"Export development policies have been a critical part of East Asia’s success and merit consideration. These schemes, mainly duty exemption and drawback systems have failed in Sub-Saharan Africa for reasons of trust and capacity, cumbersome procedures, and because the cost from delays and paperwork outweigh the reduction in duty". (p. 80)

This summary indicator confirms that South East Asian countries have performed very well in terms of institutional quality, while African countries have tended to have institutions which were not conducive to private sector development. The next two subsections discuss some general and specific institutions for successful integration.

5.1. General institutions for external performance

As mentioned above, the general institutions for external performance are not different from the institutional preconditions that have been identified for general private sector development. Table 7 mentioned a few such exemplary general institutional conditions: secure property rights, a reliable judiciary, rule of law, high capability in the bureaucracy, competent core economic agencies and political commitment to development.

The difference in the level of political commitment to development between East Asia and Africa is often highlighted. A rough definition of this commitment would be the willingness to risk political capital in order to achieve growth. The regimes in Malaysia and Indonesia (this also holds for Thailand if the monarchy is included) have also been more stable. Therefore these countries had leaders in power for long periods that placed economic growth as a top priority. The regimes in Southeast Asia have been willing to shield top economic planning agencies in the bureaucracy from political pressures and to follow their policy advice. The key lessons seems to be "to give priority to and insulate from political interference, the functions of macro-economic management and long term development strategy" (Widner, 1994).

The weak institutional foundations for growth in Africa is probably most visible in the political sphere. Many attribute one of the primary causes for Africa's development tragedy to the predatory nature of African states. African governments, have tended not to be able to put long term national development priorities over more immediate political or personal ones. Similarly, Collier and Gunning (1997) conclude that: "African governments have behaved in ways which are damaging to the long term interests of the majority of their populations because they have served narrow constituencies." The instability of regimes has also been higher. It is worrying that commentators still not that despite the rhetoric African leaders still seem to have a mistrust of the private sector (Adams, 1998).

In addition to political commitment, a much discussed institutional foundation of Southeast Asian countries’s success are their relatively competent and efficient bureaucracies. Clientalistic, rent-seeking behaviour exists in both regions but the key difference is that Southeast Asian countries tended to keep rent-seeking within bounds or have managed to grow rapidly despite this. In this context, one of the clearest lessons to emerge from the East Asian experience is the value of merit-based recruitment and promotion practices for fostering a capable and motivated civil service. Adequate compensation of civil servants was used in order to attract and retain capable staff and merit based promotion practices have ensured relatively efficient performance of the bureaucracy. To foster internal controls and restraints, some countries also introduced specific control mechanism and watchdog organisation, such as anti-corruption commissions.

At the public level, Reynolds (1995) notes that government’s administrative competence is the single most important factor explaining the difference in growth among many developing countries. In contrast to Southeast Asia, African governments have often been more preoccupied with securing public employment than promoting the quality of the civil service. Positions in public sector institutions, including many parastatals and monitoring and regulatory agencies, have been made ineffective due to political appointments, politically controlled funding and multiple objectives. Transparency and accountability of these public institutions has been minimal. Africa comes in the bottom group in cross-regional comparison in terms of an index of "bureaucratic efficiency" (Adam and O'Connell 1997). Even in the face of fiscal pressure, public employment was often maintained and even expanded at lower levels of the bureaucracy. The World Bank put it quite starkly: "[African] governments have become employers of last resort and dispensers of political patronage, offering jobs to family, friends and supporters" (The World Bank, 1997: 95). The poor economic management capacity and cumbersome administrative and bureaucratic structures of African bureaucracies has limited the successful formulation and implementation of economic policies and become a central obstacle to market oriented reforms.

There is universal agreement on the great need to improve the management of African economies. Reflecting the experience with technical assistance, Dia (1996) advances the debate greatly. He finds that the incentives that determine behaviour are as important as training and resources. He therefore distinguishes between two different types of capacity building.

1. supply side – technical – Does a country have the staff, equipment and knowledge? If not, the solution is one of increasing the quantity and quality of education and training. This was the major problem after independence but is no longer considered as the key constraint.
2. demand side – institutional – Does a country have the ability to make optimal use of existing resources. This involves issues such as commitment of leaders, enforceability of rules, local ownership & legitimacy, accountability, stability, incentives. He argues that this institutional side is the weakest link in Africa’s capacity building efforts.

