U.S. Statement at UNCTAD’s 54th Trade and Development Board

Delivered by Ann Low, First Secretary
US Mission Geneva
October 5, 2007

Economic Development in Africa

Mr. Chairman, the United States thanks the UNCTAD secretariat for its Overview of its report on Economic Development in Africa. We strongly support UNCTAD’s focus on Africa. As the Secretary General has reported, Africa is the only region unlikely to meet most internationally agreed Millennium Development Goals.

Last month, at the UNDP Executive Board meeting in New York, the United States urged UNDP to adopt a strategy to help sub-Saharan Africa meet its development goals. We are pleased that following the UNDP Board meeting and on the eve of the General Assembly, Secretary-General Ban announced the formation of the MDG Africa Steering Group. Although many agencies have been engaged in Africa for decades, there is a clear need to redouble our efforts. UNDP can play an important role in better coordinating assistance activities, improving actual program delivery, and ensuring that the products and services available from agencies that lack a field presence, like UNCTAD, reach countries that can benefit from them. Likewise, we trust that UNCTAD will work closely with UNDP and other development institutions to increase, cooperatively, their own program effectiveness to help the countries of sub-Saharan Africa achieve their development goals. To that end we encourage UNCTAD to clearly and simply educate UN Resident Coordinators about UNCTAD’s main products and services.

We are pleased to see that this report focuses on reform within African nations as the key to sustainable economic growth. The Monterrey Consensus recognizes that each country is responsible for its own policies and its own development. Reform is essential to create environments in which enterprises of all types and sizes can flourish and contribute to national and global economies. Every country, whatever its region, must create enabling economic environments that promote business creation and attract investment, both locally and from abroad.

Donor governments have injected some 2.3 trillion dollars into Africa over the past 50 years, yet poverty rates have actually increased over the past two decades. In many cases, mistaken policies have exacerbated the situation of weak economies in Africa. Increased trade is helping immensely, but more efforts are needed to ensure that the rewards of trade are shared more broadly. A healthy private sector is needed to tap trade’s benefits.

Although great progress has been made, conditions and policies in many African nations work against business creation or investment. Unleashing the power of local entrepreneurship is the key to economic growth. High business-opening costs and taxes, unbalanced labor rules, stifling regulations, and low investment protection are the enemies of entrepreneurial, knowledge societies.

We are pleased that UNCTAD’s Overview of the report encourages the incorporation of the informal sector into the formal sector, and the subsequent broadening of the tax base. Adequate attention must be given to crafting a tax regime which does not overly encumber entrepreneurs—one which encourages compliance and does not push more businesses into the informal sector through high rates, complicated procedures, and inflexible regulations.

As the Overview rightly asserts, improved economic performance will follow as financial resources in African economies are properly mobilized and wisely allocated. However, certain recommendations seem counterproductive, venturing into over-regulation and rigid policy prescription. Some of the Overview’s discussion, seeming to allude to directing remittances and infant-industry protection, lean in this direction.

The Overview names market failure as the main challenge to African development. Where markets have failed, the fault has generally been with policies that attempted to control and dictate market trends, and determine lending and resource allocation in the financial sector. Government co-opting of private initiative is not the way to create a trusting citizenry and a stable society; this is not good governance.

We readily acknowledge that technological advancement and Information and Communications Technology are also important; but they will not lead to economic development by themselves. A business-friendly environment, and indigenous capacity and knowledge, must exist before ICT, or any other enabling technology, can be gainfully exploited.

We are also concerned about the mischaracterization of World Trade Organization membership as a limiting factor in the array of policies that African States can pursue. Not only does membership in the WTO provide African nations with a stable and rules-based trade environment, necessary to attract investment, but it also offers developing countries a high degree of flexibility through special and preferential treatment. Developing countries have been required to make fewer commitments in the WTO, have been given longer phase-in periods, and have been allowed greater use of tariffs than developed countries. The WTO offers even greater concessions to those African nations that the UN has classified as Least Developed Countries, including a streamlined accession process, and exclusion from mandatory tariff cuts.

Furthermore, WTO membership actually increases the number of choices in the policy mix, increasing genuine “policy space.” Membership ensures low external tariffs for the country’s exports, allowing countries to focus on export-led growth policies, while giving the country access to the WTO Dispute Settlement Body to redress grievances over trade disputes.

There are some sound recommendations in this Overview that we support, but we cannot endorse its entirety. Unfortunately, we only received the full report today so our comments refer only to the Overview of the report. We appreciate the themes and the work of the Secretariat in making African development a priority. We also agree that there is no “one-size fits all” policy solution. However, we reiterate that, regardless of country or culture, there are certainly best practices, proven to accelerate economic growth and foster poverty alleviation.

Thank you.