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IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
1
IDE-JETRO/JICA Meeting on
Development in Africa – Past, Present and Future
February 26, 2008
Moderator: KATSUMI HIRANO
Director in Charge, Area Studies Center IDE-JETRO (Institute of Developing Economies, Japan External Trade Organization)
Presenter: PAUL COLLIER
Director, Center for the Study of African Economics
Oxford University
Attendee (main table): IDE-JETRO (Institute of Developing Economies, Japan External Trade Organization)
TAKAHIRO FUKUNISHI, African Studies Group, Area Studies Center
YUKA KODAMA, African Studies Group, Area Studies Center
SHINICHI TAKEUCHI, Director / Senior Research Fellow, African Studies Group, Area
Studies Center
TATSUFUMI YAMAGATA, Director, Development Strategies Studies Group,
Development Studies Center / Professor, IDE Advanced School (IDEAS)
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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The University of Tokyo
MITSUGI ENDO, Professor, Department of Advanced Social and International Studies,
Graduate School of Art and Sciences
YASUYUKI SAWADA, Associate Professor, Faculty of Economics / Graduate School of
Economics
KEIICHI TSUNEKAWA, Professor, Department of Area Studies, Graduate School of
Arts and Sciences
Kobe University
MOTOKI TAKAHASHI, Dean / Professor, Graduate School of International
Cooperation Studies
GRIPS (National Graduate Research Institute for Policy Studies)
IZUMI OHNO, Professor
KEIJIRO OTSUKA, Professor / Director, FASID Graduate Program
Ministry of Foreign Affairs
MASAHIKO KIYA, Director, International Peace Cooperation Division, Foreign Policy
Bureau
MAKIKO UEMOTO, Deputy Director, Second Country Assistance Planning Division,
International Cooperation Bureau
JBIC (Japan Bank for International Cooperation)
MEGUMI MUTO, Senior Researcher, JBIC Institute (JBIC)
JICA (Japan International Cooperation Agency)
MASAFUMI KUROKI, Vice President
HIROSHI KATO, Director General, Institute for International Cooperation(IFIC)
ATSUSHI HANATANI, Senior Advisor
HIROYUKI HINO, Senior Advisor
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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PROCEEDINGS
DR.HIRANO: Good morning, ladies and gentlemen. Today's quite exciting occasion, we
are happy to receive Professor Paul Collier. All of you should know him well. We learned a
lot about his works and his institute in Oxford University, and we’ll make the best use of this
opportunity, so I would like to ask Mr. Kuroki, Vice-President of JICA to the opening speech.
MR KUROKI: I will not make a long speech, just a few words. First of all, I would
like to extend our deep appreciation to Professor Paul Collier to have come to this
meeting. I think that you have a very busy schedule in Tokyo this time, and we are
very honored to be able to organize this meeting to have exchange of views,
especially on African development. I think that most of us have read your latest
book, The Bottom Billion, and I was personally impressed by your very
comprehensive approach to development from economic, political, military, and
social aspects.
Japan is deeply involved in African development. Our development aid covers
capacity development, MDG related to sectors, infrastructures, post-conflict
countries, etc.. Particularly this year, Japanese government organizes an
important international conference on African development, what we call TICAD
meeting, in May, and also G-8 summit meeting will be organized in July in Japan. I
think that African development will be one of the priority issues, main issues, of that
coming G-8 Summit meeting as well.
As for the research activities, actually JICA and JBIC have been conducting a
study on the Asian development experiences for African development, especially
industrial development experiences and the role of government for that. JICA has
been also conducting another study on the conflict prevention and development to
understand what kind of role development and aid can play for conflict prevention,
particularly in Africa. So, I think African development or Africa in general is quite a
hot issue in Japan as well as in JICA. Today, we have researchers on Africa and
development in general, both political and economic science fields, in addition to
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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the representative of the Ministry of Foreign Affairs, JBIC and JICA. So, I hope
that we can have an interesting and very useful discussion at the meeting for the
African development. Thank you very much.
DR.HIRANO: Thank you, Mr. Kuroki. Before starting Professor's lecture, I think
it's better for us to understand the nature of this opportunity. Now, we have sitting
together with our academic colleagues in the relationship in African study and
development study. I myself, Katsumi Hirano, am from the Institute of Developing
Economies, and from the Institute, several staff are also sitting here, and also JICA
experts, the University of Tokyo, Kobe University, the Ministry of Economic and
Trade and Industry, and the Ministry of Foreign Affairs. Professor Collier will
deliver another lecture in the afternoon for the public. Before that, I would like this
meeting will be more frank one, so that you are quite welcome to say something.
This opportunity is quite valuable for us, especially the academician who major in
African study and development study. So, let us start. We would like to ask
Professor Collier to make a very frank basis speech. Please.
PROF.COLLIER: Well, thank you very much for inviting me. It's a good
opportunity for me to meet Japanese experts, and the timing -- you mentioned two
aspects in which Japan is very important at the moment; the TICAD event and the
G-8 Summit. There’s actually a third which is that you are the chair of the
Peacebuilding Commission. So, you've actually got three important positions,
each of which has a strong bearing on Africa's prospects. So, it's important that
you use that opportunity to the maximum effect.
Let me just spend half-an-hour on what I think the opportunities and issues are
in Africa at the moment. Of course, Africa is a big place as you all know, and so
there is no one magic answer. The problem with Africa is X. No. So, we need
to disaggregate a little bit, and I now find it helpful to disaggregate by economic
geography and political geography, so I am going to just sketch using that
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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disaggregation what I think the key issues are at the moment.
And I'll start with economic geography. It seems to me that the single most
important event for Africa at the moment is the commodity booms. They don't
affect all of Africa. They affect perhaps about half of Africa. But the amount of
money that is flowing in is enormous from the exports of commodities. Angola
alone is getting something like $50 billion a year in oil revenues. The entire aid
flow to the “bottom billion” last year was $35 billion. So, the revenues coming in
from natural resource exports are very much bigger than aid and very much more
important, because in the past, these commodity revenues have not been used well
-- not just by Africa, but globally. I've looked globally at the experience between an
increase in commodity prices and the growth that that produces -- I’ve looked for the
last 40 years -- and it's a story of, in the short-run, the commodity booms produce
faster growth. So, you can't help but grow faster in the first few years of a
commodity boom. And that's the phase that we are in now in Africa; that the
continent is growing faster. We just can't tell whether that growth is sustainable or
not, because looking at the last 40 years, always commodity booms produce a
phase of faster growth. But then, normally, that growth turns negative. This is not
a forecast about the prices. It's the consequences of higher prices. So, a phase
of faster growth, but then a phase of decline. I've tried to simulate the commodity
booms in Africa on the past 40 years of global experience, and for the first five or
seven years, you get significantly faster growth. So, if you start GDP at 100, five or
seven years after, it's up to 110, so it's 10% up relative to counterfactual. And then
if you come back 15 years later, it's 25% down. So, it's up and down.
Now is the up. That happens for every country. The down doesn't happen for
every country. It depends. Norway, Australia -- they went up and then they went
up more. And it turns out that the critical aspect which determines whether you go
up and further up, or up and then down is governance. And there's a threshold
level of governance above which all countries that have these booms continued up,
and below which you go up in the short run, and down in the long run. And where
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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is that threshold level of governance? Well, to take a little country far away -- this
has nothing to do with Africa -- it's Portugal in the mid-1980s was about at the
threshold level of governance. Now, Portugal in the mid-1980s was about the
worst governed country in Europe. But you’ve got ask yourself, was it better or
worse than the typical governance in the “bottom billion?” And of course, the
answer is that it was rather better. So, the prospect is that unless governance is
improved or unless history fails to repeat itself for whatever reason, these
commodity booms will turn sour; up in the short term, down in the long run.
One reason why history might not repeat itself is that in the 1970s, which was
the last big experience of booms, most of these countries were dictatorships and
now they are mostly democracies. So I looked to see that how democracy affect the
performance of the commodity booms. Unfortunately, what I find is that
democracy makes things worse. Not inevitably. It depends what sort of
democracy is. What I found was that electoral competition makes things much
worse, checks and balances make things better, and a mature democracy has both;
it has electoral competition and it has checks and balances. But of course, the
democracies of the “bottom billion” in Africa are generally not mature democracies;
they’re very unbalanced democracies. They’ve got electoral competition, but there
are no checks and balances. So, that is a recipe for, if anything, a political
economy that is even worse than the previous dictatorships. So, if I was an African
living in one of these countries, I would be desperate to try and improve economic
governance as fast as possible.
And the question then becomes, can we do anything that could help? In all of
these countries, there are reformers trying to win struggles for change, and how can
we help them? We can't do it for them, but we can help them. One idea that I've
been trying to encourage, and I think suitable both for TICAD and for the G-8
Summit, is the idea of some voluntary international standards which would guide the
key decision points that are important in harnessing the booms for sustained growth.
