needed but where improvements can help to launch a cumulative process forward.

The first area, as Callisto mentioned, is improving governance and managing conflict. One of the most favorable developments that we see is the growth in political participation in Africa in the 1990s. This is opening the way to better economic management and placing pressure on governments to be accountable--that is, accountable to their own people.

We see that in general, the countries where this process is the most advanced are also the countries that are managing themselves the best. This is going to be a long process. It is not going to be a smooth one, and I am sure they will have reversals, but we show examples of how this interaction can improve development policies, in part through making better information available--we give examples from Uganda, the examples of new surveys which include feedback from those on the recipient side and how this creates a constituency to oppose corruption.

Conflict is also a part of governance and is a serious issue. We are very concerned about that in the study. What the study does is draw attention to the strong links between conflict and development. Conflict in Africa is not simply an ethnic issue. In fact there is evidence that once you account for developmental factors such as levels of income, unemployment, low education, and reliance on primary commodities that Africa is no different from any other part of the world. And quite a lot can be done from the development side to reinforce political efforts to end conflict.

I think it is interesting that if we take a country like Mozambique, which has been very much in the news recently as a victim of floods, we also forget that Mozambique is an interesting example of successful conflict resolution, and it is a country which has shown the ability after peace to grow at extremely high rates. Mozambique has been growing at about 10 percent a year for the last several years. So it is interesting that Mozambique is sometimes seen as a negative example when actually, underlying, it is really quite a positive example.

The second area we looked at was investing in people. Many people in Africa do not have the capabilities in terms of education, health, and nutrition status to contribute to accelerated growth and development. Only one in four poor rural girls even attends primary school. There is a burden of disease in Africa which is at least twice as high as any other part of the world, and a particular issue of very great concern to us is the HIV/AIDS epidemic. Life-expectancy is going to be falling by up to 20 percent in highly-infected countries. There will be tremendous pressure on savings. AIDS orphans will rise as a percent of the population to as much as 16 percent. And we see now, in terms of studies of individual firms, that there is a significant effect on labor costs, including through increasing pension liabilities.

But here, too, one can see many positive examples of what investing in people can do. First of all, gender equity. We talk a lot about gender equity in the report. We see this as not simply a social issue but as a development and growth issue--that women are providing most of the labor to African economies, but they are doing so without access to inputs, without access to education. We estimate that moving toward gender equity could boost growth rates quite sharply in Africa.

There are at least two countries that we mention--Senegal and Uganda--which show that with the proper commitment and programs, AIDS can be addressed, and infection rates can be held low or rolled back. And we provide estimates of the costs of such programs, excluding very costly drug therapy; it comes out to about $15 billion for the Region as a whole, or 1.5 percent of GDP for the typical country.

So things can be done, and we show how countries are approaching these things. We cite a program that simply used modern communications technology to link up traditional birth attendants with hospitals and clinics. This has reduced maternal mortality by half in 3 years. So information can be a very powerful force. And here, we have the potential of new technology for Africa. We also cite a number of community-based programs in the area of nutrition and other areas.

We believe that one key here is to work through strong communities and to decentralize service provision to a range of providers, not just working through single, vertical, state channels.

We also believe that we need more global research into diseases which are becoming increasingly identified with Africa--malaria, HIV/AIDS, and so on--and we support initiatives to increase funding for global research in those ares.

The third area we discuss is the question of economic diversification and trade. I think it is very sobering that in the late 1960s, Ghana was richer than South Korea, and what we saw was that in 1972, Korean exports overtook those of Ghana, exports per head, and in 1974, Korean GDP per head overtook Ghana. That's not so long ago. And now, Korean incomes are multiple of those in Ghana, and exports grew about 100 times as much.

Africa's loss of trade share since the 1960s is almost $70 billion, which is the equivalent of about 20 percent of GDP. So that to reverse marginalization of Africa, it is very important to reverse its marginalization in world trade.

What we show is that with the right business environment, there is evidence that Africa can in fact recover and diversify trade. In fact, we show that it is beginning to happen already in a number of countries and with diversification into a range of manufactured goods, agroprocessed and other processed goods.

