Sub-Saharan Africa - Elcano Royal Institute empty_context Copyright (c), 2002-2018 Fundación Real Instituto Elcano Lotus Web Content Management <![CDATA[ Nigeria’s 2019 elections: so many choices, so difficult to choose ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari23-2019-atuluku-nigeria-2019-elections-many-choices-difficult-choose 2019-02-22T11:36:13Z

The 2019 Nigerian elections comes at a time of great challenges for the nation, in economic, security and other terms. With 73 candidates competing, only two seem to be serious contenders for the role. However, both seem to lack aspects of leadership that Nigeria needs.

]]>
Theme

This paper looks at the two most visible candidates in the Nigerian presidential elections, highlighting issues regarding conflicts, political parties, the electoral commission and the changes in institutions like the Police.

Summary

The 2019 Nigerian elections comes at a time of great challenges for the nation, in economic, security and other terms. With 73 candidates competing, only two seem to be serious contenders for the role. However, both seem to lack aspects of leadership that Nigeria needs at this time in its history. This paper looks at the two leading candidates and the situation in Nigeria, describing the context in which the elections are being held among ongoing controversies.

Analysis

Nigeria is a strategic partner to many countries and a recognised global actor. With South Africa, it is among the largest economies in Africa. The country is its fourth Republic, having gained independence from the UK on 1 October 1960. The first Republic was proclaimed in 1963 with the adoption of a republican constitution, but came to an end in 1966 following a military coup. Six months later a counter coup led to a bitter civil war between 6 July 1967 and 15 January 1970 to prevent the secession of the country’s south-eastern portion, known as Biafra. Tension in Nigeria had been caused by a complex mix of political, religious, ethnic and economic factors affecting its 200 million peoples and over 300 ethnic groups. A second Republic was inaugurated in 1979 by the then military head of state General Olusegun Obasanjo, who in 1999 became the first elected civilian President of the later fourth Republic. Meanwhile, however, the second Republic was cut short by another coup d’etat that installed the current President, Muhammadu Buhari, as military head of state, who justified his overthrow of the regime by alleging the need to fight corruption. His third Republic was short-lived, starting in 1992 and ending with the annulment of the 1993 presidential elections. The military stayed in power until the birth of the fourth and current Republic in 1999. The 1999 Constitution prescribes a presidential system with three arms of government and a National Assembly comprising a 109-seat Senate and a 360-seat House of Representatives. The electoral system is a first-past-the-post system and, under the Constitution, a candidate wins the presidential election when he gains both the highest numbers of votes cast and receives at least a quarter of the votes cast in each of Nigeria’s 36 states and its Federal Capital territory. Failing that, a second election between the two candidates with the highest number of votes is held within seven days of the results being announced.

The Peoples’ Democratic Party (PDP) won the elections in 1999 and remained in power until 2015. The All Progressive Congress was an alliance of the two major opposition parties.

Nigeria goes to the presidential polls on Saturday 23 February 2019 after a week’s postponement from 16 February. For many it will be a practical challenge managing a ballot paper with 91 political parties and 73 presidential candidates without invalidating their vote.1 All, however, will be in fear of the challenges to security that may arise in their constituencies, be it Boko Haram, herdsmen-farmers or outright political thuggery.

The Nigerian electoral system is overseen by an Independent National Electoral Commission (INEC), with a Chair and Federal Commissioners, and a State Independent Electoral Commission (SIEC), with State Commissioners.

The candidates

Saturday 23 February 2019 is the date finally set for the election of the eighth President of the Federal Republic of Nigeria. There are four types of candidate in the running: the incumbent, Muhammadu Buhari; a former Vice-President, Atiku Abubakar; a handful of popular social-media names new to the game of partisan politics, a new crop of youthful and energetic would-be leaders; and what one could describe as the ‘the invisibles’. There is no division between right and left in Nigeria’s presidential election since ideologies are neither on offer or expected, except by a handful of intellectuals who in all likelihood might not have registered to vote. It is a crowded racetrack of 73 presidential candidates, each with a running mate. The hopefuls range from a young 33-year-old male to an ailing 75-year-old, with many under the age of 40, beneficiaries of the ‘not too young to run’ movement whose advocacy saw the approval of a law that reduced the eligible age for contesting presidential elections from 40 to 30. So there are newly-minted politicians and experienced warlords of old political battles, both male and female. One wished to withdraw but was told by the electoral umpire it was too late to do so, while another party has a blank on its ballot as the court declared the candidate but the party itself claimed not to have decided and is het to forward to the court its own nominee.

Up to 22,643 candidates will be contesting 1,504 seats in the 2019 general elections, to be held on the same day as the presidential elections. Sub-national elections will be held on 2 March 2019. There are 73 candidates for the presidential elections: five are women, four with male vice-presidential running mates, while 23 presidential candidates have women as running mates. One candidate announced her withdrawal from the elections in response to a coalition that was being discussed but the INEC declared it was too late to withdraw as the ballots had already been printed.

In the general elections there will be 1,904 senatorial hopefuls and 4,680 candidates for the House of Representatives, a total of 6,657 individuals contesting the 470 seats of the National Assembly. Female candidates account for 12.3% in the Senate and 11.6% in the House of Representatives, while young people account for 13.5% in the former and 27.4% in the latter (the 9.6% and 3.5% increase could be attributable to the recently approved ‘Not-too-young to run’ law.

The electorate

There are 84 million registered electors, 14.2 million more than in the previous elections in 2015. Female voters comprise 47.14%, young people (aged 18 to 35) 51.1% and those aged between 36 and 50 29.97%.

Figure 1. Registered voters for the 2019 election (INEC data)
Category Percentage Number
Students 26.57 22,320,990
Farming and fishing 16.23 13,630,216
Housewives 14.10 11,844,079
Business sector 12.87 10,810,006
Traders 9.01 7,558,012
Uncategorised 7.17 6,021,741
Civil servants 6.00 5,038,671
Artisans 5.33 4,478,202
Public servants 2.73 2,292,167
Source: the author.

Poor voter turnout may, however, mean that many registered voters will not turn up as has been the case in all past elections in the fourth Republic. Voter turnout was at 43.65% in 2015, 54% in 2011, 57% in 2007, 68% in 2003 and 52% in 1999.

Collecting permanent voters’ cards (PVCs) has remained a challenge, with around 8 million yet to be claimed by their holders as at January 2019. Despite an extension of the deadline for collecting PVCs, hundreds of thousands of them remain in the custody of INEC offices. Without a PVC there can be no voting. The reasons given range from difficulties in getting the cards back after repeated efforts, changes of locality of residence, death or inability to locate the appropriate issuing office.

Electoral malpractice and irregularities

The history of elections in Nigeria is fraught with malpractice, fraud, rigging, ballot snatching, violence and intimidation of opponents and electors.

In the 2015 presidential elections, 13.5 million out of 31.7 million voted manually without biometric accreditation. President Buhari, the then APC candidate, won in nine of the 10 of the most affected states, which were predominantly in the north-west and middle belt areas. Manual voting could be a likely irregularity in this election if, as in 2015, the card readers fail to work or other electricity-related challenges are faced.

The leading candidates

With 72 presidential hopefuls, the contest seems to be between the two dominant parties, the All Progressive Congress Party (APC) and the Peoples Democratic Party (PDP) and between the incumbent president and a past Vice-president. Amongst the others, perhaps the most highly qualified in terms of education is the former Central Bank Deputy Governor. The manifestos show little differences in the ideologies motivating either parties or leaders.

Muhammadu Buhari

Muhammadu Buhari, aged 76, is Muslim from the north-eastern geo-political zone of the country. He is the incumbent President and Commander-in-Chief of the Armed Forces of Nigeria. A retired-General of the Nigerian Army, he was military head of state from 1983 to 1984, when he was overthrown by another military coup. Buhari is the front runner, being the incumbent and having access to State-facilitated resources to attempt to retain his post. His ruling APC selected him without holding primaries.

Atiku Abubakar

Atiku Abubakar, aged 71, hails from the north-west and was formerly Vice-president, from 1999 to 2007. He won a keenly contested primary to emerge as the PDP’s standard bearer. Having ruled Nigeria for 16 years, the PDP became the main opposition party in 2015 in a historic loss in the general elections. Atiku is an entrepreneur who built his career as a customs official. He had accused his detractors of using the Economic and Financial Crimes Commission against him but the court cleared him of corruption allegations. In a CNN interview he was asked why his name consistently came up associated with corruption and claimed he was not corrupt and challenged anyone with evidence to produce it. It was alleged that Atiku could not visit the US due to a presumed case of money laundering but in a bid to quell the rumour he received his first visa in 13 years and paid a visit to the US despite lobbying by government officials for the US consulate not to grant it so that they did not appear to endorse his candidacy.

Atiku, who owns a private university in his home Adamawa state, a Boko Haram enclave, has identified unemployment and national unity as his key priorities. In a country where economic theories do not follow normal patterns and privatisation has yielded no positive results except for a few business elites, Atiku’s market-based economic preferences do not appear attractive to the masses, as Nigeria has more people in absolute poverty than India. The fear of a corporate capture of the State under an Atiku-led government is high.

The political parties

The APC was formed by the alliance of three political parties in 2013 in order to present a stronger challenge to the then ruling PDP. Most of the party’s stalwarts have previously been prominent PDP members at one time or another. President Buhari himself, prior to contesting under the APC banner in 2015, had woefully failed in presidential bids in 2003, 2007 and 2011 under two different parties. The APC considers itself a centre-left party with a preference for controlled market policies and a strong regulatory environment.

The PDP was the ruling party until 2015, when an alliance of the strongest opposition parties saw it losing the presidential elections and a historic handover of power from one political party to another. It considers itself to be at the centre-right. Atiku was the Vice-president during two terms although he was relatively out of favour with his President, Olusegun Obasanjo, in his second term in office. This saw him lose out in his presidential ambitions. The party supposedly supports free-market policies and limits to government regulation. The government under PDP saw the de-regulation and privatisation of Nigerian investments, much to the chagrin of civil society. The presidential candidate in 2015, the then President Goodluck Jonathan, lost by 2.6 million votes to Buhari.

Crackdown on the judiciary

Concern is rife over the actions of the executive power in the period leading up to the elections. The President’s bitter experience and lack of success with the judiciary in claiming what he believed to be his mandate in 2007 and 2011 elections has pitted him as an adversary. Judges under his administration have been under investigation and attacked by the security forces and prosecutors in a fight against corruption, which is alleged to be heavily biased against his opponents. The latest assault has been a charge of falsely declaring assets brought against the Chief Justice of Nigeria, Walter Onnoghen, at the Code of Conduct Bureau. The allegations of it being an electoral strategy seem to have a basis in the timing of the charge, the usurpation of the powers of the National Judicial Council, which has disciplinary powers over judicial officers, the call for the Chief Justice to resign and the presidential suspension of the Chief Justice of Nigeria on the eve of the appointment of electoral tribunal judges and members across the country.

The President then appointed the next senior Justice of the Supreme Court, Ibrahim Tanko Muhammad, as Acting Chief Justice of Nigeria. The social media could not fail but notice that the Acting Chief Justice hails from northern Nigeria, like the President and unlike the Chief Justice. The President claims he was acting in compliance with the order of the Code of Conduct Tribunal. The Constitution provides that the President can only remove a Chief Justice with the support of at least a two-thirds majority of the Senate. The matter had not been considered in the Senate at all. The day after his controversial and purportedly unconstitutional appointment, the acting Chief Justice of Nigeria swore in 250 members of the electoral tribunals to handle election-related disputes. In a swift move, the PDP rejected to no avail the electoral tribunal appointees of the new Acting Chief Justice. A petition immediately surfaced against the acting Chief Justice Tanko before the National Judicial Council. The latter had to step in through the appointment of one of its members to be the interim Chair of the National Judicial Council while both Justices were asked to answer the petitions against them. There is, however, a list of persons involved in high-level corruption cases who are yet to be charged. His fight against corruption as a military ruler was hinged on the basis of being guilty until proved innocent. His current strategy is, however, unknown and has yet to show clear results.

President Buhari hinged his 2015 campaign promises on improving security, fighting corruption and improving the economy. In a 2018 poll,2 40% of Nigerians approved his administration, while 67% rated him poorly in his management of the economy, which hit a recession in recent times. At the same time, 57% rated him poorly in the fight against corruption and 55% also rated him poorly in security. Other areas of a weak performance were electricity, education, housing, oil and gas, transport and health. His highest rating was in agriculture.

The regime’s National Social Investment Programme has seen positive results and is receiving positive reviews. Around 297,973 households were receiving cash transfers of NGN5,000 (€12) in 20 states with over 455,857 poor and vulnerable households included in the national social register. The categories of people normally excluded from credit facilities by traditional banks are targeted to give them access to credit free of collateral as part of the Government Enterprise and Empowerment Programme. The home-grown school feeding programme has also seen 9 million children benefitting and 95,422 cooks employed with over 100,000 smallholding farmers supplying the ingredients. Up to 500,000 unemployed graduates are said to be on the government payroll, earning NGN30,000/month (€73) in health, agriculture and education.

Security

Security is on red alert due to the elections and the increase in crimes, terrorism and civil unrest. Attacks continue in Borno, Yobe and Adamawa States allegedly by Boko Haram despite the Army’s claim to have regained control. Both ISIS West Africa (ISIS-WA) and Boko Haram have stated they plan to disrupt the elections with the threat of attacks on security officials, infrastructure and public places such as places of worship, malls and markets.

On 9 February nine vehicles of the ruling APC campaign convoy were burnt with petrol bombs on the outskirts of Abuja. On 13 February, in its stronghold of Borno state, Boko Haram is alleged to have attacked the convoy of the State Governor on his way to a campaign rally. The Independent National Electoral Commission (INEC) has assured the public that it has made adequate security arrangements for the elections.

The government’s response to the activities of supporters of the separatist Indigenous People of Biafra (IPOB) has also brought to light issues of human-rights abuses. The social media have shown people alleged to be soldiers complaining of a lack of weapons to combat Boko Haram despite the investments made in order to fight against terrorism. The herdsmen-farmer conflict has seen many deaths and Amnesty International has called on the government to consider the cost of its response. Nigerians generally do not feel safe and are not safe and Shiites have been subject to judicial killings.

On 9 February 2019, two weeks prior to the elections, there was a fire at the Qua’an Pan Local Government Area (LGA) Electoral Commission offices in Plateau State, in the country’s middle belt, a centre of religious strife between Muslims and Christians, herdsmen and farmers. Up to 360 voting cubicles, 755 ballot boxes, 14 generators, and election forms and official stamps were reported to have been lost in the fire. Earlier, on 2 February, a similar fate had befallen the Electoral Commission office in the Isiala Ngwa LGA in Abia State, in the country’s south-east. As many as 4,695 card readers were destroyed in yet another INEC office in Anambra State in the south-east. The Electoral Commission has requested additional security measures around its offices and critical structures but has claimed the elections will go ahead regardless of arson attacts.

As campaigns heat up in the last days before the election, violence by campaign followers and attacks on politicians have flared up. The Vice-president suffered a helicopter crash on his campaign trail, although the lack of fatalities resulted in no investigation as to the cause. Convoy accidents and attacks resulting in multiple deaths are being reported. The presence of security personnel in major towns gives credence to social-media warnings about security risks and advice on how to take extra care for self-protection.

A new Acting Inspector-General of Police, Mohammed Adamu, was appointed by the President a month before the elections. This followed the statutory retirement of his predecessor, Ibrahim Idris. Adamu was an Assistant Inspector-General and junior to seven Deputy Inspector-Generals prior to his appointment. In line with the usual practice, all seven were prematurely retired. Police Commissioners were also appointed to the main state commands. The Coalition of United Political Parties has alleged that there is a plot to appoint police chiefs prior to the elections to favour the ruling APC. The police has denied that the posting of Police Commissioners has any bias linked to the elections, declaring itself non-partisan and neutral, while attributing the new postings to vacancies created by recent retirements. The Police has planned to deploy over 300,000 of its 350,000 strong force for security purposes in the presidential elections.

The peace accord

A peace accord has been signed by the presidential candidates fostered by the National Peace Committee led by the former military head of state, Abdulsalam Abubakar, who brought the fourth Republic into being. The elections are to count on the presence of international observers.

Disenfranchisement threats

Millions of university students who had returned home as a result of a three-month strike by the Academic Staff Union of Universities (ASUU) have been recalled. The students could potentially have been disenfranchised because voters are required to register within their wards of residence, as movement is curtailed on election days. Most students attend tertiary institutions outside their home towns, to which they return when universities are not in session. However, given the threat, the ASUU suspended its three-month strike and signed a memorandum of understanding with the Federal Government. Nevertheless, the students themselves have mixed feelings, preferring to remain with their families until after the general elections. The Labour movement also threatened strike action to force the government to the negotiating table in order to agree to an increase in the minimum wage to NGN30,000/month (€73).

Foreign interests

The question of foreign intervention has also been topical since a gubernatorial candidate of the ruling party and an incumbent threatened that anyone who sought to interfere in Nigeria’s domestic affairs should expect to return home in a ‘body bag’. The EU observer, in a quick response, justified his presence as being at the behest of the authorities, an invitation the EU has been receiving since 1999, and confirmed he would continue with his work. This prompted the opposition PDP to threaten to withdraw from the Peace Accord signed by the presidential candidates. The US, the UK and the EU had expressed concern over the suspension, calling for free, fair and credible elections. The ruling APC party instead accused the diplomats of ‘making comments that are capable of undermining the integrity of the election’. In a related development, the President of Niger joined the incumbent presidential candidate of the ruling party on his campaign trail.

The social media, fake news and election campaigns

The social media have become a source of both news and fake news. The latter is making the rounds as much as genuine news with hardly any way of distinguishing between the two. Unverifiable information is being shared between people over a range of topics, including the elections and the issue of security during the election period.