In other words, what do we mean specifically by good economic governance in the
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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context of a commodity boom? If you’ve got a commodity boom, yes, we want
good economic governance, amen, but what do we mean by good economic
governance? And there seemed to me to be five key decision points, which I'll run
through very quickly. One is how the rights to resource extraction, the legal rights,
are actually sold. Now, we know how they are being sold at the moment. The
Chinese fly in and do a deal with the minister, and it's a very nice deal for the
minister and it's a very nice deal for the Chinese. How can we do better than that?
Auctions, internationally verified auctions would be the best way, I think, in general,
of getting honesty into the system. And auctions also level the playing field in
terms of information. The government doesn't need to know what the rights are
worth, because competition through the auction will reveal the true value. So, step
one is selling the rights. Step two is then taxing the revenues. Most revenue
comes from tax, not from the initial sale of the rights. And the tax regimes in Africa
are pretty chaotic. The Democratic Republic of Congo last year got royalty
payments of $86,000 from mineral rights -- $86,000! It exported several hundred
million, and revenue was $86,000. So, there are some basic features of taxation
of these resource rents which I think should have been in followed. Zambia -- $2
billion worth of exports of copper; tax revenue, $36 million. If they had the tax
regime of Chile, it would have been closer, I think, to about $800 million. So, there
are just basic errors in taxation. So, we've sold the rights through auctions.
We've taxed the revenues. The third stage is to save the revenues, at least a
sensible proportion of them. The fourth and fifth stages concern investment out of
those savings, and the investment should be honest, and it should be efficient, and
they are very different things. Honesty, --that requires competitive tendering in
public procurement. And efficiency, it requires some assessment of the likely rate of
return prior to approval of the project. So, those are the decision points and the
processes which seem to me important for economic governance of a resource
boom. If you get all those stages right, you'll probably grow. And if you get enough
of them wrong, you probably won't.
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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Just before I leave the resource booms, the key transmission mechanism onto
the rest of the economy, I think, is through the construction sector, and I think the
issues around the construction sector are rather neglected. Always when you get
commodity booms, you get construction booms. Now, typically what happens is
that in the construction booms, there's a huge increase in demand, and that pushes
up prices more than quantity. In other words, the supply curve of the construction
sector is rather steep, and price booms produce big rents for politicians, they
produce a lot of waste, a lot of increasing cost. And the policy issue is really to try
and flatten that supply curve in the construction sector, so that we get a bigger
expansion of quantity for a smaller increase in price. If we can get big quantity
expansion in construction, that will generate jobs and that then becomes the
transmission from the primary boom onto the incomes of ordinary people. So
much for the resource booms.
Let me move on quickly to the countries that are not experiencing the resource
booms -- what about them -- and there I distinguish between the coastal and the
landlocked. In the coastal countries, I think the big failure in Africa has been the
failure to break into global light manufactures markets. That is the Asian model,
and that’s what produces explosive growth, because the peculiarity of manufactures
is once one firm is profitable, other firms are also profitable, and as the cluster of
firms expands, costs fall. So, all other activities, supply curves slope upwards. In
manufacturing, supply curves slope downwards. So that once you’ve got started,
you can expand very fast. That creates threshold problems of how do you get
started, because the first firm is going to have higher costs than the tenth firm or the
hundredth firm, and because of that, the first firm never starts. And that's the
problem which Africa faces at the moment. It's a problem of a chicken and an egg.
If there were clusters of exporting firms, costs would be a lot lower and they might
well be viable, but until there are clusters, it's not sensible for any individual firm to
start. And so what Africa needs -- coastal Africa needs -- is to create these
clusters of exporting firms, and those clusters would be concentrated in just a few
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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coastal cities. That is the nature of export manufacturing.
One of my favorite figures is that 60% of the world's buttons are made in one
Chinese city. It's amazing. The power of clustering. And it's not that there’s one
big button manufacturer in that city. There are just lots of little firms making
buttons, but by concentrating together in that city, they all have lower costs. So,
there's no chance of a button manufacturer setting up in Africa.
Now, fortunately in garments, garments are not quite as powerful clustering
economies, and so Africa can break in in garments. You can you imagine a few
coastal cities -- Mombasa, Dar es Salaam, Maputo, Accra, Dakar -- where you get
clusters of exporting; something like that. Four or five coastal cities. In order for
that to happen, we need to prime the pump. And the way to prime the pump is I
think to give Africa temporary privileged access to our markets. I don't see any
point in Africa protecting its own markets. Its own markets are too small and too
stagnant, so it needs privileged access to our markets for a few years. And we
know that would work, because America is already doing it. America has AGOA,
the African Growth and Opportunity Act, which has been pretty successful. African
garment exports to America have increased seven-fold as a result of AGOA in just a
few years. Europe has a scheme, Everything But Arms, which is completely
useless. It doesn't work, because always with trade deals, the devil is in the detail,
God is in the design, right? The key issue with the trade preferences is what's
called rules of origin which determine what imports you can use as inputs and the
goods still be eligible for export. With AGOA -- there's only one part of AGOA
which works, and that's for garments, and there, there is a thing called a special
waver which allows more generous rules of origin. Europe doesn't have that, so its
scheme is useless. Over the same period that African garment exports to America
have increased seven-fold, they’ve actually declined to Europe. So, the European
scheme is a waste of time. Japan doesn't have a scheme. And what would be
nice, very simple, would be to have a common scheme across the OECD, modeled
on the American scheme -- America, a bit better, America plus -- but a common
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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scheme, and the G-8 Summit is an obvious forum to try and discuss that.
Who would lose from this? Is Africa a big threat to Japan? No. I doubt
whether a single Japanese job will be threatened, right? I mean it's incredible to
think that you're frightened of African imports into Japan of manufactures. No,
right? Who would be threatened? Well, the only country that would be at all
affected would be China. It's China that is the competitor for very cheap African
exports. It's a tiny effect on China. China is growing so fast that it could afford to
lose a little bit of market share to Africa without worrying. And of course, China is
so concerned to get on good terms with Africa so that it can extract resources that
China is not going to object. So, that’s to my mind the important thing that we can
do to help coastal Africa break into these manufactured exports. I think it's very
important for Africa, because at the moment with rapid population growth and
deteriorating climate, African agriculture is going to be very stressed. I don't
believe that African agriculture is the solution to Africa's problems. I think there’s
been a desperate struggle for African agriculture to keep pace with the growth of
population and the deteriorating climate, so it's very important that some other
sector starts to grow fast, to start pulling the labor force out of African agriculture.
I haven't mentioned the landlocked, the landlocked resource-scarce, and that's
because I think they are the most difficult intractable problem, and their best hope is
that their neighbors do better. If the resource-rich countries and the coastal
countries start to grow, then that growth can spill over to the landlocked. But that
means the sequence is really, let’s do what we can for the coastal and for the
resource boomers. That's where we can make a big difference. The landlocked
resource-scarce, unless the rest of the continent grows, there are real limits to what
is possible, I think.
In my last few minutes, let me talk about two aspects of political geography.
One is post-conflict. There are a lot of post-conflict situations in Africa now,
because the last few years, there's been a lot of peace settlements, and they are
pretty fragile. Southern Sudan could easily go back to conflict. What can we do
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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to make these post-conflict situations more secure? Well, I think, economic
development is enormously important in these contexts. I've recently done
statistical work on the post-conflict risks, and economic development significantly
and substantially brings risks down. I can find no political magic which does bring
the risks down. Democracy in post-conflict settings does not bring risks down on
average. Elections in post-conflict don't bring risks down. In fact, elections shift
the risk. The year before the election, the risks go down a lot, and the year after
the election, the risks go up even more. So, post-conflict elections are not a good
milestone for the withdrawal of peacekeeping troops. Quite the opposite. In the
Democratic Republic of Congo, the international strategy, if you remember, was
elections, October 29, 2006; date for withdrawal of peacekeepers October 30, 2006.
It was madness. Instead we had to fly troops in, fly them out. So, economic
recovery is vital to bring risks down, but it takes time. It takes a decade. There is
no quick economic recovery. What do we do during that decade? Well, that's the
role for international peacekeeping. We need to think of a package of
peacekeeping combined with economic development over the course of a decade,
where peacekeeping helps economic development because it provides a secure
environment, and economic development is the exit strategy for the peacekeepers.
And what I'm trying to encourage is to think in terms of a sort of global compact
between the key players in post-conflict. There are usually three key players.
There are the donors that provide the money for post-conflict recovery. There's
the Security Council that provides the peacekeepers. And there's the post-conflict
government that sets the policy framework. And all three of them need to
recognize their mutual responsibilities over the course of that decade, and I would
like to see those responsibilities spelled out in something like a global compact,
because they are interdependent. If there's no long-term commitment to
peacekeeping, economic development is much more difficult. Without sustained
aid, the economic growth that's needed as the exit strategy for the peacekeepers
doesn't happen. And without a commitment by the government to adopt economic
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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reforms and to avoid provocative political actions, the peacekeeping and the
economic recovery won’t actually build the peace. So, there are these mutual
obligations.
One other thing is about post-conflict. These are typically environments in
which the civil service has collapsed, and so it's a very difficult environment in which
to spend a lot of public money, and think we've not really faced up to them properly.
