Excellencies, Ladies and Gentlemen.
First of all, I would like to express my thanks to the organizers and in particular to Mr Jean-Paul Carteron for offering me the privilege to address, as a special guest, this plenary session with such a distinguished audience. I am honoured and pleased to have beside me an outstanding speaker His Excellency, Mr. Ephraïm Inoni, Prix De La Fondation, Prime Minister of Cameroon.
Since its inception, the Crans Montana Forum has been one of the key venues bringing together decision makers and key actors from all disciplines with the goal of strengthening international cooperation. I’m pleased to see this emphasis on Africa in a number of sessions this year. Africa is high on any agenda for international cooperation.
Industrial development and poverty eradication in Africa are broad subjects that can’t be covered in such short sessions. There are multi-dimension complexities and the challenges are growing. In my talk today, I would like to highlight some key points in that regard, and share with you some of the experience of OPEC Fund for International Development (OFID) through its valuable activities over the past 30 years.
As we all know, the Millennium Development Goals (MDGs) constituted a blueprint for meeting the urgent needs of the world, particularly the poorest. Eradicating extreme poverty and hunger is the number one Millennium Development Goal. These goals were set in year 2000 and the fulfillment target is 2015. This means that our meeting today marks the half way point of the implementation period. And although some progress has been made towards these goals, the pace is extremely slow. And, the statistics are still staggering.
Today, nearly half of the world’s population is living in poverty and lacks basic needs. Sub-Saharan Africa is the region with the highest incidence of extreme poverty. 1.6 billion people do not have access to energy, and 2.4 billion rely only on basic biomass (logged wood) for cooking and heating. Again, most of these are in Africa and southern Asia.
The average energy consumption per capita in Sub-Saharan Africa is only 12% of OECD levels. Only a small fraction of that energy is in the form of electric power, which reflects the low level of industrialization. Other indicators that quantify premature deaths by diseases such as malaria or HIV-AIDS are nothing less than shocking.
Sadly, I can go on and on, the statistics and indicators, one after the other, are among the greatest embarrassments of our age.
Excellencies, Ladies and Gentlemen.
Without doubt, industrial development is vital to economic growth which is one of the three pillars of sustainable development. The other two pillars are social progress and environmental protection.
Although half of the 900 million inhabitants of Africa are living in Low Income Countries, Africa is still considered to be experiencing good economic growth with a GDP growth rate averaging about 5% annually in the past six years, rising to 5.5% in 2006, and expected to reach 6% in 2007.
However, In spite of relatively high growth rates and an overall enhanced macro-economic stability, Africa remains the least industrialized continent. With the exception of South Africa and some North African countries that enjoy substantial manufacturing and mining sectors; Africa’s exports are still dominated by primary or semi-manufactured products. Manufactured goods account for only 25% of total exports. Nearly all of the continent's natural resources are exported for as row materials for secondary manufacturing and refining.
Almost all available economic indicators highlight the weak development of Africa’s industry. Africa’s share in the world manufacturing output is less than 1%, and recent trends are not showing noticeable improvement.
The slow pace of industrialization in Africa could be explained by a multitude of factors. These include:
- lack of investments to develop infrastructures able to accompany growth,
- insufficient qualified human resources,
- inadequate financing,
- inappropriate legal framework to encourage Foreign Direct Investment (FDI),
- deficient protection from the risks linked to globalisation, and
- in some countries, lack of political stability and peace.
From a marketing point of view, the African industry is also limited by narrow local markets, in addition to difficulty in accessing international markets due to tariffs and other barriers. These factors hinder the value addition of goods thereby continuing Africa’s condition as exporter of unprocessed raw materials.
Excellencies, Ladies and Gentlemen.
Perhaps it is appropriate to pause here and ask ourselves, what kind of industrial development is needed for Africa and how to obtain concrete results in the field?
We all know that Africa has a huge industrial potential in both mining and manufacturing. However, African economies are too diverse to be amenable to a one-size-fits-all solution. Nevertheless, there are certain ideas that are likely to be relevant to all or most African countries.
First, North-South and South-South cooperation.
For many African countries, the nature of industrial development coming from the South has a better chance of being absorbed in a sustained way. For instance, some manufacturing industry technologies developed in the South, are better suited for developing countries. Often, simple technologies used in rural zones can have a widespread impact on poverty reduction. North-South cooperation is also essential and has a lot of paths. One emerging path for example is through the Clean Development Mechanism (CDM under the Kyoto Protocol), where project financing can have the benefits of improving economic and social prosperity as well as protecting the environment.
Second, the creation of an investment environment
A conducive investment climate is a pre-requisite to foster FDI. However, private investments would not grow substantially without a massive boost in public sector investments. Only the development of appropriate basic infrastructures can prepare a country to receive domestic and foreign private investments that would drive the development process. Although I mentioned the lack of infrastructure earlier as a constraint, I must admit that, in areas such as telecommunications and energy, Africa is able to use new technologies to leapfrog more advanced economies.