The electoral body

As mentioned above, the INEC and the SIEC are the independent electoral management bodies for supervising elections in Nigeria. However, the former has struggled to gain public trust since it was reconstituted in 2017. Under the chairmanship of Professor Mahmood Yakubu it has attempted to build and maintain the trust and confidence of the public. The controversy generated by the appointment of National INEC Commissioner Amina Bala Zakari as head of its Collation Centre Committee has raged on despite denials that Zakari was a member of the President’s family. The media have, however, linked the two.

Conclusions

For many Nigerians it is difficult to make a choice in presidential elections with so many candidates. Looking at the candidates’ campaigns and their visibility, this analysis has focused on the two candidates considered to be the election’s front runners. While the other 71 candidates may have value to bring to the country, the battle now seems to be between Buhari and Atiku, with all others far behind and none coming close to being a close challenger. Neither are an answer to Nigeria’s problems but both are committed and consider themselves entitled.

Ojobo Ode Atuluku
Head, Africa 2 Region, Federation Development Cluster, ActionAid (Burundi, Ghana, Liberia, Nigeria, Senegal, Sierra Leone, Somaliland, The Gambia and Zambia)
 | @ojoboa


1 This video shows the Commission Chairman demonstrating how to use the ballot paper.

2 Buharimetre of the Centre for Democracy and Development.

]]>
<![CDATA[ Foreign policy and global presence: the strategies of Australia and South Africa ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari7-2016-garciacalvo-foreign-policy-global-presence-strategies-australia-south-africa 2016-01-20T05:46:40Z

This ARI examines the insertion in the globalisation process of Australia and South Africa in terms of global presence in order to determine whether they match the model outlined in their strategic foreign policy documents.

]]>
Original version in Spanish: Política exterior y presencia global: las estrategias de Australia y Sudáfrica

Theme

This ARI examines the insertion in the globalisation process of Australia and South Africa in terms of global presence in order to determine whether they match the model outlined in their strategic foreign policy documents.

Summary

Are national foreign-policy strategies effectively defining the national interest in countries far from their own borders? Do the objectives sketched out in national strategic documents evolve in accordance with these foreign-policy profiles? To answer these and other questions, we shall analyse the external projection (as it relates to documents of strategic reference) of two countries confrontingglobalization in different ways: Australia, a middle power, and the Republic of South Africa, an emerging country. The analysis of the Australian case exposes an external insertion based on the economic dimension, with primary and energy goods prominent, which follows the path marked by its strategic documents. South Africa, meanwhile, considers the exercise of regional leadership as the foundation of its influence in the international order but, in terms of global presence, it might seem that Nigeria would have taken the leading position due to the growth experienced in recent years.

Analysis

Across the four corners of the world, many are the nations that have had to reflect on their current role in the complex international scenario defined by globalisation, identifying both risks and opportunities while addressing their own national interests. Some countries have risen to this challenge by collecting into strategic documents or white papers a series of actions and goals to be achieved, in order to optimise their position on the global stage. Such exercises in planning can help not only to better understand the continuous transformations at play in the international arena, but can also contribute to a more transparent, inclusive and predictable foreign-policy.1

The Elcano Global Presence Index is not merely a useful tool for decoding the globalisation process, its evolution and its tendencies; the index is also an effective, significant foreign-policy instrument. By determining the global presence of the 80 countries examined in the index –using the three broad dimensions and the multiple variables on which they are based– we can verify how a country (or group of countries) is managing to conform its external projection, whether via soft dimension variables (science, development cooperation, tourism) or via hard dimensions (economic or military, including energy, investments, military equipment, etc). The profiles for global presence are like X-ray photos, allowing us to capture the nature of a nation’s external projection, its strengths and weaknesses, detailing the different ways that countries regard globalisation and their potential role in it, their methods of maximising the opportunities it represents in order to gain international influence or to fulfil their own national agendas.

Towards a prosperous Australia: the ‘competitive liberalisation’ of the markets

The philosophical and practical principles guiding the strategy for Australian Foreign Policy and Trade were collected for the first time in 1997, in a document titled ‘In the National Interest’.2 The document was revised once in 2003 and re-published under the title ‘Advancing the National Interest: Australia’s Foreign and Trade Policy White Paper’, and though a great number of strategic documents have been published since then they deal mostly in sectoral terms and provide a much less panoramic view.

In the White Paper the country defines itself as a medium-sized power operating within globalisation, a phenomenon that Australia regards in unquestioningly optimistic terms as an opportunity in ‘times of uncertainty’ which can yield substantial profits to all countries. The document goes on to define Australia as a ‘liberal democracy proud of its commitment to the values of political and economic liberty’ –values that have strengthened the nation’s international position–. As a country with a multicultural society, whose origin and history have been based on immigration, Australia is accustomed to looking beyond its own borders. At the same time, being located in the Asia-Pacific region, Australia is an insular and Western state with strong social, economic and cultural links to the US and Europe. The country’s national interest is summarised as ‘the security and prosperity of Australia and Australians’.

The strategic goals of Australia’s international insertion are essentially conducted through economic integration. Hence the document proposes an ambitious commercial agenda of ‘competitive liberalisation’ of the markets, using ‘bilateral and multilateral channels’ to face the competitiveness embodied by expanding markets and emerging economies, and dealing not only in terms of agricultural products and textiles but also the increasing availability of manufactured goods. Consequently, Australia has planned for genuine economic integration via exports of primary goods (agricultural, mining, wine), manufactures and services (for example, related to its nascent automobile sector), and energy, along with financial investments.3

Within the soft dimension, the vast potential of the country’s multicultural society is emphasized for encouraging “the interpersonal relationships contributing to our international status”4, another principal strategic goal. In this sense, in addition to Australian citizens living within the country, one considers also those born or living abroad, as well as the considerable number of foreign students living in Australia plus, of course, tourism. The intention here is to project an image of a successful and sophisticated country grounded on scientific and technological knowledge and sports achievements. Australian development aid is also part of the soft agenda given the ‘moral duty to eradicate poverty’, although such aid primarily focuses on good governance in the region.

Concerning security, Australia presents in its Strategic Plan a solid commitment to the war against terrorism encouraged by the US following the 9/11 attacks in New York and Washington DC.5

Has the nature of Australian external projection progressed according to these strategic positions?

In 2005, two years after the approval of its White Paper, Australia was ranked 12th among the 80 countries now included in the Elcano Global Presence Index. Its profile was at that time built upon the soft dimension (representing 55.4% of its total global presence), followed by its economic (43.9%) and military presences (2%). Five years later, in 2010, Australia maintained the same position, although the economic variable increased its weight by 3.7 percentage points at the expense of the soft variables and the military, which fell by 3.2 and 0.5 points, respectively. In the latest index (2014), the country dropped one position to 13th, reinforcing an observed tendency towards an economy-based external projection profile (Graph 1). For the first time, Australia’s economic dimension exceeded its soft dimension, rising to account for more than half of all the nation’s global presence (at 56.3%, to be precise). The contributions related to the military presence continued to decrease, indicating that Australian involvement in the war against global terrorism is not reflected in terms of its global presence.

This turn towards the economic is also evident when analysing the index value (Graph 2). Departing from similar values in 2005 (economic and soft presence indexed at 93.8 and 97.0 points, respectively), the progress in the economic area is remarkable throughout the next 10 years, and by 2014 it had risen to over 228, gaining 134.4 points while the soft variable gained only 48.2). The largest expansion of economic variables occurred during the five-year period from 2010 to 2014, when it outpaced the soft variables set by 68.5 points.

Finally, in terms of Australia’s presence within the global scenario, which is to say in direct competition with the other 79 countries included in this index, the share of its economic presence increased from 1.8% to 2.2% between 2005 and 2010. This in a context of general expansion of globalisation, chiefly economic, where emerging economies managed to seize positions previously occupied by the traditional, post-industrial powers (the model here being the case of China).

Regarding the variables that most define the Australian profile beyond its borders, in 2005 they were basically four: education (with a 17.5% contribution), primary goods (17.3%), sports (15.3%) and energy (11.9%). All of these factors became increasingly important between 2005 and 2014, although their individual evolutions were distinct. In 2010, the soft dimension variables experienced a slight increase (education to 17.7%) or decrease (sports to 12.6%), while both economic dimensions rose: primary goods to 18.8% and energy to 13.85%. The trend continued into 2014, when primary goods became consolidated as the leading variable with a relative weight of 27% (Graph 3). Immediately behind this were energy resource exports (at 15%) and, with a drop of 4.5 percentage points since 2005, education (at 13%). Among the variables included in the ‘other’ category, the most outstanding were portions of the service sector, practically constant through the 10-year period, and aid cooperation, increasing by a total of 1.6 points.

In summary, in-depth variable analysis shows an external insertion based on primary goods exports (essentially agricultural products, a strategic sector for this continent/country) and energy resources (also key to Australia’s relationships within the Asia-Pacific region, its primary area of influence). Attracting more international students to Australia, as a way of establishing bonds with foreign countries, also counts among the country’s greatest strengths. In this regard, although Australia’s weight in global presence terms of education has lately declined, one must bear in mind its exceptional ‘starting point’ in 2005, along with the outstanding rise of other economic variables supporting the national strategic goals identified by the White Paper.

Thus our analysis of the index variables on Australian global presence and their evolution since 2005 leads us to conclude that the country has indeed continued on the path laid out by its own strategic foreign-policy document of 2003, combining the dual aspirations of strong international projection and a more prosperous and secure nation.

The South African case: can regional leadership lead to a stronger global influence?

The year 2005 was a turning point for the Republic of South Africa, marking ‘the beginning of a second decade under democracy, coinciding with the 50th Anniversary of the proclamation of the Freedom Charter by the People’s Congress’, as stated in the country’s strategic foreign-policy plan for 2005-086 addressing the national vision and goals for the medium term. Revealing a strong inclination to place South Africa in a regional leadership position, with a commitment to the African continent, the country’s foreign-policy strategy was assembled around the ‘building of a new Africa in which peace and security will endure, moving deeper into democracy and prosperity so the quality of life for African people will keep continuously improving’.7

When in 2009 the Ministry of Foreign Affairs changed its name to the Department of International Relations and Cooperation (DIRC), this was a strategic move, largely intended to connect the country’s national project with what was currently happening in the region around South Africa. A period of reconsideration began, culminating with the composition of a reference document regarding external action: a White Paper under the title of ‘Building a Better World: The Diplomacy of Ubuntu’,8 approved by the cabinet and now under parliamentary consideration.

The document reaffirms the basic principles guiding the South African spirit that was expressed in 2005, focusing on respect for other nations, people and cultures (‘the Diplomacy of Ubuntu’) and on South-South cooperation, in contrast to colonialism. South Africa’s ultimate goal was none other than to prepare the country ‘to become a winning nation in the coming decades of the 21st century’.9 Consequently, the national interest was closely related to the ‘stability, unity and prosperity of Africa’, specifying that ‘South Africa’s future global and continental standing will be determined by how South Africa remains true to its enduring values, economic success, and the continued leadership role on the continent’.10 Clearly, such regional leadership is defined as a major strategic goal from which to achieve stronger influence within the global order.

South Africa’s self-image in 2005 was that of an influential country within the African continental context, but with an international scope, supported broadly by its principles and values and a competitive, sustainable global economy.11 Therefore, the country’s economic diplomacy should lead the government and other agents for external action to try and bring down trade barriers for South African products, to identify and open new markets and to attract investments and tourism. All this, of course, further implies improvements in the competitiveness of national goods and services, while at the same time South Africa’s reputation as a responsible and stable supplier was to remain as before. In order to accomplish these targets, some strategic movements have been established which could be roughly summarised as integration (and diversification) in global markets, supporting the country’s exports of natural resources, the creation of a more productive business setting, innovation for new market opportunities and the implementation of measures to attract tourism.12

South African regional leadership in terms of global presence?

South Africa considers its own regional leadership as a solid base for becoming a global influence. However, in considering global presence rankings, the better-positioned country within the Sub-Saharan African region (including Angola and Sudan) is not South Africa but Nigeria, which has climbed 13 positions to number 36 (since the first index, estimated for 1990). For its part, South Africa is now ranked two positions below Nigeria, in 38th place (Table 1), while its improvement within the index has been well below Nigeria’s, having risen only four positions since 1990. Angola and Sudan appear much further down the list, in the second half of the table, positioned at numbers 54 and 77, respectively.

Considering the presence by dimensions of these two regional leaders in the context of the index, South Africa tops the soft presence ranking, but is surpassed by Nigeria in both the economic and military dimensions. Still, regardless of whether Nigeria has changed its position in the economic rank, South Africa has fallen 14 positions in this area since 1990. Meanwhile, the opposite has occurred in terms of the soft dimension: South Africa has climbed 11 positions, while Nigeria has dropped 10 in the ranking. As for military presence, both African countries have shown an improvement in their positions since the early 1990s.

On the basis of these global presence rankings, Nigeria and not South Africa is currently in the regional leadership position. However, through in-depth analysis of the nature of the countries’ external projection –of the global presence variables and dimensions and how they interrelate– a slightly different interpretation can be made.

The external projection of the four countries of the Sub-Saharan area included in this index rest mainly upon the economic dimension (Table 2): Angola (with an economic weight of 95.6% over its total global presence), Nigeria (at 84.1%) and Sudan (at 60.3%) are all well ahead of South Africa (51%) in this regard. In terms of the soft and military dimensions, South Africa’s percentages are 47.1% and 1.9%, respectively, compared with Nigeria’s 13.3% (soft dimension) and 2.6% (military). Thus, Nigeria’s global presence is very largely based on the economic dimension.

Furthermore, concerning the variables, the ranking shows that Nigeria’s global presence (Graph 4) relies overwhelmingly on energy resources (at 79% of its total global presence), with the next most important variable being culture (at only 5%). On the other hand, in the case of South Africa the variables supporting the nation’s international projection are much more dispersed, being chiefly primary goods, education and tourism but with another 13 variables together representing a significant total of 28%. Thus, the country’s profile is much more diversified than Nigeria’s, making South Africa not only less dependent on fluctuations in international energy prices but also recalling its stated national project vis-à-vis the global order. The country is placing emphasis on developing the different strategic sectors identified in its White Paper, from exports of primary goods to its ability to attract tourism, as the bases for regional and, ultimately, global projection.

Nigeria stands out from the rest of Sub-Saharan Africa due to its improved global presence results. But a detailed analysis of the nature of the international projection of both Nigeria and South Africa, the two regional leaders, shows how South African influence, being based on diversity, constitutes a more solid and sustainable projection. Indeed, this is an international projection and a strategic incorporation firmly connected to the globalisation process, not only through the economic dimension but also through other factors including the attraction of international students, tourism and sports. All of these are soft variables, indicating a sophisticated pattern more suitable to the ever-growing complexity of the international relations scenario in effect since the end of the Cold War.

Conclusions

As we have seen, the Elcano Global Presence Index is a useful tool to analyse the foreign policy of countries for which it is calculated. Are a country’s current foreign policies coping with weaknesses in that nation’s external projection? Are countries fully exploiting their potential? In the case of Australia, the connection is evident: the shift towards an international economic profile with a liberal bent, in a region –Asia-Pacific– that has become the epicentre of global economic activity, explains to some degree the fact that the economic dimension has become the dominant aspect of the country’s project in order to gain the maximum benefit from globalisation. As for South Africa, its main strength and basis for exerting regional (or even global) influence has been the relative diversification of its global presence around different economic and soft variables, which projects the country in a more complex and sophisticated way in the regional challenge with Nigeria, which bases its global presence on energy exports.

Carola García-Calvo
Analyst, Elcano Royal Institute
| @carolagc13


1 Ignacio Molina (coord.) (2014), Hacia una renovación estratégica de la política exterior española, Informe Elcano, nº 15, Real Instituto Elcano, Madrid. Both Executive Summary and Conclusions are available in English.

3 Advancing the National Interest, p. 25-30.

5 Advancing the National Interest, p. 13.

6 Advancing the National Interest, p. 13.

7 Department of Foreign Affairs, Republic of South Africa (2005), South Africa Foreign Policy Strategic Plan: 2005-2008.

8 Department of Foreign Affairs, Republic of South Africa (2011), White Paper on South African Foreign Policy - Building a Better World: The Diplomacy of Ubuntu.

9 See Building a Better World, preamble.

10 Building a Better World, p. 3.

11 Building a Better World, p. 26.

12 Building a Better World, p. 18.

13 Building a Better World, p. 26.

]]>
<![CDATA[ The Economic Crisis and the Emerging Powers: Towards a New International Order? ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/00053_niblett_economic_crisis_emerging_powers 2012-02-20T12:14:12Z

The real challenges to the existing international order will come not from the established or emerging powers, but from global forces that are beyond their control and also from those non-state entities and groups which seek to undermine the process of globalisation that links all states and societies ever closer together.

]]>

[1]International order within a system of more or less sovereign states implies the absence of major conflict between those states. It implies their general acceptance of norms of international behaviour that preserve the peace and enable them to pursue their objectives in a competitive manner but without jeopardizing the peace and prosperity of others. International order does not imply the absence of low-level conflict around the world or the disappearance of various other forms of injustice. From a European perspective, then, the question of whether we are moving towards a ‘new international order’ generally implies that a transfer of power is taking place from states in the West to those in the East and, therefore, from ‘us’ to ‘them’. Seen from this perspective, international order could easily decay over the coming years. Large-scale international disorder was a central feature of the early 20th century when two World Wars accompanied the rebalancing of power among states in Europe, the Middle East and in the Asia-Pacific region. And the further rebalancing of power at the end of the Second World War evolved into a Cold War between the US-led Western bloc and its protectorates, on the one hand, and the Soviet Union and its network of proxies, on the other. The fear is that China, India, Brazil and other emerging powers may increasingly ignore the norms, rules and institutional arrangements put in place by the US and European nations after 1945 or seek to redefine them to their advantage. At a minimum, they may limit efforts by some in the West to extend or deepen those rules or institutions, by transforming the Kyoto Protocol into a global agreement on combating climate change, for example, or by further opening markets through the Doha trade round.