But in addition, we point out that Africa needs access to markets, and we noticed that in agriculture, OECD agricultural subsidies are running at about $300 billion a year, which is equal to Africa's entire GDP. So the whole area of access to agricultural markets is a very important one, especially considering the new products that Africa is now beginning to export, including temperate zone, high-quality fruits and vegetables and flowers. We think the African trade bill is a good start. Actually, we supported this bill, and we think that still more can be done to open up the range of manufacture in other areas to Africa's trade.

The fourth area we discussed was aid and debt. Africa is highly aid-dependent, but aid transfers have been coming down very rapidly. We notice that aid transfers per head have fallen from $32 in 1990 to $19 by 1998. So aid transfers have been coming down, and we are concerned about this. But we are also concerned that the effectiveness of aid be increased, and this requires a number of changes in the way that assistance is thought about and the way in which it is delivered, including greater selectivity between countries, which draws on previous research; to deliver aid in ways that encourage governments to be accountable to their own people rather than accountable to aid donors-- with multiple donors in Africa, many donors, many projects, this has to be a major focus of change; to empower the poor, to provide those who do not have access to resources with greater control over how resources are used in their interests; and to create better incentives to retain and create capacity. Current mechanisms of technical assistance are not working well, and the report recommends a radical overhaul there.

We see debt relief in this context, in the context of removing some of the core drain of resources out of African governments and restoring back some balance into the fiscal accounts.

We also document the ways in which the debate is moving and the ways in which aid is changing. We think it is changing in the right direction, but as a practical matter, we also see it as a long way to go before these new ideas are fully implemented.

So let me just sum up. We think that trends will indeed need to change radically if Africa is going to claim the 21st century and come close to the international development goals for 2015. But we believe these changes are possible, and we note that thinking is changing also; it is changing within Africa--in fact, this report is part of that--and it is also changing outside Africa on how to make them change. So our objective in writing the report is also to stimulate discussion and debate on how best to move forward in these areas.

We'll be happy to take any questions. Thank you very much.

MR. HAY: Okay. The gentleman in the third row.

MR. HAMILTON: You flatter me. Thank you.

A.B. Hamilton, International Trade Finance Report.

If the development of exports, particularly nontraditional exports, is significant in Africa, is the World Bank Group doing anything to stimulate the creation of export credit agencies--there are 12 in Sub-Saharan Africa, which is not enough for 47 countries.

Thank you.

MR. HAY: Alan, I think you're being nominated first.

MR. GELB: Oh, I see--we're going to take them as they come. On export credit, there is a whole infrastructure for exports that is lacking in many African countries, and actually, this is an area that we are looking at. We are very concerned about this--not just the credit agencies, but the whole question of creating a space, an environment, where firms can operate with more efficient regulation, with less bureaucratic obstacles, with more efficient customs services.

For example--and I will get to your specific question--customs clearance and rebate systems in Africa just don't work very well, and we are very concerned in many countries to do things about that as well. We have a project, for example, in Ghana called the Gateway Project, which seeks to establish an area, a zone, to facilitate trade, exports.

On export credit, we are actually looking now at what I think is quite an innovative scheme of political risk cover for a number of African countries. The countries are very small. That's one of the problems. We would like to do something that brings a number of them together so that they in effect provide some mutual insurance to each other to underpin such a scheme.

So the answer is yes, we are very interested in this, and we would like to see as much grouping of countries as possible in terms of providing financial services for trade in general, yes.

MR. HAY: Are you happy with that, sir?

MR. HAMILTON: Well not exactly.

MR. HAY: Okay. Let's give you another crack at a follow-up.

MR. HAMILTON: If you are in exporting in today's world, nobody pays cash; it is all on credit.

MR. GELB: Yes.

MR. HAMILTON: The African manufacturer needs working capital, which is financing, and he has to be able to extend credit to his foreign buyer. The banking system doesn't do that.

MR. GELB: No; I know. We are aware of this problem, and as I said, part of the problem is the countries are very small. Individual African countries are very small, and their financial systems deliver only a very limited range of services. So we are working with the financial systems in many African countries now to try to expand the range of services.