The needs are enormous, but the capacity of the government ministries to spend a
lot of money well is extremely limited. A good example of this was Liberia where
once we got a good president and good finance minister. If you remember their very
first act was to sack the entire Ministry of Finance, which was very necessary, but
then what? I think the international community has been unrealistic here in not
facing up to the fact that trying to recreate something that looks like Europe in the
1950s -- these monopoly ministries that spend public money -- that's not going to
happen in a short time frame in these environments. It’s just not a realistic model.
We need a different institutional architecture for spending public money in these
environments. The model that I have proposed is to split the functions of these
monopoly ministries into three blocks. One block which is the policy block, so
policy formation would stay with the ministry. That's what Ministry of Education or
the Ministry of Health would do; set policy. At the other end, the actual retail
delivery of health services, educational services, would be down competitively by
whatever delivery channels worked, multiple delivery channels. This might be
NGOs, it might be churches, it might be local governments, civil society; whatever
worked. So, multiple channels of service delivery. And in between would be an
agency which I call an Independent Service Authority, which would channel money
to retail providers, and the agency would be analogous to an independent central
bank. It would be a public agency but outside the civil service, and the board of
that agency would include donors. So, it would be an alliance between
government and donors and probably some representatives of civil society within
the country, so that there would be a board scrutinizing the agency, and then,
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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donors could channel their money through this agency. The agency would work to
the policy framework set by the ministry, but it, not the ministry, would be
responsible for spending the money. And that I think is a more realistic framework
for scaling up aid money fast in the delivery of basic services. Trying to rebuild
these monopoly ministries is just, to my mind, a fantasy.
Let me close with some remarks on the situations such as Kenya at the moment,
because anybody working on Africa, the Kenya crisis is something that we not only
cannot ignore, but we have to solve. We have to say how this sort of situation can
be avoided. I think what Kenya crisis illustrates is the failure of the model of
democracy promoted over the last 15 years, so I think it's a very serious issue.
Let's think what has been promoted over the last 15 years. With a lot of pressure
from the international community, especially from the Americans and to an extent
from the Europeans, I think less so from Japan -- but that pressure was essentially
to hold elections, and the image in especially American and European minds was
the fall of the Soviet Union. It was the model of Eastern Europe applied to Africa;
the idea that, if only you could get elections, then everything will be all right. We
now know that was wrong, and it seems to me to be wrong for two reasons in Africa.
One is that it goes back to what I said earlier about the lack of checks and balances.
So, it's electoral competition without any rules. There are no rules either limiting
the use of government power once somebody's won, nor any rules about the
conduct of the elections. So, the stakes are very high, the winner wins everything,
and there are no rules of conduct for how you win, so of course, governments have
learned how to win by illegitimate methods. And the standard methods are bribery,
ballet fraud -- so vote miscounting -- and voter intimidation. Those are the three
standard ways of winning an election. Being a good accountable government
doesn't feature in the top few strategies. So that's one problem.
That's bad enough, but it's made a lot worse, because in most of Africa, political
leaders have never built the nation. The sense of nationhood is weak relative to
the sense of tribal identity. East Africa provides a very good contrast between
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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Tanzania and Kenya. Tanzania, where President Nyerere got his economic
policies absolutely wrong, he got his political policies absolutely right, and he built a
sense of nationhood, and played down tribal identity. And he used very
straightforward techniques to build a sense of nationhood. In Asia, the model
would be Sukarno who was very like Nyerere; terrible economic policies, but a good
strategy for building a sense of nationhood in a nation that was just a collection of
very different societies. You remember Sukarno introduced a common language,
Nyerere introduced a common language, KiSwahili. Nyrere focused education
policy on building a sense of common identity. In Kenya, you have exactly the
opposite strategy. You have 40 years in which political leaders have played upon
ethnicity. Kenyatta got his economic policies much better than Nyerere, and his
political strategy much worse. Kenyatta favored the Kikuyu, and then Moi favored
the Kalenjin. And then Kibaki has favored the Kikuyu again. And so Kenya is
now this disaster where there is a weak sense of nationhood, strong electoral
competition, no rules on the use of power, no rules on the conduct of elections.
How can we get out of that mess?
Well, I’m going to close with one suggestion, which is for a voluntary set of
international standards on the conduct of elections. This wouldn't solve everything,
but it would help. I am a very strong believer in voluntary international standards.
I've already given you that idea for the management of the resource booms, for the
idea of a compact for post-conflict peacekeeping, and now for the conduct of
elections. Let me sketch how it would work. The neat thing about this proposal is
there is a carrot which turns into a stick. So, governments could sign up to a
voluntary set of standards on how to conduct an election, which would include
international monitoring of the election. If they signed up, what would be the
carrot? Not aid. Aid is not a credible carrot. After 40 years of aid being given by
agencies for all sorts of reasons, that's not a credible carrot. So, the carrot would
be protection against a coup d'etat. A coup d'etat is a much bigger threat to a
government than is the risk of losing an election. There've been over 80
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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successful coups d'etat in Africa, and several hundred failed coup d'etat.
Governments are frightened of their own armies. And democracy does not provide
protection against a coup d'etat. It would be nice if it did, but it doesn't.
Statistically, I've looked at these things. But African armies are very weak, so it's
very feasible to provide a security guarantee. So that's the carrot. Now in fact, if
a compact like that or a charter had existed five years ago, President Kibaki would, I
think, have signed up for it even before he became president, because if you
remember, he was fighting a closely contested election, and I think he would have
used it. His whole campaign was based on the argument that if we win, we will be
the honest party. So, it would have been very convenient for him to say, if we win,
we will sign the democracy charter.
And now, the real advantage of this proposal is that the carrot turns into a stick,
because we now come to the elections of December, and President Kibaki, you
must imagine, has signed this charter, so there are monitors there monitoring the
election. Now, if President Kibaki decides to steal the election, and the monitors
then say, sorry, but this is not a free and fair election, what then happens? What
happens is that that guarantee against a coup d'etat is removed. The guarantee is
only provided as long as the elections are free and fair. Now, why would the
international community remove the guarantee? There's a very powerful reason
for it to remove the guarantee publicly. That is because suppose Kibaki steals the
election and then in January the Kenyan army moves in to depose Kibaki saying,
that election wasn't free and fair, we are going to rerun the election. We don't want
to find ourselves as the international community required to go in and remove the
Kenyan army and bring back President Kibaki despite the fact that he's stolen the
election. And so to protect ourselves, we would have to say, I’m sorry, our
monitors have said this is not a free and fair election, therefore, the guarantee
against the coup is removed. But of course removing the guarantee is actually an
invitation to the army to do a coup.
Now knowing that, what would President Kibaki have done in December? You
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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see, we don't even get to the business of a coup and international intervention.
President Kibaki is then suddenly faced with a very different scenario in which if he
tries to steal the election, he risks a coup. That was in fact what happened in
Senegal, one of the very, very few African democratic elections in which a president
was defeated and stood down -- and why he stood down was that the army told him,
if you don't stand down, there's going to be a coup. And the reason that threat was
credible was because there had just been a coup in Cote d’Ivoire. The French has
temporarily lifted their guarantee against coups. So, I'll close with that. By having
an international voluntary standard on the conduct of elections supported by a
minimal amount of security provision, in this case a guarantee against coup d'etat,
we could I think have made these elections much cleaner.
So, I’ll close there. I've tried to give you some ideas on the current economic
geography issues, and some ideas on the current political economy issues. But
let’s open it up.
DR.HIRANO: Thank you very much, Professor. I believe that this lecture is
ample of the idea, and the implications are very stimulating. Before starting
forward, I forgot to mention the name of the organization is Japan Bank of
International Cooperation also together with us today. And also the National
Graduate Research Institute of the Policy Study is also together with us. At first,
let me allow to ask Professor Sawada, because both of us was in Brisbane in the
seminar of Professor Collier, and Professor Sawada is also coming the tutoring
under Professor Marcel Fafchamps, who is one of Professor Collier’s deputy at the
Centre for Study of African Economies. So please.
DR.SAWADA: Thank you very much. Actually I have to leave earlier and I have
to give a lecture on suicide to French people during a lunch meeting, so please
allow me to ask you questions first. My name is Yasuyuki Sawada. I was an
advisee of Marcel Fafchamps, your fellow colleague at Oxford, so I may identify
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myself as your grandson or nephew.
I think I have four or five short questions and comments. First question is about
governance, economic governance. I was wondering what is the -- we are now at
the JICA as one of the largest donors in the world, so I wonder what kind of aid can
be designed? How can you design foreign aid as an instrument to improve
governance of recipient? As I know, your colleague at World Bank, David Dollar
has a paper (with Jacob Svensson) in Economic Journal, saying that structural
adjustment lending was not quite effective to improve governance or governance of
the recipient countries was independent of the way foreign aid was provided. So, I
wonder what kind of aid can be -- how aid can be designed to improve the
governance. So, this is the first question.