But is the shift in global economic gravity and, ultimately, power from West to East and North to South really the defining global trend in the context of international order? I would argue not. Western powers do face a host of problems. But, as outlined below, the emerging powers face their own structural challenges, while the West still has a number of significant attributes relative to the emerging powers. At the same time, the current economic crisis is deepening the ongoing process of political and economic interdependence between all states –emerging and established–. Rather than simply shifting power from West to East, these developments are in fact knitting West and East, North and South ever closer together.

As a result, we are witnessing a deepening of the existing framework of the post-1945 international order under which nation-states have established rules designed to avoid the outbreak of inter-state conflict and to enable them to interact ever more deeply economically, while not interfering unnecessarily in each other’s internal political affairs. To be sure, there are exceptions to this system, such as the EU and its single currency, the International Criminal Court and the concept of ‘Responsibility to Protect’. But these represent the boundaries of the existing international order rather than the building blocks of a new one. For the next 10 to 20 years at least, as the emerging powers acquire greater political power and autonomy, they are likely to repeat what the Western powers have done, promoting their interests within institutions rather than handing any more power than absolutely necessary to them. In other words, the world’s most powerful states will seek to manage their interdependence through international political negotiation, rather than through new forms of global governance.

The real challenges to the existing international order will come not from the established or emerging powers, but from global forces that are beyond their control and also from those non-state entities and groups which seek to undermine the process of globalisation that links all states and societies ever closer together. Ensuring the continuation and deepening of international order in the next decades of the 21st century will require governments in both the West and among the emerging powers to improve their domestic resilience to internal and external shocks and, as suggested below, to use deeper regional cooperation as a testing ground for higher levels of international cooperation.

The Economic Crisis is Indeed a ‘Western Crisis’

The US, most European states and Japan, which, together with Canada and Australia, constituted the core of the ‘West’ during the past 50 years, are experiencing a structural weakening of their domestic drivers of growth. This weakening could undoubtedly challenge an international order that was built on the foundation of the West’s international economic and military dominance.

While Japan has experienced nearly two decades of slow growth and a declining share of world GDP, European nations only appear to be recognising today, in the wake of the global financial crisis, the extent to which they too face structural constraints to their future growth. The first constraint arises from their demography. By most estimates, the share of the elderly as a proportion of the total population in Europe will grow from roughly 17% in 2000 to over 30% in 2050, by which time more than half of Europe’s population will be 49 or older. The beginning of this process is already pushing many EU budgets into structural deficit and is forcing governments to reform generous European welfare systems that had defined their social compacts with their citizens. Across Europe, wide divergences in rates of employment among youth, women and the elderly pose further constraints on growth. Significant differences in levels of educational attainment –particularly between Mediterranean and northern European states– pose their own risks to future European international economic competitiveness. Rates of university attendance in Europe range from 20%-40%, but even the highest are below the 50% levels in South Korea and Japan. And there are similar divergences in secondary education: whereas 90% of Nordic school children complete their secondary education, only some 45% do so in Portugal.

The effects of declining European growth will also be geopolitical. Most European defence budgets have fallen to below 2% of GDP, limiting Europe’s ability to project military power internationally. As governments in Europe struggle to adapt to their straitened circumstances, cohesion on external matters –such as the military operation against Colonel Gaddafi or sustaining an effective fighting force in Afghanistan– has become ever more complex, despite the adoption of new mechanisms for intra-EU coordination in the 2009 Lisbon Treaty. Perhaps more importantly, the combination of European inertia towards questions of international security and the new US strategic focus on Asia, where the rise of China threatens long-standing US alliances and influence, is weakening the transatlantic alliance.

The US does not face the same demographic challenges as its European partners, but it now appears to be facing its own structural economic challenges. For example, US unemployment has been stuck at roughly 9% over the past two years –nearly double its rate in the late 1990s and most of the 2000s, and only a little below the EU-27 rate, which climbed back up to 9.5% in the first half of 2011–. The current high rate of unemployment and slow rate of job creation in the US may not simply reflect the after-effects of credit de-leveraging. As Michael Spence has noted in the July/August 2011 edition of Foreign Affairs, many US multinational companies are now creating more jobs abroad than they are at home, focusing their job creation on the dynamic markets of East Asia with its well-educated and well-priced workforces.

Today, the US, Japan and major European economies depend on exports to China and other emerging markets to drive their own marginal rates of growth. In 2010, President Obama made exports a central plan in his growth strategy for the US. Similarly, French, German and British political leaders are beating a path to Beijing and New Delhi to try to secure major new export orders. And the UK has announced a new ‘commercial diplomacy’ that places improved access for UK goods and services to emerging markets at the heart of the Foreign Office’s remit.

This economic rebalancing is contributing to a weakening of the West’s strategic influence across the world, from the Middle East and Latin America to South-East Asia and Sub-Saharan Africa. First of all, regional powers in each region (Turkey and Iran in the Middle East; Brazil in South America; China in South-East Asia; South Africa in Sub-Saharan Africa) now vie more effectively for influence relative to the US in capitals in these regions, partly because of their own growing economic magnetism and partly because they have taken advantage of the decline in the legitimacy and credibility of US global leadership during and following the George W Bush Administration. Secondly, regional organisations are also challenging US and western influence across the world, whether it is ASEAN, the East Asia Summit, UNASUL, the African Union or the Shanghai Cooperation Organisation. Third, the West’s influence is declining also in the world’s major international institutions, such as the UN, IMF and WTO, where the emerging powers now follow a far more independent line. The most obvious symptom of this shift in institutional power was the nomination of the G20 (at the London 2009 G20 summit) to be the world’s primary forum for international economic coordination, in place of the Western-led G7.

Finally, perceptions are also important in the emergence of a new international order. When asked in a 1997 ABC/Washington Post poll which country would be the world’s leading nation in 20 years time, 56% of Americans said the US and only 9% said China. In a similar ABC/Washington Post poll conducted in 2011, only 35% said the US while 38% said China. The growing sense among US citizens of their relative declining power risks becoming a self-fulfilling prophecy, which will then weaken the US and the West’s voice on the international stage.

How Powerful are the Emerging Powers?

It is easy to over-estimate the strength of the emerging powers in the midst of a Western economic crisis. Any change in the balance of power must be judged in relative terms before assessing its potential impact on the international order. And each emerging power faces its own major domestic challenges even as their collective economic gravitational pull is strengthening.

China is a perfect case in point. Its rapidly ageing population has led to a desperate race for China to grow wealthy before it grows old. China’s greying society combined with its lack of a social safety net incentivises saving over investment and spending today (contributing therefore to China’s overall current account surplus). But China’s dash for growth has led to growing disaffection among parts of the population that are uprooted or disadvantaged by the current allocation of wealth and assets –180,000 protests or ‘mass incidents’ were reported in 2010, compared with 60,000 in 2006–, meaning that the Communist Party must fight ever harder to retain its legitimacy even as it manages an ever more complex set of domestic economic and political dynamics. Domestic challenges that will absorb Chinese leaders’ attention over the coming years include containing inflation and asset price bubbles, shifting the economy from a reliance on exports to a greater balance in favour of domestic consumption, and capping the country’s voracious appetite for resources (food, water and energy). The West’s problems appear more manageable when compared to the enormous challenges facing China’s leadership.

The same argument could be made regarding the world’s other emerging powers. India has recently achieved levels of annual economic growth close to those of China, and some of its largest companies, such as Tata, Reliance, Wipro and Infosys, are becoming international players. Yet India still struggles to overcome the burden of high levels of poverty and illiteracy among its population, of pervasive political corruption and of rising inflation, as the country’s higher levels of economic growth expose shortages of skilled labour and bottlenecks in power generation, transport and other aspects of physical infrastructure. Brazil has grown into one of the world’s dominant food exporters, while its aerospace and energy sectors are also closing the gap with their Western counterparts. Yet inflation is also becoming a serious economic problem, not only because of rising food and energy costs, as the demands of wealthier consumers confront domestic supply constraints, but also because of the growing stratification between large numbers of poor, uneducated young people and a far smaller, well-educated cosmopolitan class, which is becoming ever more integrated into the global economy.

There are also geopolitical risks to the emerging powers. Their growing economic and military strength arouses suspicion among its neighbours which could limit their future regional power and influence. China’s increasingly assertive stance to its claims over the South China Sea has caused alarm among South-East Asian nations, many of which have turned to the US in the hope that it will retain its role as an external provider of security and stability in the region. India must manage tense relations with its main neighbours, including Pakistan, China, Nepal and Bangladesh. Brazil has managed its rise the best within its region, but even here, suspicions over the country’s relative economic size have limited its ability to push for closer regional economic integration. In contrast, the US and European countries live in relatively peaceful neighbourhoods with no real external challengers to their security.

There are other limits to the international or regional influence of the emerging powers. Setting Brazil to one side, they have yet to project the sort of ‘soft power’ of attraction or imitation upon their neighbours or other countries that the US and the most successful European countries have done. The US and European democratic political systems continue to serve as a model for others, most recently for parts of the Arab world, in ways that the Chinese systems (communist authoritarian) or Russian (state authoritarian) do not.

The stark differences between the political systems and national interests of Brazil, China, Russia and India create a further limit to their international influence. Despite convening annually along with South Africa at the BRICs summit, they have not yet acquired the habit of acting in concert in key international institutions or conferences. In contrast, the US and European countries, for all of their hand-wringing over the recent weakening of the Atlantic alliance and transatlantic relations, have retained an interest in and the formal and informal structures for consultation on both economic and political issues. The election of the new Managing Director of the IMF in 2011 stands as a case in point; the emerging powers were unable to act as a unified group and propose an alternative candidate to Christine Lagarde. Where the emerging powers have proved effective, however, is in blocking some of the international priorities of the Western powers, whether over tightening Iran sanctions, completing the WTO trade round or achieving progress on international climate change negotiations. But even here, they have generally taken advantage of divisions among the Western group rather than offer a convincing alternative approach.

The ultimate limit to the ability of the emerging powers to challenge the existing international order is that they are as dependent as the West upon the smooth-functioning of an open global economy for their economic success and political stability. The EU and the US are China’s first and second-largest trading markets and, along with Japan, its principal sources of foreign direct investment (FDI) as well as technology partnerships. China depends on the US Treasuries market to ‘sterilise’ its ever-growing trade surpluses. China, India and Brazil are all becoming increasingly important investors into the EU and the US in order to grow market share. Rather than launching a zero-sum competition for geopolitical influence and economic supremacy with the West, the rise of the emerging powers is deepening their levels of interdependence with the West.

Can the West Recover?

Another constraint on the emergence of a new international order arises from the powerful residual strengths of the US and the EU, which, far from decaying, are likely to remain two of the principal global actors well into the future. The US’s innate strengths are well-known: its military forces far exceed those of any nation in terms of power, sophistication and reach and will continue to do so for at least the next 20 years. The US’s youthful demographic profile reflects its continuing openness to immigration and will compensate for the ageing of its ‘baby boom’ generation. Its open, transparent and wealthy economy provides a strong domestic platform for economic growth. Combined with its world-leading higher education system and deep domestic capital markets, these attributes have made the US the global hub for technological innovation at a time when such innovation is a central driver of international economic competitiveness. And the US also has the advantages of easy access to food and energy resources (its exploitation of massive reserves of unconventional gas being the latest boon to its future economic stability) which make it less dependent on imports of these vital resources than any of the emerging powers, Russia and Brazil aside.

It would be easy today to underestimate Europe’s resilience. Despite the current Eurozone crisis, Europe continues to be home to three of the world’s five most competitive economies, according to the World Economic Forum’s 2010-11 Global Competitiveness Report (Switzerland #1, Sweden #2 and Germany #5, alongside Singapore #3 and the US #4) and has six out of the top 10 and 13 of the top 25. Europe will not quickly cede these strong rankings; it is home to many world class companies and industries (33 of the top 100 according to the Financial Times World Top 500 in 2010) as well as being a competitor to the US in many areas of high technology and innovation. Europe is also a world leader in service industries, such as finance, law, accounting, design, education and communications, which will be far harder to replicate in emerging economies than sheer industrial strength, but which are central to economic productivity and wealth generation. And, despite all of its stresses and flaws, the EU brings 500 million relatively wealthy European citizens together in a Single Market that is more likely to deepen over the coming years –in response to the economic challenge of the emerging powers as well as to the Euro crisis– than it is to fragment. And there is significant scope for further integration, especially in the services sector which remains largely outside the rules of the Single Market.

To be sure, the EU is unlikely ever to compete with the US or, in the future, with China, as a global military power. Foreign and security policy are likely to remain areas where intergovernmental processes persist within the EU and so, therefore, will lowest-common denominator approaches. But the size and internal coordination of the Single Market mean that the EU will be a world power in the areas of trade negotiations, investment rules and the establishment of the standards and norms that define whole new areas of global economic activity, such as renewable energy. It is important in this context that the EU and European states are already well-represented and well-versed in the operations of all of the world’s main international organisations, an advantage that they will not give up soon or easily. And the long history of democratic governance, established welfare systems, general adherence to the rule of law and strong civil society across the EU together mean that Europe has a good chance to remain a bastion of political and social stability, even as emerging powers undergo painful and potentially destabilising political and economic transitions.

Just as the US is likely to retain much of the power it acquired during its period of global supremacy in the latter part of the 20th century, a resilient EU is more likely than one that collapses over the coming decades under the internal stresses of its recent enlargement and the external pressures of its rising economic competitors. But, to be resilient, a youthful US and an ageing Europe will both need to tap into the dynamic economic growth taking place beyond their borders in Asia and Latin America, in particular. Access to the emerging powers’ growing export markets and, increasingly, to their growing reserves of potential foreign investment will be essential to the West’s continuing prosperity, just as the emerging powers will depend on access to the West’s wealthy markets and technology base.

Towards a New International Order?

The growing economic interdependence of the established and the emerging powers will likely be the defining feature of the new international order. Given the West’s residual strength and the continued vulnerabilities of the emerging powers, a zero-sum rebalancing of power in favour of the East and a consequent fundamental shift in international order is unlikely. However, a new international order rooted in deepening levels of international interdependence is not an inevitable scenario. A principal source of potential conflict between states in the coming years will be the competition for natural resources that accompanies rapid global economic growth and improving levels of personal disposable income. Until technological innovation radically improves levels of energy production and efficiency, helps increase food production and water consumption in a sustainable manner and reduces human dependence on specific minerals that are unevenly distributed across the world, then there is a risk that ensuring access to these commodities might drive states into conflict with one another, whatever their levels of overall economic interdependence and the risks that would accompany such an outcome.

However, it is also possible that the main risks to international order during the coming decades will emanate not from the rash actions of states, but from outside the state system altogether. First, economic interdependence brings with it its own set of vulnerabilities for societies. Natural disasters now have ripple effects that extend from one side of the world to the other, whether this be the effect of the Japanese tsunami on just-in-time supply chains in the US or the ash cloud from the Icelandic volcanoes which crippled air travel over much of northern Europe and whose effects then threatened to spread across the region’s economies. And significant changes in the earth’s climate, which have led to the fall of empires when these have occurred during the past three millennia, now run the risk of having cascade effects across state borders in terms of migrant flows, disease transmission or food supply disruptions.

Interdependence also heightens the vulnerability of societies the world over to the disruptive actions of extremist, anarchist or criminal groups and individuals. Critical national infrastructure can be disrupted by cyber hackers. Terrorist attacks, or the fear of them, can bring national and international transport networks to a near standstill. And a well-executed biological attack by an individual could spread internationally and force governments to institute border controls that would stop national and international trade in its tracks.

The main challenge to international order, therefore, is that governments, businesses and societies in East and West, South and North fail to comprehend their levels of interdependence and do not deepen or build, therefore, the common norms, rules and institutions to raise their levels of resilience and ability to manage the impacts of such developments. Adapting existing international institutions to manage these risks will take a long time, given the sovereignty-based approach to establishing new multilateral agreements of both the existing and the emerging powers. And, while new international institutions, such as the G20, may offer a more legitimate forum for international policy cooperation than the old, such as the UN, they are likely to be hamstrung by the same instinct for sovereign governance among the majority of its members.

Two priorities stand out in this context. First, all states need to professionalise and improve their delivery of key services that promote security and enable sustainable growth and prosperity. For countries in the West, this will involve major reforms to welfare systems that remain industrial in their scale and approach and have not yet adapted to the West’s changed demographic profile and reduced future rates of economic growth. It will also mean finding more affordable ways of maintaining their internal and external security, both in terms of lessening the appeal and impact of extremist or criminal attacks on their societies, and in terms of contributing to enhanced levels of security beyond their borders. In this regard, military deterrence will be as important as incentives to reduce the disparities in wealth and human security between them and their poorer neighbours.

For the emerging powers themselves and for most countries in the developing world, the priority will be to build the political institutions and processes, including functioning judicial systems and vibrant civil societies, that will embed a culture of greater transparency and accountability. Otherwise, rising levels of economic growth could lead to social upheaval or to unsustainable economic bubbles, either of which could bring to a jarring halt the process of global economic and political rebalancing that is currently under way.

Finally, deeper forms of regional integration may serve as a useful bridge to a future in which the term ‘global governance’ starts to have a real meaning. Although few groups of states are likely to emulate the EU in terms of building supranational institutions and methods of political governance, the deepening of consultation and cooperation of groupings in Asia (such as ASEAN and ASEAN plus 3), in Latin America (UNASUL) and sub-Saharan Africa (the African Union and ECOWAS) is serving two useful purposes. First, it is bringing pressure to bear on the emerging powers themselves to adhere to norms and processes that they do not control. And secondly, it is enabling the development of best practices in economic cooperation, market opening and political consultation at a regional level which could gradually be elevated to an international or global level, as and when a consensus begins to emerge on the validity of those best practices across regions.