Just to go back, the issue with the financial systems in Africa that we discuss in the report is that there has been a lot of reform, but there hasn't been very much development. So, yes, the answer is we are very concerned about that, as one element of the services which financial systems provide. But there are many other services also that the financial systems are not providing yet.

MR. HAY: The lady in the second row.

QUESTION: The West African nations, ECOWAS, will have a joint passport next month. What could be the economic impact on those countries regarding the joint passport?

MR. GELB: A joint passport?

QUESTION: They will have a West African passport next month.

MR. GELB: Ah. Actually, in the report, we do draw attention to some of the bureaucratic costs associated with visas and passports, including, by the way, for foreign tourism, where tourists will have to obtain multiple visas for a number of small countries, and this makes travel difficult, not only for business but for tourism as well. So we think that anything that cuts the cost of transit in Africa is worthwhile, and certainly, that can help; agreements on cross-border transit can help. In Southern Africa, for example, we find that trucks are regularly stuck for half a day, for 12 hours or more, in between border crossings.

So yes, we are very much supportive of any measures which widen space for travel for economic opportunity. So that's a favorable development.

MR. MADAVO: If I might just add, I have just come back from a trip that took me to West Africa, to Mali, to Senegal, to Cote d'Ivoire, and to Nigeria. What was very interesting for me was that in every one of these countries in my meetings with the heads of state, there was a very sharp focus on the issue of regional integration and regional cooperation.

This is clearly an area where we at the Bank have not done much in the past, but I think that going forward, we are going to really have to focus on this for the reasons that Alan just talked about.

But in those conversations, in addition to indicating to the Africans that we will be supporting them, I also kept reminding them that this integration has got to be an integration that creates a larger economic space that enables Africa to compete and to play a role and remain linked to the global economy. In other words, it shouldn't be an inward-looking kind of regional cooperation and integration; it should be, rather, an outward-looking, a creation of platforms from which Africa then can join the rest of the global economy and become more competitive.

MR. HAY: In the second row.

MS. GLASS: Thank you.

I have a question for Mr. Gelb. Could you please give us an assessment of the current economy in South Africa, actually, the quality of the economy as you might define it, and also give us an idea of how you think the AIDS epidemic in South Africa is going to eventually affect economic growth in that country.

MR. HAY: Let me just ask you to identify yourself for the transcriber.

MS. GLASS: My name is Pamela Glass, and I represent Independent Newspapers of South Africa.

MR. GELB: Well, as you know, the South African economy has been through a bad patch. It was hit by the Asia crisis. It was actually about the only economy in Africa, I think--in Sub-Saharan Africa--that was sufficiently integrated into the global capital markets to have a direct effect through that vehicle. The effect of the Asia crisis on the other countries has been much more muted and slow. It has come through the trade accounts, not through the foreign capital accounts. Growth dropped to, I think it was almost zero, and now it has been bouncing back to around 3 percent. This is still not enough, but it is better than it was previously.

We hope that continues and accelerates, because what happens in Southern Africa or South Africa is important regionally as well.

On the AIDS issue, this is something that we take very seriously. We don't know--I don't think anybody knows--what the ramifications of AIDS are at the levels of infection that we are seeing in parts of Africa. There is on real precedent for this--what the impact will be, for example, on social structures, on saving, and so on. But we are very concerned about it. Almost certainly, there will be a slowdown in growth for an extended period, and we think there will probably also be a decline in GDP per head, although that's something relative to what there would have been without HIV/AIDS.

So yes, this is something that we are very concerned about, but we can't give quantitative estimates--I don't think anybody can--of exactly what the effect is going to be.

MS. KAPS: Caroca Kaps, FAZ. I have three questions, two very short, the one probably a bit longer. First of all, can you give any figures whether there is already some kind of a poverty reduction visible in some of the more successful countries?

Second, is there evidence that FDI is increasing in the more successful countries, which you are mentioning? And I would be especially interested in Ghana, because Ghana has been the prime example of successful programs for years and years and years.

Third question. I have been in Washington long enough to have lived through various Africa reports, and every one of them was advertised as you advertise the new one, again, hope for Africa, changes, and so forth. What actually differentiates this one now from all the other ones which makes you so hopeful? Where is really the evidence on the part of the industrial countries and on the part of the Africans themselves, which really gives you now confidence that Africa will be joining the other countries in the 21st century?