This would seem to reflect the experience of economic management in Thailand and Indonesia, which was achieved with a few highly qualified economists. But the key is to insulate them from the political pressures that would undermine development-oriented policies and to provide the correct incentives and penalties to encourage their performance.

Also in terms of rule of law, many countries in Sub-Saharan Africa have certainly lacked the conditions for private sector development. For instance, the survey conducted for the 1997 World Development Report shows that formal enforcement of property and contract rights are indeed a problem. Between 70 and 80 percent of entrepreneurs answered that they thought that theft and crime were serious problems, that they were not confident that the state authorities would protect their persons and property and that judiciaries were very unpredictable.

5.2. Specific institutions and external performance

Regarding institutions specifically affecting integration, these tend to reflect the application of general institutional issues to the external sector issues. For example, at the political level, this would refer to, for example, the political commitment to increasing exports. Other such issues are identified by Harrold et al. (1996) in their study of Southeast Asian trade and industrialisation lessons for Africa. These include issues such as the existence of a competent economic bureaucracy, that bureaucrats and private sector actors should enjoy a high degree of mutual respect and that there should be a minimum of trust between the government and the private sector. First we will discuss two specific institutional mechanisms for export promotion, which have been studied in the East Asian context: (i) a clear political commitment for exports and (ii) deliberation councils. We will then look more closely at some of the specific institutions in Sub Saharan Africa.

The political commitment of Southeast Asian leaders and elites to economic development has often been noted. This commitment was usually credible because the leaders’ personal incentives appeared to be in line with the announced course of action. Moreover they had specific commitment for promoting development though encouraging exports. One instrument of this commitment was a quantitative export target. A target alone is of course not sufficient to increase export, but they were backed up with concrete policy measures as discussed above, and with some institutional arrangements. The most famous of these are the so-called business councils.

Most East Asian governments have worked very closely with the business community to achieve specific development goals. They have built forums on which government officials and industry representatives discussed and designed policies for external performance. The most famous such forum is the business council or deliberation council. The main function of the council is to gain information that is needed to formulate policies that will enhance the performance of the private sector. At the same time the deliberation council may help to reduce rent seeking through a more transparent allocation of rents and also helps to reduce uncertainty about future policies. The Korean government used government-business forums for the implementation of export policies by setting specific performance standards were set for private firms, which were monitored and adjusted according to market conditions.

In Africa, the relationship between the government and the private sector has been much more adversarial than in East Asia, both in general and with specific reference to trans-national corporations. There has also been in many cases a lack of political commitment to integration, particularly in the years after independence, reflecting concerns about neo-imperialism. A small, recent example of different levels of political commitment to integration is that of the approaches taken by Uganda and Kenya toward the Forum on Trade and Investment in Africa held in Addis Ababa in March 1998. Uganda sent the President and Minister of Trade, gaining much credibility in the process. Kenya sent the Vice-Chairman of a Manufacturers Association with the opposite result (reported in the Daily Nation, 1998).

The experience of some African countries with versions of deliberation councils has generally not been so positive. Deliberation councils need a substantial technical capability if they are to use the information supplied effectively. Also they have the inherent problem that, by default, they exclude some parts of the private sector and can well degenerate into mechanisms for unproductive rent extraction by the insiders.

This list of factors shows the close interaction between general and specific institutions for successful external performance. For example, most of the reasons why deliberation councils failed to deliver the same result in Africa as they did in Asia are related to a lack of general institutional foundations. It seems that at least some of the general institutional basis must be in place to ensure private sector development.

VI. Comparison of Key Issues

The conference will concentrate on four main issues:

• Resource Exports and Resource-processing for Export
• Export oriented industrialisation and FDI
• Management of Financial Flows
• Management of Foreign Aid and Debt

This section provides a brief comparative overview of each of these in turn.

6.1. Resource Exports and Resource-Processing for Export

There is a general pessimism about dependence on primary exports in terms of a long term development strategy. Also, due to the emphasis on manufacturing in literature on East Asia, the importance of primary sector exports seems to have been underplayed. However a number of studies have found that the expansion of primary exports was one of the key factors behind the integration of Southeast Asia (Tomich et al., 1994; Chhibber and Leechor, 1995). In Southeast Asia the expansion of primary exports seems, through the mechanisms indicated in the Box below, to have had a significant impact on the development. The rapid growth of agricultural exports in Malaysia, Indonesia and Thailand was also a basis for the subsequent upgrading and shift to manufacturing (Chhibber and Leechor, 1995). In this regard it is important to recognise that primary exports remain the most important link to the global economy for many countries in sub-Saharan Africa. Any strategy for increasing Africa’s linkages to the global economy will need to centre initially on resource exports.

