Gwen Mahlangu-Nkabinde: Good morning. My name is Gwen Mahlangu-Nkabinde. I am the Deputy Speaker of the National Assembly, but this morning, I am meeting you as the acting speaker of the assembly. Distinguished President of the World Bank, Mr. Paul Wolfowitz, Managing Director of the International Monetary Fund, Mr. Rodrigo de Rato, President of the African Development Bank, Mr. Donald Kaberuka, your excellencies, visiting speakers, Ambassadors and High Commissioners, distinguished guests, in a rapidly changing global, social, economic and political environment, countries are, to an increasing extent, having to locate domestic policy in the context of global realities. In this environment, institutions such as the World Bank, the International Monetary Fund, the World Trade Organization, and the United Nations are assuming increasing prominence.
The challenge is to ensure that organizations such as this will benefit the developing world and particularly the poor. Parliamentary involvement can also contribute to increasing transparency and inclusiveness in international developmental initiatives. Such international participation creates new opportunities for parliaments to promote their domestic and international interest in the service of the constitutional responsibility to represent the interests of their people. The parliamentary network, with the World Bank, has the potential to offer an efficient and effective approach to addressing global policy issues. If that approach is genuinely in the service of the many challenges facing the world, it will assume the authority and the legitimacy required to tackle the vast and complex problems affecting many countries today.
May I take this opportunity of welcoming you to South Africa. It is my hope that we will be able to learn a great deal from each other. I would like to take this opportunity to extend a particularly warm welcome to the Honorable Speakers and Deputy Speakers who are attending this event as delegates to this conference. I wish you success in your deliberations. Thank you.
Kimmo Kiljunen: Madam Deputy Speaker, your Excellency, Minister, the President of World Bank, the Managing Director of IMF, the President of African Development Bank, your excellencies, ladies and gentleman, and particularly my colleagues. It is a great honor for me to have this welcoming address for our Seventh Annual Conference following the network of World Bank. Last time we had our conference in Helsinki, in my capital in Finland. The town is exactly on the other side of the globe. Good luck nevertheless, we are on the same time zone, so no jet lags to come here, but nevertheless, the travel is quite long from Helsinki to Cape Town.
It is interesting and important that for the first time, the annual conference of parliamentary network for World Bank is organized outside of Europe -- first time outside of Europe and obviously it is important that we recognize that we organized this annual conference here in Africa and particularly in South Africa. That tells you of the significance of your country and your continent in terms of development processes across the whole globe, in the world, and particularly, I am obviously thanking the parliament of South Africa for hosting this conference here. We have already enjoyed in the first days your hospitality and all that beauty of this city. Actually, in my ratings, this is the most beautiful city in the world.
Obviously, I also thank the World Bank and particularly the development policy dialogue division of the World Bank for helping us organize this, and the thanks goes also to the African Development Bank for your contribution in organizing this conference. We are particularly pleased that the President of the World Bank, Paul Wolfowitz is here and the Managing Director of the IMF, Rodrigo de Rato, is also here and the President of the African Development Bank, Donald Kaberuka is here -- Three major leaders of major international financial institutions. That actually, is very important for us as Parliamentarians, that you are here and that we will have a discussion with you.
Mr. Wolfowitz, I remember very well your words in Helsinki, at our last conference and I will make a quotation of what you said: “The mission of the Parliamentary Network of the World Bank, your mission of strengthening parliamentary ways on development and global issues is becoming more relevant and more important.” That is true. That is absolutely true! Is it actually unbelievable. Still today, we are calculating in millions those who are dying of hunger. Eight hundred million people in the world are living in constant malnutrition; the most elementary basic needs is not satisfied.
Every year, according to the calculation of UNICEF, more than 10 million children die of preventable diseases -- that actually means 30,000 children a day. We have 850 million illiterate adults, 2/3 of those are women, more than one billion people lack access to safe water and 2.4 billion people lack access to proper sanitation. Ladies and gentlemen, these are absolutely grotesque figures; It is unbelievable. We have all these resources available in the modern world and still, hundreds of millions of people are suffering. That the most elementary basic needs are still not satisfied, it is absolutely unbelievable. This is morally unbearable and obviously politically unacceptable; That is very clear.
The new century began with an unprecedented declaration of solidarity and determination to get rid of world poverty. In the year 2000, the United Nations Millennium Summit gathered in New York and obviously, you know very well that the so-called Millennium Development Goals were accepted. The basic aim was to eradicate extreme poverty and hunger in the world. These goals as you very well know range from halving extreme poverty to enrolling all children, girls and boys, in primary school by year 2015.
The responsibility, and that is very important, the responsibility is shared between rich and poor countries. For poor countries, it is obviously to take poverty reduction seriously in the policy codes, that they need commitments and reforms to democratic and good governance and commitments to health and education which are needed in the developing world. For rich countries, our task, I am coming from Finland, our task is to support these global development efforts. The Millennium Development Goals call for partnership, and from our side, it is particularly a question of more effective and even also, more aid and support.
Obviously we understand this is in partnership. In this particular partnership, the role of multilateral institutions and agencies play a very, very important role. That is why we are here to discuss the role of the World Bank, IMF and the African Development Bank. I am particularly very pleased. You know and we know that partnership in the PRSP, Poverty Reduction Strategy Papers are one of the cornerstones of the development efforts of the World Bank everywhere in the developing world and, we from the donor country side are also supporting those efforts.
Ladies and gentlemen, Kofi Annan, the former Secretary-General of the United Nations made a very important speech in December last year at the Truman Presidential Museum. His speech was entitled “What I have learned during these years as secretary general” and he had five lessons. I will try to summarize them only.
First, we are all responsible for each other’s security. The security is shared. Secondly, we are all also responsible for each other’s welfare. Third, both security and welfare depend on respect for human rights and rule of law, and lesson four from Kofi Annan’s years was, governments must be accountable for their actions in the international as well as domestic arenas. And the fifth lesson for him was, how states hold each other to account and he says, only through multilateral institutions. The final lesson is that multilateral institutions must be organized in a fair and democratic way. I would say that is why we have gathered here. That is why we have parliamentary answer here. We want to make both our governments, as well as the multinational institutions accountable. We are doing the advocacy work for development issues. We are taking the poverty reduction targets seriously and obviously, we demand also that our governments as well as those inter-governmental organizations are respecting and working in that line too, that is why we are here, that is the purpose for this meeting.
I am very pleased that actually now, the accountability process, the process for accountability starts. Now we will have Minister Trevor Manuel, the Minister of Finance from South Africa – who is the doing the domestic accountability and then we will have the leaders of the international organizations to sit here.
My final conclusion is, these meetings are important. It is important that we are here together. We are discussing, we are trying to make accountability in these processes, but obviously, the most important task asked for us as parliamentarians is to work at home -- is to work at home and having all of these information and arguments to put our governments to work to reduce the global poverty. Thank you very much.
Trevor Manuel: Thank you very much Honorable Kiljunen and Honorable Mahlangu-Nkabinde, joint Chairs, President of the World Bank, Paul Wolfowitz, Managing Director Rodrigo de Rato, President of the African Development Bank, Donald Kaberuka, honorable members of parliament gathered from all over, I am very glad to see that those whom I encountered directly in this parliament in the portfolio committees who look after me and control me, I am glad to see you here in such large numbers, members of the diplomatic core, dear friends, I should single out the person who will be chairing the round table just now, very dear, Dr. Mamphela Ramphele, welcome to all of you and I want to say a special word of welcome, one of the things that people look at me and scan for is that I am born in this town.
I am very happy as a member of parliament to bid you welcome to this discussion here with us. I have quite a simple view of this forum and this view is to ensure that parliaments know what happens in the interactions between ourselves, governments, and the international financial institutions. And for that reason, it is exceedingly important to heighten the levels of accountability. This morning though, I would like to touch on some of the challenges from a slightly wider African perspective. I would like to start by saying that last year, Africa had a gross domestic product of just over 2 trillion dollars, but with that number, it is clearly the poorest region in the world. On a per capita basis and premised on purchasing power parity it varies from low in Malawi of $645.00 to a high of $17,426.00 in Equatorial Guinea, but I am sure that those who are familiar with the continent would know that the very rapid change in Equatorial Guinea arises from circumstances where that oily black stuff was found just a few years ago that has driven the change.
But this view of Africa, the poorest region in the world, is quite different from the view that we obtained at the end of the nineteenth century. It was during this time that Africa’s income amounted roughly to one-third of that of Europe and its recorded growth was certainly far more rapid than that of Asia, but of course in the intervening period came colonialism. In the last twenty years of the twentieth century, GDP per capita on the African continent remained remarkably flat while most of the emerging regions enjoyed substantial increases in both prosperity and welfare. Africa is ever catching up. Economic growth has been sustained and it is more rapid now than it has been in decades.