MR. HAY: Okay, some good penetrating questions. Alan, why don't you kick us off on that, maybe the first one or two, and then we'll get Callisto to take the third one.

MR. GELB: I think we should share these a bit, but let me just start off on the first. The first question is: is there visible evidence that in the better performing countries poverty is reducing?

You know, in order to have comprehensive evidence of what is happening to incomes in the countries, you need comparable household surveys, and very few African countries have got comparable surveys over time of a sufficient quality that you can tell trends, but some do now have. The information base is increasing quite rapidly. And we give some examples in the report of what happens when countries have sustained growth. And there are two countries that are discussed in some detail in the main report. I'll be happy to give it to you if you don't have it.

One is Ghana and one is Uganda. And what we find in these two countries is they're both countries that have had sustained growth and income and consumption per head, and we find that there is a pretty regular relationship between the growth and the poverty reduction. We also find there are some groups, in fact similar groups, in both of these countries, who get left behind by this. One group is people in isolated rural environments that don't really have access into the modern economy, so there is a certain group that needs to be dealt with there. And secondly, there are urban groups that still find it difficult to get employment, even when demand and growth is moving forward. So we have quite a lot of evidence there, and I'll be happy to refer you to it.

On FDI, I think the latest figures we noted in the report was that FDI had tripled into Africa in the second half of the 1990s. I think it went up--I think it roughly tripled, FDI per head. I can't offhand speak specifically to Ghana; I don't have the numbers in the--to hand. I can get them to you. But Ghana is very interesting, because it's also one of the countries where we've seen a considerable increase in exports and also a lot of export diversification away from traditional products and towards quite a wide range of products. So whatever has happened to FDI very recently there, certainly business has not been doing too badly.

Would you like me to speak to the one on Africa or--

MR. HAY: Maybe. And then we'll bring in Callisto and Dr. Ould-Abdallah.

MR. GELB: Well, you ask a good question. And, you know, in the report we don't paint a rosy picture, and we show the possibilities. We don't try and predict exactly what will happen, but there are three things that we note in the report that are different from previous years, and which we believe that developments in Africa have to build on.

The first is political change. There has been a great deal of political change in Africa, and this has been in the form of increased levels of participation. It's not without risk, it's not without problems, but it opens the way to new ways of doing business and new ways of strengthening development. And that's one issue that is very important, and you will see that that discussion permeates a number of chapters in the report. This is different from previous years.

The second factor is externally the end of the Cold War. Now, this is taking a while to permeate through into development programs, but the fact is that I think there's much more interest now in the donor community in supporting effective development partners, rather than, as it was in previous decades, supporting trusted allies. And this again opens the way for much better ways of doing business, and we describe in the report what kind of changes can take advantage of that.

And the third is the issue of modern technology, particularly information technology. This is often seen as a liability to Africa, as a loss. Africa is isolated from global technology trends, and that's substantially true. But those same trends have enormous advantages for Africa because Africa is very sparse. Africa's GDP per head is only about one-fifth of the next densest region in the world, and it's traditionally been an area that has been cut off from global communications. It is now possible to extend communications and information across Africa to use it for training--and we are doing quite a lot of that at the World Bank already; we are supporting, for example, the African Virtual University--to use it to supply information on health practices, as I mentioned with the example in Uganda, where maternal mortality had come down; to give farmers access to information on prices for their products and the possibilities there. So, actually, this is something that it of potential benefit to Africa if it can be harnessed appropriately. It's a very valuable gain.

Let me turn to others to supplement that.

MR. MADAVO: Let me perhaps make two or three points as a supplement to what Alan just said.

I think the issue is if you compare this report to the report of 1988-89, the Long-Term Perspective Study, if you look and compare this report to the report in the early '90s of a changing Africa, basically you see real continuity in the emphasis of certain themes. The idea of opening up Africa. The idea of participation. The idea of capacity building, the importance of capacity building as a missing link. The ideas, the beginnings of the ideas around the importance of ownership of the development programs and processes. So there is in fact a continuity in certain kinds of key themes.