The primary export performance of Southeast Asia and Africa has differed markedly. Again a rough contrast is that the primary export base shrank in African countries between 1970 and 1990 whereas it was maintained in Southeast Asia despite the shift to manufacturing (Tomich et al., 1994). Successes have been seen in coffee and tea in Kenya and cocoa in Cote D’Ivoire in Africa, for example, but these have not been sustained. Overall, it is telling that African countries failed to maintain their market shares of in the commodities in which they had a comparative advantage whereas Southeast Asian countries have been gaining export shares in the same markets previously dominated by Africa and Latin America.

There is widespread agreement that one of the key factors behind the successful agricultural exporters in Southeast Asia was that they maintained exchange rates that favor exporters. Tomich et al (1994) also identified three main areas of heavy investment that supported export agriculture: rural transportation, research and planting programs. These increased yields and reduce the costs of growing exportable crops.

Finally, there is interesting evidence on the constraints faced by firms trying to move into non-traditional exporting in East Africa (Ndulu, Semboja and Mbelle, 1998 and Mwega, 1998). A summary of the findings of four surveys of the constraints faced by firms in the liberalisation era– see Appendix 4. The key restrictions were identified as:

• Lack of finance
• Inadequate supportive infrastructure (e.g. transport, power, water, waste disposal, telephones, storage at ports)
• Bureaucracy and an adverse regulatory environment.

As one of the studies emphasises, it is the general influences that played a more important role in export promotion than specific policy measures (Bol, 1995).

The key question for Africa is (i) how can primary exports be expanded; (ii) whether primary export expansion is a pre-requisite or if a shift to manufacturing can be achieved in other ways?

6.2. Export-oriented Industrialisation and FDI

The strong relationship between industrialisation and economic development indicates a vital need to look at this issue. Linked to export promotion and encouraging inward investment, the rapid rate of industrialisation was one of the cornerstones of the strong performance of Southeast Asia. Accounting for this also remains one of the most contentious issues for analysis. In contrast, there has been very little upgrading in most countries in Africa. The share of primary commodities in total African exports only declined marginally - from 92% in 1965 to 86% in 1987 (Wangwe, 1995). Only very few countries have been able to export manufactured products.

The difference in manufactured export performance between Southeast Asia and selected countries in Africa is highlighted in Graphs 7. It shows that the proportion of manufactures in exports were relatively similar in Southeast Asia and Africa in 1970, in some cases African countries were markedly better off. However, since then there has been a rapid and sustained increase in the proportion of manufactured exports in all three countries in Southeast Asia. In Africa, there has not been much increase except for Mauritius, where it was even more pronounced than in SE Asia.

Source: Calculated from World Development Indicators, 1997.

A similar picture emerges if we compare FDI. Both regions were attracting low levels of FDI in the 1970s. Since then Southeast Asia has attracted increasing amounts of FDI whereas many countries in Africa attract virtually no inward investment. The year 1987 is a key turning point where Southeast Asia began to attract large amounts of FDI after the Plaza Accord.

It is interesting to note that Malaysia really stands out as the country where FDI is likely to have had the most significant impact. FDI accounted for an increasing proportion of GDP and investment (see Appendix 3) whereas the impact of FDI was more limited in other countries. In Thailand for example, Thai corporate investment was twelve times that of all foreign investment (Phongpaichit and Baker, 1998). It must be noted that FDI may be of a greater qualitative value (vis a vis upgrading) than domestic investment.

Source: Calculated from World Development Indicators, 1997.

The share of Africa in FDI flows to all developing countries dropped from c6% to c3% between 1984-89 and 1994-95 (World Bank, 1997b). The explanation for low FDI flows to Africa include factors such as civil conflict, low GDP growth, low trade openness and high variability of real effective exchange rates. In terms of enhancing FDI potential in Africa, recent studies emphasise a number of institutional issues. These (see UNCTAD, 1995; Pearce, Islam and Sauvant, 1996) include:

• reduce bureaucratic procedures and assure property rights;
• treat foreign and domestic investors equally;
• establish efficient (low rate) tax systems;
• ease access to foreign exchange and expatriate employment

Overall, a key point that seems to be emerging is that it is "systemic competetiveness" that will affect the amount of investment that is attracted. The issues firms would look for include:

• Sound economic policies
• Social concerns – education, health, languages, non-fragmented societies, non-confrontational culture
• Labour skills
• Physical infrastructure
• Rule of law
• Efficient and effective public sector

Source: Rodriguez, 1998

6.3. Management of Financial Flows

Although the level of financial flows to sub-Saharan Africa remains relatively small, there are two main reasons for focusing on this issue. First, one of the key conduits of globalisation is through cross-border transactions of financial assets. Second, this financial linkage, particularly its high volatility, has major implications for macroeconomic stability as well as on real sector performances, as vividly witnessed in the most recent currency crisis experienced by the three Southeast Asian economies. The importance of a strong financial system is one of key lessons of Asian crisis that is valid for all developing countries.

Graph 9 clearly contrast the level of capital inflows of selected countries in Southeast Asia and Africa. Southeast Asian countries have shown a greater ability to attract capital flows after low inflows in 1970. The explosive growth of such flows to their level in 1995 is notable. Similarly notable is the total inability of African countries to attract finance. For much of Africa, there needs to be concentration on policy and institutions that provide an attractive environment that can reverse capital flight rather than to control excessive inflows.

Source: Calculated from World Development Indicators, 1997.

6.4. ODA, Debt and Development

In overall terms, private financial flows to developing countries are now substantially greater than official flows of foreign aid. But, financial flows are concentrated in a few countries and of importance to this study is the fact that foreign aid remains one of the most significant external links for much of sub-Saharan Africa. There is a great need to reduce aid dependence and increase the effectiveness of aid in Africa. There is also a great need to resolve the debt problem facing many countries in Africa. In contrast, countries in Southeast Asia seem to have managed foreign aid and debt effectively, thereby accelerating the development process. There may be interesting lessons for Africa in this regard.

Graph 10 shows the proportion of ODA to GNP for select countries in Southeast Asia and Africa. The low levels in Southeast Asia (and Mauritius) contrast markedly with the high and rising levels in the other countries in Africa. Although the data is rather scarce, Graph 11 gives an indication of the level of dependence on ODA of African governments. African countries now seem caught in an low-level trap of "aid dependence" whereby aid is vital for the short term yet is distracting countries away from concentrating more on the more dynamic issue for long-term development – fostering the private sector.

Source: Calculated from World Development Indicators, 1997.

Unfortunately, the current ODA situation in Africa can probably most accurately be described as a bit of a mess. In a recent review of aid performance in Africa, Helleiner (1998) concludes that as it is practised at present aid remains a "wholly unsatisfactory basis for linking Africa with the world …. The impact of ODA is constrained by procurement restrictions and conditions unrelated to development, high transaction costs and poor donor co-ordination……. Aid would have to be massively transformed if it were to serve as a major instrument for mediating Africa’s future relationship with the world" (Helleiner, 1998). It seems unlikely, however, that a transformation will take place and aid flows are declining in any case.

Source: Calculated from World Development Indicators, 1997.

It is clear that central responsibility for aid effectiveness and aid co-ordination lies with each recipient (World Bank, 1995). In contrast to Southeast Asia (see Soderberg, 1996) very few recipient countries in Africa have put forward a coherent development strategy and have demonstrated the ability to co-ordinate aid flows around this. But this partly reflects the incentive structure facing recipients that donors have created.

There seems to be a strong argument that better selectivity of countries is the key to aid effectiveness in Africa or elsewhere. In terms of our framework outlined above, most aid can basically be considered as a specific intervention. And similar to other specific measures it would seem to be more likely to be effective if sound general economic policy and institutional foundations exist. Similar to developing country governments being warned away from specific policy unless very rigerous conditions are met, it would seem that donors should have to meet similarly stringent conditions in choosing the countries they provide aid to. But what are the most useful objective criteria for selectivity and monitoring? First, there is certainly increasing evidence that aid works better in a good policy environment (Dollar, 1996). In this regard, the general economic policy criteria outlined in the previous sections could be used. Second, there would also seem to be a good case for including institutional criteria – political commitment, bureaucratic quality, rule of law, property rights etc. Clearly, more work is needed in identifying viable criteria in this area.