Since the turn of the century, growth has averaged 4.8% across the continent reaching 5.2% last year. Macro-economic policy reforms and outcomes in terms of stability underlie the improving performance. Lower and more stable inflation, manageable debt levels, sound fiscal policies and improved public financial management provide a firm foundation for this accelerating economic growth, but strong commodity prices, in particular oil, have also supported growth in recent years and this combined with some macro-economic performance has provided a framework for resilient growth in most African countries. While this trend is encouraging, it does not yet provide a sustainable platform for the reduction of poverty and inequality. Africa needs two to three decades of rapid growth to make a substantial dent in the levels of poverty.
Half of Africa today is regarded as poor while in regions such as Asia, the number of people living in poverty has halved in the past three decades. Thus a challenge on the continent is to sustain this rapid economic growth through further acceleration of investment in both physical and human capital and central to that effort are three important areas of work.
First African governments need to continue to increase the fiscal space for development via a range of reforms, prudent fiscal decisions and the development of government institutions affecting revenue collection and administration and effective government expenditure. Second, the continent’s capacity to trade must be enhanced through a pragmatic approach to regional economic integration. And third, the efforts of recent decades to improve governance need to be strengthened, accelerated and made irrevocable, in large part, by ensuring that we make major strides forward to improve global governance. The two are clearly interdependent. As economic integration proceeds and deepens and the issues associated with globalization reach further into our social, political and economic lives, we need a system of global governance that is both representative and effective.
In looking at the issues of fiscal space, clearly it is the room that governments build through sound fiscal decisions to respond to economic and social needs. Reducing debt service costs to lower debt releases resources that can be spent on social services. Improving the efficiency of the revenue authority provides additional income to invest in government spending on human and physical capital. Managing and mitigating risks on the spending side provides governments with the policy room to be able to respond to increased demand for public services or indeed to be able to deal with adverse shocks.
African governments have done well to create fiscal space in recent years. In 2006, despite rising public expenditure, many African countries accorded surpluses or moderate deficits reflecting improved domestic revenue collection and significant current grants. Debt relief efforts are helping and progress is being made to reduce the burden of interest costs.
Increased aid is also providing additional resources. However, the volatility and unpredictability of aid flows present a significant obstacle to proper budgeting and quality spending. For example, aid to Africa began rising after the early ‘70s going steadily from 16% of global aid in 1974 to 28% in 1992. Thereafter, the continent experienced a sharp downturn lasting until 2000 followed by a recovery in 2002, which actually surpassed earlier peaks. But in more recent years, aid levels have been affected by geo-political issues and in particular, the demands placed on donors to help sustain and re-develop Iraq, Afghanistan, and other countries experiencing conflict.
According to the OECD Development Assistance Committee, despite a significant increase in overall aid during 2005, the share going to the sub-Saharan Africa had declined from 35% in 2003 to 30% in 2005. I think one needs to take it a bit further and recognize that if the donor aid were driven to deal with the deficits on the budgets where there is a public accountability for the way in which money is spent, the world could make very significant advances. What we have not been able to do yet is to convince donor countries to pool their resources.
To get beyond the pet projects, to get beyond the individually bagged 4x4s, to get beyond those kinds of issues and recognize, as Kofi Annan says, that poverty threatens the security of all of us, we have got to deal with these issues together. If we don’t, I think that we place quite an untenable burden on the international financial institutions. As an international community, we have developed a common language and a set of understandings and agreements on raising the level of aid and how it will be used. Reciprocal commitments have been made covering donor and recipient behavior. Because those agreements are so important, the difficulty currently being experienced in the ensuring of fully funded IDA is especially disconcerting. In fact, IDA should not be at previous levels. It should be raised substantially higher.
We need to remind ourselves that agreements were struck in Monterrey about a partnership for development and these agreements have not been met. When the G-8+ met in Gleneagles further commitments were made, they still are not being met. And these are the deficits we have to focus on, change our perception and deal with development as an enormous challenge to all of us, not just people who happen to reside in the poorest countries in the world. But for these reasons and others, reliance on aid flows is risky and governments need to design and implement the institutional and other reforms required to develop other forms of revenue. They also need to ensure that the fiscal space created is sustainable and that expenditure that follows from it provides a human or capital return to support more rapid economic growth and/or higher productivity.
Our multilateral institutions have tended to dissuade us from focusing too much on fiscal space issues, but I think it is critical to moving African economies and governments from a condition of dependence to one of independence. It is very important that elected governments with all of the elements of democracy can account to the people for their decisions. It is fundamental to sustaining peace in the world. Some of the increased revenue accruing to African countries obviously arises from higher commodity prices and there will be structural and cyclical elements to this. Sound fiscal management suggests that once-off revenue be spent on items that provide a sustainable boost to economic development and well-being.
This implies that a substantial portion of the increased revenue should be spent on infrastructure and capacity so that development can continue when commodity prices abate. Later this year, African policy makers will have an opportunity to engage finance ministers and Central Bank governors of the G-20 on the issues of fiscal space and integrate the lessons and best practices coming out of these discussions into their own fiscal management processes. South Africa belongs to the G-20 and for us, it is very important to involve African perspectives into this—not because we represent the continent, but it is important that these voices be heard consistently.
Turning to the issue of trade with the rest of the world, it is quite evident that multi-lateral trade and reform and regional integration holds a promise of economic growth for both developed and developing countries. A strong external sector would help integrate African economies into the global economy and ensure that it is not left behind when the global marketplace expands. Increased trade has been beneficial to Africa and in that it supports poverty alleviation and is able to create new employment opportunities on the continent.
It promotes regional integration and helps expand intra-regional trade while infusing new capital and technology into the continent. Finally, by promoting strength, stability and prosperity, trade enhances Africa’s ability to contend with the problems of crime, of drug trafficking, of terrorism, of corruption, of HIV and AIDS and other infectious diseases and environment degradation. It is precisely for these reasons that the collapse of the Doha Round originally termed the Development Round is a serious indictment of the intention of developed countries to increase market access to the developing world.
And through your chair, let me make that appeal to our members of parliament from wealthy countries to raise the bar within their countries. It is quite unacceptable that the round cannot be concluded. It is quite unacceptable that market access remains at the levels where it is. It is quite unacceptable that the poor remain excluded from the markets of the developed world and this will continue unless the pressures arise from elected representatives of the people everywhere. Agricultural subsidies, phyto-sanitary rules and other non-tariff barriers remain significant obstacles to increase trade between Africa and the developed world.
They distort markets and impoverish millions thereby reducing the incentives to African countries to invest in improving their supply-side infrastructure. This is especially true for least developed countries and it is exactly why trade and aid must go hand in hand for these countries. Aid for trade needs to be addressed as a critical step towards the Doha Round. LDCs require more than just lower tariffs and improved market entry conditions to benefit from the global economy. Enhanced supply side capacities are of utmost importance in enabling developing countries to strengthen their export performance. Thus, these countries often need financial resources to remove the supply side constrains through investments in trade and infrastructure, technology, production capacity, human resources and institutions.
At the UN World Summit in September 2005, our leaders pledged their support to increase aid for building the productive and trade capacities of developing countries. It is important that Africa derives maximum benefit from this initiative and that it results in an increase in the level of both inter and intra regional trade. In spite of this disadvantage, African countries are breaking in to certain niche markets in the developing world and are benefiting greatly from the commodity riches they can export. Nonetheless, together as African countries, we face a challenge of attempting to diversify our exports within an environment where access to markets is concentrated on a limited number of products.
A much stronger approach to African and regional economic integration would also help to improve the balance of trade with the rest of the world by creating new economic links between national economies and deepening those that currently exist, but a new and robust approach linking African efforts to free fiscal space to the need for cross-border infrastructure could use greater coordination. And it is especially important that the banks work on infrastructure and its financing in Africa be given a fresh importance and urgency.
For Africa, economic integration depends on the infrastructure development in a way the continent has never before witnessed and again, I appeal to this body. There are number of very important non-governmental organizations present here, and I think we want to welcome them, but some of the difficulties that sometimes arise is that they raise obstacles to infrastructure so it becomes easier for international financial institutions to focus on the non-infrastructure issues, but in the absence of infrastructure, we cannot actually stimulate the productive side of African economy.
Turning to the issue of global governance, the key concept in the international development debate and policy discourse has been that of good governance, and I too want to refer to what Kofi Annan said, when he said, “Good governance and sustainable development are indivisible. Without good governance, without the rule of law, predictable administration, legitimate power and responsive regulation, no amount of funding, no amount of charity will set us on the path to prosperity and fruits.” Improving Africa’s governance environment has been an essential part of NEPAD, an initiative by African leaders to place the continent on a path of sustainable development encompassing good political, economic and corporate governance and prosperity, but governance at the national and regional levels is only one part of the economic trajectory that developing and poor countries need to follow.
Global governance--the roles and accountability of our multilateral institutions--must play a key role in achieving the economic and social outcomes associated with sustained economic growth and good policies. The public good qualities of these institutions play themselves out and provide key benefits in different ways and at different levels. Ever more integrated economies need a global governance structure to help resolve disputes, identify common interests and help countries achieve mutually beneficial solutions. They may in some cases even provide public goods, and one of the more important of these it seems to me is a high quality dispassionate macro-economic and micro-economic advice.