But this continuity is supplemented by a better understanding from experience of some of the constraints and the complexities involved in African development. So that I mean we have been learning, as we have come along. And not just "we", in the development community, in the international community, but also the Africans themselves.

I think a second point I would emphasize is this issue of ownership, that I think you are finding much more increasingly the fact that Africans are developing the programs that we're beginning to support. These are homegrown programs. They are programs that are being developed through the help of private sector participation, civil society, and others. So that it's a much broader base, and therefore, a much robust, a more sustainable basis on which these development ideas are being carried forward.

I think a third point would be to emphasize the fact that within the donor community, there's a lot of new thinking. For example, in the Bank, we have been talking about the Comprehensive Development Framework, a more holistic approach to the way in which we look at development. We have written the--then defined the Poverty Reduction Strategy Papers and strategies that are going to be as instrument of in fact cutting through and operationalizing the kind of thinking and approach to development that is inherent in the Comprehensive Development Framework approach.

I think another element that's quite interesting is there has been a lot of debate about the extent to which we are giving the Africans the space. You know, ownership as opposed to donorship, but we're not continuing to crowd the Africans out to design strategies in Washington and carry them to Africa, put them on the table, and ask people to sign them, that we have begun to look at development differently.

All of these are, in my view, you know, points of hope in terms of hoping that we can put together programs in Africa, and Africans can put together programs that are going to be more effective in the future than they have been in the past.

MR. HAY: Let's bring in Dr. Ould-Abdallah from the Global Coalition for Africa. You're a constant traveler to the continent. So how would you reply to that question? Yours was one of the agencies that took part in the report.

MR. OULD-ABDALLAH: Thank you very much. I think the question is excellent, because this report, maybe more than any previous report, would be much read in Africa, simply because the development in information technology, transportation and so on. So her question is very relevant.

And second, it puts the problem of credibility and leadership within--on African issues--credibility and leadership on African issues within Africa and within the international community. Most African issues seem as academic issues when they are human, social, and--in my opinion, the World Bank--and we are happy to be working closely with the Bank on this report--the Bank has demonstrated in the past leadership and credibility, especially when it was not popular to suggest to African governments structural adjustment program, in other words, not to live beyond your own means. And I know it has been criticized in Africa and elsewhere, but it is this kind of leadership and credibility which is needed today, more than acting like many organizations, of the UN system, enumerating repeatedly African difficulties, that you are mostly [?] Bulgaria than in Africa, or that you have more vision; this is not productive.

So to me this report is interesting, and it mentions a point which has not been mentioned, the infrastructure, the cost of infrastructure to developing of power, electricity, telephone, and of course, roads.

MR. HAY: Okay, Dr. Ould-Abdallah.

Matt Harrison, in the second to last row there.

MR. HARRISON: Thank you. I'm Matt Harrison with AFP, French news agency.

I was intrigued by your observation or your argument that the problems of poverty and conflict in Africa are really no different from anywhere else in the world, and I wonder if you are breaking new ground here, because hasn't the prevailing attitude in the industrialized world been that Africa's problems are intractable, that they are rooted in ethnic--ancient ethnic conflicts that can never be resolved. So I'm wondering, is this a new departure for the Bank.

And secondly, do you think this attitude in the industrialized world has explained or can explain the indifference that it has shown toward Africa in the past?

MR. HAY: Alan, why don't you kick us off?

MR. GELB: Let me kick you off. I think this is a very important issue, and there is actually quite a lot of new research going on on the question of conflict and violence more generally in the World Bank, but also in a number of other organizations that the Bank is working with, and Ibrahim Elbadawi, who is on my left, is heavily involved in that research. He may want to say something as well.

Clearly, the report does not deal with all issue of conflict, but it draws on recent research, which shows that there are very strong relationships between development factors and the propensity for conflict, and that once these are taken into account, Africa is not very different, in fact, it's not different, if I recall right, from anywhere else in the world, that the ethnic dimension is not an inevitable and irremedial cause of conflict. It's something that makes finding appropriate structures for government more difficult, certainly, because you have to take it into account in designing political systems. But there are many ways in which that can be done, and the report discusses those.