And second question is related to your information in your presentation. I was
really interested in the fact of the quite steep supply curve of construction sector in
Africa that generates the rents to the politicians. I wonder what kind of policy
device we can design to make the supply curve flatter. Can we think about some
flexible migration policy within the region so that supply curve of the construction
sector can be changed? I wonder what kind of a policy device you can you
elaborate on.
Third question is about policy externalities in the landlocked resource-scarce
countries. I have read your writings and papers. Admittedly you regard the
foreign aid has relatively little role to improve the externality for these landlocked
resource-scarce countries, and aid is not an effective instrument to improve
neighborhood growth spillovers nor neighbors externality arising from neighbors
economic policies, but I wonder there is a way to design aid policy so that donors
can somehow enhance the externality arising from the neighbor countries.
Then, fourth comment is about Asian type model. I agree that we need some
sort of jump-start device to start the positive feedback process of manufacturing
sector and export. I have one paper which I like very well, which is Paul
Krugman’s paper entitled “History versus expectation,” and which was published in
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QJE (Quarterly Journal of Economics) in 1991. He said there are two ways to start
up this positive feedback process. One is the “history”--some slight increase in
history can automatically generate the cumulative process. The other one is the
“expectation”--government can set up indicative planning policy or some
coordination-type policy so that the people's expectation is coordinated. So,
through the self-fulfilling expectation, whole cumulative process can be started.
These kinds of stories are quite natural for us living in East Asia. Economic
Planning Agency, now a cabinet office, has been setting 5-year plans that
generated coordination. And also from the donor's viewpoint, for example, the
Eastern Seaboard project in Thailand. I think most of the government officials here
in Japan regard this as one of the most successful cases where ODA generated
strong spillover and complementarily with foreign direct investment and also exports.
We call it “aid trinity” of ODA, FDI (Foreign Direct Investment) and export. And that
kind of project has been nested into the national economic planning. So, I wonder
whether this kind of Asian type of model is really feasible, say in Kenya or Mombasa.
I knew that Mauritius is sort of consistent with Asian-type export oriented policy but I
wonder.
And then finally, I have a little bit different type of question. I myself have been
working on micro-development economics, so I worked on a lot of micro data.
Recently, MIT and Harvard, people on the East Coast in the US has been working
on the randomized program evaluation. I think they are academically quite
successful, so they are pushing this small scale social sector program, very, very
carefully designed and carefully evaluated, and then, they intended to scale it up.
So, I wonder what is your view on this type of scientific program evaluation as an
instrument to identify effective aid policy at the grassroots level and the scaling it
up? MIT is Poverty Action Lab has been working on. I think this is also relevant
for Japanese government policies and new JICA. How should we adopt these
kinds of randomization into the operation? I think I will stop there. Thank you.
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PROF.COLLIER: Let me respond to those. They’re all good questions. So,
question one was aid design for governance; how do you use aid to improve
governance?
DR.SAWADA: Yes, and also I’d like to follow-up. You know China as a
non-OECD member. I think China is providing aid money without any careful
conditionality, so this mitigates the role of aid as a policy device. So, can you also
include that?
PROF. COLLIER: I think the scope for sort of policy conditionality is very limited,
very limited. I've for a long time been a critic of policy conditionality. I think
there's more hope for what I call governance conditionality. Policy conditionality is
trying to insist that the government adopts particular policies. Governance
conditionality is trying to insist that the government be accountable to its own
citizens. And that seems to me a lot more legitimate. Now, how can we do it?
How can we do governance conditionality? Two things, really. One is, where we
do budget support, we need, I think, to have much higher standards of the process
of the budget, and that probably needs a lot of technical assistance. It needs two
things. It needs technical assistance to improve budget processes, and it needs
verification processes to judge whether standards have been met. The budget
support is only as good as budget processes, and at the moment, in a lot of Africa,
budget processes -- they’re just not satisfactory. So that money can appear to be
-- even in Uganda, which is one of the better budget processes, they manage to
increase military spending and put it under the heading of education, and they could
do that because budget processes were so weak. And then there's the famous
example of the tracking surveys in Uganda showing how very much money leaked
in the spending chain. So, there needs to be a lot of technical support for
improving these budget processes, and then quite separate from that technical
support, a verification process which judges whether budget procedures are
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sufficiently good to justify budget support.
At the moment, there's a very big gulf between the American position at one
extreme and the European position at the other extreme, where the Americans are
basically saying, we will never put money into budget support under any
circumstances, and the British at the other extreme are very keen on budget
support, and the European communities for that matter. I think both are wrong. If
we push budget support into budget processes which are too weak, it's not just that
the money is wasted. It's much worse than that. It's that the money gets
captured by exactly the political forces that we want to oppose. All these societies
have struggles between reformers and crooks, and if we push money into leaky
systems, we are empowering the crooks, and therefore, weakening the reformers.
So, we’ve got an absolute responsibility only to use budget support where we’ve
verified that budget processes are sound. In some environments, we know they
are not sound, and we know that realistically they are not going to be made sound.
And in those environments, I would favor this model of the independent service
authority which provides within the broad framework of government, a system for
much tighter scrutiny of spending processes, because the essence of what an
independent service authority would do is monitor the retail providers, compare one
with another, and always move money from the less cost effective to the more cost
effective channels. So, you’d have yardstick competition between different
spending channels.
So, in answer to your question, one approach is to just strengthen budget
processes, another is to just say, that's not realistic in these environments, we’re
going to introduce a new architecture for public spending. So, I think both of those
are sort of sensible approaches. As you say, with the introduction of China has
really set back and all of this.
DR.SAWADA: Can I ask a quick follow-up question?
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PROF.COLLIER: Yes.
DR.SAWADA: Do you, for example, recommend conducting a public expenditure
tracking survey (PETS) at the very initial stage so that all the budget flows can be
properly monitored by donors?
PROF.COLLIER: Yes, I think those tracking surveys -- Ritva Reinikka, who
pioneered these things, was one of my students -- yes, she pioneered all these
tracking surveys of expenditure, and they’re just very revealing.
Now, all this will cost money. And this will be my final comment that we often
make a big mistake in trying to judge the efficiency of our aid agencies in terms of
how much money they disperse relative to their administrative costs, and that's the
wrong way of judging an aid agency. We keep squeezing the administrative
budget relative to the amount they disperse, thinking that that makes them more
efficient when actually we are quite rightly encouraging our aid agencies to go into
more and more difficult environments, and the cost of operating effectively in these
environment is very high, and we should just face that. It is much better to have
very high administrative costs but to spend money well than to have low
administrative costs and let the money be captured by our enemies. And there is
this very dysfunctional discourse on greater efficiency in the aid agencies which we
need to counter. We’re in a position to counter that. Of course, ordinary citizens
are not in a position. It's an easy language for them to understand; more
administrative efficiency. But we're in a position to provide a counterargument to
ordinary citizens, and we need to do that.
I should say -- this is just an aside -- the reason why I wrote The Bottom Billion
was that I recognized that it's enormously important for ordinary citizens to
understand the key issues about African development, because until ordinary
citizens understand, politicians will not deliver sensible policies. They'll deliver
gesture politics. The Bottom Billion is shortly coming out in Japanese translation,
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but you are all the experts here. It's part of your job to get a message out to the
Japanese society, not necessarily the message of the “bottom billion,” but a
message of how Japanese policies towards Africa can be as effective as possible.
Let me turn to the question of flattening supply curve in the construction sector.
Quite a good model here is Botswana. Botswana had a rolling five-year
development plan that within that five-year development plan, they had an annual
plan for the construction sector because they knew that part of what they were
doing was placing big demands on their construction sector. So every year, they
would call in all the construction firms, explain what they are trying to do, and said,
is this feasible, and if not, how can we make it feasible? And they discovered
simple things, like the size of the contracts they were trying to award didn't match
with the size of the firms they’ve got. They were too big. Especially in
post-conflict settings, the construction sector has withered away because
throughout a civil war, there is no construction. The society is in destruction mode.
So, you inherit a situation in which there were very few firms and huge demand.
Skills have withered away. So, one of the bottlenecks is the ordinary skills of the
construction sector. So, there is a sequence here that you need to establish
simple colleges of technology for building. Train brick layers, plumbers, welders.
That's a simple thing to do, but it's just not usually done. So, there's a skills
bottleneck, there's a firms bottleneck, short of firms, and the firms we’ve got are
very small. There’s sometimes the bottleneck on land, urban land. Although
there's plenty of urban land, there's not a legal framework in which to put that land
on the market, and so there's an urgent task of getting an urban land market going
with properly defined land rights. And then sometimes there are bottlenecks in
terms of key inputs into the construction sector, such as cement. In Southern
Sudan at the moment, there's no cement. There are only two companies
supplying, both in Uganda, and they are making a fortune. So, there are
bottleneck inputs like that. These are big issues. In Liberia, the cost of building a
school has doubled in the last year, so the aid budget is buying half the schools that
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they thought they could buy. And if you could flatten that supply curve, you’d get
more schools. But nobody's looked at these issues as far as I can see, so it's very
much a sort of cutting area, cutting edge of research.