I mean dispassionate not in the sense of not caring about the outcomes but in the sense of being alive to the interplay of national interests, ideas and influence that can bias advice away from the best interests of the country receiving advice. The Bank and the Fund have come far, but we need to be mindful of the risks involved with applying templates across economies that are idiosyncratic and diverse. The repercussions of the approach taken in the past to structural adjustments still bear scars on the political consciousness of many African societies and undermine the voices of our multilateral institutions. How do we address these sort of problems? Let me suggest a few ideas.
First, we need to ensure good policy advice, calibrated appropriately to our economies, our economic challenges and our social and political norms. This is less straight forward that it sounds and critically important to get right. It also entails ensuring the broad ideas and approaches that sometimes in spite of our international forums are set off against solid core programs of policy analysis and advice. One example of this is of course the millennium development goals, you refer to it, both chairs refer to it. If you look at the MDGs, laudable? Certainly. Useful? Definitely. Comprehensive enough? This is where the questions arise.
The MDGs have swung our thinking too far away from the productive sides of our economies. It is important to keep a sense of perspective. For most developing countries achieving the MDG is as much about more rapid economic growth as it is about shifting around government spending. Lifting constraints to the economic growth has to remain a central role of developing country governments and for most of them, the activity is neither clear cut nor simple. What to do with land, the use of natural resources like water and how these link to thornier problems and our property rights remain key to the questions of sustainable economic growth. Despite what we sometimes hear, the oldest profession on Earth may in fact be agricultural economics.
Trying to address local economic problems, whether they center on land reform, irrigation, or how to develop a sustainable revenue base requires capacity building, knowledge and global systems for making sure that knowledge is available and usable. As part of the global governance system, the Bank and Fund will not be able to create positives out of a quest to rid the world of negatives, important as it is in its own right, to tackle corruption. Capacity building, institution building, and knowledge building have to be at the core of our development equation. Our multilaterals also need to think more broadly about their role in the provision of other types of public goods, in particular environmental ones. Those of us who were privileged to hear Nick Stern last night would attest to this. In coming decades global and regional environmental issues will need clear economic and policy thinking backed up by institutions and regulatory frameworks capable of handling the intersection of national governments and economies, cross-border environmental concerns and frameworks for addressing externalities that are today still in their infancy.
The solid growth seen in Africa at this time is greatly encouraging, but will only be sustained if states develop the capacity to use additional resources for the benefit of all. Investment in infrastructure and building solid economic and social institutions will affect our ability to turn the current commodity cycle into a sustained improvement in living standards of the broadest possible range of people. We continue to make progress in building our institutions, improving governance, supporting macro-economic stability, and investing in long term development. In large part, these efforts are independent of the current economic trajectory, but it is also true that difficult policy reforms can sometimes have a better chance of succeeding when economic times are good.
African governments should use revenue gains and improved fiscal positions to make clear progress in policies that hold back economic growth especially those with vested interests or which relate to regional economic integration and in order to build institutions, but they need to be able to do these things within a system of global governance that supports these efforts, truly and free of cynicism. Bank and Fund intentions, policies, and systems must place economic development and the interest of African and other peoples at the center of this approach. We have just developed a new understanding of vulnerability to price changes. The price of onions in India, or the price of tortilla in Mexico, affected by all manner of issues suddenly bring home the story of what affects the poor in ways that the macro-economic variables do not always calculate. The role of the parliamentary network is critical to resolving many of the issues that I raised today.
Global governance can only be effective when it is owned by those countries willing to participate in the global governance arrangement. As parliaments, founded as representative institutions, you need to probe and inquire, hold multilaterals at even higher standards of accountability and effectiveness. It is only in this way that the societies that you represent as parliaments will benefit fully from multilateral institutions that truly work in harmony with you to achieve our common human goals. Just before I finally say thank you, I want to express a very, very sincere word of appreciation to you Paul, to Rodrigo and to Donald for having traveled to be here. I mean, Paul has been on the road for a while now, in Africa primarily, Rodrigo flew in last night and will fly out tonight and Donald I think had just arrived from Dar Es Salaam and will have to leave after this again, but the fact that they are here is indicative of the value that they attach to this forum and that is why I think we have got to utilize this opportunity fully. I trust that the network’s review of the role of the Bank and Fund in Africa will help us together to generate further steps on the road to prosperity for all. Thank you very much.
Kimmo Kiljunen: I suppose we should also thank you, Mr. Manuel. It was an excellent expose about obviously we all know very clearly that you are not only one Finance Minister among others, you are clearly on the world scale, one of the Finance Ministers who is very committed to global development issues. We know that very well indeed.
I would like to remind you that here, actually South Africa is today chairing the Group of 20. And it is interesting that you make reference in your presentation to the Doha Development Round concerning the world trade issues. We all remember very well the Cancun meeting in 2003. I was there also from the parliamentary side observing it and after that Cancun meeting, everybody said, “Oh this was a collapse! A total failure.” But I would say one thing. It was not total failure, one major issue of yours in Cancun was that this group of 20 was established. That was the group of developing countries who have a major share in the global trade system. I would almost say that it was as indicative and important as your 1964, when the first meeting was held in Geneva, where the group of 77 was established, then actually started at the UN level, the so-called North-South dialogue. I am pretty sure that it is as important now that the group of 20 was organized within the World Trade System because we need clearly this North-South dialogue to go also on that level. Similarly, here we are particularly addressing the Bretton Woods institutions and here too obviously, it is very important that we do have these country groups very well represented and we have the partnership and dialogue because that is the only way of solving these issues.
So, I once again thank you in your personal role and also for South Africa’s leadership of the group of 20. Now India and Brazil, are important countries too, but what is important is that the world is organized and we can have a dialogue and discuss on serious terms.
Now, we are moving to the next stage in our program. Trevor, you are not actually liberated yet, you will go to that long table, you made your presentation already on African issues and it is my pleasure to invite actually, the President of African development, Donald Kaberuka, Managing Director of IMF, Rodrigo de Rato and President of World Bank, Paul Wolfowitz to sit around the table. This parliamentary discussion on Africa will be moderated by Mamphela Ramphele and Norbert Mao.
Mamphela Ramphele: This is a historic meeting of this network and we look forward to your very active participation and I would like to encourage you, as you make your interventions to state your name and where you come from so that we have a sense of the representation of the people and the raised issues in front of us. Our role is simply that of facilitators. Our topics are going to center around three main issues.
The first is the question of growth, that Minister Manuel raised very, very eloquently in his speech and the link between economic growth and good governance and the important thing is the interaction and the sustainability of growth that depends on good governance. The second question relates to the commitments to aid flows and their linkages to trade and again, we know that aid alone cannot do it, but trade also needs a full facilitation effort and third, we need to also talk to how Africa positions itself in the light of new emerging countries.
These are India and China on one hand, but also private foundations on the other. And given these three major trends the panel is going to raise and respond to your questions around the consequences for the IFIs, the International Financial Institutions and how they respond to the needs of developing countries. In the light of it, it is very important that for the IFI, they focus particularly on how they need to adapt to this changing landscape in Africa. How can the IFI optimize opportunities and mitigate potential risks? Those have been very eloquently spelled out, but you no doubt are going to raise others. And for you and the representatives of the people, parliamentarians, how can you make a positive contribution to making sure that those in your governments are held accountable, but also how can you contribute to accountability at the regional and the global levels? These three topics are going to be the anchor for various people to respond to the questions at hand. I am now going to ask my co-facilitator, Norbert Mao, to put the first question to Mr. de Rato.
Norbert Mao: This is intended also to be a kind of town hall meeting, so later on, we will invite people to supplement on our questions, kind of like a talk show so you can phone in also without necessarily having to use telephones…
President Wolfowitz: Cellular SMS?
Norbert Mao: Yes!
There are many things that offend Africans and the most offensive is when people treat Africa as one country. They say Africa. We are talking about landscape here. It has contours, valleys, hills, points of light, dark spots and now we have identified four types of landscapes in Africa-they are fast-growing countries, the countries that are resource-rich, the speedy reformers and the fragile states that come from conflict, or that are still in conflict. So a cliché that one size fits all no longer applies. Managing Director, de Rato, are you ready for this new landscape? Where one size does not fit all.
Rodrigo de Rato: It is true, that one size does not fit all in the world economy, but at the same time it is also true that we are reminded by the events all week last week and this week in the financial markets that we live in the global economy.
So, we have to learn from each other, what are the good outcomes and the good policies and which are the most common mistakes that in one condition or in another situation countries and policy makers make. Advice of course has to be case-by-case and I definitely agree with you that at the end of the day, there is no substitute for homegrown policy and homegrown decisions. Parliaments, governments, are the ones who have take the decisions and have the opportunities. This is a good time of opportunities. We probably have not lived in the last 40 years, not only in Africa, but in the rest of the world, in a more promising time. It is a time that we should see with some sense of urgency because this is the best performance of the world economy, at least since in the 1960’s, and probably since in the Second World War.