On the issue of debt, the constraint on development imposed by the debt overhand is increasingly clear, particularly for Africa. In their regression analysis Ndulu and Ndungu (1997) find a very strong negative and significant influence of the debt to GDP ratio beyond a threshold of 97% - a very large proportion of African counties exceed this threshold and face retardation of growth. Easing the burden of unsustainable debt would free up government resources for more productive developmental activities, reduce transactions costs (which are a massive burden on policy-makers) and help restore macroeconomic stability and investor confidence. A dollar of reduced debt is therefore likely to be more valuable than an additional dollar of conventional aid. Thus Helleiner concludes that there is "an overwhelming intellectual case for significant further reductions in the external debt of debt-distressed-low income countries in Africa, and particularly if the resources made available are truly additional." But debt relief, like aid in general, is only likely to have a significant impact if recipient governments have sound policy and institutional fundamentals in place.

VII. The Transferability of Lessons?

One of the main aims of the project is to take a close look at the key issue of the transferability of any lessons between Southeast Asia and Sub-Saharan Africa. Successful economic policies and institutional arrangements need to be rooted in the underlying structures and characteristics of each country. Although many are sceptical about the potential for drawing lessons from Northeast Asia for Africa, as argued above, we feel that Southeast Asia and Africa may be similar enough for there to be the potential to draw lessons from Southeast Asia for countries in Africa. It is also important to reflect on whether external circumstances have changed significantly enough to affect transferability.

But, first it is important to outline what we mean by transferability. We do not mean the direct wholesale adoption of economic policies or institutional arrangements. Instead, we refer to indigenous adaptation (the alteration of ideas to suit local circumstances) and to proximate institutional prerequisites. For example, economic policies should only be adopted where the technical capacity exists to implement them effectively or they should be adapted to suit the current capacity. This modification is even more important for transferring institutional arrangements. Copying Asian institutional arrangements should only be attempted if, for example, there is already sound macro-economic conditions, the appropriate social pre-conditions exist and/or if political commitment exists to ensure the credibility of any new institutional forms. If not, any arrangements would need to be modified to reflect the existing historical, cultural, economic and political context. But, as in other areas, latecomers do have the advantage of learning what has worked and what has not worked in other countries.

In this section we next identify some of the important differences between Southeast Asia and Sub-Saharan Africa in terms of socio-economic structures, domestic conditions and external circumstances.

7.1. Socio-economic Structures

Perkins and Roemer (1994) do an interesting comparison of socio-economic structures in Southeast Asia in the 1960s and Africa in the 1990s – see below. For most indicators there is a similarity in economic structure between Southeast Asia in 1965 and Africa in 1990. Many countries in Africa would actually have more favourable socio-economic structures now than Indonesia had in 1965. This would seem to suggest that African countries could achieve the kinds of results achieved in Southeast Asia. But, a key difference is in the level of savings which is was almost twice as high in Southeast Asia. Another difference is that adult illiteracy is notably higher in Africa in 1990 than in Asia in the 1965.

Table 4: Africa in 1990 and Southeast Asia in 1965.

	Africa 1990	SE Asia 1965
			Indonesia	Malaysia	Thailand
GDP (US$)	658	868	461	1309	833
Agriculture share GDP (%)	35.3	37.0	51	28	32
Manufacturing share of GDP (%)	11.5	10.3	8	9	14
Savings share of GDP (%)	8.7	17.0	8	24	19
Investment share of GDP (%)	18.1	16.0	8	20	20
Export share of GDP (%)	23.5	24.3	13	41	19
Urban population (%)	27.9	18.3	16	26	13
Primary Education (% of eligible population)	71.4	80.0	72	90	78
Secondary Education (% of eligible population)	17.6	18.0	12	28	14
Adult Illiteracy (% of adult population)	53	35.3	43	42	21
Life Expectancy (years)	50.7	52.7	44	58	56

Source: Perkins and Roemer, 1996: 52.

However, historians argue that social science explanations have not been sufficient to answer the question "Why have some states been applying better economic policies than others?" (Thompson, 1998) and that there are "deeper differences among peoples environments", (Diamond, 1998). One factor often mentioned is that the type of colonisation in Africa was more destructive and reduced the ability of African states to respond to the opportunities after independence. Thompson (1998) tends to reject this argument, focusing instead on the advantages Southeast Asia had in terms of physical geography (easier environment, better natural resources and lower barriers to movement) and the access to ideas contained in the strategic location of Southeast Asia between China and India. In particular, Thompson concludes that "Southeast Asian cultures were better equipped to respond to the challenges and opportunities of the colonial era and, subsequently, to enter the capitalist, interconnected world of today".