Your third question was what can aid do for the landlocked? I think there is an
important role for aid, especially in improving transporting things to the coast. Very
simple reason, which is that the coastal countries don't have a very strong incentive
to spend their own money to do this, because there are externalities, and so the
coastal links are very poor, and it's a proper use of aid to provide these things where
they are powerful externalities.
Your fourth question was about expectations and coordination in industrialization.
I very much like the ODA-FDI-exports trinity, and I think Mauritius is quite a good
model, actually. That's why you've now got a success in Madagascar, because the
Mauritian firms have moved south to Madagascar. Most African governments
don't really understand the coordination role, and of course, they’ve got very low
credibility even if they tried to play it. But the right institution is the export
processing zone. But they misuse that. A good example would be Kenya. The
Kenyan government decided that it would be a good idea to have export processing
zones. Now, realistically, you need one -- in Mombasa. It's very obvious. You
just have to look at a map. You need a cluster of export manufacturing at the port.
In fact, Kenya's got 42 export processing zones. The total number of firms in all
the zones put together is only 73. So, the typical zone has one-and-a-half firms,
and most of those 42 zones are hundreds of miles from the coast, because the
Kenyan government used export processing zones as a patronage device. It was
a tax break. So, if I was particularly friendly with you for the obvious reasons, then
you became an export processing zone wherever you were. So, the government
has just not understood what the opportunity is really about. It's about creating
these clusters.
The final question was about the randomized experiments. We're doing quite a
lot of the randomized experiments at Oxford as well. We're doing randomized
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experiments on education strategies in Kenya. We've even done a randomized
experiment on trying to reduce voter intimidation in elections in Nigeria. So,
randomized experiments are obviously a good approach. I think what are they
good for? They are good for -- really they need to be internalized by government
ministries as devices for learning about public expenditure. I think my criticism of
the sort of MIT approach at the moment is that it's a great device for getting articles
published but it's not necessarily a great device for getting policy changed, because
in order to get policy changed, policymakers actually have to do the evaluations
themselves. So, my center in Oxford is working with the Kenyan Ministry of
Education. They are devising the experiments that they want, and we're just
working with them to do the randomization and the quantitative analysis. But it's
their choices of what policies they want. And we're working with them over five
years so that they will themselves build a capacity to do that learning internally in
the ministry. Now, if you can do that, that's good for improving the quality of public
spending, and that's fundamentally what randomization can do.
Now, how important is that? Well, it's useful, but of itself it's not a development
strategy. I mean, Esther Duflo is very clear about this. She says, oh, I've no idea
about development strategy; just let's find out what interventions work to reduce
poverty. And I think that's too limiting, that we’ve actually as economists got
responsibilities to think about and advise about development strategies and not just
focus on this rather limited function. But clearly, randomization is a good scientific
way of getting information, so I've no problem with it. We're doing it.
DR.SAWADAS: Thank you very much.
DR.HIRANO: Okay. Next, I would like to ask Mr. Hino.
DR.HINO: Thank you, Paul. Your presentation was, as usual, very lucid and
interesting, but you know that there are some parts of it that I must confess that I
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was feeling a bit uncomfortable. That has to do with your proposals to basically
solve problems with introducing additional international voluntary codes of conduct.
That is the part I was feeling a bit uncomfortable, both with regard to managing
natural resources and also managing elections. I feel that there are already too
many of those international codes. When African governments do procurements,
they have to comply with the procurement procedures that the World Bank and
others have set up. African governments have to go through the PRSP process in
formulating their economic policies. They have to go through the donor coordination
processes in setting budget allocations. African governments have to go through all
sorts of international procedures and processes in managing their affairs. There
are already too many in my view. To me, rather than sort of “imposing” those codes
from outside, the emphasis should be to build institutions within the country and
incentives within the country, so those good conducts would come naturally out of it.
Let me first talk about your proposal on the elections and then go back and talk
about your proposal on natural resources. First, elections. Your proposal is to
sort of give a carrot for not rigging elections by extending a guarantee against the
coup, and also a stick by promising to remove the guarantee if the lections were
rigged. This is difficult in my view, because in a way you would be legitimizing the
coup. You might also be, in a way, encouraging a coup. In Nigeria, where both you
and I know well, after the last elections, the people talked about coup but it did not
happen. It didn’t occur. Instead, a legal process is taking place. The court is
verifying which election results were right, which elections results were wrong, and
many of the elections were nullified. If I have to bet, I would bet that there will be
new elections--presidential elections--in July because the court would likely judge
that the elections were wrong in December. And that, I think, is a healthy process.
Now, in Kenya, what transpired after the elections were, of course, tragedy and sad,
but again, Kenyans are trying to find some political solutions. Such a solution may
come, may not come, but I think that this is a healthy process of finding a lasting
solution.
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In my view, your remark on the democracy in Kenya is, generally speaking, right
in the sense that the international community was too simpleminded in “imposing”
the multi-party system and presidential election. In a way, I was a part of it. No, I
was not a part of it, sorry. Kenya is, as far as I know, only one example where the
donors collectively decided to withdraw aid until the multi-party elections were held.
To me, in Kenya and others in Africa, a presidential system is in a way a problem,
because the presidential system means winner-take-all, right? If you win the
election, you get everything. If you lose, you lose everything. So, that brings the
ethnic conflicts into a sharper focus. I think that this is the problem of the political
system that Kenya has now. So, what they need and what they are working on
now is a constitutional reform; more devolution of powers, perhaps parliamentary
system, not the presidential system, more devolution of powers to local
governments, so that powers may be shared amongst different ethnicities. Finding
such a political system could take time, but that is what I think we need to
encourage, that is, to help build institutions that will solve the problems for a long
time to come. Not a quick fix, not like guaranteeing against a coup. To me,
seeking a quick fix is not quite right.
Now, let me talk about your proposal on introducing an international code of
conduct for managing natural resources. In my view, in Nigeria and others, the
real solution to natural resource management lies in giving the monies back to the
people, rather than giving all the oil monies to central governments. If you look at
Niger Delta in Nigeria, you would know that this international code of conduct would
not solve the fundamental problems that oil monies are causing. Niger Delta is the
place where the oil is produced, and where the conflicts have persisted for a long
time. These conflicts are one of the reasons why the oil prices have been very
high. Those conflicts would not be resolved unless the people in Niger Delta feel
that they have their shares of oil monies with them. If there is a way to give oil
monies directly to the people, and then if the government has to tax it to get its
revenue– just like any other incomes --then the people would naturally ask for
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accountability. They would ask how the government to account for the monies that it
spent. I know that you dismiss this idea simply because it is not politically feasible.
I know that it's not politically easy, and perhaps not so feasible, but I don't think one
should dismiss an otherwise good idea simply on the ground of political infeasibility.
What Nigeria and others need is an institution, to build institutions that would
safeguard the use of their own oil monies.
We would like Africans to be able to safeguard the use of their oil monies, not
because they have to comply with those codes, but because there is a process or
an institution within a country that provides checks and balances from – and for--
their own people. Again, this takes time. But to me, generally speaking, the way
forward is less codes and rules that are required from outside, and more of own
institutions that regulate from within. In my view, the problem of aid dependency is
not so much financial dependency, but that of intellectual dependency. In a way,
the international community may wish to push back to Africans many of the
challenges and issues so they deliberate and decide how best to meet those
challenges. That, I think, will lead to a lasting solution in the long run. Thank you.
PROF.COLLIER: Okay. Let me come straight back at that. I think you are
wrong. The main reason that I think you're wrong is that -- what are institutions?
They are a form of public good. They are a sophisticated form of public good.
Institutions have to be created by collective action. The typical African country has
characteristics which make collective action for the creation of public goods very,
very difficult. That's why Africa is so short of public goods. And by the time we
get to institutions which bind the state, these are very difficult public goods to supply.
African governments can't even supply primary education or health, and these are
far simpler public goods to provide than institutions that constrain the actions of the
state. So it's completely, I think, romantic to believe that these societies are
capable of generating internally these very sophisticated public goods which took
the developed world centuries to develop, centuries. So, like many public goods,
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Africa has chosen to structure its policies in such a way that it’s fundamentally
ill-suited to generate the public goods which it needs internally. So, a lot of these
public goods need to be supplied, for a phase, internationally. I've just given you
one example earlier of the landlocked countries which need good roads to the coast,
but the internal poverty of Africa is such that for 40 years, those roads have not
being produced. And they won’t be produced in the next 40 years unless they’re
provided internationally, because there are no institutions to internalize the
externalities. So, the aid donors are in a position to internalize those externalities
in their own decisions.
If I come down from that general position that it's entirely legitimate for the public
goods that Africa needs to be supplied outside the continent, let's take a
non-controversial example, which is a vaccine against malaria. A vaccine against
malaria would be a public good for Africa. It's quite clearly not a public good which
Africa is capable of supplying, and so it will be supplied outside Africa, but benefit
Africa. The institutions which bind and limit and constrain the state are far harder
to supply than a vaccine against malaria. And so the same is needed. They are
going to have to be supplied initially internationally. Once you’ve got them
supplied internationally, then the societies can climb up to a position where they can
build institutions which make those external supplies redundant. So it's a phase,
it's a sequence.