So that means, that we should feel confident may be true, but we should also feel with some sense of urgency that the good times have to last. Then let me now answer about Africa. I totally agree with you that talking about sub-Saharan Africa is a big generalization. There are very different circumstances and some of the papers you are looking at regarding the different characterizations of the countries I think are accurate.
But nevertheless, I think that in some general ideas that would be worthwhile to contemplate this morning. One is that, this Minister Manuel reminded us, there is very strong growth of many of the African countries and this is not only concentrated on rich commodity countries, or in coastal countries, we have seen growth more or less as a strong case in all the countries. We see also better macro-economic frameworks with no inflation in many countries and we see also fiscal deficits and debt coming to sustainable levels. All those are very good news because they put the foundation for what I think is key, which is sustainable growth. And at the start, I want to share with you that unless we talk about 15 to 20 years of sustainable growth, things would not change for most of the population. That has been true in Europe after World War II, it has been true in Asia, it has been true in Latin America and is also true in Africa.
So, we need sustainable growth and these figures that we all know of growth, macro-economic stability, low inflation, sustainable debt, growth that is not only concentrated on commodity-rich countries is the key. But is this better circumstances, can we characterize them as good, well, I do not think so. So we are better off, but I am not sure where we are where we want to be yet. In fact, if Africa will continue to grow at the actual rhythm, it will not achieve the millennium development goals. So it has to grow not only sustainable, but it has to grow more.
So the challenge is not small because at the same time that we recognize that we are in the best growth environment over the last 40 years, we have to recognize that we need more growth over a sustainable period of time for many countries to reduce poverty in a lasting way. So let me add two different sets of ideas. One directed to the African countries and I think there are four inter-related questions or pieces of advice: One is integration into the global economy; the other is the role of the private sector; the third is the developing of the financial sector; and the fourth is in efficient use of public resources.
I have chosen these four pieces of the puzzle because I believe that among the four, they define very well agendas and the four are inter-related and they help each other as they move along. Let me briefly talk a bit about each of them. Trade has proven, in the last 40 years or 50 years, there is an essential utility for developing growth in all countries of the world. And thus your countries of major economies, low-income countries, all of them are going to benefit from trade and there is no example of a country that has been able to lift itself out of poverty that has not integrated itself in the global economy. That was true 30 years ago, but it is even more true today the importance of global market.
So in that respect, the Doha question is a good question. I would in fact, return to the Doha question a little later. I want to emphasize that African countries need to trade more resources. There is a lot of growth that has been lost because of lack of lack of inter-regional trade in Africa.
Speaker: I may interrupt you just a little bit because we need the input of the other leaders of the international financial institutions. By the way for those who don’t know Managing Director de Rato was for 25 years a member of Parliament. So he is not a stranger to your kind of environment and so for all these people around this table who held this kind of position in government. But I just wanted to get comments from the President of the World Bank on his own readiness from where he sits to respond to these different landscapes now that we have agreed that one size does not fit all. Mr. President, Are you ready?
Paul Wolfowitz: On this notion that somehow you can have poverty reduction without growth. Unfortunately, you can’t have growth without poverty reduction if it’s not shared growth. I don’t think it’s possible to have poverty reduction with no growth, and increasingly, I think it’s important to recognize that. One of the missing Millennium Development goals is jobs; there is no goal for jobs and jobs are one of the keys for escaping poverty. But I think it’s very important to stress what is represented by our two friends here from Africa. Rwanda has had a spectacular growth record after the genocide literally over the twelve years and Donald was finance minister most of that time; 8% to 9% and that’s just amazing. And of course South Africa has had an incredible record. In a way, it’s more difficult when you start at a high level and it has been an engine of growth for the subcontinent, but I think it has also been an inspiration. What I would say is this in response to your question.
Yes, it’s a very, varied landscape, but what impresses me is, how people on one hill look at people on the next hill and that leaders from some of the most fragile states in Africa attended the independence celebration in Ghana. I have to be honest -- I looked at Ghana and thought how much further they have to go, but for these people they looked at Ghana and said, that’s where we need to get to. So, it is a pathway, and while each country is different, each country is at a different point on the path. I think it’s a path to the same thing, which is to give all these countries a chance to have a better future for their children. I know there are not many things that motivate people more than that. What is so exciting to me about Africa today is that I think it really is a key to change over 10 years. We are seeing not just growth broadly across the subcontinent, but very impressive sustained growth over 10 years in some 17 countries that have about a third of the population. If you ask me in somewhat simplistic terms to say what I think, the approach of the Bank should be to recognize that our role is different at different places.
In places like Ghana and Tanzania that are on a good strong track, it’s how to get them on an outstanding track. And if lack of electricity, lack of roads are a big barrier to growth. I think also some of the policies that make it hard to do business are barriers to growth. So, they have something to do, we have something to do. When you get to a country like the Democratic Republic of the Congo, that’s just barely on the pathway out of the disaster, it is a different kind of support they need, that produces results not in 6 years, but in 6 months. It’s just now starting on the path of democracy but at the same time I think the government’s problems have to be front and center. And it is encouraging when you go to Kinshasa to learn the government has put the governance compact at the foundation of all of its development efforts.
Moderator: Thank you Mr. President. Dr. Kaberuka, Managing Director De Rato agreed that Africa is not all the same, but he also insisted that they are global links as we agreed. We used the image of climate; it’s raining everywhere in Africa, but in some places it is hailstorms, in some places there are drizzles, and in some places there are storms. What specific policy measures from where you are sitting are you taking to respond to this specific inferences and circumstances?
Mr. Kaberuka: Thank you Chairman Mao.
I just wanted to question one idea. It is true that we are 50 + countries in Africa but that is not our doing. But Africa is one. Some of these numbers are very, very, linked. When there is a conflict in a particular country that is not confined to that particular country, it has an impact on the entire region. You can not look at an isolated country and say these are the policies for this country and these are the policies for another country. Take an example. If a country like South Africa is growing, it has powerful neighborhood effects on the others in the neighborhood, pulling in these countries. And therefore, what Trevor was talking about, the importance of regional integration, and our ability to facilitate the integration of those markets is real – for the size of the market, for the diversity of the market. And that’s why I think the stress on infrastructure is very important.
In the first decade of post-independence in Africa our economies were fine—some of them.
But in the 70s and 80s they were….you know Chairman Mao—the other Chairman Mao!—said something that I think is important: for an egg to hatch a chicken, the internal conditions have to be right, and the external conditions have to be right. In the 70s and 80s there were some internal conditions that were clearly wrong, which were not fixed. But there were also external conditions that were wrong including the cold war.
I think what we need now is an understanding that we Africans need to fix internal conditions especially governance, peace and democracy. And what the international community needs to understand is this, is that poverty needs to be resolved because it’s money for us. So what do we do? What has to be done has been defined; in Moterrey, in Gleneagles. I think what we have to ask ourselves as parliamentarians is “why can we not deliver what we have committed to deliver?” And I think the role of our parliaments is that you ensure that you hold our governments for the promises they’ve made.
Trevor talked about deficit, but there’s another important deficit in the world. That is the deficit of commitments. People make commitments and then five years down the road people shift the goal posts. In our countries, hold our governments accountable to deliver on governance. In terms of the donors, hold your governments accountable to make sure that the World Bank IDA is attainable. To ensure our own soft window is replenished so that you can carry on development in infrastructure, skills, and all of that, and so on.
I agree with Rodrigo. Africa is facing its best chance to get on the road to success but the internal conditions and the external conditions have to be met.
Norbert Mao. Thank you very much and, Trevor you were quoting Kofi Annan. Now, I want to quote you. In your speech you talked about cross-border infrastructure. Now, coming from Uganda, I wish there was a highway linking Congo and Uganda maybe we would be more at peace with one another; what are regional organizations and African governments doing to promote these common cross-border infrastructure?
Trevor Manuel: Thank you very much Norbert. I think one of the big, big challenges is, is that African nations ask the donors to take us on to resolve the contradictions with our regional institutions. Last year, at the ADB meetings the AU did a presentation on the work that’s being done, but we must speed up this work. You know, where we are in Southern Africa, you could be simultaneously a member of SADC, of the Southern African Customs Union, of COMESA, of the Indian Ocean Group, of one or two EPAs because the EU decides who they deal with, and at the end of the day it’s quite impossible to get a program going that compels government to interact with each other because that interaction will bring certain positives.
One of the big positives, is that we understand that we must change the pattern of infrastructure. If you take the satellite picture of Africa the infrastructure grid looks very much like it was in the 60s and the gist of it is where a hole has been dug to extract copper or gold or any other—coal--you build the railway line to the nearest port and you send the away the unprocessed goods. There is no infrastructure that compels us to trade with each other and for that reason intra-African trade holds us back. And because intra-African trade holds us back it is possible for countries to live cheek-by-jowl without being compelled to deal with a commitment to convergence of the macro-economic variances.