Although the question posed by Thompson is very valid, the answer provided seems less convincing. The data shows that Southeast Asia and sub-Saharan Africa had similar economic situations (in per capita GDP, agriculture as a % of GDP, etc.) in the 1960s – why did this historical legacy favouring Southeast Asia not appear as such an advantage earlier? The argument also seems to rule out any form of action – that your development depends on factors outside your control. This seems to contradict much of the apparent evidence that successful performances were built not bequeathed. In other words, the analysis does not actually answer the key question about how these environmental issues actually led the state to apply better economic policies in Southeast Asia than Africa.

The analysis by Thompson does however raise questions about the limits of economic statistics in capturing the crucial factors that affect successful economic performance in a globalising world. Our analysis has tried to go beyond economic policy analysis and concentrate on the institutional foundations. This may provide more of the answer to the question of why have Southeast Asian countries and cultures been better at responding to the challenges and opportunities that emerged since the 1960s. A key point for further investigation is: How similar were the institutional starting points? And what are the key factors affecting these?

7.2. Human Resources

One of the main issues that is usually discussed regarding the replicability of East Asian strategies is the endowment of human resources. If we look at the level of human resources, Africa certainly had a disadvantage compared to Southeast Asia in the 1960s, when Southeast Asian countries had began their primary export expansion. Even compared to Indonesia, which had the lowest endowments in Southeast Asia in the 1960s, Africa started from a weak position. This is illustrated in Graphs 12 and 13 using primary and secondary enrolment as indicators.

The graphs indicate that both regions have made rapid progress. The average for Africa in 1990 is equivalent to that of Indonesia in 1965. But this masks a great disparity within Africa, as indicated by a comparison of Kenya with Burkina Faso for example. The Africa Brief (World Bank, 1998) is very clear on this: "In education, Africa faces an alarming deficit: 15 countries (out of 48) still enroll less than half of their children in primary school; 25 countries have adult literacy rates below 40%; less than 4% of the relevant age-group has access to higher education; and more than half of all African women are illiterate. Further, enrollment rates are dropping." This has very important implications in terms of recommending for many (but not all) countries in Africa the types of approach undertaken by East Asia (e.g. upgrading into manufacturing) and for transferring institutional arrangements.

Source: Calculated from World Development Indicators, 1997.

Source: Calculated from World Development Indicators, 1997.

7.3. External Circumstances

There are a number of specific differences in external circumstances that seem to indicate potential hurdles to African countries in an attempt to imitate some of the Southeast Asian policies.

• First, there is the perception that the global economy is now characterised by increased competition due to the number of countries attempting "export-oriented" strategies. However, the "fallacy of composition" argument can be challenged because of the experience that export oriented strategies tend also to generate imports.
• Second, the levels of debt in Africa are much higher than they were in Southeast Asia. Debt service payments are now claiming 30-40% of Africa’s export earnings. These payments are also larger than government expenditures for health and education. It is increasingly accepted that the debt crisis represents one of the most constraining factors for recovery and growth in sub-Saharan Africa. A key question for investigation is: To what extent does the current debt crisis limit the options African countries have regarding strategies for integration?
• Third, African countries are unlikely to be able to pursue some of the policies undertaken by Southeast Asian countries due to the extent to which IFI’s dominate policy-making. The World Bank and to a greater degree the IMF do not have a favourable view of undertaking selective policies in Africa.
• Fourth, and in a similar vein, there is a perception that the policies undertaken by the Southeast Asian countries would no longer be permitted in the new global trading environment as represented by the World Trade Organization. An analysis by UNCTAD staff (see Akyuz et al., 1997) found, however, that although the WTO has reduced the scope for some policy options it will not restrict poorer countries to a considerable degree.

There is also a temporal and strategic dimension to the question of the transferability of policy and institutional lessons for improving external performance – i.e. concerning the nature of "globalisation". First, the extent of globalisation is likely to be different now than in the past. Also, although the process of globalisation in the world economy that has been progressing for many decades, centuries even, it could be argued first that the process is becoming qualitatively different. Global economic interaction is becoming increasingly electronic / financial rather than physical, with the global economy increasingly information-based rather than industrial. Second, and linked to this, it seems that the pace of globalisation has accelerated. The relevance of past experiences needs to be examined in this context.