Hedley Bull, the renowned British international-relations theorist, wrote that international order would at best resemble the notion of an ‘international society’, where states chose to adhere to certain rules and norms as a way of avoiding falling into anarchy and war. The rebalancing of economic and political power from the West and North to the East and South, and the deepening interdependence that is accompanying this process, now offers an opportunity for the world to test out Hedley Bull’s vision. The birth of an international society is by no means foreordained, but governments, companies, civil society and individual citizens now have the opportunity to see if they can put his theory of international order into practice.

Robin Niblett
Director, Chatham House


[1] This essay is a chapter from the book 'Globalización, crisis económica, potencias emergentes...Diez años decisivos para la transformación del mundo' devoted to the 10th Anniversary of the Elcano Royal Institute.
]]>
<![CDATA[ Challenges facing the international community in addressing peace-building priorities in Guinea-Bissau ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/00047_mutaboba_guinea-bissau 2011-03-14T06:05:27Z

Remarks by Joseph Mutaboba, Special Representative of the Secretary-General  for Guinea-Bissau, on the peace-building priorities in this country at the Elcano Royal Institute (Madrid) on16 February 2011.

]]>

Preliminary Remarks
First of all, let me express my deep gratitude to the Elcano Royal Institute and to Madame de la Peña Corcuera, the Director for Africa at the Ministry of External Relations of Spain, represented here by her Deputy, for giving me this opportunity to engage with you on the challenges I, and other key international partners, face in supporting the authorities and people of Guinea-Bissau in their efforts to overcome recurrent instability and embark on the path to peace-building and economic development.

But before addressing some of these challenges, and the issues at stake today when it comes to the situation in Guinea-Bissau, I would like to give you a brief historical background of the developments that brought Guinea-Bissau to where it stands today.

Brief Historical Background
Following a decade of instability triggered by the 1998-99 civil war, and despite repeated efforts by national and international partners in Guinea-Bissau throughout that decade to address the root causes of the instability, in particular the complex relationship between the civilian and military leadership, it was only recently, at the beginning of 2010, that tangible prospects for reversing the negative dynamics that had hampered the stability of the country and the sub-region became visible.

The Government of Prime Minister Carlos Gomes Júnior, which emerged from the 2008 parliamentary elections, had managed within a short period of time to achieve tangible results in his efforts to place economic and fiscal reform at the core of his overall strategy for supporting economic recovery and reducing instability. For the first time in a decade, at the beginning of 2010, the Government of Guinea-Bissau was able to improve fiscal management and the payment of salaries in the administration.

Meanwhile, a change of leadership in the armed forces and the assassinations of President Vieira and the Chief of General Staff of the armed forces, General Tagme, in March 2009 contributed to creating the conditions, albeit fragile, for addressing the sensitive civilian/military relationship and the increasing linkage between insubordination of the military and drug trafficking and organised crime.

By early 2010, progress made by the Government had generated a positive momentum among international partners, who had expressed their commitment to support the reforms in various sectors: the World Bank, the IMF and the African Development Bank had resumed and increased their programmes in Guinea-Bissau; The EU had contributed to devising the overall SSR framework for Guinea-Bissau; ECOWAS and the AU had demonstrated continued engagement to support political dialogue and SSR efforts; and the UN strengthened its presence in the country, with the deployment of UNIOGBIS (SCR 1876 (2009)), to ‘deliver as one’ and assist the country in its peace-building efforts, with particular focus on the strengthening of State institutions, SSR, as well as the fight against drug trafficking and organised crime.

The 1 April Events: A Turning Point for the International Community in Guinea-Bissau
It is against the above background that the events of 1 April 2010 occurred. The brief arrest of the Prime Minister and the prolonged detention, since 1 April, of the Chief of General Staff of the armed forces not only constituted a serious breach of the constitutional order, but also underlined the fragility of key State institutions, due in part to the persistent insubordination of the military to the civilian leadership and the continuation of the negative practice of ‘shifting opportunistic alliances’. These events also illustrated the widespread impact of drug trafficking and organised crime and its links with the absence of civilian control over the armed forces.

More importantly, these events demonstrated that despite the positive momentum and combined efforts by national and international partners to root out the causes and triggers of instability in Guinea-Bissau, the process was not irreversible and the weakness of State institutions deeper than anticipated.

Drawing on these conclusions, the international community immediately adopted a common and firm position to condemn the breach of the constitutional order, urge the armed forces to remain subordinate to the civilian authorities and request the national authorities to urgently resume political dialogue and demonstrate their commitment to advancing the reform agenda under the leadership of the Government of Prime Minister Gomes Júnior.

Since April, it is worth noting that the AU, ECOWAS, the EU, the UN and the CPLP continuously joined forces in that regard and have maintained that long-term engagement by international partners in Guinea-Bissau would be conditioned by the respect of the constitutional order, the designation of a credible leadership in the armed forces and immediate progress on the reform agenda, starting with SSR.

As you are aware, as a result of the 1 April events, and acknowledging the lack of political will to advance the SSR in Guinea-Bissau, the EU Commission and Council decided to cease their operational support to the country’s authorities. This legitimate and understandable decision, however, left the other international partners with an important vacuum. The US took a similar decision following the appointment of the current Chief of Defence Staff, General Indjai, who was responsible for the 1 April events.

At that point, the United Nations was faced with the delicate challenge of creating the conditions for trying to sustain the gains already made by national and international partners on some aspects of the reforms agenda and, at the same time, of avoiding having to compromise the unity among international partners and maintain pressure on the national authorities for their firm commitment to address our concerns in earnest.

In this context, it is worth stressing that the combination of pressure and disengagement by major partners has left the country, and the UN, with a narrow path and little options to implement the key tasks under SCR 1876 and SCR 1949, such as the SSR programme and the fight against drug trafficking.

Current Priorities of the United Nations in Guinea-Bissau
Allow me now to address the key priorities of UNIOGBIS, in line with its mandate, as given by the Security Council in its resolutions 1876 and 1949. The priorities for UNIOGBIS can be summarised under five areas, as follows:

  1. To enhance the protection of State Institutions as a means to increase civilian authority and oversight over military structures and contribute to the stabilisation of the Institutions. With the departure of the EU-SSR Mission, the focus has been placed on mobilising CPLP and ECOWAS Member States to complement the internal capacities of UNIOGBIS to support the reform of the Police Sector, for which Spain directly contributed with two UNPOL, and to avoid losing momentum. However, despite the recent launch of Angola’s bilateral support to the rehabilitation of military and police installations and equipment, the core of the SSR support package is yet to be endorsed by the Heads of State of ECOWAS.
  2. To contribute to the establishment of a genuinely inclusive political dialogue. The UN has been particularly involved for the past few months in maintaining and improving the dialogue between the President and the Prime Minister. This dialogue, that also involved the Speaker of the Parliament and the President of the Supreme Court, helped, in certain instances, make tremendous progress in resolving contentious issues.
  3. To fight against impunity and strengthen the Rule of Law and democracy. The United Nations continued, through the past months, to insist on the importance of bringing to a close the investigations of the assassinations of 2009 without political interference as a step to consolidating State Institutions and increasing trust in the State. Similarly, the continued pressure by the UN, together with other partners such as the EU and the US, contributed to the release of the former Chief of Defence Staff Zamora Induta and his co-detainees on 22 December 2010.
  4. To combat drug trafficking and organised crime in a more robust fashion. Guinea-Bissau is one of the four pilot countries selected in the context of the West African Coast Initiative (WACI), that brings together ECOWAS, UNOWA, DPA, DPKO, UNODC. The recent establishment of a Transnational Crime Unit (TCU) in Guinea-Bissau put the country at the forefront of implementation of the WACI. It is important to stress, however, that in order to root out this phenomenon that has corrupted all segments of society in Guinea-Bissau, in particular the armed forces, a more robust and concerted approach is needed from the international community. This approach should combine the establishment of mechanisms for monitoring the activities of organised crime networks, for enhancing the maritime surveillance of the islands and for creating intelligence sharing mechanisms within the region and beyond. Another positive development is the negotiations on the establishment of a MoU for Maritime Surveillance, under which vessels of partners will be allowed to patrol the territorial waters of Guinea-Bissau, along the lines of what is already done with Cape Verde and Senegal. Expectations are also running high on the French initiative to convene a G-8 ministerial meeting on drug trafficking, which will bring together the countries of origin, transit and destination of drugs.
  5. To coordinate the actions of international partners for their assistance in Security Sector Reform. This support is crucial for the benefit of other listed priorities. As indicated before, besides mobilising partners such as ECOWAS and CPLP, the priority of UNIOGBIS has also been to ensure that ties are maintained between the authorities and other partners. It is expected, in that regard, that the upcoming political consultations between the EU and the Government of Guinea-Bissau will produce tangible results, so as to enable the acceleration of financial and technical support for the reforms in Guinea-Bissau. However, it is worth noting that while partners talk about coordination, very few actually like being coordinated.

 The Way Forward
After more than a decade of actively engaging with Guinea-Bissau, the international community should not, at this stage, condemn the country (and the sub-region) to a scenario of unpredictable consequences for its political stability, the application of rule of law and its socioeconomic development. The decision by Bretton Woods institutions, in December last year, to alleviate some US$1.2 billion of Guinea-Bissau’s external debt was a major positive step and should be welcomed by all Guinea-Bissau’s partners.

It remains urgent for the UN and other key partners such as the EU, the AU, ECOWAS and the CPLP to continue to impress upon national stakeholders the need to: (a) create the conditions for a sustained and constructive dialogue between not only the President and the Prime Minister, but also the opposition, and other key State institutions; (b) address the weakness of the civilian leadership vis-à-vis the armed forces by strengthening civilian State institutions; (c) expedite the implementation of the SSR programme with quick-win projects focused on the armed forces, the police and the judiciary, and inclusive of the civil society; (d) fight effectively against impunity, organised crime and drug trafficking; and (e) maintain the unity of action of international partners and put pressure on potential spoilers in the political and military leadership to prevent a repetition of cycles of violence and instability.

The decision, earlier this month, of the EU leadership, to engage in political consultations with the authorities of Guinea-Bissau, consistent with Article 96 of the Cotonou Agreement, could serve this purpose if exploited in a positive manner. The authorities of Guinea-Bissau are offered a unique opportunity to clean their records and reverse the negative effects of the 1 April events, by entering in a frank and direct dialogue with their EU counterparts, and possibly re-engage their support for long-awaited reforms in the country at the end of the process.

Concluding Remarks
From the EU and UN perspective, I believe it is high time to identify, within Guinea-Bissau, those partners who could genuinely contribute to the reform of the State. In this regard, it is crucial to recognise that the status quo benefits those who should actually be targeted by immediate reforms both in the defence and security sector, and also in the administration.

Therefore, the main question is: do we benefit from maintaining a firm stance, without engaging in constructive dialogue and trying to sustain progress where and when possible? This question raises the issue of the right balance between the carrot and the stick, and the necessary recourse to pragmatism.

It is important to keep in mind that, if not addressed in earnest, the challenges facing Guinea-Bissau today could have a spill-over effect on other countries in the sub-region, considering the scourge of drug trafficking and organised crime. This danger also affects countries that have recently successfully embraced democracy but remain very fragile institutionally speaking, such as Guinea (Conakry).

Within the country itself, we need to ask ourselves and the leadership of Guinea-Bissau, how long can the reforms be delayed without causing trouble to society? More so when the age pyramid of the armed forces, police institutions and other administrations are reversed compared with the proportion of youth in the population.

Over a decade, and given the combination of lack of political will in the country and the international partners’ legitimate fatigue, this country, if left to its own fate, risks coming under the growing influence of international drug lords, given its inability to discipline the armed forces and security institutions and to establish the rule of law.

We may still prevent such a transformation scenario and reduce the risk of the country turning into a haven for terrorist groups, given the emerging inter-linkage with drug trafficking and organised crime. It is therefore critical to address the main challenges that the country is facing, including the weakness of the civilian institutions, the absence of a republican army, the un-finished transformation of a liberation movement into a republican system, the lack of constitutional clarity between key State institutions and the absence of the rule of law and security and their impact on major reforms, including SSR.

Despite this negative picture, it is my firm belief that Guinea-Bissau has reached a crossroads, a turning point, and that the country has a real opportunity to address state-building priorities in an integrated and holistic manner, provided that the national actors continue to demonstrate their willingness to advance on the reforms agenda in the country and that international partners continue to enhance their support for building credible and reliable republican institutions. The onus is now on the Government and armed forces of Guinea-Bissau to demonstrate their firm commitment to address the key challenges and obstacles that are hampering the long-term prospects for stability and state-building priorities in their country. In parallel, it is our obligation, as the international community, to assist in steering the country along the path to the consolidation of stability. It is in the interest of all of us.

Thank you.

Joseph Mutaboba
Special Representative of the Secretary-General for Guinea-Bissau and Head of UNIOGBIS

]]>
<![CDATA[ China in Africa: Seven Myths (ARI) ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari23-2011 2011-02-07T07:11:35Z

Sensationalism and rumours cloud our ability to understand China’s growing engagement in Africa, and to craft appropriate responses. This paper dissects seven common myths on China in Africa.

]]>
Theme: Sensationalism and rumours cloud our ability to understand China’s growing engagement in Africa, and to craft appropriate responses. This paper dissects seven common myths on China in Africa.

Summary: Many of the fears about Chinese aid and engagement in Africa are misinformed. This paper unpacks seven myths: (1) ‘China is a newcomer to Africa’; (2) ‘China targets pariah regimes’; (3) ‘China hurts the West’s efforts to build democracy’; (4) ‘Chinese aid is huge’; (5) ‘Chinese aid is mainly used to win access to resources’; (6) ‘China is sending millions of farmers to Africa, leading the land grab’; and (7) ‘Chinese companies bring in all their own workers’. While China’s rise in Africa is cause for some concern, efforts to gain a more realistic picture should help Africans and their other development partners to craft appropriate responses.

Analysis: From Berlin to Tokyo, newspapers and parliaments have depicted China’s economic engagement in Africa in alarmist terms. We read that the Chinese arrived a few years ago, desperate for oil. They began to build palaces for dictators and roads to remote mining regions, brought in all their own workers and lavished piles of cash to muscle aside Africa’s traditional partners in a brutal play for resource security and influence. Enormous aid programmes propped up pariah states, enabling them to continue human rights abuses. Ambassador Johnnie Carson, the US Assistant Secretary of State for Africa, spoke for many when he said (as the Wikileaks cables revealed) that China is ‘a very aggressive and pernicious economic competitor with no morals… China is not in Africa for altruistic reasons’, he emphasised, in a meeting with US oil companies in Nigeria. ‘China is in Africa primarily for China’.[1]

If we in the West are to understand the real nature of the competition provided by China’s rise, and the very real attraction China holds as a model on the continent and as a contributor to its development, we need a more realistic appraisal of China’s engagement in Africa –an appraisal that cuts through the many myths that circulate like viruses through cyberspace–.

(1) China is a Newcomer to Africa
Many believe that the Chinese arrived in Africa quite recently, in a desperate search for oil and minerals. In fact, the Chinese have been in Africa for many decades. As African countries began to become independent in the late 1950s, Beijing (People’s Republic of China) and Taipei (Republic of China) competed for official recognition under the understanding that only one could represent ‘China’. Partly as a result of this diplomatic competition, in the 1970s China had more aid programmes in Africa than the US.[2] When China began to turn to the market in the 1980s, the aid programme was put under a ministry that evolved into today’s Ministry of Commerce. For several decades, the Chinese experimented with linking aid to business. Aid, investment and trade all began to grow after 1990, although no one was looking very closely.[3]

The extensive engagement we see today has very deep roots. In Zambia, for example, Chinese state-owned companies set up construction companies to bid on local projects in the 1980s, began buying modest commercial farms in 1990 and purchased their first copper mine, Chambishi, in 1996. Ethnic Chinese from families that arrived in the 19th and early 20th centuries have risen to become cabinet ministers or parliamentarians in several countries, including Mauritius, Mozambique, Zimbabwe, Gabon and South Africa. Chinese engagement is not seen as a new or temporary phenomenon in most parts of Africa.

(2) China is Targeting Pariah Regimes that the West Will Not Touch
If you read some analyses of Chinese engagement in Africa, you might believe that the only countries that interest Beijing are those that currently give the West a headache, with Sudan and Zimbabwe heading the pack. The Wikileaks cables again provide a good quote from US Assistant Secretary of State Johnnie Carson: ‘The Chinese are dealing with the Mugabe's and Bashir’s of the world’. End of story.

Between 2004 and 2006 as Sudan’s government and its proxies began to brutally crush the rebellion in Darfur, Beijing did little to interfere, supporting Khartoum diplomatically and supplying arms. In 2007, this began to change. Most notably, special envoys sent by China began to cooperate actively with the West. They were able to convince Sudan to allow a hybrid force of UN and African Union peacekeeping troops into Darfur. As the Brussels-based International Crisis Group remarked that year: ‘Beijing is shifting in Sudan from being an obvious part of the problem to a significant part of the solution’.[4] Under President Obama, US policy began to reflect a new understanding that it was indeed essential to ‘deal with’ Bashir in order to push the peace process forward.

Chinese companies do continue to invest in Sudan’s oil sector, as well as its booming construction industry. American and EU companies are barred from investing in Sudan, (although not in Zimbabwe, where dismal economic conditions have probably deterred investment more than any sanctions could have done). But China’s largest stock of foreign investment on the continent is not in Sudan or Zimbabwe, but in relatively well-governed and stable South Africa.[5] In 2009, South Africa was also China’s second-largest trading partner in Africa, behind only oil-rich Angola, which is also a large supplier of the US market. The Chinese are looking for investment opportunities in democratic Ghana, Namibia and Mauritius, and they are also joining American and European investors in many less well-governed countries: Equatorial Guinea, Nigeria and Gabon.

(3) Chinese Hurt the West’s Efforts to Strengthen Democracy and Governance in Africa
It is widely believed that Western engagement is conditional on governance improvements, while the Chinese engage with ‘no strings attached’. In fact the Chinese do have one important political string attached to their aid (but not to investment or trade): the ‘one-China policy’. Only countries that recognise Beijing as ‘China’ are eligible for aid. Yet much of the discussion about Chinese engagement compared with Western engagement misses this point: ‘engagement’ can be public or private, and it can be trade, aid, commercial finance or foreign direct investment.