So, these things interact with, you know, my argument is that unless we are compelled to minimize the number of regional institutions we belong to, to ensure that those that exit are strengthened, are more effective, we won’t be placing ourselves in a position where we grow together. And I want to be quite frank about that; I want to, in fact, appeal to parliaments on this issue. You know frequently when our heads of state meet -- with great respect they meet and there is an executive secretary of one country in one institution and his counterpart in another institution. The two heads of state meet. Neither wants to give up the seat because we attach prestige to it and somehow -- the point that Dr. Kaberuka makes about a single vision of Africa - hold on! It is the 50th anniversary of Pan Africanism this month, so let’s remind ourselves of that. It is the 50th anniversary of the independence of Ghana. It means something to us and part of our interpretation of that must actually compel us to behave differently and decide what sovereignty means in the context. We don't need everything, but we need some things and that which we need prepare to be a lot better at then what would have been over the past 50 years.
Norbert Mao: Thank you very much. Now, we are going to ask people to call in and just a little caveat; this debate is being broadcast live and on the Internet, the IMF and World Bank staff are right now watching you. I noticed that in Uganda the quality of debate went up when we started being broadcast on television towards the great caveat, not to sound stupid. So, just one of you. Our colleague from Kenya, honorable Sungu; very briefly please.
Gor Sungu: Okay, thank you. The name is Gor Sungu, Kenya. A very brief one, the landscape issue. Between the three gentlemen we have here, they control enough money-- the IMF, the World Bank, and the ADB--to change the face of Africa completely. Africa is susceptible to a lot of natural calamities. Drought is a major one, flooding (El Niño) is another one. Not to mention the pandemics, you know, Rift Valley Fever, bird flu, HIV/AIDS, malaria and other communicable disease. Now, these calamities do tend to have a long-term effect on the economies of the countries affected and it doesn’t matter what kind of budget you have if they are wiped out by a flood or people are dying by the thousands.
The kind of response we get from the international community, particularly from the three institutions is lacking, it is never at the same level, at the same speed as you would get from -– for example when the Asian Tsunami struck, or when there was Hurricane Katrina, or when something happens in Europe, in Bosnia or wherever it is. It doesn’t happen in Africa as it happens else where. Is Africa being ignored? Are we giving enough attention to Africa? Are we serious about Africa? Thank you.
David Matongo: Thank you very much. I am David Matongo, member of parliament in Zambia. In the context of the natural and structural landscape of human development, vis-à-vis debt construction, I would like to ask the gentlemen around the table whether the international community could develop a debt-resolution mechanism that defines a responsible lending framework by creditors and is supervised by parliamentarians from those creditor countries. That defines a responsible borrowing framework from and for debtor countries again with a very strong watchful eye of parliamentarians and indeed an international debt-resolution mechanism that is a fair. Meaning, there are terms defined by both, the creditor and the debtor through negotiations. I raise this issue with you ladies and gentlemen sitting there in light of the Zambian situation. Most of you are aware of the vulture fund debt of which some judgment has been made against Zambia, primarily because you did not foresee a situation like that in your insistence with countries that borrow money that the elected leaders in fact are the final authority for any-debt construction.
Norbert Mao: Thank you for your question, let’s move here now. Yes sir.
Moses Asaga: My name is Moses Asaga, Member of Parliament from Ghana and my contribution would be on what Dr. Kaberuka said about this soft window of the African Development Bank. I totally support him because, when it comes to the true knowledge of Africa, I believe that it is the African Development Bank which is the true bank of Africa. Other banks like the World Bank and the IMF and IDA, IFIs, would have to complement because Kaberuka knows the various climates in Africa and he would be able to go down and meet the people and know where exactly to invest. But in supporting his soft window I must also see that for that soft window to be transparent, he needs to strengthen his private sector development division. He needs to set up an Africa Finance Corporation just like the equivalent of the IFC if that is possible, but again he must know that the voice of the ADB is not the top management of ADB.
It is the regional members. Therefore, in such cases we should be able to have a forum where about three or four regional member countries would be invited with the non-regional members and the donors, so that these regional members would speak for the ADB. It has been done before and I participated in one in 1999, in 1998. We were four countries Ghana, Nigeria, Mozambique, Mali. I led the Ghana team and at the end of the day we were able to secure a replenishment of about $2-3 billion because the voices came from the regional members and not from ADB per se. So, this is my contribution. Thank you.
Moderator: Thank you very much, yes; the last but not the least let’s take from the back.
Louisa Mabe: Thank you I am Louisa Mabe from the South African Parliament. I want to start by indicating that all of us are aware that Africa is natural resources-rich and to most of -- actually all the regions are dependent on our natural resource of Africans but we are the poorest of all the regions. So, what I want to get from the panel is why is it difficult to provide development aid according to our own conditions? According to the way we view development as Africans and not according to how the IMF, how the World Bank sees development from its view? How we view development as those who need to develop? So, what makes it difficult to move from the way you have been viewing things to the way we view things? Thank you.
Norbert Mao: Thank you very much, I will turn it to the panel now. The Managing Director de Rato so maybe you’ll respond fast to honorable Sungu’s question. He is alleging that Africa does not get the same attention that other parts of the world like the Tsunami areas get. Is his comment fair?.
Rodrigo de Rato: Well first of all, I would like to say that, in disaster circumstances, relief is not fast enough; so maybe it is not fair. So, I think that the question is how can we from international institutions move more rapidly when natural disaster occur. And I think there is an effort; certainly I am going to talk about mine but I think in the case of the other two institutions it is also true. There is constant effort to streamline our procedures and to move faster in conditions or in situations in which there is urgency in natural disasters.
Of course, we cannot prepare ourselves for crisis and that has to do with better budget, more efficient public expenditure and capacity to building; and I think many of the work that at least the IMF is doing in Africa has to do with capacity building. We have a very extensive and increasing effort in technical assistance and capacity building and with institutions very often reactions are much better and more focused. Let me take the chance to answer a little bit about the two other questions. One is about debt sustainability; I think the gentleman from Zambia asked about it.
Debt sustainability is a crucial question, we have gone through a tragic period of debt accumulation that Africa could not handle and I think the efforts on HIPC and then on the multilateral debt relief were in the right direction. I am very proud that we were able to deliver in the case of the IMF and also the other institutions. But debt could build up again and I think the debt sustainability issue, which is a difficult one, should be put high in the agenda of governments and parliamentarians when we are looking at tradeoffs between needs and resources. Thirdly, there was a question about home grown development. I totally agree and I think that PRGF and PRSP initiative that the World Bank and we started in 1999 has proven that it is the road to growth.
Countries have to develop their own poverty reduction strategy. It has to be a question not only of governments but also of parliament and civil society to discuss inside the country, to get a national consensus of what is the poverty reduction strategy in each country and that has proven in the last six years of applying it a very successful instrument. So, I totally agree on that, I think international institutions like the Fund have to be cooperative with countries in designing their own poverty reduction strategy, but at the same time and to the parliamentarians that are here from donors countries, I want to really urge them to harmonize their conditions.
Right now, there is an incredible and increasing burden of aid with different conditions, and aid that is not predictable and its going to be very difficult for countries who need resources from outside, as Trevor was mentioning, to be able to plan their infrastructure or their health systems if there is not enough predictability of the flows of aid. So, I think we need home grown approaches to poverty reduction but at the same time we need from donor countries less specific conditions, try to harmonize conditions and make them more predictable.
Norbert Mao: The second question from Zambia: He asked you about a responsible lending. Mr. President from your experience and the way you see it, how much responsibility do you share for tax that goes bad and the credit cases like in Zambia and how can you ensure that the parliamentarian representatives of the people play a more visible role to make sure that governments borrow responsibly and they plan responsibly?
Paul Wolfowitz: Liberia has emerged from a terrible and tragic history, finally has peace, there is a remarkable election in which the people vote for -- actually the first Women President in Africa on a platform of economic reform and that she has to spend so much of her time at the beginning figuring out how to deal with the debts of Samuel Doe and Charles Taylor. That is just wrong, but I am proud that with our institutions I think we are on the way to clearing up that issue. Going forward what we do not want to create is another whole set of highly indebted countries, and I don’t think the challenge mainly comes from our institutions, I think it mainly comes from a whole range of other potential creditors.
That’s why the framework that Rodrigo talked about is so important; but I think the real key making that framework work is going to be publicity. We are not at that point yet, but I think if parliaments are more aware when their government is starting to borrow excessively or using the proceeds of loans for unproductive purposes, that’s probably going to be the most effective way of controlling irresponsible lending and irresponsible borrowing.
You also mentioned the challenge of the vulture funds and I have read the facts about the Zambia case; I think it is just tragic. I think we need to find some ways to avoid that kind of preying on countries that just emerge from having been heavily indebted. But we need to do it in a way that doesn’t destroy the whole ability of countries to borrow responsibly. So it is a challenge, but it is one that our institution needs to face up to. I would just also like to say I wish the whole world would respond to Africa the way we responded to the Tsunami, but let’s recognize that was a kind of shocking and spectacular event and made headlines in the way that was important.