The strategic dimension is that the evolving situation could offer the strategic opportunity for African countries to leapfrog stages of development. This has the added incentive for Africa that a knowledge-based economy is based on a cheap resource (silicon) and entails lower initial investments compared to industrialisation (Ndulu, 1998). But, such a strategy would put a premium on very high levels of human capital and on developing infrastructure to link to global information networks. Apart from South Africa, there seem to be few countries in Africa that could consider such a strategy.

VIII. Summary and Preliminary Conclusions (to be updated)

Given the rapid rates of economic growth in East and Southeast Asia over the last three decades there has been considerable effort devoted to investigating the causes of this performance. Although economic growth has slowed in Southeast Asia is in recent months "the crisis does not take away from the achievements of history". Africa can benefit from the lessons of the successful Southeast Asian experiences as well as the lessons contained in the current crisis. It can also learn from the lessons of its own economic history.

Most countries in Africa are small and poor, making an inward looking strategy unattractive. Significant advances in economic development in Africa in the future will depend in no small part on the success with which countries can exploit the opportunities and avoid the risks presented by globalisation. A viable outward oriented strategy for countries in Africa will have to reflect the structure of the economy and endowments relative to other parts of the world. On the first point, the primary sector dominates most economies in Africa. On the second, Africa has low levels of human capital in comparison to other regions. The familiar proposition seems to hold – for most countries in Africa comparative advantage lies in primary production and unskilled labour-intensive primary processing (Perkins and Roemer, 1994; Wood 1994; Helleiner, 1998). Given the long gestation period of investments in human capital, this is likely to remain the situation for many years to come.

This section intends to bring some of the major themes together in order to suggest a few preliminary conclusions as well as highlighting further questions. The conclusions will naturally need to be amended based on the findings of the conference. It must also be stressed again that circumstances vary within Africa and only broad conclusions can be made at this stage.

8.1. Broad Policy Messages for Africa

The main message that seems to emerge is that in order to integrate more successfully into the global economy countries in Africa will need to concentrate on improving the general economic policy and institutional situation. In this regard, it is important to reiterate three broad conclusions. (Some related follow-up questions are added).

1. The importance of sound "general" economic policies –

These include investment in human and physical capital, a stable macroeconomic environment and greater outward orientation. These were the basis for Southeast Asia’s performance. In particular, analyses indicate that many countries in Africa still not have the macro-economic policy stance that would enable them to maximise their external performance. (What kind of "targets" can be set in this regard?) In particular, there is still a need to reduce anti-export bias. However, sound general policies seem a necessary but not a sufficient foundation; although policy stances have improved considerably in Africa, export and growth performances remain fragile.

2. The importance of improving "general" institutional foundations

Rather than technical capacity building, the key would seem to be, through reform, to improve the general institutional foundations. Surveys indicate that many countries in Africa do not have "adequate" institutional foundations for growth. In this regard, the key institutional foundations to aim for are political commitment and credibility, an efficient and non-corrupt bureaucracy; a degree of bureaucratic insulation from political pressures, a positive relationship between government / bureaucracy and the private sector and basic property and contractual rights. (What kind of "targets" can be identified in this regard?) In particular, there is a real need for a balanced approach to the state – a strategy to strengthen the capacity to undertake important functions as well as to reduce unnecessary or negative aspects. It is likely that establishing sound institutional foundations will represent the greatest challenge for Africa for many years to come.

3. The importance of matching policy choices with institutional capability

8.2 Cross–cutting Issues for Clarification

a) Economic Policies

Neoclassical economists have long propounded the general approach to openness. According to such analysis, taking the sphere of trade as an example, openness provides the potential to exploit comparative advantage and economies of scale as well as the opportunity for the greater utilisation of capacity. In addition, competitive pressure can lead to increased efficiency. There is also the argument that productivity increases are associated more with inputs acquired via importing and that productivity gains are generated as global technical change continues (World Bank, 1991). Since the 1980s the Bretton Woods Institutions have applied this approach as basic tenet of structural adjustment policies emphasising the importance of across-the-board liberalisation. Recently a series of empirical works based on growth regressions (see for example, Sachs and Warner, 1995) have been conducted to provide support for this position.