Except in the case of Sudan, there are almost no strings attached by the West to its companies’ trade or investment in Africa. Likewise, Western commercial banks provide loans wherever they see the potential for profit. In 2004, for example, Western donorsand the IMF refused to provide aid or finance for post-conflict reconstruction in Angola before it had made improvements in revenue transparency. But Western banks, led by Standard Chartered and France’s Calyon, provided several rounds of loans totalling over US$2 billion to Angola. China’s Eximbank also provided a line of credit worth US$2 billion. None of these banks imposed any governance conditions.

Even when focusing strictly on aid, the differences between the West and China are less than commonly believed. Take the US, for example. The largest recipient of US aid in Africa is Egypt, where President Mubarak has refused to allow free and fair elections. Ethiopia, which earned a dismal five out of seven (with seven being worst) on the Freedom House assessment of civil and political liberties, received US$1.2 billion from the US in 2009.[6]

(4) Chinese Aid is Huge
One of the most widely circulated myths involves the size of China’s official aid programme, which many believe, wrongly, to be enormous. Not long ago a senior fellow at the Washington DC-based Nixon Center repeated as fact a rumour that Beijing had offered US$6 billion in ‘aid’ to convince the government of Malawi to break its diplomatic ties with Taiwan.[7] A little digging would have revealed that this figure of US$6 billion –which, indeed, circulated widely around cyberspace– referred not to Chinese aid, but to the total value of a mega project: a canal linking the landlocked country to the sea. Malawi hoped to attract Chinese firms to invest in the project.[8]

In 2009, the US Congressional Research Service (CRS) published a report on China’s foreign aid activities in Africa, Latin America and South-East Asia that gave a gloss of official sanction to many of the rumours.[9] Applying a ‘flexible’ definition of foreign aid which included all state-sponsored economic activities (foreign direct investment, commercial loans, export credits as well as official aid), the researchers simply counted up any and all reports of China-related finance going into these regions, as mentioned in the global media, without investigating whether these were firm commitments as opposed to rumours, recipients’ hopeful requests or even mistakes.

The CRS approach had two obvious problems. Given that many of the Chinese companies investing abroad –including its oil companies– are state-owned, and that its main banks are also state-owned, lumping all of their activities together as ‘aid’ just because they occur in the developing world defies both logic and convention. The West has never considered export credits or investment by its own state-owned companies as official development assistance.

Secondly, counting up figures based on media stories requires very careful investigation into their veracity. As Remi Bello, CEO of a political-risk consulting firm focused on Africa noted: ‘Keep in mind that only 2% to 4% of MOUs [memos of understanding] lead to projects in Africa’.[10] The CRS researchers’ methodology produced a Chinese ‘aid’ figure of US$17.96 billion for Africa (2007). However, if the same definition of ‘aid’ is used for China and for the West, in 2007 China disbursed only about US$850 million in official development assistance to Africa, about 40% of its total aid. China’s aid is growing rapidly, but disbursements still reached only about US$1.4 billion in 2009.[11]

(5) Chinese Aid is Mainly Used to Win Access to Resources
It is also widely believed that ‘China’s foreign aid is driven primarily by the need for natural resources’, as one study put it.[12] In fact, China’s official development assistance is driven by politics: the one-China policy as well as diplomacy and the desire to maintain ‘friendships’ across the range of countries. It is for this reason that the Chinese are careful to spread their official aid (grants, zero-interest loans and concessional loans) across all the countries with whom they have diplomatic relations, including many without any resources (Senegal, Mauritius, Mali, Rwanda, Togo and Benin). China provides aid to every country in Africa with whom they have diplomatic ties –currently 49– even some with higher per capita income, such as South Africa.

A major reason for confusion about Chinese aid figures, and their purpose, is the Chinese government’s expanded use of very large lines of export buyers’ credit that can be secured with commodities. In resource-rich Angola, Equatorial Guinea and the Democratic Republic of the Congo, and outside of Africa, in Brazil and Russia, Chinese banks have offered long-term lines of export credit, secured by commodities, to finance Chinese companies to do infrastructure projects or for the import of Chinese goods. These large credits are almost always secured with commodity exports (not, as often believed, by a resource concession). It acts as a kind of complicated long-term trade arrangement, with financing up front. Though countries can use their credits to finance infrastructure projects, the instrument itself is based on commercial market rates, and is not ‘aid?”.[13]

China’s use of commodity-secured lines of credit parallels similar commercial instruments long in use by Japan and also by Western banks.[14] None of these are regarded as official development assistance but as ways to promote business. As the African Development Bank’s President Donald Kaberuka, pointed out, this was not aid but investment: ‘When an investor comes and says, “I want to do business here and I will also build infrastructure”, what is bad about it? Nothing’.[15]

(6) Beijing is Sending Millions of Chinese Farmers to Settle in Africa, Leading the ‘Land Grab’
Headlines about Chinese interest in African land have created a mistaken impression that Chinese companies (or individual farmers) are at the head of a new wave of land colonisation in Africa. For example, purportedly reviewing a major study on large-scale land investment released by researchers from the UN’s Food and Agriculture Organisation (FAO) and others, The Guardian told its readers: ‘A million Chinese farmers have joined the rush to Africa, according to one estimate, underlining concerns that an unchecked “land grab” not seen since the 19th century is under way’.[16] Media reports that ‘a million’ Chinese farmers have settled in Africa have been circulating for several years –but without any evidence to back them up–. In fact, the study on which The Guardian was reporting actually distanced itself from the conventional wisdom, saying: ‘A common external perception is that China is supporting Chinese enterprises to acquire land abroad as part of a national food security strategy. Yet the evidence for this is highly questionable’.[17]

One of the stories often used as an example of Chinese ‘land grabs’ comes from Zimbabwe. In 2003, ‘China’, it is said, ‘purchased 100,000 hectares in Zimbabwe’.[18] What really happened in Zimbabwe was this: China International Water and Electric Corporation, a large state-owned engineering company which has built irrigation projects in Pakistan, the Philippines and a number of other developing countries, won a contract issued by the Zimbabwe government to develop 100,000 hectares of land for irrigated maize production, a quixotic scheme dreamt up by the Zimbabwe government to fill the production gap left by their illegal seizure of white-owned farms.[19] CIWEC began construction, but when the Mugabe government was unable to make any payments, CIWEC withdrew its construction team and abandoned the project.

The only African country with hard evidence of a large-scale land concession obtained by a Chinese company comes from the DRC, where ZTE Agribusiness was given a concession reported variously to be from 100,000 to 3 million hectares, to grow oil palm.[20] However, the project had not moved forward by late 2010. Apparently, ZTE’s economic feasibility analysis suggested that transport and infrastructure problems in the Congo would make the production and export of palm oil too expensive.

There are no hard facts on the number of Chinese who have moved to Africa. The number is certainly high, and may indeed be in the range of one million, compared with the 6.5 million or so white Europeans who are resident on the continent. But it is clear that at present, most Chinese immigrants are coming to Africa not to be farmers, but rather traders, more intent on opening a shop or a small business than growing rice.

(7) Chinese Companies Bring Over All Their Own Workers
A robust mythology has developed that Chinese companies ‘bring in all their own workers’. Yet as reports of labour problems on Chinese worksites multiply, it has become sadly evident that Chinese companies do employ many, many Africans. For example, at a Zambian coal mine notorious for its poor working conditions, 62 Chinese managers supervised 455 Zambian workers.

The companies most likely to bring in a hefty share of Chinese workers are Chinese construction companies. Over the past few years, Chinese engineering firms in Africa have secured literally thousands of contracts, building projects such as health clinics, industrial estates and many kilometres of roads. In recent years, Chinese companies have been winning the largest share of all African Development Bank and World Bank civil works projects in Africa.[21] In 2007, according to official figures, over 114,000 Chinese were working on a temporary basis in Africa, in 2,142 different projects.[22] This comes to an average of about 53 Chinese staff per project.

These numbers are indeed higher than one would find with Western companies or aid donors, whose costs of bringing in expatriates are so much higher. Yet in many countries, Chinese win contracts not based on cheap Chinese labour but on their relatively inexpensive top level staff. A Chinese engineer costs around US$10,000 annually, a small fraction of the costs associated with European engineers. Furthermore, in most countries, the numbers of Africans working on these projects will be far higher than Chinese. While there are exceptions, Chinese tend to be in skilled technical or managerial positions where Chinese language skills are key, while less skilled positions are filled by African workers. Proportionately more Chinese workers can be found in places like Angola, where population densities are low and skilled labour is expensive. Even here, Chinese companies resident for several years have doubled the proportion of locals they hire compared with newly arrived Chinese firms.[23] In Tanzania, a Chinese official predicted that localisation would continue to grow: ‘Tanzania doesn’t want to give work permits. And it’s more expensive now to bring people from China. Some don’t want to come. It costs a thousand dollars a month for a Chinese worker now. This is ten to twenty times what it costs for local salaries’.[24]

Much of the cyber-space portrait painted of China in Africa rests on rumours, myths or outdated understandings. Trade between the two regions is huge, but official development assistance from China is far smaller than that from the West. China is not leading the land grab in Africa, and Chinese companies do not bring in all their own workers. So on and so forth.

China is now a powerful force in Africa, and the Chinese are not going away. Their embrace of the continent is strategic, planned, long-term and still unfolding. China’s rise in Africa is cause for some concern among all who care about development on the continent. But this concern has more to do with the standards of companies and banks from a country where capitalism is still relatively raw and where corporate social responsibility is rudimentary at best.

For many decades, Africans have been used to foreign investors coming from countries with higher standards than their own. But many Chinese companies are bringing over China’s own, notoriously low environmental and safety standards and labour relations. A growing number of Chinese entrepreneurs compete very effectively as traders and service-providers. Operating at the same modest level as their African counterparts, these entrepreneurs provide ample ground for discontent among those scratching out a living in African cities and towns. These are concerns where the Western role should be largely limited to advocacy, setting better examples, and, if asked, helping African governments bolster their own enforcement capacities and African NGOs their important local advocacy and watchdog role.

Ultimately, it is up to African governments to shape this encounter in ways that will benefit their people. Many will not grasp this opportunity, but some will. The West can help by gaining a more realistic picture of China’s engagement, avoiding sensationalism and paranoia, admitting our own shortcomings and perhaps exploring the notion that China’s model of consistent non-intervention may be preferable, for many reasons, to a China that regularly intervenes in other countries domestic affairs or uses military force to foster political change.

Deborah Brautigam
Professor of International Development, School of International Service, American University, Washington DC


[1] ‘US Monitors Aggressive China in Africa’, BBC News, 10/XII/2010, http://www.bbc.co.uk/news/world-africa-11955516.

[2] Deborah Brautigam (1998), Chinese Aid and African Development, Macmillan Publishers, New York, p. 4.

[3] For an exception, see the excellent reporting by Philip Snow (1988), The Star Raft: China’s Encounter with Africa, Weidenfeld & Nicolson, New York.

[4] Gareth Evans & Donald Steinberg (2007), ‘Signs of Transition’, The Guardian, 11/VI/2007, http://commentisfree.guardian.co.uk/gareth_evans_and_donald_steinberg/2007/06/signs_of_transition.html.

[5] Ministry of Commerce (2010), ‘2009 Statistical Bulletin of China’s Outward Foreign Direct Investment’, Ministry of Commerce, Government of the People’s Republic of China, Beijing.

[6] United States aid figures from http://www.state.gov/r/pa/ei/bgn/2859.htm.

[7] Stefan Halper (2010), ‘Beijing’s Coalition of the Willing’, Foreign Policy, July/August, http://www.foreignpolicy.com/articles/2010/06/21/beijings_coalition_of_the_willing?page=full.

[8] The rumour seems to have started in a Malawi newspaper. See Dickson Kashoti (2007), ‘Malawi Set to Switch from Taiwan to China’, Daily Times [Malawi], 25/XII/2007, and Taonga Sabola (2008), ‘Govt Dismisses US$6bn China Waterway Pledge Reports’, Nation [Malawi], 4/II/2008, which ‘dismissed’ reports of US$6 billion in aid and explained that Malawi planned to offer commercially viable components of the US$6 billion project as investment concessions, and that Chinese investors had expressed an interest in participating. Henry Mussa, Minister of Transport, Public Works and Housing said: ‘As government, we have segmented the waterway project into a number of areas like ports, dredging and others and we will be concessioning the areas to various stakeholders. So the Chinese are interested to concession one of the areas’.

[9] Thomas Lum, Hannah Fischer, Julissa Gomez-Granger & Anne Leland (2009), ‘China’s Foreign Aid Activities in Africa, Latin America, and Southeast Asia’, Congressional Research Service, 7-5700, R40361, Washington DC, 25/II/2009, http://www.fas.org/sgp/crs/row/R40361.pdf (accessed 22/I/2011).

[10] ‘Nigeria Secures Agreement for Refineries’, Engineering News-Record, 16/VI/2010.

[11] Deborah Brautigam (2011), The Dragon’s Gift: The Real Story of China in Africa, Oxford University Press, Oxford.

[12] Lum et al. (2009), p. 5.

[13] These large lines of credit use market interest rates and are not subsidised by the Chinese government. Interest rates are based on commercial terms –albeit very competitive–: usually London Inter-Bank Offered Rate (LIBOR) plus a margin, usually between 1% and 2%.

[14] In Angola Western banks have provided oil-backed loans at very low rates: LIBOR plus 2.5%, for example. Although the World Bank does not ask for commodity guarantees for its finance, it also offers similar, non-concessional loans through its IBRD window: loans that are also not considered official development assistance. These are based on LIBOR plus a margin that varies from .28 to 1.25 depending on the repayment period. World Bank (2010), ‘IBRD Pricing Basics’, August, http://treasury.worldbank.org/web/IBRD_Pricing_Basics_Aug_2010.pdf.

[15] ‘What is Bad About it?’, Der Spiegel, 29/I/2010.

[16] David Smith (2009), ‘The Food Rush: Rising Demand in China and West Sparks African Land Grab’, The Guardian, 3/VII/2009. The Guardian failed to tell its readers the source of this ‘estimate’.

[17] Lorenzo Cotula, Sonja Vermeulen, Rebeca Leonard & James Keeley (2009), ‘Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa’, IIED/FAO/IFAD, London & Rome, ftp://ftp.fao.org/docrep/fao/011/ak241e/ak241e.pdf.

[18] Blake Hurst (2010), ‘The 21st Century Land Rush’, The American, American Enterprise Institute, September, http://www.american.com/archive/2010/september/the-21st-century-land-rush/article_print (accessed 17/I/2011).

[19] http://www.guardian.co.uk/world/2003/feb/13/zimbabwe.andrewmeldrum. While this article accurately reports the contract, it suggests that CIWEC would not simply develop the irrigation system for the land but wished itself to farm there. This was not the case.

[20] The DRC government approved 100,000 hectares; the Chinese Embassy website listed 300,000 hectares; the Chinese news agency Xinhua said 1 million hectares; newspaper reports claimed it to be 3 million hectares.

[21] Vivien Foster, William Butterfield, Chuan Chen & Nataliya Pushak (2008), Building Bridges: China’s Growing Role as Infrastructure Financier for Africa, Infrastructure nr 5, World Bank, Washington DC, p. 26.

[22] Ministry of Commerce (2009), China Commerce Yearbook 2008, Ministry of Commerce, Beijing, pp. 217-218 & 488.

[23] Tang Xiaoyang (2010), ‘Bulldozer or Locomotive? The Impact of Chinese Enterprises on the Local Employment in Angola and the DRC’, Journal of Asian and African Studies, vol. 45, nr 3,18/VI/2010.

[24] Brautigam (2011), p. 157.

]]>
<![CDATA[ ‘Failed States’ in Sub-Saharan Africa: A Review of the Literature (ARI) ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari5-2011 2011-01-14T07:50:53Z

The concept and measurement of ‘failed states’ is not generally helpful in understanding the economic and political realities in Sub-Saharan Africa.

]]>
Theme: The concept and measurement of ‘failed states’ is not generally helpful in understanding the economic and political realities in Sub-Saharan Africa.

Summary: This paper undertakes a review of the literature that addresses the concept, measurement and causes of ‘failed states’ in Sub-Saharan Africa. It finds that concept and measurement of ‘failed states’ is not generally helpful in understanding economic and political realities in Sub-Saharan Africa. In particular, it argues that an aggregate index of state performance is unhelpful for policymakers because it misses the wide range of capacity across different state functions within polities. It also finds that the main theories attempting to explain ‘state failure’ have important theoretical shortcomings and are not supported by the evidence. Finally, the paper examines the political economy behind why some states in the region are more resilient than others.

Analysis: The literature on ‘state failure’ has received considerable attention across the range of social science enquiry. Sovereign states are expected to perform certain minimal functions for the security and well-being of their citizens as well as the smooth working of the international system. The political science and international relations literature has been concerned with identifying why the state itself ceases to perform core Weberian functions. States that fail to meet these minimal standards have been described as ‘weak’, ‘fragile’ or ‘poorly performing’ (Torres & Anderson, 2004, p. 5). More extreme cases have been labelled ‘failed’ or ‘collapsed’. The growing interest in state failure is no coincidence. This is because the number of new or embryonic states has grown dramatically in the last half of the 20th century (Rotberg, 2003).

The interest in state breakdown at this core level has been sparked by the urgency of understanding the factors behind political violence and civil war, and the growth of terrorist organisations in many less-developed countries (Cramer 2006; Menkhaus, 2004). The proliferation of labels –ranging from ‘crisis states’, ‘countries at risk of instability’, ‘challenging environments’ and ‘countries under stress’– reflects the range of ways in which the core problem has been conceived (Torres & Anderson, 2004, p. 5).