I think there is an improved response; we saw it in Gleaneagles, you see it again in the campaigns of Bono and Bob Geldorf and they have been very effective. They are not effective enough, and the pressure has to be kept up, but I think it is there. The last thing I would say is that it is important to not just emphasize the needs, which are enormous and which do get a lot of headlines. What doesn’t get enough headlines is the progress that has been made. So, a lot people say, well Africa got a lot of aid over many years and what good did it do? It might not be politically correct to say this but we are not giving it to the likes of Mobutu anymore. We’ve seen the difference in the record of Rwanda and the record of Ghana and the record of Tanzania, not to mention –though it’s not an aid recipient—the record of South Africa. I think people in the larger world don’t hear about Africa’s success stories, don’t hear enough about responsive government and I think that is a very important part of mobilizing support.
Norbert Mao: Thank you Mr. President. No more red carpets for the likes of the Mobutus. Before Maphela Ramphele comes to the table next, let me ask Dr. Kaberuka: Is it time to set up an Africa Finance Corporation and involve more the regional groupings, make sure that better projects get funded by what our colleague call the true Bank of Africa?
Donald Kaberuka: Thank you. Can I begin by saying that—our colleague from Ghana said that collectively we have enough resources to ensure African growth. I hope that day comes. But the truth of the matter is, neither IDA nor the ADF nor the IMF has enough resources to get anywhere near the kind of growth that is needed to meet the MDGs . It is critical in this replenishment to increase the capacity of IDA, to increase the capacity of the ADF. It’s not one or the other. It’s both. Now on this other issue of voice; what is this voice of Africa? It is not simply the voice inside the African Development Bank, it should be the voice internationally.
There is no particular difficulty in getting an African Finance Corporation. We’re trying to expand our private sector reach. That said, when it comes to private sector development in Africa, there are three issues we have to address; one is the investment climate in Africa. The kind of perception of the investment climate on the continent. Foreign business people, African business people, need to have the kind of climate that lets them invest. One of the ways of ensuring that the climate is good is by applying good policies in a consistent way for a long period of time. In the past the policies have been on-and-off, stop-and-go and that is not good….and no institution can resolve that issue unless the governments, the parliaments, the institutions ensure that kind of climate exists.
Now, let me also add something which might be a bit controversial but clearly it’s on the table. It is no longer the private sector versus the state. It is both the states and the private sector. It is the state that has the capacity to have the strong institutions that support the private sector. It is a private sector that understands the challenges which are linked to trade. So, I think that, in an attempt to improve the private sector climate, we need to strengthen the capacity, strengthen the institutions, but also the private sector itself. Now, one of the lessons we have learned from India and in the other Asian countries is this one: a high quality relationship between the States and the private sector. So, you know, in our approach to promote private sector development in Africa, we are also developing the capacity to have a state in its function to support the private sector development, to ensure public sector can be mobilized, to ensure that basic rights are respected.
Trevor Manuel: Now my understanding of the three institutions represented here is that they are not donors. Donors give. Financial institutions lend. And even the concession windows are about lending and nobody comes alone to lend you money unless there is an agreement.
Now, we are dealing with the higher level of transparency. I went along with the President once to visit another country and we looked at some issues and we went to IMF Website, found the letter of intent that has been signed between this country and the IMF. It’s published. The head of state didn’t know that his minister of finance entered into an agreement with the IMF. It’s on the IMF website. It’s published. It’s in circumstances of secrecy that strange things happen. What we need to advance is what the transparency that we’ve succeeded in securing over the last few decades means as we go forward.
So, there is no -- these are not innovations now -- they’re there already. I think similarly, we must accept that governments are elected to take responsibility for contracting because just -- I mean, these institutions can’t contract with anybody, they have to contract with their member states. And the other thing is that in terms of contracting, there need to be rules about whom governments contract with. What we require to do by our own constitution is to publish an annual statement of assets and liabilities, debt maturities of all of those things. But as we take countries through that kind of responsibility, what we do is we will, in fact, be able to circumvent the prospect ever again of a country finding itself at the mercy of donors.
So, it’s what we do, before the fact in ensuring that everybody understands what is in the nature of the agreement that will ensure that the development needs of a country are best addressed. Thank you.
Norbert Mao: Thank you very much. Let’s go now to our next topic of aid and trade.
Mamphela Ramphele:We actually took a long time expressing ourselves on issues of growth... I am going to suggest that you take the next questions together because we are running out of time. We are supposed to be ending this discussion at one o’clock. So, I am going to ask for your indulgence in asking those two to synthesize. The issues on the table, will revolve around scaling up on aid and trade. As Trevor Manuel said in his speech many promises have been made. When I was at the World Bank, I spent a lot of time focusing on the preparation for Monterrey where a lot of promises were made…
I am suggesting that before responding to the question of why, after all the efforts that we have made, and I was directly implicated in preparing for the Monterrey Conference organized by the UN, where the main purpose was to spell out the complementary responsibilities between the international finance institutions on one hand, developing countries on the other and developed countries in a partnership to scale up development interventions. Here, we are now in 2007, and that was 2002, we had also the video that talked very eloquently about doubling aid and we have heard from the discussion this morning about how the Doha Round has not quite delivered on what we expected. Where are the bottlenecks and how can we move forward? And second, how do the emerging new players such as China, India, and the private foundations, how could they play role in helping us scale up? And what is Africa going to do to position itself so that it can be part of the aid?
Paul Wolfowitz: Let me just try to start the discussion, first of all Trevor pointed out correctly, two points. Number one, the last year or two have seen a significant increase in aid on the one hand and on the other hand, most of that has gone to debt relief and most of that to Iraq, Afghanistan, and Nigeria so the result is that Africa’s percentage has actually gone down and arguably the quality rate has gone down. I am not saying the debt relief is bad, I am not saying that debt relief doesn’t cost real money to the donor countries, although, I don’t think dollar for dollar is the same thing. And I do believe that the multilateral debt relief initiative is a very good thing for Africa.
Although that’s a new set of promises that have to be kept. On top of the Gleneagles promises we now have promises for donors to make good the resource flows that have been lost to the African Development Bank and the World Bank. I think the next year or two is going to be crucial as to whether the donors live up to their promises and I think it’s absolutely crucial. Tony Blair said, I think correctly at Gleneagles, that what came out that is kind of deal for deal, that it was promises of improved performance by the developing countries particularly in Africa, in return for increased assistance from the developed countries. I heard in some places, including good performing African countries, that the kind of promise game has set in. People ask us to present plans for using increased resources, we put a lot of our scarce talent into developing those plans and then the resource don’t come.
Yes, Ghana has been growing at 4% or better for the last ten years, but what Ghana really needs is to grow at 8% better for the next ten years and yes, good policies are essential. Korea and China and Malaysia didn’t get where they are today without very good, sound, macro- and microeconomic policies. But they also got very substantial investment in hard infrastructure and in human infrastructure. South Korea got $25 billion dollars of assistance just from the World Bank over its course of development, China got $40 billion; again, just from the World Bank.
So, there is an ability of the African countries to absorb aid and those promises really need to be kept for many reasons, including the current conditions of the world economy. This is the rare opportunity to turn around the situation in Africa, which I think is a burden for the whole world. It really has implications, not just for Africans, but for the whole world.
I do think the quality of aid needs to be looked at. One thing that is a little startling when you start to look at it, although when you start to say it, it’s not such a surprise, is that the donors increasingly are applying their aid to such specific purposes, even terrifically worthwhile purposes like the fight against AIDS, that sometimes what’s left over for countries to use for the purposes that they consider the highest priority has actually declined. There is one case, the case of Rwanda and health, where donor assistance that is not tied to a specific disease, is down to less than 5% of the total assistance.
One of the reasons infrastructure is inadequately funded, and I believe it is and Trevor Manuel made that point, is because the development community discovered, I think correctly and maybe little late, that human development is a crucial part of development. I think the pendulum has almost swung too far, where of course health and education are critical, but even health and education depend on roads and electricity. I think the balance was a little out of whack, but it’s much easier to get the balance right when numbers go up. I would argue we need more assistance. Those of you who are parliamentarians from donor countries, I hope that you will go home and tell your governments that there is an opportunity here, there is an opportunity in Africa, there is an opportunity throughout the developing world and it is incredibly short-sighted to see the relatively small amounts of government money that’s involved –and not to step on to the plate.
Take my own country the United States. If you ask Americans, I believe they think that roughly 25% of the US budget goes to what we call foreign aid. In other words 25 cents on the dollar. Of course, the reality is barely one cent on the dollar goes to foreign aid. If you ask American tax payers how much should go to foreign aid, they say oh about 14%. So, by my count is another 13 cents on the dollar that Americans think they ought to spend on foreign assistance. I think it’s time the United States, the Europeans, Japan and even South Africa whom I know is now a donor--I thank you for that— and China should step up. It is good to have these new emerging donors and yes it would be good if we coordinate better and I hope we can. My view is it is a great opportunity.
