Journal Issue

African finance ministers’ press conference: Trade and foreign direct investment are crucial to sustainable development

International Monetary Fund. External Relations Dept.
Published Date:
January 2002
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Question: The UN’s Millennium Development Goals currently are not on track to be achieved by the 2015 target date. Early in the spring meetings, James Wolfensohn, President of the World Bank, put forward a concrete proposal to address one of these goals: to seek to ensure a primary school education for all children by 2015. He also said the World Bank, in particular, might need to change its approach to one that measures all of its development work against the Millennium Goals instead of measuring projects against their own specific goals. What do you think could be done to catch up and make progress toward these goals by 2015?

Bouabre: For us Africans, poverty reduction is crucial. To this end, African economies must be able to create wealth. We must implement all required measures to improve our countries’ macroeconomic frameworks. There are examples of countries that have succeeded in improving their macroeconomic frameworks, so I do not see why other countries would not be able to do it.

But improving the macroeconomic framework is not enough. Each African country must carefully review the essential sectors of its economy and implement structural reforms for a regulatory framework that will provide the flexibility needed for economic growth and prosperity. If we manage to meet these two criteria, I believe we will have set up the required internal conditions for wealth creation. But still more must be done to eradicate poverty.

In order to obtain strong, lasting results, developed economies should work to help African countries raise their income levels. While official development assistance is important, it will not provide the sustainable development that Africa needs. To significantly improve income levels and revenues in African countries within the context of globalization, African countries’ exports require greater access to the large markets in Europe and the United States.

Moreover, it is not acceptable that Africa should be marginalized in attracting its share of foreign capital. By implementing structural reforms and improving the macroeconomic framework, we will have put in place the necessary conditions to attract foreign capital to Africa.

Question: These meetings provide a forum for developed countries to announce and take credit for their new commitments to increase aid flows while criticizing developing countries for not opening their markets to trade quickly enough. Yet Mr. Wolfensohn said yesterday that developed countries spend $50 billion on official development assistance every year and as much as $350 billion on trade protection. Do you view rich countries’ stance on aid and trade at these meetings as hypocritical?

Osafo-Maafo: The figures you cite highlight the importance of trade and the fact that providing market access to African exports is key to our development. Let’s take the case of cocoa in Ghana. We are able to sell cocoa beans to Europe on a duty-free basis. But when we sell cocoa butter and chocolate, these products are subject to tariffs. Obviously, these discriminatory trade policies do not help Ghana develop domestic processing industries. This is the kind of unfairness that must be addressed. The discussions in Monterrey made clear that Africa needs fair trade, with aid increases as supplementary.

There is also an important link here with foreign direct investment—essential for acquiring the technology to develop the processing capabilities needed for higher value-added goods that will be competitive on international markets. It is not aid that purchases these goods. The entire international community must press for measures and reforms that increase foreign direct investment flows to African countries, followed up with fair trade policies.

Question: Do you feel the momentum for an African renaissance has been totally eclipsed by the Middle East conflict and the fight against terrorism, with international attention shifting to reconstruction priorities in Afghanistan and the Middle East?

Masangu Mulongo: Obviously, there is a lot of concern at the moment, with international attention perhaps having shifted away from Africa and elsewhere to Afghanistan and the Middle East.

This should not discourage us. We know what we must do, and we are doing what we must do. It is also up to us to develop good and efficient means of communication to boost international awareness of African countries’ strengths, assets, and potential as future sites for foreign direct investment. This conference gives one such boost to African countries’ visibility: this is the fourth year that this conference has been held as part of the spring meetings as a forum for African financial officials to discuss African issues as they relate to the global economy.

Question: How would you respond to the claims of the demonstrators outside the meetings that the IMF and the World Bank are the “worst enemies” of the world’s poor?

Osafo-Maafo: I think it is a good thing that people are free to express their views and their opinions. Certainly, these demonstrators have good intentions in that their basic concern is with the poverty in evidence around the world, particularly in Africa. We are fighting poverty, but how quickly? As far as I am concerned, these demonstrations are important because they tend to turn our consciences and attention toward the reality of the poverty situation. At the same time, the demonstrators may not be fully aware of all the current facts on the ground with respect to what the IMF and the World Bank are both doing to fight poverty. So we need to better inform the demonstrators of the progress that is being made. But the overriding message is that we must fight poverty faster than we are fighting it now.

I would like to inform the demonstrators that the world is a better place with the IMF and the World Bank than without them.

—Emmanuel Kasonde

Kasonde: I would like to inform the demonstrators that the world is a better place with the IMF and the World Bank than without them, and that it would behoove the demonstrators to take a more constructive approach. If they can come up with better ideas for improving the current international financial architecture, we are all listening. We are all reading their placards, and we are all thinking people.

Photo credits: Denio Zara, Padraic Hughes, Pedro Márquez, and Michael Spilotro for the IMF; Staton R. Winter for AFP, pages 138 and 139.

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