In recent times, the failure of US interventions in Somalia, Haiti and Afghanistan have heightened academic and foreign policy interests in conceptualising the notion of ‘failed’ states. Fearon & Laitin (2004), for instance, argue that failed states create ‘international public bads’, and other negative spillovers (such as harbouring criminal organisations) and thus the international community needs to develop forms of ‘neo-trusteeship’ in order to intervene to build states. US foreign policy has been shaped, particularly since the September 11 bombings, by the potential threat of so-called ‘failed states’.

(1) What is a Failed State?
Helman & Ratner (1993) were among the first analysts to use the term ‘failed state’. They were concerned about ‘a disturbing new phenomenon’ whereby a state was becoming ‘utterly incapable of sustaining itself as a member of the international community’. They argued that a failed state would ‘[imperil] their own citizens and [threaten] their neighbours through refugee flow, political instability and random warfare’. Michael Ignatieff (2002) adopts a Machiavellian/Weberian understanding of state failure when he argues that state failure occurs when ‘the central government loses the monopoly of the means of violence’ (p. 118). In the wider sense of state failure, Zartman (1995) develops the idea of state failure along the lines of Hobbesian social contract theory. For Zartman, state failure occurs when the basic functions of the state are no longer performed as well as referring to a situation where the structure, authority (legitimate power), law, and political order have fallen apart.

There are many categories and definitions of ‘state failure’ that have proliferated in the literature. State failure can occur in many dimensions such as security, economic development, political representation, income distribution and so on. According to Rotberg (2002): ‘nation-states fail because they can no longer deliver positive political goods to their people. Their governments lose legitimacy, and in the eyes and hearts of a growing plurality of its citizens, the nation-state itself becomes illegitimate’ (p. 85). ‘Failed’ or ‘collapsed’ in his view is the end stage of failure. In extreme cases, failure may occur on all dimensions simultaneously as in Somalia. However, in most cases, there is a wide variation in the extent to which a state ‘fails’ across different dimensions. In Colombia, for instance, the state has been relatively impressive in macroeconomic management, but has been unable to control large parts of its rural areas where guerrilla and paramilitary groups and drug cartels are powerful. It is thus imperative for any definition of ‘failure’ to be explicit in which dimension a state fails. Given the variation in state capacity across sectors, aggregate measures or categorisations of ‘failure’ can be misleading.

The failed-states literature stresses that there are certain indicators that are necessary (if not sufficient) to categorise a state as ‘failed’. Rotberg (2003) identifies three important indicators. First, the persistence of political violence is salient in most definitions of ‘failed states’. For Rotberg (2003), ‘failed states are tense, deeply conflicted, dangerous, and bitterly contested by warring factions. In most failed states, government troops battle armed revolts led by one or more warring factions’ (p. 5). In his definition, the absolute intensity of violence does not define a failed state. Rather, it is the enduring character of that violence (as in Angola, Burundi and Sudan), the direction of such violence against an existing government or regime, and the vigorous character of the political or geographical demands for shared power or autonomy that rationalise or justify that violence that identifies a failed state.

A closely related indicator of state failure is the growth of criminal violence (ibid.). Here the presence of gangs, criminal syndicates, arms and drug-trafficking are the most cited. As a result of the failure of a state to provide security from violent non-state actors, people often seek protection from warlords or other armed rivals of the state. A third indicator of failed states concerns their inability to control their borders and/or significant chunks of their territory (ibid). Often the expression of official power is limited to the capital city and one or more ethnically-specific zones. Indeed one measure of the extent of state failure is how much of the state’s geographical expanse a government genuinely controls.

Rotberg also introduces the idea that it is possible to rank failures according to the number of dimensions in which a state fails to deliver positive political goods. In order to rank the severity of state failure, Rotberg suggests that there is a hierarchy of positive state functions. These are: (1) security; (2) institutions to regulate and adjudicate conflicts, rule of law, secure property rights and contract enforcement; (3) political participation; and (4) social service delivery, infrastructure and regulation of the economy. In this analysis, strong states perform well across these categories and with respect to each separately. Weak states show a mixed profile, and failed states are a sub-category of weak states. The main idea developed by Rotberg is that no single indicator provides certain evidence that a strong state is becoming weak or a weak state is beginning to fail. As a result, it is necessary to take the indicators together.

Secondly, aggregate indicators do not provide information about variations of state capacity across functions. There are several examples of countries that have failed economically but have not experienced large-scale political violence (such as Tanzania and Zambia). Third, the lack of political participation does not necessarily weaken a state internally. Much of the literature in fact finds that semi-authoritarian regimes (so-called ‘anocracies’) are more prone to political violence than either more open democracies or more authoritarian regimes (Marshall & Gurr, 2003). For instance, Iraq under Saddam Hussain, however distasteful, was not a ‘failed state’ in all the above-mentioned dimensions despite the absence of widespread political participation. The same could be said of Angola, Ethiopia and South Africa in the era of apartheid. The idea that repression is a necessary indicator of ‘failure’ is an ahistorical proposition given the construction of many developmental states before democracy became a source of legitimate government rule (Moore, 1966). Finally, the extent of corruption and bureaucratic capacity, which is cited as an indicator of failure, is also misleading. Cross-country evidence for less developed countries suggests that levels of corruption and bureaucratic capacity do not determine long-run growth rates (Khan, 2007). However, the idea that state ‘failure’ should be broken down into sub-categories is useful. This is because of the co-existence of variations in state capacity at a given time in one country and because of the movement of states to and from more and less severe conditions of failure.

The main problem with ranking states according to a ‘failure index’ (such as the CIA’s Directorate of Intelligence in 2000) is that state formation is a historical process that is open-ended and continually subject to contestation, particularly in the case of new/post-war and low-income states. The terms ‘state failure’ or ‘failed state’ are clearly inappropriate since they imply that there is an ‘end state’ in which the ‘failure’ arrives in final form. The term ‘failing state’, as Dorff (2000) suggests, is somewhat more appropriate as it suggests a process of failing, and better fits the perspective of a continuum along which increased weakening of the state governing capacity occurs. Failure, however defined, needs to be understood in the historical context in which it occurs. It is misleading, for example, to define a ‘failed state’ in the context where state formation never really happened in the first place. Just as misleading is to refer to two states as ‘failed’ when such ‘failure’ occurs from very different initial conditions (ie, a state that never consolidated such as Afghanistan versus a polity where significant state formation and capacity has taken place, such as Zimbabwe). Moreover, if policy intervention is to be more effective, it is useful to establish the time frame of ‘state failure’: processes of state weakening are likely to have different characteristics and dynamics if they are at an advanced as opposed to an initial phase.

Rather than insisting that states need to be pigeon-holed as ‘successful’ or ‘failed’, a framework should allow for an assessment of state effectiveness along a continuum where conflict and violence (far from an aberration of state formation and development) are an integral part of these processes. In this perspective, it is possible to assess violence, war and non-state challenges not only as ‘development in reverse’ (though this may occur in the case of failed states), but as both reflective of the political economy of state formation in less developed economies, and, as history attests, the extent to which such contestations have the potential to be developmental. Such a framework also allows for assessing effectiveness in the sub-components of a state. This is useful since state capacities are not uniform across functions.

(2) Causes of State Failure
There have been several theories that seek to explain why states fail. The ‘resource curse’ is perhaps the most influential explanation, and has been written on and critiqued extensively (Di John, 2007, 2009; Rosser, 2006). A second set of important theories of state failure have been subject to less scrutiny. These are the so-called functionalist theories of the state. A series of authors working on post-colonial African states have challenged the idea that ‘state failure’ is a useful way of examining how elites in actually existing political systems legitimate rule, accumulate capital and maintain a semblance of political stability in the context of underdevelopment (Keen, 1998; Bayart, 1993; Reno, 1995, 1998; Chabal & Daloz, 1999). They challenge the basic idea of measuring degrees of ‘stateness’ along a continuum starting with those that meet classical Weberian criteria of statehood and ending with those that meet none of the criteria of ‘successful’ statehood. In general these authors seek to explain how anti-developmental states have emerged as well as attempting to explain the political logic holding these states together.

The starting point for most of these theories is to explain the emergence of patrimonial and clientelist politics.[1] Many authors point out that the speed with which independence occurred created the context which generated politics based on political patronage (Cooper, 2002). The need to construct political alliances at short notice with minimal resources and the absence of party organisation outside urban areas meant that nationalist leaders –typically urban, union-based teachers, union leaders and administrators– had to rely on existing political structures. This meant finding individuals –often chiefs or other prominent notables– and using patronage to bind these individuals to the party and local voters to candidates.

There are several influential theories worth considering. First, Bayart (1993) develops the idea of the ‘politics of the belly’, which is defined as the predatory pursuit, or rush for spoils, of wealth and power that, as a mode of governance, takes historically-specific forms appropriate to the post-colonial state in Africa. The predatory nature of the state, according to Bayart, generates incentives for leaders to ‘eat’ from the resources of the state. In this model, the invasion of ever-wider spheres of economic activity by informal political networks leads to the ‘criminalisation of the state’. The criminalisation of the state and its associated corruption at all levels in Africa is less a sign of state ‘failure’ than a mechanism of social organisation that has to be related to the specific historical experiences, cultural repertoires and political trajectories of the sub-continent through which political power is disseminated and wealth re-distributed.

A second model is the idea that the late colonial legacy created incentives for leaders to use ‘disorder as a political instrument’ (Chabal & Daloz, 1999). This refers to the process by which political actors in Africa seek to maximise their returns on the state of confusion, uncertainty and sometimes even chaos which characterises most African polities. The use and creation of personalised informal patron-client networks is central to their argument. For Chabal & Daloz these might include kinship, witchcraft, ethnic or religious forms of identity that are the outcome of different rationalities, and the instrumentalisation of different forms of disorder that are more attuned to maintaining social bonds that ‘work’ in Africa. Implicit in their argument is that the legitimacy of rule depends less on delivering rapid economic growth and employment creation than on accommodating powerful elite factions. A key policy prescription of the model is that the introduction of economic liberalisation and multi-party electoral politics are likely to allow even greater scope for those powerful ‘businessmen of crime’ (such as warlords and high-level political patrons who use disorder and violence to accumulate capital) to flourish, as such liberalisation policies tend to reinforce the power of ‘shadowy’ entrepreneurial elites (Chabal & Daloz, 1999, p. 91).

A third model is the idea of the ‘shadow state’ developed by William Reno (1995). The idea of elite accommodation is central to the argument. For Reno, the end of the Cold War and the rise of economic and political liberalisation policies put traditional patterns of patronage under pressure in sub-Saharan Africa. Such liberalisation processes, he argues, further undermined the incentives of the rulers of weak states to pursue conventional strategies for maximising power through generating economic growth and, hence, state revenues. In this context, economic motives and objectives are not the unique purview of rebel forces, but can also include those of personalistic rulers of corrupt ‘shadow states’ who maximise the use of violence to ‘manage their own economic environments’ siphoning off state resources for personal enrichment and the establishment of patronage networks, instead of providing public goods such as security and economic governance. Rulers address the internal threat of warlord politics by transforming their own political authority into an effective means of controlling markets without reliance on formal state institutions. Weak state rulers use new and strengthened alliances with outsiders to shed old clients and discipline those who remain. Reno (1995, p. 8), in his analysis of central African states –Angola, Sierra Leone, Zaire/DRC–, describes how leaders have based their personal power and derived individual wealth from the overt and clandestine manipulation of markets, at times with the connivance of foreign investors in natural resource enclaves such as oil.

In general, functional and new war theses move beyond simply measuring state failure. They seek to understand the rationale for state breakdown and its often associated political violence. These theories seek to explore how the changing nature of international economic and political relations affects the viability of states in poor countries.

(3) Shortcomings of the State Failure Theories
While functionalist theories provide important insights about ‘state failure’, they also have several important shortcomings. First, leaders are assumed to have predatory or distributional aims as opposed to developmental ones. The neglect of the political processes through which a leader appropriates power limits our understanding of the motivations of state leaders. As a result, these analyses cannot explain why capital accumulation requires state breakdown, or ‘the instrumental use of disorder’ in some cases and not others.

Secondly, the idea that neo-patrimonial politics is necessarily anti-developmental is ahistorical. The problem with Chabal & Daloz’s analysis, for example, is that what they refer to as a specifically African problem is actually a general characteristic of all developing countries undergoing processes of primitive accumulation and associated political corruption (Khan, 2007; Hutchcroft, 1997). The key analytical challenge is to explain why some countries are able to create more developmental outcomes in the context of clientelism and corruption and why other states do not (Kohli, 2004; Khan & Jomo, 2000). For example, functionalist theories cannot explain why economic growth rates vary across (clientelist) sub-Saharan African polities, or why many countries in sub-Saharan Africa achieved rates of growth close to East Asia and Latin America in the period 1960-80 (Mkandawire, 2001).

Third, there is little analysis in these theories as to why violent and non-violent challenges to state authority actually succeed in some countries or why such challenges lead to state collapse in some contexts as opposed to others. The idea that the ‘shadow state’ always ‘works’ flies in the face of the many civil wars and coups where leaders were unable to use informal patronage to stay in power or even stay alive.

Perhaps the weakest aspect of functionalist theories, however, is the sweeping generalisation that there is one type of African politics. Kaplan (1984), for instance, portrays West Africa as epitomising ‘the coming anarchy’ (in which scarcity, crime, over-population, tribalism and disease are rapidly overwhelming states and societies). He argues that ‘Sierra Leone is a microcosm of what is occurring albeit in a more tempered and gradual manner throughout West Africa and much of the underdeveloped world’ (p. 48).

Allen (1995) critiques the idea that there is one type of patrimonial politics in Africa. He makes a distinction between two variants of the post-colonial state moving beyond the simple neo-patrimonial description. He argues that the response to the instability of clientelism in some states, including Kenya, Tanzania, Zambia, Senegal and Cote d’Ivoire was to centralise and bureaucratise power. Political parties were displaced as the main distributors of clientelist resources by a bureaucracy under control of the President. In other states, including Nigeria, Sierra Leone, Liberia, Uganda, Ghana and Somalia, Allen argues the incipient crisis of clientelism was not resolved; leaders did not bureaucratise, nor did they centrally control clientelism. The system became more unstable. Allen describes these regimes as having ‘spoils politics’ with a more winner-take-all nature of electoral politics, more pervasive and fragmented corruption, greater economic crises, with a greater disintegration of political institutions and mediations. It is these regimes that give full expression to Bayart’s notion of ‘politics of the belly’.

While it is not clear that the long-run economic growth rates between these two types of politics differs on average (or whether all the states remained in the same category over time), it appears to be the case that countries with more centralised clientelist systems (as identified by Allen) have avoided state collapse and large-scale and prolonged political violence.[2] The sample size is too small to make any definitive statements. However, developing more refined typologies of polities within Africaand tracing the extent to which states move from one category to another, and why, will help identify which political factors are crucial to prevent fragile states from failing or even collapsing.

Conclusion

Reflections on New Approaches to Measuring and Addressing ‘State Failure’
There are several research avenues worth pursuing with respect to the interest in ‘failed states’. First, more disaggregated indices should be developed. An aggregate index (eg, ‘state failure indices’) does not provide any information on the extent to which capacity varies across different state functions or sectors within a polity. The historical evidence suggests that state capacity varies substantially across functions and sectors within polities. There are numerous examples of this. For instance, South African tax collection capacity (by far, the best among middle-income countries) is much greater than its ability to undertake industrial policy or tackle HIV/AIDS. Botswana’s democratic institutions are among the most robust in the developing world yet it has also been very poor at controlling HIV/AIDS. Brazil has among the highest levels of tax take but is not (politically) capable of collecting personal income and property tax. The Colombian state is known for among the best macroeconomic management but has among the lowest tax takes in Latin America, and is unable to contain decades of guerrilla and paramilitary political violence. Tanzania and Zambia have had relatively poor records on economic performance but have been able to prevent large-scale political violence, unlike most of their neighbouring countries. This variation in capacity is not picked up by aggregate measures and thus our understanding of why capacity varies so much within polities is limited in such a framework. Detailed historical analyses of the political coalitions and settlements underpinning specific state capacities are essential to increase understanding of variable state capacity within a polity and provide a fruitful ground for research.[3]

Secondly, understanding why some low-income countries avoid large-scale political violence does not merit particular attention. Political science has long been concerned with the problem of what types of political arrangements, or in our terms political settlements, generate basic political order and stability. This issue concerned the likes of Plato, Machiavelli, Hobbes and others. More recent examinations of the issue have argued that, at low levels of development, the general nature of political settlements that are likely to generate political order are far from inclusionary.

The principal solution through history to the classic Hobbesian problem of endemic violence is the creation of what North et al. (2007) call ‘limited access orders’ (as opposed to the much rarer ‘open access orders’, which characterise advanced market economies. The limited access order creates limits on the access to valuable political and economic functions as a way to generate rents. The dominant coalition within a political settlement creates opportunities and order by limiting the access to valuable resources –land, labour and capital– or access and control of valuable activities –such as contract enforcement, property rights enforcement, trade, worship, and education– to elite groups. When powerful individuals and groups become privileged insiders and thus possess rents relative to those individuals and groups excluded (and since violence threatens or reduces those rents), the existence of rents makes it in the interest of the ‘privileged insiders’ to cooperate with the coalition in power rather than to fight. In effect, limited access orders create a credible commitment among elites that they will not fight each other. This is the basis for a stable ‘elite bargain’.

The shape of the elite bargain on which a political settlement rests is central to understanding differential trajectories of state resilience, that is, the ability of the state to establish and maintain control over coercive power, administrative authority and popular allegiance. This is not adequately addressed in the North et al. (2007) model. Recent work on Zambia (Di John, 2010) and Uganda (Lindemann, 2010) suggests that the shape and character of the elite bargain matters for the prospects of political stability. Di John’s (2010) study on Zambia suggests how and why the construction of political organisations, particularly dominant political parties, has been central to providing the institutional mechanisms of distributing patronage to regional elites and to important political constituencies in ways that either prevent challenges to authority and/or maintain cohesion of the ruling coalition. Further evidence of the importance of political party organisation and centralised patronage in the maintaining state resiliency can be seen in the cases of South Africa, Tanzania Botswana and Mauritius. These countries all have strong centralised national parties.