Last comment: We are talking about big numbers. I think $260 billion, which is what Europe, the United States and Japan, between the tax payers and the consumers, spend in subsidized agriculture. Doha is a modest success, I hope it makes a dent in that number but it’s certainly disappointing that there is not going to be a big dent. But that’s no reason to maintain irrational trade barriers within Africa between African countries. There are big markets within Africa that I think would be opened if more were done regionally.
Mamphela Ramphele: Thank you very much Paul. I am very keen to hear from parliamentarians from developed countries, because this question of scaling up and the meeting, all the promises made must be something that you can help us with to move forward.
Denmark: Thank you very much. My name is Steen Gade from Denmark. Two quick questions. The first is what will you do with the countries that are not donor darlings? You know there are donor darlings, and what will you do with all the others? What are the obligations for the banks, and for the countries that are not darlings? The next question is to President Wolfowitz, I am coming from Europe and of course it’s terrible to see how the discussion in Europe and in the US is on agricultural subsidies, cotton, sugar, and everything.
Of course it’s terrible, and we have to change that attitude in the US and in the EU. Could you give this argument to the public in the US and in Europe, that it is to our own economic benefit to cut the subsidies as quickly as possible, so we can have money to use for much better things in our own economy? I could imagine that the World Bank here in the last round of the Doha discussion could go out in New York Times explaining with economic figures that it’s to the benefit, economic benefit of the population in Europe and in the US to cut the subsidies on cotton and sugar and everything in a planned manner, so that we can have money for the next investments and not doing a bad thing in using the money on these issues. Thank you.
Peter Stollery: I am Senator Peter Stollery, and I am Chairman of the Senate, Foreign Affairs Committee of Canada and we have just completed and exhaustive study of this subject. We have spent two years, interviewed 400 witnesses on the failure in African development over the last 40 years. I think it’s best described by our cover. In 1965, percent GDP in Sub-Saharan Africa was 17.1% of the world average and in 2004, it was 9.7% of world average. It is really a tragedy, unprecedented, since the end of the war in my opinion. First I would just like to very briefly, (Chairman, I realize that we are very tight), congratulate Minister Manuel for what I thought was a magnificent speech, I really mean that genuinely, and I have heard an awful lot of them over the last 35 years in Parliament.
It seems to me that there can be no real -- I am talking about Africa between the Tropic of Cancer and the Tropic of Capricorn, tropical Africa essentially -- and I was in Hong Kong at the last Doha Ministerial, and I would recommend to anyone the speech by the foreign minister of Paraguay on the tragedy that is unfolding in what is suppose to be the agricultural round. How can there be much success in Africa if 80% of the people work in subsistence agricultural if there are no markets for their products. To me that is self-evident. On the other issue and it’s my question – transparency – when the figures are put out about growth they include of course the recent oil, petroleum discoveries on the West Coast, I guess ranging from Angola up to Nigeria, Gabon and all the rest of it, and really the facts are that much of that money has been stolen and deposited in Western banks.
I have heard figures as much as $300 billion from a certain country deposited in Western banks; a book has been published, “The Achilles Heel of Capitalism.” Now, I know that there have been accusations, and I am not making them, but there have been accusations that the World Bank has not been particularly effective in controlling the huge role of corruption, particularly in the petroleum industry because the money is so easily moved around. If you start taking those kinds of figures out of the growth that the average citizen sees in these African countries where are we left? I would like to know and I am not the only one, what is being done about that by the World Bank where the accusations has been made that staff sometimes move between private banking interests and the World Bank and have not shown great enthusiasm for cleaning up the system.
Monyane Moleleki: Thank you ma’am. I am a Member of Parliament from a Parliament which is probably closest to this one, just around the corner Lesotho, but I am also just masquerading as a parliamentarian because I come from the executive as well. My name is Monyane Moleleki. I relish this opportunity to be able to address these two Presidents and one Managing Director as well as the rest of you. I am going to make a comment and invite them if they wish to respond to that comment to do so.
We get a lot of support from the World Bank and from the African Development Bank, but the conditions that come with those lendings are such that we get perhaps the desired infrastructure, a road project here, a water project there, but there is this conditionality about open international competitive bidding that goes with it. So, we get the infrastructure but our private sector doesn’t get to benefit because they are made to compete with French, German, Italian and a lot of developed world companies. Even where our small fledging nascent companies have the capacity to do the job. So my comment is we get the desired infrastructure, but our private sector doesn’t get the opportunity to grow. What is your comment? Thank you.
Mohammed Fella: Hello, Mohammed Fella, Algeria. In order to fight poverty Algeria wanted to clear its debt before its term and the donors and banks refuse this gesture on our part. How can you explain that we want as a country to pay debt before its turn?
Mohammed Oudor: Thank you Ms. Chair. I am Mohammed Oudor from the Parliament of Morocco. I want to make a comment. First of all, as you introduce this meeting, it was historical day and it is indeed a historical day because Africa is here, present in South Africa to talk about poverty which is particularly crucial in this part of the world.
It is also historical day because we parliamentarians are here to talk with international institutions which we have often criticized rightfully or wrongfully, but now dialogue is established. I would like to warmly thank those who are here today and thank those who decided to start up a dialogue between the parliamentarians and the international institutions, and we have to thank the PNoWB who is at the origin of this dialogue. Then I would like to come back to the comments that were made by the representatives of the institutional banks and international organizations and would particularly like to come back to the words of the Managing Director of the IMF who said that we were at a promising point and there is also sustained growth but along with this growth we need to meet certain conditions such as integrating into the world economy, the better management of natural resources, and intensifying trade.
How can we as African be part of the international trade and global economy when you know that African economies face these economic barriers? On the other hand, you know that all the African resources have been plundered to enrich the west without reaping any compensation; Aid alone can not develop Africa. Africa has the potential and the means to develop if it takes itself in hand and the international institutions are implicated. Today, parliamentarians who have always been ignored--and I am very happy to be here today—must also play their role.
Azra Hadziahmetovic: My name is Azra Hadziahmetovic from Bosnia and Herzogovina, I have three short questions. First, about regional disparity in the region and between the regions. We had a discussion today about new regional trade solutions made by representative of EU here in Africa, and I want to ask you for all of the regions in the world, for example, Western Balkans and Europe or the differences between Western Balkans and the western part of EU. Could you explain your approach about regional development priorities? Second question, is about immigrants and their integration in society. In this context, maybe World Bank or IMF have some comments. Thanks.
Mamphela Ramphele: One last question here and then we are going to come back to the whole pane.
Billow Kerrow: Thank you. My name is Billow Kerrow from Kenya. Now, there was a call by, I think, the Managing Director of ADB that its Members of Parliament who are here, who will need to hold there countries to account, but my concern is that that effort by these Members of Parliament to hold their governments to account is being undermined by the multilateral institutions themselves and a good example is that when you get a couple of guys from the IMF walking into town, spend a couple of weeks and conclude and give the government a clean bill of health as regards to the economy and so forth, when indeed the Parliament and the people of that country are raising concerns about governance.
I think it really undermines the good governance, it undermines the growth of democracy. So, my question really is, can these institutions, multilateral institutions, IMF and World Bank undertake to include Members of Parliament or Parliaments as institutions in their engagements when they are visiting the countries and trying to examine the governance issues in those country. I think that is my observation. Thank you.
Mamphela Ramphele: Thank you very much. The key issues are of corruption and what you can do to help with making the trade systems work.
Paul Wolfowitz: First of all, you asked about aid orphans, countries that are neglected. Let me say just very briefly; that is an important reason why donors should support the African Development Bank and the World Bank because we have a system that I think is fair across the board. You make an interesting suggestion. We have done actually, a lot of public advocacy on the fact that these agricultural trade subsidies are hurting the poorest people in the world because they are our clients or our partners and the people we care the most about. I already got into trouble with some members of US congress for doing that, and they might say it is essentially not in the interest of Americans or Europeans as well but, it is a powerful argument, and I make the point that $260 billion is coming out of the pockets of American, European, and Japanese tax payers and consumers, but let me take it under advisement. I do think anything that we can to do help push for more effective trade negotiation would be enormously valuable.
On the broader question that Senator Stollery asked about, and first of all, I agree very strongly with the suggestion made on the lack of accountability for these large streams of oil revenues and sometimes other extractive industries. More often than not, it has turned out to be a curse rather than a blessing. Nigeria is a stunning example of a country whose oil revenues over many years probably did damage and they certainly didn’t do much good. Although Nigeria too is beginning to show some very significant performance on the governance front but I am sorry if I have to say, I don’t think the World Bank is responsible for that one. These countries by definition are not getting large amounts of money from the World Bank. As I go around the world I find there’s an image of the World Bank as extremely powerful. Our friends think we are very powerful and our enemies think we are very powerful and the truth of the matter is, we’re not as powerful as our friends hope or our and enemies fear.