What this research finds is that certain factors increase the probability of conflict, and they include poverty; they include lack of employment opportunities, which means that the opportunity cost for young men of going to war is very low, there are no jobs, there's nothing for them to do; it includes a heavy reliance on natural resources, especially mineral resources, because this can fuel and sustain and even incentivize rebellions, so that economic diversification becomes a major--a long-term thrust to make countries more secure. And it also includes political systems that marginalize large parts of the population, creating the potential for discontent.

Now, many of these factors can be addressed, and the report describes some ways in which they can be addressed, and also notes that this is really long-term--this is long-term state-building. It requires a sustained effort and it requires generous financing. You cannot just start it and then pull back quickly. And this is an area that we believe may have been under financed and really under considered in the past.

Maybe Ibrahim would like to say a word or two.

MR. ELBADAWI: Thank you, Alan.

Yes, I just wanted to follow on Alan to say that this is an area that the World Bank have taken considerable interest on, doing research and building networks with academic researchers, as well as with practitioners in the UN system as well as in the regions.

Just to give you an example, just last month we held a symposium with the United Nations Economic Commission for Africa on the determinants of conflicts in Sub-Saharan Africa, and basically, the idea, as Alan mentioned, is that the underlying causes behind conflicts are much more complex than what meet the ear, so to speak, or the eye, but actually, ethnic conflicts is lurking behind as a conduit to much more fundamental developmental problems, both at the economic level as well as the political level.

And what we hope to do is to actually understand better the causes of conflicts, the duration of conflicts, and the need for designing better packages for intervention during the post-conflict reconstruction, not just in terms of the economic measures but also in terms of the collaboration between politically mandated institutions and developmental institutions such as the World Bank or the African Development Bank.

And then also, finally, to steer institutions such as the World Bank, to move increasingly into conflict prevention, because conflict prevention is clearly much more manageable and much more amenable to economic development and political development than post-conflict reconstruction.

MR. HAY: Yes?

MR. OULD-ABDALLAH: If you don't mind, I would like to add one point on these issues I am very familiar with. I am convinced that whatever in Rwanda, where you have--or Burundi, where you have the same, or in Kosovo, or in Guatemala, the real cause of conflict is political leadership. It is the leadership which creates a program on exclusion, and if there is not ethnic diversity, it uses geographical difference or religious difference, and we see it in Northern Ireland. You see it in former Yugoslavia. So it is the leadership and lack of ideology which create domestic conflict.

Second, another cause of conflict is contagion from a neighboring country. And I don't like to elaborate too much about it. You have Sierra Leone and other countries.

And finally, just to be brief, the economic dimension appears only when conflict lasts, when a conflict has been on for a number of years, the economic dimension becomes an end in itself. And I am raising this point because there is now as tendency to blame diamonds or Africa resources for conflict. Resources are a source of wealth and growth. They are not source of conflict. It is the leadership which make them source of conflict. You have Saudi, Arabia, with minerals, oil, and there is no conflict; Norway, with a single product, Norway, oil, there is no conflict. It is bad leadership. Thank you.

MR. HAY: Okay. Let's go to the gentleman here in the third row, and then the lady right back in the back.

MR. ADHICARY: Hi. This is Dave Adhicary, CNN.

I have a question. Any one of you can jump in. I want to find out, have you heard any response from any of the African political leadership, and what sort of response do you expect? Are they going to say something to the effect that, "This is another World Bank report coming out of Washington", or this is something they are going to take notice of?

MR. HAY: Callisto, why don't you start us off, knowing as you do the leadership so well?

MR. MADAVO: Well, I think in many ways one of the things that's different about this report is that it has been done with the participation of Africans, the ECA, the African Development Bank, the African Economic Research Consortium, all these are institutions that are our best in Africa. But there have also been very substantial consultations during the process of the development of these ideas by meeting with people from different walks of life in Africa, and people who are concerned with some of these issues.

I am fairly confident that a number of the themes that are founded in this report will resonate with the African leaders. I just told you that I was in West Africa, and regional integration was very much a preoccupation, and it's one of the themes that is in this report. I was in West Africa, HIV/AIDS was very much a concern in Mali, in Senegal, in Cote d'Ivoire, in Nigeria by President Obasanjo. So I am fairly confident that the Africans will be welcoming some of the themes that are in this report, including, incidentally, the issue, of the need to address debt, to continue to address debt, and to continue to address the issue, access of African exports to the markets in developed countries.