Of course, there are other dimensions of the central role played by the political organisation of elite bargains within political settlements in determining trajectories of resilience and fragility (or development). These include the ideological role of the political organisation in control of the state, both in fostering national identity and in broadcasting the state’s presence throughout the territory. This may be decisive in terms of developing a state capacity to ensure control of coercive power and administrative authority. There are, as well, important agency factors that intervene that depend largely on the qualities of individual leaders that wield executive authority. It would be hard to imagine an explanation of the trajectory followed in Tanzania without reference to the particular qualities of Julius Nyerere.

In sum, far more research on the nature of elite bargains and political settlements more generally is required if we are to understand why and how states perform across a range of public functions. Moreover, more research is required to explain why some elite bargains generate both resilience and long-run economic growth in some contexts (such as in Botswana and Mauritius) and why in other cases, achieving state resilience seems to come at the expense of long-run economic development (such as in Zambia, Malawi and Tanzania).

Jonathan Di John
School of Oriental and African Studies (SOAS), University of London

References

Allen, C. (1995), ‘Understanding African Politics’, Review of African Political Economy, nr 65.

Bayart, J.-F. (1993), The State in Africa: the Politics of the Belly, Fayard, Paris.

Chabal, P., & J.-P. Daloz (1999), Africa Works: Disorder as Political Instrument, James Currey, Oxford.

Clapham, C. (1985), Third World Politics: An Introduction, Routledge, London.

Cooper, F. (2002), Africa Since 1940: The Past of the Present, Cambridge University Press, Cambridge.

Cramer, C. (2006), Civil War is Not a Stupid Thing, Hearst & Co., London.

Di John, J. (2010), ‘Political Resilience Against the Odds: An Analytical Narrative on the Construction and Maintenance of Political Order in Zambia Since 1960’, Crisis States Working Paper, Series 2, nr 75, London School of Economics.

Di John, J. (2007), ‘Oil Abundance and Violent Political Conflict: A Critical Assessment’, Journal of Development Studies.

Dorff, R. (2000), ‘Addressing the Challenges of Failed States’, paper presented at the Failed States Conference, Florence, Italy, April.

Eisenstadt, S. (1973), Traditional Patrimonialism and Modern Neopatrimonialism, Sage Publications, London.

Fearon, J., & D. Laitin (2003), ‘Ethnicity, Insurgency, and Civil War’, American Political Science Review, vol. 97, nr. 1.

Gutiérrez, F., D. Buitrago, A. González & C. Lozano (2010), Measuring Poor State Performance: Problems, Perspectives and Paths Ahead, Crisis States Research Centre Report, London School of Economics.

Helman, G., & R. Ratner (1993), ‘Saving Failed States’, Foreign Policy, nr 89.

Hutchcroft, P. (1997), ‘The Politics of Privilege: Assessing the Impact of Terns, Corruption and Clientelism on Third World Development’, Political Studies, vol. 45, nr 3, p. 639-658.

Ignatieff, M. (2002), ‘'Intervention and State Failure’, Dissent, Winter.

Kaplan, R. (1994), ‘The Coming Anarchy’, Atlantic Monthly, February.

Keen, D. (1998), The Economic Functions of Violence in Civil War, Adelphi Paper, nr 320, London.

Khan, M. (2007), ‘Governance, Economic Growth and Development Since the 1960s’, in J.A. Ocampo & K.S. Jomo (Eds.), Growth Divergences: Explaining Differences in Economic Performance, Zed Books, London, p. 285-323.

Khan, M.H., & K.S. Jomo (2000), ‘Introduction’, in M.K. Khan & K.S. Jomo (Eds.), Rents, Rent-Seeking and Economic Development, Cambridge University Press, Cambridge.

Kohli, A. (2004), State-Directed Development|: Political Power and Industrialization in the Global Periphery, Cambridge University Press, Cambridge.

Lindemann, S. (2010), ‘Exclusionary Elite Bargains and Civil War Onset: The Case of Uganda’, Crisis States Working Paper, Series 2, nr 76, London School of Economics, London.

Marshall, M.G., & T.R. Gurr (2003), Peace and Conflict 2003, Center for International Development and Conflict Management, College Park, MD, http://www.cidcm.umd.edu/inscr/PC03web.pdf.

Menkhaus, K. (2004), ‘Somalia: State Collapse and the Threat of Terrorism’, Adelphi Paper, nr 364, London.

Mkandawire, T. (2001), ‘Thinking about Developmental States in Africa’, Cambridge Journal of Economics, nr 25.

Moore, B. (1966), The Social Origins of Democracy and Dictatorship: Lord and Peasant in the Making of the Modern World, Beacon Press, Boston

North, D., J. Wallis, S. Webb & B. Weingast (2007), ‘Limited Access Orders in the Developing World: A New Approach to the Problems of Development’, Policy Research Working Paper, nr 4359, World Bank, Washington DC.

Reno, W. (1998), Warlord Politics and African States, Lynne Rienner, Boulder.

Reno, W. (1995), Corruption and State Politics in Sierra Leone, Cambridge University Press, New York.

Rosser, A. (2006), ‘The Political Economy of the Resource Curse: A Literature Survey’, IDS Working Paper, nr 268, Institute of Development Studies, Sussex.

Rotberg, R. (2003), State Failure and State Weakness in a Time of Terror, Brookings Institute Press, Washington DC.

Rotberg, R. (2002),’The New Nature of Nation-State Failure’, Washington Quarterly, nr XXV.

Sartori,G. (1970), ‘Concept Misformation in Comparative Politics’, American Political Science Review, vol. 64, nr 4, p. 1033-1053.

Torres, M., & M. Anderson (2004), ‘Fragile States: Defining Difficult Environments for Poverty Reduction’, Policy Division, Department for International Development (DFID), London.

Zartman, W. (1995), Collapsed States, Lynne Rienner, Boulder.


[1] Following the standard Weberian definition, patrimonialism is a system of personal rule based on administrative and military personnel, who are responsible only to the ruler. Neo-patrimonialism, a term first coined by Eisenstadt (1973), and one which features prominently (though not exclusively) in the political science literature on Africa, commonly refers to a form of organisation in which relationships of a broadly patrimonial type pervade a political and administrative system which is formally constructed on rational-legal lines (Clapham, 1985, p. 39-60). In this system, the office of power is used for personal uses and gains, as opposed to a strict division of the private and public spheres. Clientelism, in this article, refers to a specific set of patron-client relationships where leaders (patrons) provide state resources in the form of credits, subsidies, and employment opportunities to clients (individuals and groups) in order to secure the loyalty of such clients. One common form of client loyalty is voting for the party responsible for dispensing with state patronage.

[2] South Africa, Botswana and Mauritius would be three countries that maintained a relatively centralised state.

[3] Most useful indices are not designed to tell the whole story. Actually, it is good that they refrain from doing so (Gutierrez et al 2010). Indeed, a great danger of indexes is “conceptual stretching” (Sartori, 1970), trying to measure more than one thing at a time.

]]>
<![CDATA[ Africa and Climate Change: Impacts, Policies and Stance Ahead of Cancún (ARI) ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari173-2010 2010-12-15T03:45:55Z

This analysis reviews the effects of climate change in Africa, the response measures undertaken in the continent and the expected position of African countries in Cancún, Mexico.

]]>
Theme[1]: This analysis reviews the effects of climate change in Africa, the response measures undertaken in the continent and the expected position of African countries at the meeting at Cancún, Mexico.[2]

Summary: The analysis first provides an overview of climate change impacts in Africa. It begins with a brief review of general climate projections for Africa, with their overall impacts. Later, it moves on to assess specific climate impacts of the continent’s climate zones. The paper uses a sample of African countries to provide specific details of vulnerability in accordance with national circumstances. Secondly, the analysis looks at the policies implemented so far, or foreseen, in Africa, to respond to the climate threats previously reviewed. The analytical framework proposed is in line with the approach followed in the Bali Action Plan, which was established ahead of last year’s Copenhagen summit. That is, it reviews measures undertaken to respond to climate change in terms of mitigation actions, adaptation responses, technology interventions and finance provisions. This section briefly concludes with an overview of the contributions of Spain and the EU to these measures, before and after Copenhagen. Against this background, the third section of the analysis looks at the negotiating position of Africa in the aftermath of COP-15. Namely, it looks at the demands of the Africa Group and other relevant alliances within the continent, for consideration in Cancún.

Analysis

Main Consequences of Climate Impacts in Africa: Strategic Interests and Regional Threats
Science has become more unequivocal about global climate-related events. In Africa, average annual temperatures have been rising steadily and during the 20th century the continent saw increases of around 0.5°C. Meanwhile, countries in the Nile Basin had an increase of around 0.2°C to 0.3°C per decade during the second half of the century, while in Rwanda temperatures increased by 0.7°C to 0.9°C. Climate models project that across the entire continent and for all seasons, the median temperature increase by the end of this century will be between 3°C and 4°C, roughly 1.5 times the global mean response. Future warming is likely to be greatest over the interior of semi-arid margins of the Sahara and central southern Africa.

In this regard, vulnerability to external factors continues to threaten the region’s ability to make progress towards the Millennium Development Goals (MDGs). Food price volatility has become a critical challenge for Africa to achieve food security for all. Coupled with the current global financial and economic crisis, these factors continue to negatively impact African economies. Therefore, the following key impacts of climate change threaten the sustainability of the gains that have been achieved in terms of MDG attainment,[3] including:[4]

  • A drop in agricultural yields of up to 50% in some countries, with the consequent effects on agricultural output, food security and nutrition.

  • An increase in the number of people (from 75 to 250 million) at risk from water stress.

  • An increase in the exposure to malaria.

  • An increase of between 5% and 8% in the surface area of arid and semiarid land.

  • Rising sea levels that could severely affect mangrove forests as well as coastal fisheries, and lead to increased severe flooding, with a potential cost of 5% to 10% of annual PIB.

Many of the predictions for the continent were summarised by the IPCC (Intergovernmental Panel on Climate Change), along with the potential implications for international climate negotiations.[5] However, climate change impacts in Africa vary across the continent owing to its sheer size and diversity. Scientists distinguish at least seven climate zones in Africa (Figure 1), with varying geographical conditions:[6]

Figure 1. Africa’s climate zones

Figure 1. Africa’s climate zones

A case study selection of one country from each climatic zone, adding an island state and a mixed region, is shown in Annex 1 to provide an overview of Africa’s climatic diversity.

Policies Implemented in Africa or Foreseen for the Near Future
Africa’s responses to climate change impacts can now be better understood against the backdrop of the preceding case study in various climatic zones of the continent (see Annex 1). A suggested approach to reviewing climate policy development in Africa is to look at the measures adopted in the four areas constituting the building blocks of the Bali Action Plan:[7] (1) mitigation; (2) adaptation; (3) technology; and (4) finance. Reference will be made to interventions in some of the countries studied in Annex 1. In addition, it may be relevant to review other activities and initiatives that might have a policy or regulatory impact when addressing climate change.

(1) Mitigation: it is important to note that the main sources of global emissions are key sectors relevant to the attainment of the Millennium Development Goals (MDGs). These key sectors include electricity and heat (29%), agriculture (14%) and land-use change and forestry (12%),[8] with the remainder having a comparatively less direct impact on MDG attainment.

Consequently, emission reductions in these sectors require transformation of economies that should be well informed. Indeed, any actions to be undertaken in Africa should be informed by the diverse range of national priorities of its countries, particularly for poverty reduction (see Box 1, for a sample of mitigation efforts in this regard):

Box 1. Africa’s Climate Change Mitigation Actions at a Glance

  • Namibia and Nigeria: preparation of the Second National Communications (SNC) to the UNFCCC, including studies on measures to reduce emissions in the main polluting sectors, including forestry, and actions undertaken in this regard.

  • Namibia: the Barrier Removal to Namibia’s Renewable Energy (NAMREP) and Namibia’s Energy Efficiency Programme in Buildings (NEEP) projects, both executed by the Ministry of Mines and Energy, are being implemented to expand access to energy services to the poor and to promote the adoption of energy-efficient practices. In addition to climate change mitigation, the removal of policy, financing and cultural barriers to the use of solar energy technologies (eg, solar water heaters, solar water pumps and other solar home systems) is contributing to poverty reduction in rural areas that might not be connected to the grid. Meanwhile, more efficient energy demand-side management practices in urban areas are expected to address escalating energy prices and reduce the high dependence on energy imports.

  • Nigeria: a consultative and multi–stakeholder approach was taken in the development of the Nationally Appropriate Mitigation Action (NAMA), encouraging similar highly participatory and consensus-based processes. Nigeria has now been granted observer status in the UN-REDD process, with a roadmap being developed by the government to fast track designation as a full blown REDD+ pilot country and taking steps to establishing a National REDD Task Team.

Source: UNDP (www.undp.org).

(2) Adaptation: one of the main objectives of adaptation is to improve climate resilience, particularly as it impacts existing development assistance. The main purpose is to strengthen the capacity of national institutions to incorporate adaptive planning and management into development policy in an iterative manner. The focus is on anticipatory and deliberate measures. Examples of support to Africa in this area are the Africa Adaptation Programme (see Box 2), the Adaptation Learning Mechanism and the Community-based Adaptation project.

Box 2. Africa’s Climate Change Adaptation Responses at a Glance

  • Africa Adaptation Programme (AAP): there has been a sustained effort to improve the alignment of adaptation programmes with national strategies and priorities in Africa. AAP funded by the Government of Japan has been instrumental in supporting a comprehensive and integrated national approach towards climate change adaptation. AAP is helping 20 countries in Africa to develop their capability to design and implement holistic climate adaptation and disaster risk-reduction programmes that are aligned with their national development priorities. It is a US$92 million programme, started in 2009 and to be completed in December 2011. The donor recipient countries are: Burkina Faso, Cameroon, Republic of the Congo, Ethiopia, Gabon, Ghana, Kenya, Lesotho, Malawi, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Tanzania and Tunisia.[9]

  • Nigeria: preparation of a National Adaptation Plan of Action (NAPA) and a National Adaptation Strategy, as well as the development of a Climate Change Policy and a National Response strategy. A consultative and multi-stakeholder approach was taken in the development of the NAPA, encouraging similar highly participatory and consensus-based processes.

Source: UNDP (www.undp.org).

(3) Technology: technology transfer and capacity development need to take place effectively for African countries to pursue climate change mitigation actions that at the same time contribute to their economic development. The installation of additional technological capacity not only requires significant investment but also capacity development and technical assistance in order to support the ensuing economic transformation and reap the expected poverty dividends. A sample of efforts in this regard is summarised in Box 3.

Box 3. Africa’s Climate Change Technology Transfer and Capacity Development Interventions at a Glance

  • Namibia: the Concentrated Solar Power Technology Transfer for Electricity Generation (CSP TT NAM) project, executed by the Ministry of Mines and Energy, and implemented through the Renewable Energy and Energy Efficiency Institute (REEEI) at the Polytechnic of Namibia, aims to increase the renewable share of the country’s on-grid energy mix. Beyond the obvious mitigation impact, the technology transfer component will seek to attain this goal through a pre-commercial demonstration pilot plan, which should allow the promotion of domestic manufacturing, development of an in-country national skill-set and overall contribution to local content in the process.

  • Congo DR: several technology capacity reinforcement projects are in the pipeline for the country, as already identified and reported in the country’s Second National Communication to the UNFCCC:

- Pilot Electrification Project for Five Agglomerations by Solar Means in Kinshasa (US$4 million).

- Pilot Development Installation for 50 Micro Hydroelectric Power Stations (US$361 million).

- Firewood Plantation in Kinshasa, Lubumbashi and Mbuji‐Mayi (US$22 million).

Source: UNDP (www.undp.org).

(4) Finance: a key challenge for the transformation of African economies towards low-carbon and climate-resilient development is accessing sustainable financing to support the process. The challenge is at institutional, regulatory and policy development levels, which are required for investment to take place. It is also crucial to ensure that any financing mobilised actually contributes to the development of the national priorities of African countries.

Any success in furthering this approach will significantly contribute to poverty reduction and MDG achievement. Access to sustainable finance should allow Africa to control and direct financing consistent with the low-emission climate-resilient development strategies (LECRDS) of its countries. This is particularly so, considering that international climate financing is largely unpredictable and currently provides little guarantee of long-term sustainability.

For instance, the fast-start finance proposed in the aftermath of last year’s Copenhagen climate talks (US$30 billion for 2010-12) and the US$100 billion per annum envisaged from 2020 onwards do not provide any assurance on the funding allocation approach or eligibility criteria. Meanwhile, financial mechanisms such as the Global Environment Facility (GEF) are co-funding a range of initiatives (see Box 4) to attain global environmental benefits.

Box 4. Africa’s Climate Change Financing Actions at a Glance: the GEF

The Global Environmental Facility (GEF) is a financial mechanism under the UNFCCC established to mobilise financing to address environmental sustainability and climate:

  • Congo DR: the GEF has been funding enabling activities to support the fulfilment of the country’s obligations to the UNFCCC. In addition, it is funding a NAPA, a capacity-building project for global environmental management, as well as a climate-change project in the agriculture sector focusing on food production security.

  • Namibia: GEF is funding adaptation (eg, pilot crops and livestock farming practices), mitigation (barrier removal to access off-grid renewable energy technologies, energy efficiency in buildings) and technology transfer (concentrated solar power for on-grid electricity generation) projects. These interventions are in addition to supporting enabling activities for UNFCCC commitments (eg, Second National Communication).

Source: GEF (www.thegef.org).

It is important to note that GEF has become a significant instrument to support African countries on the climate change and environment agenda.