Now, if we go from the general to the specific, in the case of resource riches,
Nigeria itself promptly picked up on the one international code we have in this area,
which is the extractive industries transparency initiative. The Nigerian reformers
immediately adopted it, and it had a big impact. It produced transparency and a
degree of accountability within Nigeria. If there hadn’t been an extractive
industries transparency initiative, the EITI, the Nigerian reformers wouldn't have
been able to use it. As it is, our friend, Ngozi, then moved on to the issue of a
sensible savings rate out of the revenues, which is one of the things I believe there
should be an international voluntary standard on, and she introduced her own
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attempt at a standard, which was the fiscal responsibility bill which she and the
president were unable to get enacted, and so at the moment, it's stuck as a bill
which didn't get past the Senate, and Ngozi’s gone. Let's hope the Ngozi’s law
survives, but it would have a better chance of surviving, if it were actually reflecting
an international standard, just as the Nigerian EITI (Extractive Industries
Transparency Initiative) reflects the international EITI.
The model of distributing oil money to citizens -- yes, I mean, if they did that, it
would change the political economy, but that's why they are not going to do it. It's
not that they don't understand. It's that they understand only too well. And this is
the chicken and egg, that there's the solution, very straightforward solution, and
they are not going to adopt it because it's not in the interest of the governing elite to
adopt it. So, one has to have external assistance to the reformers to improve the
chances of change.
If we go back to where we started, which was the guarantee against coups, you
said the danger is that this legitimizes a role for coups. Precisely. That's what we
should be doing. The coup threat is a reality in Africa. There are hundreds of
these coup attempts. At the moment, we're adopting the romantic position of
saying, let's abolish coups. And a much more sensible position is to say, let's
harness the power of the coup, which at the moment is an unguided missile; let's
provide a guidance system for it. Is this something that’s unique to Africa? Is this
unheard of, the military as a discipline on civilian governments? There’s no Asian
country that has done anything like this? What's been going on in Thailand?
What's been going on in Turkey for years? These are transitional societies in
which the military has actually played rather a stabilizing role in limiting the
excesses of democratic governments. And that's a phase. It's not something that
we would want to make permanent. And it’s something that sometimes happens in
Africa. Mauritania -- recently, there was a coup. The army removed the
government and then said we are going to have free elections, and we’ll step back,
and they did just that. The problem in Africa has been that often well-motivated
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coups have then turned badly. A classic one will be Ethiopia, where Emperor Haile
Selassie, by the time he was replaced, he was a senile autocrat. He was a
complete disaster. And he was replaced by a very respected general of the army,
General Andom, and what should have happened then was elections and
democracy, and instead what happened was another coup, and we got Mengistu
who was even worse then Haile Selassie. So, providing some sort of guidance
system for coups. And of course, once you’ve got the guidance system, the coups
wouldn't happen, because governments would not put themselves in a position
which exposed them to the risk of a legitimate coup. By defining circumstances in
which coups are legitimate -- and we can all think of circumstances in which coups
would be legitimate -- by defining circumstances in which they are legitimate, those
circumstances are never going to happen, because governments want to avoid
them. That's a more realistic world than the romance of a coupless democracy in
which the government obeys all the rules. Look what's happening.
DR.YAMAGATA: Shall we discuss that issue of coup because this is focal point in
his speech, I guess. Now, let me ask a question. My name is Yamagata of the
Institute of Developing Economies. I’m an economist and I’m not that familiar with
that particular issue but still interested in how that system works. For example, it
seems to me, it's not easy to define the coup. Actually for example in the case of
Thailand, some people might argue that Thaksin voluntarily stepped down. Then
that's not the coup. And in the case of Bangladesh, actually there was an interim
government for election and the military backed the government. Then some
people might argue that is a kind of coup. Obviously, the government doesn't say
that. So, that's my question.
PROF.COLLIER: First it’s a matter of realism. I mean, let's think what the French
have been doing for years. The French have just put down a rebellion, just two,
three weeks ago in Chad, right? If you remember the rebels got to the palace, and
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the French said, no, go away, and they went away, because the French have got a
huge military base in Chad, and basically the French initially didn't know what to do.
The first pronouncements from the French were, oh, it has nothing to do with us,
and then they thought better of it and decided they better put the rebellion down.
And then they said, we'll do what it takes to put this rebellion down. And then, the
rebels ran away. Right? Now, that's how not to do it, if you think about it. It's the
French being stupid. It's the French never having recovered from the mistake they
made in Cote d’Ivoire, which was President Chirac’s mistake; a disastrous --
allowing a coup to happen. For years, until 1995, if there had been a coup d'etat in
Cote d’Ivoire, it would have been put down. After Rwanda, the French got nervous
about intervention. So, when the coup in Cote d‘Ivoire happened in 1999, the
French elite around Chirac said, we’ve got put this down, and Chirac said, no, it
would look bad, we'll just let it happen. And that was a disaster. Look what
happened in Cote d’Ivoire. The coup led to a civil war, and they are still not really
out of it. What should the French have done? And they’ve got Chad wrong, that
if they had some clear rules about when they would and wouldn't have intervened,
they wouldn't have needed to intervene. So, getting explicit rules about
intervention radically reduces the actual need to intervene. And making it up as
things happen maximizes the confusion, and maximizes the need to actually
intervene. So, some clear rules that say, you’re guaranteed against the coup as
long as you conduct democracy in a reasonable fashion -- it doesn't have to be very
demanding. And of course, we’ve monitor the elections for years, so there's
nothing unusual about monitoring elections and declaring whether they are free and
fair or not. We've been doing that for years, right? This is just trying to link the
security provision that we are doing already with the monitoring that we're doing
already. And it's trying to make Africa look a little bit more like the situations in
Thailand, which might be messy but are more satisfactory than what we've typically
got in Africa, I would suggest.
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DR.HIRANO: I invited Mr. Takeuchi. He is engaged in the conflict study in Africa.
DR.TAKEUCHI: Thank you very much. My name is Takeuchi. I am studying on
Africa, especially French speaking Africa, and I am interested in conflict problem in
Africa. I learned a lot from your works, and I am very happy to be here.
I would like to tell you my impression when listening to your discussion. I have
studied post-conflict issues in Africa, and my main research field is the DRC
(Democratic Republic of Congo). Observing especially the situation in the DRC
and even in Chad, I think that there is a tendency for international community to
backup the incumbent government. Everybody knows that actual Kabila
government have many, many problems. And the international community had even
established a special institution called CIAT (International Committee for Supporting
the Transition). CIAT is an international organization, which was embedded in the
peace accord in Pretoria and supervised the peace process in DRC. P5 in UN and
important countries were involved in that organization. In fact, they monitored the
DRC peace process very closely. But as you know, there are many problems in
DRC peace process, and especially the conflict is continuing in eastern part.
Surprisingly, in eastern part, MONUC (the Mission de l’organisation des Nations
Unies au Congo), as the peacekeepers, are fighting along with DRC armies.
Actually they are involved in government side. There are structural causes that the
international community tends to back up the incumbent government. The
important reason of that is the criteria of judgment are very ambiguous. It is often
difficult in the peace process to judge which is right and which is wrong. And clearly
incumbent profits the situation. So, listening to your proposal which is very
interesting for me, I also felt that it involves similar weak points. How can the
international community judges, for example, whether an election is credible or not?
This is the point I want to ask.
PROF.COLLIER: Yes, sure. Just to take up the specific question at the end first
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33
as to how we judge elections, we've been doing this for 15 years. We have
election monitors who just declare, who base a judgment that the elections are free
and fair or they’re not. These have been official judgments. So, the European
Commission, for example, officially pronounces on a lot of African elections, that
they either meet standards or they don't. So, there's nothing new about monitoring
elections and judging whether they meet satisfactory standards or not. That's
been done for years. So, we know how to do that
DR.TAKEUCHI: In that case, I think the criteria should be extended. Maybe you
remember the election in Rwanda in 2003 in which Kagame, actual president was
elected. the European Commission sent a monitoring team, and they judged that
the election itself was clean and fair. But before the election, the Rwandan
government ordered to dissolve the rival parties, and suppressed the rival candidate.
So, even if the election itself might be fair, it was difficult to say that the way of
election was fair. This is the reason that I argue that the criteria of election
monitoring should be extended.
PROF.COLLIER: I agree with that. One very standard ploy is to debar
candidates. This reached its sublime limit with President Abache of Nigeria, who
you remember died just before he was able to contest a multi-party election in which
he had five parties, all of which nominated President Abache as their candidate.
And so the election he was going to propose -- it's a pity that he died before having
a multi-party dictatorship election. So clearly, there are a range of issues, not just
about the conduct of the election, but about who is eligible to stand.
But I think the deeper issues are not about the conduct of elections, they are
about the uses of power. What's gone wrong in the DRC was not just the conduct
of the election, it was about the uses of power. And I think the same sort of story
occurred in Sierra Leone where in effect, the British government got captured by the
government of Sierra Leone who put enormous amounts of money in. It hasn't
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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prevented Sierra Leone falling to the very bottom of the human development index.