MR. HAY: Okay. The lady at the back end of the room.

MS. HARRIS: Emily Harris for South African Broadcasting. I have a follow-on for Mr. Gelb, but first, Mr. Madavo, would there be any objection in the World Bank to funding any HIV/AIDS projects that called into question the relationship between HIV or AIDS? Would there be any reason why the World Bank would or would not fund those types of projects?

And to Mr. Gelb, you had mentioned that HIV and AIDS is expected to slow the growth of South Africa and to decline the GDP per capita, and then you said although that will be relative to what would have happened anyway. Could you elaborate and make that a little clearer?

MR. MADAVO: Let me start with HIV/AIDS. As Mr. Wolfensohn has indicated, the World Bank is committed to making available IDA resources to those countries that are putting together programs that are going to effectively address this epidemic. So there is absolutely no question about that; we will be there.

In terms of the approach that we will be taking, we will be guided, of course, by the scientific information and basis that is out there. We are not in the Bank the scientists who do this work, and we certainly would by and large follow the mainstream views on the question of the linkage between the HIV virus and AIDS. The mainstream view is where we would stand.

MR. GELB: On the question, just to elaborate on what I said about HIV/AIDS slowing growth, what the impact of HIV/AIDS is going to be is--of course, as you know, the effect is most marked in young adults just entering their most productive period. AIDS is also a disease which very often hits highly-skilled and highly-educated parts of the populations in Africa. So one of the first results is going to be an effect on the availability of people, including productive people, in African economies.

There will be a second effect, which will be a decline in fertility, because AIDS is also affecting women--I believe the proportion of women infected is actually higher now than that of men--and that will lead to a decline in fertility as well.

But the net effect of this is probably going to be that the dependency rises. In other words, every active, able-bodied workers will be supporting more, either children who lack parents or other adults who are incapacitated by AIDS and are unable to work but are still living.

So what the effect will be is to undoubtedly slow aggregate growth, and we think it will slow aggregate growth by more than it slows aggregate population, so that income per head is likely to fall. That effect is very difficult to measure. There are a number of studies that try to estimate the effect of that particular--the fall in income per head--but I wouldn't honestly say that we have great confidence in any one estimate, so we haven't included that in the study.

But as you can see, when a high proportion of the population is dying early, and it costs a lot of money to take care of people who have AIDS as well as orphans, there will be pressure on national savings rates as well. So relative to the scenario where you do not have HIV/AIDS, you have a slower population growth, you have slower GDP growth, and you probably have lower savings and lower GDP per head.

Is that okay?

MS. HARRIS: Your statement that the decline would be relative to what would have happened anyway--I thought you meant that things were on the decline anyway, but you apparently didn't mean that.

MR. MADAVO: No, no, no. What I meant was if you think of the scenario without HIV/AIDS, you have a population scenario without HIV/AIDS, you have an economic scenario without HIV/AIDS, and then you factor in HIV/AIDS as a factor. So it is relative to whatever would have happened had you not had HIV/AIDS. Those are the kinds of comparisons I am speaking about.

MS. GLASS: And in South Africa, what's the conclusion?

MR. GELB: Well, it is no different, actually, from the conclusions on any of the other countries with high HIV/AIDS infection rates. It will probably lead to an increase in dependency ratios--in other words, each active member of the labor force will be supporting more either young people or other adults who have the disease and are incapacitated; it will probably lead to some pressure on savings rates for the same kind of reason and to, therefore, a slower growth outlook than it otherwise would be; and probably lower income per remaining head of population that would have occurred without it.

This again is the reason why we are so concerned about this. But also, as the report points out, there are things that can be done. There are examples of countries which have turned this around, and is very important to bear that in mind, that countries can do a great deal to turn it around with the right policies.

MR. HAY: I think that's it. Thanks very much indeed for coming today, ladies and gentlemen.

Remember it is embargoed until 2 p.m. Eastern tomorrow.

Thanks very much.

[Whereupon, at 11:05 a.m., the press briefing was concluded.]





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