One thing that we have supported, and I am proud of, is pushing the Extractive Industries Transparency Initiative, which is an initiative to get oil companies and the countries they are operating in to at least declare what the revenues are. And that will be a start, it’s only a start, and unfortunately only about twenty countries have signed up it, although significantly Nigeria has. At least, if the people know how much money was coming in they might be more demanding with where it ends up going. I do believe we should do everything we can to contribute to that. We make very big efforts to ensure that our own staff behave in an accountable way. I think we probably have as good a policy on individual disclosure of financial interests as you could ask for. We have this strongest investigative unit of any of the multilateral banks and I think they are looking to follow our example.
So, I do think we need to have our own act together, we can’t go and tell other people to worry about corruption and turn a blind eye ourselves. But this is a big problem which all the donors need to look at. Thankfully, and I’ve said this many times before, corruption is fed by the bad behavior of multinational companies who often find themselves forced to compete in a race to the bottom. I would encourage parliamentarians in donor countries to think about toughening up the laws on bribery. Every corrupt transaction has at least two parties and the briber more often than not comes from the United States or, dare I say, Canada or Europe or Japan.
Mamphela Ramphele: Thank you. Mr. de Rato, what can you say about countries which are given a clean bill of health in countries that are less than healthy.
Rodrigo de Rato: First of all I would say it would be surprising if the IMF would give a clean bill of health to anybody. So, it’s usually pretty critical and we are usually accused of the contrary- that we are always asking for more efforts. But in-as-much as we give a clean bill of health to a country or not, I think the question of the parliamentarian is very right. There is a need for international institutions, certainly for the Fund, to engage with civil society and with parliamentarians and we do that, but we have to understand also, and I ask you to do so, that the member countries are government for us. So, our partners, the ones we have to engage with the ones we have to advise, the ones we have to have a high degree of candor with, are governments. It is true that through the years, and we are doing more and more so, we are engaging in our countries, with the rest of society, and especially parliament.
But at the same time parliaments have to be aware that the relationship between an international institution is with the government and that is the way we were set up. And probably, if you think about it, there are not many other alternatives to that. We want to be effective. It’s very true, as I think Trevor mentioned before, that the degree of transparency, that we are giving to our reports, to our assessment, to our engagement with countries is almost total. When we are not able to publish something it is because the government asked us not to do it. Because, at the end of the day, we are formed by 185 governments, who have the capability to decide. I have to say that in most cases governments, of all your countries, follow a very transparent policy and I think the role of the Fund in making, not only transparency decisions that are related to the government, but also contributing to the quality of data that governments are giving to society. It’s a very important public good contribution to it.
Let me just mention one of that issues on trade, following up on Paul’s remarks. It is essential for the world that we move further in the multilateral framework. All countries have benefited in the last 50 years, but especially developed countries. Industrial countries have truly benefited from a multilateral system of trade and bilateral agreements would not substitute for that. That is very important and certainly what citizens from industrial countries should know is that, the first ones who are paying for the subsidies are the consumers of those countries. They are the first ones. Then the possible producers of low income countries are the second ones. The ones that are paying directly for all those subsidies are the consumers of industrialized countries. I think there is a genuine interest among those consumers, and we are all consumers, to reduce those costs.
At the same time in a world in which the pressure from society to have a fair attitude towards development and poverty reduction is increasing, we cannot be asking for poverty reduction with one hand and closing the door to trade from the other. That is unsustainable. I think that parliaments here can play a very important role in having a vested interest and understand that there is a limit to looking to a very narrow view of economic issue.
Mamphela Ramphele: Thank you very much. One of the issues that was raised is the pressure of international organizations versus the private sector and potential bidders in Africa. How can that be addressed in a way that builds capacity but allows for integration
Donald Kaberuka: Thank you very much. Before I come to this, and I have mentioned something about this issue of corruption. (inaudible) there is an issue of asset recovery. We will have to deal with the issue of assets that are deposited in overseas countries, which assets have been taken from poor African countries. ….(inaudible)
This money has been taken from African countries by corrupt leaders. This is fine, this has been bombarded. I think the Nigerian experience is a good example. They tried very hard to recover it and they succeeded only in recovering a bit of that. I think they should recover all the assets. I think that would be a major change in the paradigm which we should welcome.
Now on this issue of a level playing field between the African countries and the international companies. I think one issues is developing the capacities of private sector adequately compete. But we have to be careful because I think Africa deserves to have the best from everywhere else in the world. If international competitivity is good, it is important to have international sellers. That is what the economy wants, that’s why the economy requires. (inaudible) What you shouldn’t do is give the Lesothian people second-best because they are a national company. You should develop the capacity of the people in these business opportunities.
One last issue concerning that thought. Someone mentioned conditionalities. I think that age is gone. Nowadays we discuss ownership. But it is important that resources of our countries, whether they are internal or external, are used for the purposes they were intended. But it is also important that we get results. Taxpayers of your countries want results. Taxpayers of donor countries want results. And therefore conditionalities, in so far as you can call them conditionalities, are meant these two objectives. Indeed we should streamline, among these organization, and we have done. But you have to own development of your own countries. It cannot be imposed by the World Bank or the ADB or International Monetary Fund.
Trevor Manuel: Thanks very much Chairperson. Let me make the first point and that is one that I have enormous intellectual difficulty with and that is the issue of agricultural subsidies. The number of Members of Parliament that I come to, and I have been minister of finance for a “few weeks” now. Agricultural subsidies in this country are zero, now it’s for this reason I don't understand why you even have to talk about a phase down of these things. Why don't we look at the world quite differently? So that’s the first point.
The second issue is, what debt relief does is it staunches an outflow of debt services, money that would go to service that cost. But that flow on its own would be insufficient to change the productive side of the economy of the poor country. That is why inflows are important and the aid-for-trade issues are important. Donor countries must actually have a greater focus and give more attention to the aid-for-trade issues. Third point is we haven’t spoken much about India and China. I’d like to say that the issue of market prices are exceedingly important for us. China is delivering one (inaudible) a week now, (inaudible) but for as long as that’s there the copper price in Zambia is going to be exceedingly strong. The key issue is when Zambia learns from this and how it utilizes it’s earnings from copper prices now, because as it with commodity cycles these are not permanent. So it’s trying to take account those kinds of lessons and they are there for us, we’ve got to seize them and utilize the resources differently.
The issue of immigration: I think Chinese and Indian people were first brought here as indentured labor to this country about 150 years ago and now they are indistinguishable from people here. So you are not going to be able to keep people apart and I think we’ve learnt. I saw a figure the other day that there are four million Zimbabweans living in South Africa. We have got very good border fences, you don’t keep people out. As the Spanish have learnt from West Africa, you don’t keep people out. Development and balanced development is in our own collective interest.
The last point that I want to make is in response to the issue of clean bills of health. One of the big moral contradictions that faces the global lenders is who you punish. If you need to build schools or clinics in the country and even if the government doesn’t have an absolutely clean bill of health, if you can apply the rules and ensure that the clinics get built, that they start with essential medicines -- that it renders a good public service--even when the clean bill of health is not there, you are changing the quality of lives of the people every time.
The managers of international financial institutions have the power to determine, that power in fact shifted the way from elected governments to elsewhere. I think that question is one that I’d like to leave with the forum, who do you punish when you take decisions? Whose lives do you advance? And where do you strike the balances? To what extent do Parliaments have a role to play in ensuring that things happen for their constituents? Thank you very much.
Mamphela Ramphele: Thank you very much, we’ve had a very productive morning and I would like all of us to really feel proud that we have made a contribution to the discussion around the room. I think it’s important also to make one point which I pick up from all the comments of the parliamentarians. We talk about the International Finance Institutions as if they are outsiders. You as Parliamentarians represent countries that are member states of the international financial institutions. In the same way that you hold your country’s government accountable, you also need to take the same active and ongoing interest in what these entities are doing. And it remains for me to say thank you to the panel members, for their very succinct responses and I turn it over to Chairman Mao.
Norbert Mao: Thank you very much; I think we had a very engaging discussion. Minister Trevor set on the tone, Africa is a story. The question is will it be a story with a happy ending? Having said it is a story, let me leave you with a short one, of a Pastor who went to visit his very sick friend who was full of tubes, hanging out of all parts of his body in a hospital and then he knelt down to pray for him. Then his friend gestured to him desperately and because his friend could not talk, he wrote a note and gave it to this Pastor, the Pastor put the note in his pocket without reading it and knelt down again to continue praying and when he finished his prayers, he found that his friend had died. Then arrangements were made for a funeral and this Pastor was invited to make a speech. And he said, “Well, I have the last note he wrote to anyone alive,” and he pulled out the note and his face stunned and he started sobbing because the note was reading “Pastor, you are kneeling on my oxygen tube.” Sometimes those who wish us well are kneeling on our oxygen tubes; let’s give a big round of applause to the IFIs.