Third, development of the agriculture sector.
Examples elsewhere in the world have shown that industrialisation often follows a period of agricultural growth. The agricultural sector is the backbone of many African economies since 80% of the people depend on farming for their incomes. The development of micro, small and medium-sized enterprises to process the primary agricultural products, would provide alternative livelihoods for rural communities, generate employment opportunities. and, therefore, greatly help in alleviating poverty.
Four, a focus on an industrial development strategy suited for Africa.
African countries need to be able to drive their own development. The right model is the model that works in the fields by producing growth and alleviating poverty. I am sure that, His Excellency, Mr. Inoni, will enlighten us on the Cameroon’s experience concerning its model of development.
An important key point to stress here is that whatever the industrial development model used, and no matter how Africa achieves it through north-south and south-south cooperation, the enhanced economic growth resulting from industrial development can make a sustainable positive impact on poverty only if the fruits of growth are to be passed on to the poor. So, another key challenge here, is: how to translate growth into real social development for all?
Based on our experience, this requires an active role of the state in order to assure the inclusion of poor people in the growth. One of the known established paths to reach this is through investing in education and health services.
Excellencies, Ladies and Gentlemen,
When we talk about international development aid, the word “scaling-up” is quite topical. However, this scaling-up is yet to be reflected in the field.
Although Official Development Aid (ODA) from OECD countries may indicate some increase, ODA actually fell in real terms in 2006 compared to 2005. This is because the increase of the aid was in the form of debt relief, which means that on the ground, African countries did not receive more fresh money.
So when we talk about scaling-up, there are two factors to consider, Amount, and Effectiveness. As the challenges grow in Africa, the effectiveness of the development assistance provided becomes increasingly critical.
Excellencies, Ladies and Gentlemen,
Allow me now to shed some light on the role that my organization OFID is playing, along with its Member Countries, in providing international development assistance.
Alleviating poverty and deprivation through various means is at the heart of the mandate of OFID. Participating in the achievement of the MDGs is one of our strategic operational goals. Since its inception 31 years ago, OFID has used its global mandate to finance a wide variety of projects in 119 countries while paying special attention to the needs of the least developed. It is noteworthy that OFID’s mandate explicitly excludes its Member Countries from benefiting from the institution’s development financing.
As of today, OFID has committed around 8 billion US Dollars, in soft loans and grants, to support development projects. Almost half of OFID’s efforts are concentrated in Africa. In general, projects supported by OFID range from infrastructure like roads, hospitals, power generation plants, to research and development, capacity building as well as intellectual activities. We try to put more focus on much needed infrastructures, which are crucial for industrial development. Moreover, OFID is also active under the “Heavily Indebted Poor Countries Initiative” by providing debt relief. I am pleased to note that Cameroon has successfully qualified and implemented this initiative, with the contribution of OFID.
To cope with the rising and challenging demands, and to continue enhancing our efficiency in the field, OFID has diversified its financing instruments. In addition to straight grants and classic public sector operations, OFID also operates a private sector window and a Trade Finance Facility. These windows offer various levels of concessionality. In the next three years, OFID plans to commit almost US$3 billion through these windows, which represent an increase of 50% over the past three years.
Excellencies, Ladies and Gentlemen,
The aggregate combined GDP per capita of OFID Member Countries is about one tenth of that of rich countries. In other words, given the size of their respective populations and development needs, OFID Member Countries are not particularly rich countries, as the misconception goes.
Still, in the spirit of South-South cooperation, partnership and solidarity, OFID Member Countries have been channelling substantial development assistance through OFID and various sister institutions, to developing nations all over the world. In fact, this development assistance has totalled over US$80 billion over the last 30 years, excluding bilateral aid. During the last years this assistance has averaged US$4 billion per year.
Excellencies, Ladies and Gentlemen,
In conclusion, I would like to say that today, achieving sustainable development is one of the most important challenges facing humanity; this is the path that will take poor nations out of poverty. Putting a diversified industrial development in the driving seat of economic growth is indeed a sure way of contributing toward this noble goal.
African countries are doing what they were encouraged to do by the international community. These countries are progressively opening up their economies. They are also improving their governance, and setting up the right environment for fostering domestic and foreign investments to permit more development in all sectors. On their part, the donor countries as well as development institutions are also doing their share. However, more is needed. Efforts for scaling-up needs to be enhanced; scaling-up to both deliver higher and more effective contributions.
“Prosperity for All” must be a shared vision and ambition by developed and developing countries alike. We all have a responsibility and role to play. Governments, IGOs, NGOs, private sector and businessmen.
Together we can make a difference.
Thank You