In contrast, aiming towards strategic integration would imply that countries should liberalise in order to gain the benefits outlined above but only when and up to a point that it is in the national interest to do so. This is based on the arguments regarding "dynamic" comparative advantages, learning by doing and that imperfect competition exists in the real world (Singh, 1994). Chakravarty and Singh (1988) argue first that openness is a multi-dimensional concept (incorporating, among other things, trade, finance, technology and migration). The argument runs that circumstances vary according to each aspect, therefore the optimal level of openness may differ for each aspect and therefore a country should operate a different policy for each sphere. Second, their analysis suggests that that there is no single optimum form or degree of openness, which holds true for all countries all the time. The factors that affect the particular degree of openness would include, for example, the world configuration, the past history of the economy and its state of development (Singh, 1994). The question is not only about how much to liberalise but about what is the best policy mix to achieve integration. Aiming towards strategic integration also involves a more proactive approach by the state through a measured and properly sequenced set of policies towards trade, capital flows and FDI (Akyuz et al., 1997). Strategic interventions would involve short-terms costs, which would be discounted for longer-term gain (although even strategic interventions should see results relatively quickly).

The challenge is that the evidence is not conclusive. It does not clearly support either that liberal trade regimes always leads to greater productivity increases or that strategic government polices necessarily have such effects. Based on the lack of clear evidence and the poor institutional quality in most countries in the region, the standard advice is that it would seem to be safer for these countries to go for the liberalization option. This leaves a number of key questions for Africa:

• What is the relationship between the scale of policy liberalisation and the scale and forms integration?
• Can and do standard market based (thus general) economic policies for integration have limited impact for long term – e.g. they could result in static comparative advantage associated with declining (and volatile) income streams and hence low-level traps.
• Is there a case for different approaches to liberalisation in the different spheres of integration? What are some of the key issues (regulation capacity etc) that should underly degree of liberalisation in each sphere?

b) Institutional Foundations:

We hope the conference will generate further insights into (i) the general institutional foundations for improving external performance and (ii) the specific foundations in each sphere identified. This sections highlights one further proposal - the setting up a cross-cutting "competetiveness promotion" agency would be one way countries could start to link these issues. Lall (1998) identifies that most developing countries are not geared to mounting an export competetiveness strategy because most decisions affecting exports are scattered over an array of ministries and institutions. He argues that to increase competetiveness there is a need for an agency that can co-ordinate a strategy that cuts across competing interests and uses resources in each ministry to further national aims. It would need to be headed by high level minister or President and report directly to cabinet. The premise of this project is that globalisation entails a number of interlinked processes involving trade, FDI and finance – therefore the mandate of such an agency could be expanded to include all these facets. A similar kind of agency could be advocated for aid co-ordination.

References (to be updated)

Appendix 1:

Source: Calculated from World Development Indicators, 1997.

Appendix 2: GDP and Export Growth Rates in Africa (average 1990-96)

Country Equatorial Guinea Uganda Mozambique Sudan Mauritius Lesotho Botswana Namibia Ghana Benin Guinea Mauritania Guinea-Bissau Ethiopia Tanzania Cape Verde Nigeria The Gambia Malawi Seychelles Burkina Faso Gabon Mali Swaziland Kenya Senegal Côte d’Ivoire Chad Niger São Tomé and Principe Zimbabwe Comoros South Africa Central African Republic Madagascar Republic of Congo Zambia Togo Cameroon Burundi Angola Sierra Leone Democratic Republic of Congo Rwanda

GDP 7.0 6.9 5.5 5.3 5.2 5.0 4.8 4.3 4.3 4.2 3.8 3.5 3.4 3.4 3.4 3.3 3.1 3.0 3.0 2.9 2.7 2.5 2.5 2.1 1.9 1.8 1.7 1.3 1.3 1.2 1.0 1.0 0.8 0.4 0.3 0.3 0.0 -1.0 -1.7 -2.6 -2.9 -3.2 -7.0 -8.7

Exports 0.0 11.8 9.0 0.0 5.5 3.2 0.0 6.0 7.2 9.6 1.8 0.1 11.5 1.2 0.0 5.8 2.1 -0.1 4.4 -2.3 -0.9 5.7 5.7 1.0 4.4 1.5 2.8 3.4 -4.6 -13.0 6.8 12.1 3.6 2.1 5.8 2.0 7.9 -3.2 1.3 -5.7 3.1 -14.1 -10.2 -16.0

1. Or most recent year available. Countries sorted by GDP.

Note: Data not available for Djibouti, Eritrea, and Somalia

Source: World Bank, 1997b, Africa Regional Brief, Washington DC: The World Bank.

Appendix 3: FDI as a % of GDP and GDI in Southeast Asia and Africa, 1970-1995.

Source: Calculated from World Development Indicators, 1997.

Source: Calculated from World Development Indicators, 1997.

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