This year, it's just come out as bottom despite this huge amount of money, and
despite peace. So, it was a very, very poor government performance.
What I would like to see, especially in the post-conflict settings -- I think the
post-conflict settings are unusual in that donors or the international community has
a lot of power. It's providing the peacekeepers. It's providing the money. And it
should be setting some clear standards, some clear limits, on what governments
should be doing. And by setting those out clearly in advance, you get much more
chance that governments will obey them. At the moment, we are not setting out
clear standards in advance, and so we blunder into confusion in which governments
do terrible things, and then the donors either over-react or under-react. I think we
do have to favor the incumbent because it's much better to have somebody in
undisputed power rather than a civil war. Civil wars are hugely costly, so we need
to favor the situation in which power is not so disputed that there’s a civil war. But
the price we should impose for favoring the incumbent is saying, that is conditional
upon some aspects of governance, and they can be fairly minimal, but they should
be clear. If they are clear, they are much less likely to be breached. And that's
been our failure in Sierra Leone, it's been our failure in DRC.
DR.TAKEUCHI: So you think that the criteria is not clear now, so it should be
more clear.
PROF.COLLIER: Yes. If you have 50 points, they’re not credible. So, they’ve
got be few enough and clear enough that they’re credible. So, a few major points.
And then if they’re breached, then there's a real pullback, a coordinated pullback
across the security and the money. The costs of these things going wrong is so
enormous, and a lot of the costs accrue to neighbors -- about half the costs of failing
states accrue to neighbors -- and so the neighborhood has a legitimate interest.
Now, one possible model would be to say the neighborhood should share
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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sovereignty. But that isn't in the end viable because the neighbors also have
illegitimate interests. So, the international community needs to represent the
legitimate interests of the neighborhood on behalf of the neighborhood. And that
doesn't seem to me a breach of sovereignty. It's recognition of the very high costs
that failure inflicts on a neighborhood. So, very much less intervention is then the
right to protect. The right to protect says, if you mistreat your citizens, I've got the
right to intervene. What I'm suggesting is that neighbors have the right to protect
their own citizens from the costs that you inflict if you do particular things, and the
international community then has a right to represent the legitimate interests of
those neighbors. So, it's a much more limited questioning of sovereignty than the
right to protect.
DR.HIRANO: Mr. Kiya.
MR.KIYA: Thank you for enlightening presentation. I am Kiya Masahiko from the
International Peace Cooperation Division of the Ministry of Foreign Affairs. I
studied in the United Kingdom and worked at the Embassies of Japan in Nigeria,
the United States and Bangladesh. When I was in Washington, DC, I was in charge
of development issues including the World Bank. I am now in charge of Japan’s
policy on UN peacekeeping operations. I feel I am fit for today’s discussion.
Regarding external guidelines and rules, I think that they are important and
necessary. The United Nations Security Council and many other UN organs are
setting rules. Such activities of the international community are quite legitimate.
They will foster leadership with ownership in those conflict-affected countries in the
long-term. I would like to ask two questions. One is about the three blocks you
mentioned: policy ministries, and the public agencies, and the service providers --
three layers. In my experience, for example in Bangladesh in education sector, a
different framework seemed to have been working: the Ministry of Primary
Education chaired the donor-government meeting, where the World Bank funds
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were allowed to be channeled to NGOs. I think that this framework giving more
ownership to the government could work better than using public agencies like in
Britain or New Zealand. The challenge is how to ensure fostering medium and
long-term ownership through good TA, technical assistance.
Then the second point is the potential for South-South collaboration, which
Japan has long been working on. There are a number of projects that are led by
JICA between Asian and African countries. Fosterering leadership and nurturing a
group of future leaders in developing countries in post-conflict affected countries are
quite important. It would be very meaningful to inspire those leaders by showing
good leaders in other regions, other countries in Africa or in Asia. Studies in such
areas are critical in realizing ownership-driven healthy political and economic
development in African countries. Japan has been taking this approach. I hope
that you could emphasize the potential and importance of South-South
collaboration, regional collaboration as well as inter-regional collaboration. I'd like
to hear your opinion about those two points.
PROF.COLLIER: I think the first point on leadership is, in economic terms,
leadership is often endogenous, that is to say the sort of leaders you get reflects the
political processes you’ve got, so that if you have an environment in which the
surest way to win an election or to win power is to be very corrupt, amass a lot of
money, and then run a patronage system, if that's the best way to power, you won't
get good leaders, because the sort of leaders that are produced by that system are
going to be pretty awful. So, the quality of leadership that you get depends upon
the roots to power that are most viable. That's one reason why we’ve got to clean
up the flows of money, the flows of aid money. My friend Ngozi Okonjo-Iweala, the
former finance minister of Nigeria, after her experience said, in Nigeria, until we
clean up campaign finance, we'll never get good politicians. So, that was her sort
of considered assessment of Nigerian politics, that the weak point was campaign
finance. But I don't know.
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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The ownership point that you are making in particular contexts -- let me give
specific examples. I think there are opportunities both in Liberia and in Sierra
Leone at the moment. Liberia has very good leadership. In fact, Liberia is a
classic case of good political leadership, and a completely broken civil service.
Now, how can leaders lead when the civil service they command is just part of the
problem? So, that's a classic case. Sierra Leone is a little bit like that. We’ve
got a new government, and again, a broken civil service. So, there are two
opportunities for, as it were, a new architecture that the leadership can use to
achieve its objectives.
In Liberia at the moment, we start from the opposite of ownership. We start
from a system called GMAP (Governance Economic Management Action Program).
GMAP is really, is back to colonialism. It's an act of despair on the part of the
donors, because what GMAP requires is a dual signature on government
expenditure, so the donors have to sign off literally on Ministry of Finance spending.
So, that is not a sustainable root, GMAP.
And the sort of model I was trying to sketch of these independent service
authorities is quite attractive to these governments -- I've talked about it with them --
in two senses. One is it moves on from GMAP, so it creates institutions that look
much more government ownership and much more permanent. The other is it
brings NGOs inside the perspective of government. At the moment, governments
are very worried that NGOs are completely outside their line of sight. For example,
donors are giving money directly to NGOs, which are then providing services
completely without reference to the government. And that's a ridiculous structure;
uncoordinated funding of individual NGOs by individual donors. And the concept
of the independent service authority provides a device where the money is
coordinated, NGOs have to compete for that money, demonstrating that they are
more effective than other NGOs so there’s an element of accountability coming into
NGOs, and the government is part of the supervisory structure, and the whole
authority is meeting standards set by the ministries that lay down the policies for
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education, or health, or whatever. So, it's a model which I think offers much more
ownership than what's going on at the moment, and it offers the prospect of
long-term institutions that are appropriate for the context.
Finally, you discussed the South-South model of leadership, and I think that is a
good model. Leaders learn from other leaders. Now mostly, they learn from
neighboring leaders. And that's of course what happened in Asia, was that you got
some countries that they got ahead, and they provided role models and challenges
for other leaders in the region. And that what needs to happen in Africa. In a way
we need to invest in a few stars. Africa has too many countries for them all to
move at the same pace. That's just not realistically what's going to happen.
What's going to happen is three or four are going to make real progress, and then
the rest will start to follow.
DR.YAMAGATA: Mauritius?
PROF.COLLIER: Well, Mauritius is indeed ahead, and Madagascar is learning
from Mauritius. The problem is Mauritius is a little island in the middle of the Indian
Ocean, and so if one had to pick one African country to be the role model, it wouldn't
have been Mauritius.
DR.YAMAGATA: Hopefully Madagascar.
DR.HIRANO: Professor Otsuka.
DR.OTSUKA: I’m greatly handicapped because I went to IFIC this morning and I
missed your presentation. I am sorry I made a mistake. So, my comments may
not be directly related to your argument, but it has something to do with the role
model or success story. Indeed success story affects, or disciplines the policies of
neighboring countries. Taiwan and Korea learned a lot from Japan, China learned
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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a lot from Japan, and the Vietnamese are learning a lot from China now. The
flower industry developed in Kenya, and in Ethiopia now, flower industry is also
growing, and other countries are trying to catch up. So, I like your argument of
policy externality. Road construction in Kenya affects the welfare of the people in
Uganda, but similarly, this success story in certain industries can affect, I think,
would affect the policies in other countries. In this connection, I am particularly
interested in development of clusters. Actually I am working with JICA and JBIC to
some extent, and also with the World Bank to develop industrial clusters in Africa.
Tonight I am leaving for Ethiopia, Addis Ababa, where there are many industrial
clusters. Many people do not know them, because small enterprises are hiding.
You have to open doors three or four times to find out small workshops. But in the
case of shoe, there are more than 1,000 enterprises in Ethiopia. There are more
than 300 enterprises in garment industry in Addis, and there are more than 10,000
small enterprises engaged in car repair and metal processing in Kumasi in Ghana.
We have offered the training program to managers so that industrial clusters can
grow. Although I missed your presentation, I read your paper written a year ago,
and interestingly you pointed out the importance of technical assistance and
importance of importation of skills. You said that investment in skills has a high
pay off. What we found is that there are a lot of similarities in the patterns of
development of clusters between Asia and Africa up to a certain point, up to the
point where clusters have been formed. But in Asia, innovations take place, so
that clusters continue to grow. In Africa, the importation of skills or technical
assistance is missing. Therefore, there are a lot of industrial clusters, but many of
them continue to stagnate. So, my idea is to transfer knowledge from outside,
particularly from Asia. And also JICA has been interested in technical assistance.
It's a very good subject to discuss in JICA's meeting. So, I'd like to ask what you
think about the potential of developing industrial clusters in Africa.
PROF.COLLIER: I like where possible to link industrial clusters to exporting. I
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think exporting gives you two big advantages. One is your market is infinite and so
you can expand without limit -- Africa is so small relative to the world market --
whereas producing to the domestic market, these markets are small, so you rapidly
hit a demand curve that is sloping downwards. The focus on the domestic market,
then, as it were, this was the model that Africa tried 40 years ago, and it didn't work
very well because what happened was that the very easy things were exhausted,
and then, the government tried to encourage things which where the market was
even smaller, and that required heavier protection. So, gradually you accumulate
the whole apparatus of a lot of protection and a lot of patronage, and then firms
learn that they succeed or fail not by being efficient, but by being cozy with the
government. So, that focus on the internal market, I think, is much less
satisfactory than being able to break into international markets.
I think the other advantage of breaking into international markets is that the
benchmark of efficiency is then sort of automatically there and keeps moving
upwards, and that, as it were, puts firms on a treadmill for productivity growth. I’ve
done some work which finds that African firms that are exporting are getting much
faster productivity growth than firms which are not.
DR.OTSUKA: I don't think that jump-start is possible. Look at the major Japanese
large enterprises like Toyota, Honda, and Panasonic. They started with the family
business. They were SMEs in the beginning. But they innovated, and they
improved the quality of products, and then they started the export. That has been
happening in China as well, and what I’m trying to do is to develop SMEs which
already exist in Africa to improve the technique and management know-how, so that
they can export. But I don't think it's possible to export from the beginning.
PROF.COLLIER: Well, the alternative way of doing it is to bring in some foreign
firms.
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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DR.OTSUKA: I don't think that works.
PROF.COLLIER: Well, I don't see why not? The advantage of foreign firms is
that they provide rapidly the two things Africa lacks, which is capital and
organization, and actually, a third thing which is market know-how. What Africa
desperately needs is jobs. If I have to choose between African-owned firms and
African jobs, I think African jobs are much more important than African ownership of
firms. A structure in which a lot of the manufacturing sector is foreign-owned, but
provides millions of jobs is much more satisfactory for ordinary people than a
structure in which most of African manufacturing is African-owned, but there aren't
many jobs.
MR.KIYA: Garment industries in Bangladesh started from Korean investment.
That could be a good example.
DR.OTSUKA: But Bangladeshi sent more than 100 people to Korea for two years
to take training.
DR.HIRANO: Mr. Fukunishi?
MR.FUKUNISHI: I just want to make a comment about the exports through the
FDI in Africa. I am studying garment industry in Africa, particularly Kenya and
Madagascar. There have been a lot of FDI spillovers to the local industry in Asian
countries, including Bangladesh and Vietnam, but there seems to be some
problems in FDI spillover in Africa. The one thing is the threshold problem as you
told. It seems to be that the threshold is high in Africa, according to my
investigation, because of the factor prices. In some African countries wages are
quite high, particularly in Kenya. So, their threshold is too high to penetrate in the
export market. It has been temporarily reduced because of the AGOA, but again it
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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got back to high because of the termination of the MFA (Multi-Fiber Agreement).
So, as you know, the export from the Kenya has reduced now. That’s one
problem.
The next problem occurs after the threshold problem. Madagascar has
succeeded in the penetrating to the export market. They are still increasing the
exports to European market and the US market. The problem is that there is no
spillover. I have been there two weeks ago and have investigated spillover in
Madagascar, but I have found only fifteen firms are working with EPZ firms. Only
fifteen, and they are mainly doing embroidery or printing, not sewing clothes. I
don’t know why they do not participate in export market despite that their wages are
much cheaper than Kenya’s, and so it is profitable. The fifteen firms are making a
profit. But the entrepreneur is not interested in that industry. I think that has to be
investigated soon. So, if you know something about that, I would like to know your
answer.
PROF.COLLIER: Certainly my information is the same as yours in terms of labor
markets, that Madagascar is one of the few countries in which basically the labor
market isn’t a problem. Kenya -- certainly labor market is a problem. South
Africa, of course, it’s an enormous problem -- labor regulation. One simple way
forward would be to create within export processing zones, deregulated labor
market zones, so you don’t have to deregulate across the whole country; you just
deregulate within the zones. And that I think is politically a lot easier.
The lack of spillovers. This partly reflects, as it were, the much unsophisticated
nature and small size of these economies, so you really lack the skill base for very
many linkages. That is why generous rules of origin actually become more
important, that I think trying to force integration may well be a mistake because in
forcing integration you’re more likely just to kill the activity. Where the world is
going in terms of manufacturing globalization is trade in tasks. By trade in tasks is
meant the very opposite of vertical integration, that trade in tasks means each stage
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
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in the production process is done by a different country, so a different cluster will
specialize just in a particular task and the product might gradually accumulate
stages by being moved around many different clusters. That trade in tasks is
potentially very good news for Africa because it means you only have to learn one
task, whereas the integrated process, you need to learn many tasks together. If
you have to learn a lot of tasks all at the same time, what actually happens is
nothing. There’s always some missing task, and so these activities just don’t
develop. And so to my mind, Africa needs to, as it were, to embrace the idea of
trade in tasks. Just do a few stages and expand the quantity of production at those
stages rather than trying to get a lot of inter-linkages. So it’s a new world of big
quantities in narrowly defined tasks rather than integrated production structures.
But it’s a very suitable world if you start without any skills because then you only
have to get one.
DR.HIRANO: Time has come, but, Ms. Muto, please.
MS.MUTO: I come from JBIC and I have one question about landlocked countries,
the development strategies for such countries. I am very much involved in the
process of World Development Report 09 which deals with spatial development.
Last week I was in Washington attending some internal meetings at the World Bank.
One of the arguments there was whether to invest in education and health of these
landlocked countries so that people can choose the location to work, maybe
migration, or to improve the connectivity so that landlocked countries are integrated
in to the regional economy. This is a real budget allocation question. What would be
your reaction to this discussion?
PROF.COLLIER: Well, that’s awfully difficult, isn’t it? First of all, I think there are
no easy answers for these countries and they’d be far better off if they were parts of
other countries. And outside Africa, they usually are. Outside Africa, only 1% of
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44
the developing world’s population lives in countries that are landlocked and
resource-scarce. In Africa it’s something more like 30%. Another way of saying
that is that outside Africa, places that are landlocked resource-scarce have not
become countries. Very sensibly. Too late. There they exist. What can we
do? To my mind, the sort of the emigration and remittances strategy is something
of a last resort that the model of connectivity depends upon who you are connecting
with and what they’re doing. Niger’s only hope is that Nigeria should harness oil
for development. So, if Nigeria is going through a phase where it’s growing, which
it now is, and then connectivity looks much more attractive than it did 15 years ago
when you were connecting to something that was stagnant. So, I think the answer
is that the connectivity strategies seem to me better where the neighborhood shows
some signs of growth.
And then, ideally, the model is that these countries become a sort of hub and a
haven. Lebanon, which is not landlocked, but Lebanon became a haven within the
Middle East, a regulatory haven. And that is a sort of model that I think is feasible
for the landlocked. Rwanda and Uganda are both in a way trying to do that. And
the reason why it’s feasible is that precisely because they’ve got so few
opportunities, it’s credible that they have to be better in terms of governance and
regulation. So, their very limited possibilities are the political underpinning to
superior governance. In fact, we tend to find that with the landlocked -- you know,
if you look at the better governance environments in Africa, they’re often the most
desperate situations. They are: Rwanda, Burkina Faso, Uganda, and Botswana.
If only we could have put those governance environments in the countries that had
the big economic opportunities, Africa would look a lot more prosperous. The
paradox is that the better governance has been matched with the weakest
opportunities.
DR.HIRANO: Okay. Always time is limited. I’m sorry, but I think we are still on
the process to exploit the Professor, and this afternoon Professor will make a
IDE-JETRO/JICA Joint Meeting on “Development in Africa - Past, Present and Future”
45
lecture for the public and Professor Takahashi and Professor Ono are going to
comment again. Please continue to exploit him. Okay, thank you very much.
* * * * *
Japan International Cooperation Agency
Institute for International Cooperation
10-5, Ichigaya Honmura-cho, Shinjuku-ku Tokyo 162-8443
TEL: +81-3-3269-3374 FAX: +81-3-3269-2185