Indeed, using a project approach to bring about change from business-as-usual scenarios, the GEF has positioned itself as a catalytic co-financier of environmental projects.[10]

However, in addition to mechanism-driven approaches, other countries are using country-driven approaches to ensure national ownership and direct access to financing. Some of these are briefly explained in Box 5.

Box 5. Africa’s Country-Driven Approaches to Climate Financing

  • Namibia: as part of UNDP’s global project towards the ‘Capacity Development for Policy Makers to Address Climate Change’, the country is currently finalising its assessment of the investment and financial flows (I&FF) needed to meet national adaptation and mitigation costs. The I&FF process is contributing to a better understanding of the magnitude of funds needed to tackle climate change now and in the long term. The process followed relies on a multi-stakeholder approach to ensure national ownership.

Source: UNDP (www.undp.org).

(5) The role of Spain and the EU: Spain has been one of the most active players in international development assistance in recent years. The establishment of the Millennium Development Goal Achievement Fund (MDG-F) between Spain and the UNDP in December 2006 has been a landmark instrument for bilateral contribution and joint programming. The MDG-F is supporting, through the UN development system, over 140 initiatives to promote the attainment of MDGs in 49 countries to the tune of €528 million, with an additional €90-million contribution received in 2008.

Several of these initiatives (around €68 million) are supporting countries to co-ordinate efforts towards environmental sustainability and climate change, with some pilot initiatives taking place in Africa. For instance, in Mozambique, the MDG-F is supporting processes for environmental mainstreaming and climate change adaptation in rural and coastal zones (a €6-million joint programme).

Therefore, Spain is an active partner in development assistance for addressing climate change and broader environmental concerns, and has continued to do so during its Presidency of the EU. The latter earmarked €7.2 billion for 2010-12 (with €2.4 billion available for 2010). Meanwhile, in April 2010 Spain became the first country to make a voluntary contribution to the Adaptation Fund, with €45 million disbursed for 2010.[11]

The Negotiating Position in Cancún:[12] Alliances, Demands and Institutional Arrangements
Considering Africa’s size and diversity, it is quite a complex task to summarise and simplify the negotiating position of the whole continent. An easy starting point is the positions advanced by the Africa Group, within the Group of 77+China, in the various negotiating areas. This would also serve as the point of departure from which various alliances are being formed. In turn, this would help us better understand the range of demands and preferred institutional arrangements by Africa, including the red lines the region will not cross if it is to agree on a legally-binding post-2012 regime.

(1) Regional alliances: Africa has been playing a significant role in the climate-change negotiation process. The African Group, with its 53 member states, is the largest regional group (28% of all UN members).[13] However, the group’s main challenge given its size has been defending positions suitable to its variety of members. Consistent with the preceding sections, which have underscored the range of climate-change impacts in Africa, and measures adopted to increase resilience in the continent, there is also a diversity of negotiating positions, in accordance with the major alliances noted in Box 6:

Box 6. Africa Regional Alliances

  • Africa (Africa Group):Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo DR, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Republic of the Congo, Rwanda, São Tomé & Príncipe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Togo, Tunisia, Uganda, Tanzania, Zambia and Zimbabwe. Africa Group members also exert significant influence within the Group of 77 (eg,. South Africa, Nigeria and Egypt).

  • LDCs (Least Developed Countries), currently incorporating 33 African countries:Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Congo DR, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, São Tomé & Príncipe, Senegal, Sierra Leone, Somalia, Sudan, Togo, Uganda, Tanzania and Zambia.

  • APPA (African Petroleum Producers Association), including OPEC countries (Algeria, Angola, Libya and Nigeria) alongside 12 other African countries (Benin, Cameroon, Chad, Congo DR, Egypt, Equatorial Guinea, Gabon, Ivory Coast, Mauritania, Republic of the Congo, South Africa and Sudan).

  • SADC (Southern African Development Community), with 15 member states that are trying to exert influence of their own within the African Group (Angola, Botswana, Congo DR, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe). Several member countries are currently negotiating for SADC to form another negotiating group within Africa at the UNFCCC. Similar moves are currently unknown from other existing regional alliances (eg, ECOWAS, CEMAC, EAC).

  • COMIFAC (Central African Forest Commission): at present including 10 forested nations in Africa (Burundi, Cameroon, Central African Republic, Chad, Republic of the Congo, Congo DR, Equatorial Guinea, Gabon, Rwanda and São Tomé & Príncipe).

  • SIDS (Small Island Development States): at present including six African countries (Cape Verde, Comoros, Guinea-Bissau, Mauritius, São Tomé & Príncipe and Seychelles).

  • BASIC (ie, Brazil, India and China plus South Africa).

Both LDCs and SIDS can be considered the most vulnerable, whereas South Africa, Nigeria and Egypt (all part of APPA) are the continent’s economic powerhouses. However, the level of power and influence of these alliances depends on the negotiating demand or issue at stake, with COMIFAC countries playing a progressively responsible role in issues such as mitigation actions related to forests and land use, and SADC countries seeking to exert more strategic influence in the overall African group position. However, it should be noted that the diversity of positions was not as marked prior to the Bali road map to Copenhagen.

(2) Main African demands: the proposed framework for analysis of African demands is in line with the main areas of the Bali Action Plan (mitigation, adaptation, technology and finance), and the shared vision for long-term cooperation action. It is within these areas that issues such as commitments by African countries vis-à-vis developed economies, positions on land use, land-use planning, conservation and forestry (LULUCF), sectoral and market mechanisms, capacity building and other response measures can be better understood. Overall, there is agreement that these demands might not be met in Cancun. Meanwhile, Africa will push for a deal to be agreed on African soil (COP-17/MOP7 in South Africa);[14] however, significant progress will be required during and after Mexico, so that a package with advances in all areas may be agreed upon.

Mitigation: the Copenhagen Accord provided for quantified economy-wide emissions targets for 2020 by developed countries.[15] The vision was to further strengthen the emissions reductions initiated by the Protocol. Meanwhile, developing countries would undertake national appropriate mitigation actions (NAMAs) in the context of their sustainable development, with LDCs and SIDS allowed to undertake voluntary actions on the basis of external financial support. The African group has clearly said that mitigation commitments by developed countries must be resolved urgently. Progress in other negotiating areas will be rendered insufficient if a legally-binding outcome does not emerge from the negotiating sessions with a clear post-2012 regime in terms of commitments.

While developed countries acknowledge that greater ambition is needed on their part, disagreement remains on the form of commitments (eg, relative reductions, baseline years); the role of offset mechanisms, including Land Use, Land Use Change and Forestry (LULUCF), towards commitments; and the inclusion of Annex I parties not currently subject to the Kyoto Protocol (eg, the US). In the meantime, further technical guidance is required for other mitigation actions relevant to Africa, ie, REDD+ (eg, particularly for COMIFAC member states). For instance, there is a consensus on the need to provide social and environmental safeguards for forest-dependent communities (including indigenous people) for REDD+ to succeed.

Adaptation: the African group demands that developed countries assume their historical responsibilities by prioritising adaptation actions for the most vulnerable. Africa’s main contention is that it has contributed the least to climate change, following decades of greenhouse gas concentrations caused by industrialised nations. However, the continent is the most vulnerable to its consequences and has the least capacity to adapt.

Meanwhile, mechanisms to address revenue losses have been demanded by APPA countries, opposed to by SIDS. Namely, oil exporters (such as Nigeria from the case study selection) call for the inclusion of compensation for economic losses within any adaptation support. Again, the demand relates to expected mitigation actions in developed countries (ie, a reduced reliance on fossil fuels and a transition to non-fossil or renewable energies). However, island states like Mauritius (also in the case study selection) demand that any economic compensation be primarily devoted to support adaptation.

Technology: as a cross-cutting element of the negotiations, Africa is placing great emphasis on progress in climate-change technology transfer and capacity building. Current negotiations are mostly engaged in the institutional arrangements required for an international technology framework to play an effective role in addressing climate change. Beyond that, Africa and most developing countries are concerned with the issue of intellectual property rights (IPR).

Effective technology transfer, particularly in a North-South context, requires the building of IPR provisions into any proposed technology mechanism. While developed countries refuse such a proposal, Africa’s counterargument is that mitigation actions in developing countries are unlikely to take place without an increase in the installed technological capacity of its economies. Apart from infrastructure capacity, the processes of knowledge sharing, skills development and overall human resource strengthening are crucial for Africa to benefit from any investment flows to address climate change in its economies.

Finance: One of the landmark outcomes of COP-15 in Copenhagen was the pledge of US$30 billion for developing countries for 2010-12. While the pledge may address some of the Africa Group demands, the fast-start finance proposal still does not provide financing arrangements for a post-Kyoto regime beyond 2012. Another test for this pledge is to prove that any sources of climate financing put forward are actually new and additional to existing development assistance.

The incentives arising from carbon credits are creating an enabling environment for the establishment of promising linkages between the private and the public sector. These should now move on from their current seemingly “piloting and testing” stage, to another where market mechanisms are enhanced and improved under the UNFCCC convention. However, Africa demands that this transition is accompanied with significant pledges on emission reductions by developed countries first. Indeed, other developing countries[16] have expressed their caution about private sector funds altogether replacing public climate financing.

(3) Institutional arrangements: the UNFCCC is undergoing significant pressure to convince all its parties that it is the adequate platform to negotiate a deal. As the new UNFCCC Executive Secretary Christiana Figueres emphasised throughout the year, there is a ‘need to prevent multilateralism from being seen as an endless road’. While all parties seem to agree in principle with the multilateral approach, there is widespread disagreement on the acceptance of the instruments from the Convention.

Africa is pushing for a continuation of the Kyoto Protocol into a second commitment period. In terms of mitigation by developed countries, the African group sees the Kyoto Protocol as the best model to reach a legally-binding agreement and to hold industrialised economies accountable for their past and future GHG emissions. LDCs have stressed that the Protocol has established the institutional and governance structures that ‘are and must remain at the heart of the climate regime’.[17]

Regarding adaptation, further guidance is required on how adaptation funding will be allocated and disbursed. Africa (particularly LDCs and SIDS) argue for priority access based on the continent’s vulnerability. With regards to technology, a three-part technology mechanism under the Convention has been proposed.[18] The question remains as to how any technology institutional frameworks would be supported and resources, given the lack of clarity on climate financing mechanisms. The institutional arrangements for climate financing will largely depend on final agreement reached in terms mitigation, adaptation and technology.

Africa is demanding additional flexibility in these instruments so that low-emitting or carbon-neutral nations can still benefit from them. For example, South Africa, as the continent’s biggest emitter, has been able to tap into the CDM market easily owing to its great emission reduction capacity. However, the current CDM methodology does not account for the fact that the country’s coal-based electricity supply is also exported to other countries in the SADC region. As a result, energy importers such as Namibia, Zimbabwe and Lesotho are not eligible to cash-in on emission reductions from their neighbour, even though they are contributing to South Africa’s growing global carbon footprint.

(4) Africa’s red lines: the African group has clearly stated that mitigation commitments by developed countries must be resolved urgently. Progress in other negotiating areas will be rendered insufficient if a legally-binding outcome does not emerge from the negotiating sessions with a clear post-2012 regime.

The African demands noted above on the way to Cancun are fairly comprehensive, with common areas of agreement with the position of other developing countries. There are certain lines Africa will not cross and paths the continent will not follow, if it is to agree to a legally-binding agreement.

In line with the G77+China, Africa has a firm position on resisting any mitigation action commitments imposed on developing countries by Annex I parties. This approach is informed by the principle of ‘common but differentiated responsibilities’.[19] It is important to underscore that progress in other negotiating areas will be rendered insufficient if a legally-binding outcome does not emerge from the negotiating sessions with a clear post-2012 regime. Meanwhile, the continent agrees to the development of mitigation strategies that include NAMAs in a way that effectively capture and follow the national priorities of each of the countries, particularly poverty reduction and the attainment of the MDGs.

Discussions around the requirement by developed countries for developing countries to follow international measurement, reporting and verification (MRV) procedures for internationally-supported NAMAs will not be entertained until developed-country commitments are undertaken. Africa underscores the need for international MRV requirements to respect national sovereignty of its countries. Most critically, Africa requires that Annex I countries determine an overall numeric target both in the current AWG-LCA and AWG-KP negotiation texts. This is due to the insufficient level of ambition, or willingness to comply, shown by Annex I countries in the Copenhagen Accord.

The Accord shifts the emphasis from legally-binding commitments to voluntary emission pledges. Recently, South Africa noted that the long-term global goal for emission reductions is more than just a number, but also nothing without a number.[20] Also, Africa will not pursue NAMAs unless this is accompanied with intellectual property-right sharing provisions to support them. The process of economic transformation to a low-carbon intensive path is costly in the short term for any country. Therefore, Africa feels less compelled to make any efforts in this regard, particularly in the current economic context.

Conclusion: This paper has attempted to provide a detailed understanding of climate impacts in Africa. Indeed, reduced rainfall may have adverse effects in dry regions (eg, land degradation in northern Nigeria), but have a positive impact in humid or flood-plain areas (eg, a reduced incidence of malaria in Mozambique). Therefore, climate policy-making in Africa should not only respond to general climate risks (eg, coastal infrastructure development against sea-level rise around Africa), but also reap the specific opportunities brought about by climate mitigation (eg, carbon markets for REDD+ initiatives in Congo DR). In the same light, the EU, and particularly Spain, should not only identify interventions requiring donor assistance in Africa (eg, support for crop-switching initiatives in rural Lesotho) but also developments making business sense (solar or wind technology investment in Namibia). Taking this detailed approach has also contributed to a better understanding of the nuances in national negotiating positions across the continent. Nonetheless, Africa’s overall approach to Cancún shows its focus on the next step in the road to a post-Kyoto climate regime (COP-17 in South Africa). It considers the little room provided in Mexico for a global outcome that bypasses the red lines Africa will not cross.

Raúl Iván Alfaro-Pelico
Programme Analyst, Energy & Environment, United Nations Development Programme (UNDP)

Bibliographical References

Boko, M., I. Niang, A. Nyong, C. Vogel, A. Githeko, M. Medany, B.Osman-Elasha, R. Tabo & P. Yanda (2007), ‘Africa’, in M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden & C.E. Hanson (Eds.), Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge University Press, Cambridge, p. 433-468.

Earth Negotiations Bulletin, ‘Summary of the Copenhagen Climate Change Conference: 7-19 December 2009’, vol. 12, nr 459, Tuesday, 22/XII/2009, http://www.iisd.ca/climate/cop15/.

Eriksen, Siri, Karen O’Brien & Lynn Rosentrater (2008), ‘Climate Change in Eastern and Southern Africa: Impacts, Vulnerability and Adaptation’, Global Environmental Change and Human Security (GECHS).

IISD (2010), ‘Summary of the Tianjin Climate Change Talks: 4-9 October 2010’, Earth Negotiations Bulletin, International Institute for Sustainable Development.

IPCC (2007), Climate Change 2007. Summary Report, http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_sp.pdf.

Lázaro, Lara (2010), Cambio climático: frenazo en Copenhague; próxima estación: México 2010 (COP 16), ARI nr 9/2010, Elcano Royal Institute.

MMA (2010), ‘Balance Segundo Trimestre 2010 – Presidencia Espanola EU. Secretaria de Estado de Cambio Climatico’, Ministerio de Medio Ambiente y Medio Rural y Marino.

Report of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol on its tenth session, held in Copenhagen from 7 to 15 December 2009, FCCC/KP/AWG/2009/17.

Report of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention on its eighth session, held in Copenhagen from 7 to 15 December 2009, FCCC/AWGLCA/2009/17.

The Copenhagen Accord, Advanced Unedited Version, http://unfccc.int/files/meetings/cop_15/application/pdf/cop15_cph_auv.pdf.

UNDP (2008), ‘The Bali Action Plan: Key Issues Under Negotiation’, UNDP Environment & Energy Group.

United Nations Convention to Combat Desertification (UNCCD) (2009). Climate Change in the African Drylands. Options and Opportunities for Adaptation and Mitigation, UNDP & UNEP, Nairobi.

Annex 1. Africa’s Climate Zones: Case Study Selection

(1) Tropical RainforestCongo DR

(2) Tropical WetandDryNigeria

(3) Tropical Dry
Namibia

(4) Mountain
Tanzania

(5) Mediterranean
Tunisia

(6) Middle Latitude DryLesotho

(7) Humid SubtropicalMozambique

(8) Island
Mauritius

(9) Mixed
South Africa

(1) Tropical Rainforest: Congo DR[21]
The impacts of climate change are already noticeable throughout the country. Particularly, there is a persistence of excessive heat waves, violent rain, soil degradation (especially by furrowing erosion), a prolongation of the dry season and an increase of the drought sequences during the rainy seasons, as well as floods. Figure 2 shows an overall summary of the range of projected variations for temperature, precipitation and atmospheric pressure.

Figure 2. Congo DR: Climatic Parameter Variation[22]

Parameter

2010

2025

2050

2100

Temperature (°C)

0.45 to 0.52

0.91 to 1.03

1.72 to 2.08

2.69 to 3.22

Precipitation (%)

0.3 to 2.5

0.4 to 4.2

0.3 to 7.5

0.8 to 11.4

Atmospheric pressure (hPa)

0.08 to0.006

0.16 to0.13

0.29 to0.25

0.5 to0.39

Source: UNFCCC (2009) DRC’s SNC.

Climate impacts on agriculture, among other land-use, land-use change and forestry (LULUCF) activities, are expected to have a direct incidence on the population’s food security. Indeed, the LULUCF sector is DRC’s most carbon intensive (see Table B below for GHG assessment). Its greenhouse gas inventory shows Congo DR’s insignificant contribution to global emissions and significant carbon capture/sequestration potential:

Figure 3. Congo DR: CO2 Emission/Sequestration Sectoral Assessment

Emissions (sectoral %)

1999

2000

2001

2002

2003

CO2 emissions (Gg)

553,188

330,351

196,796

370,944

428,233

Land use and forestry

501,889

(91%)

280,345

(85%)

147,418

(75%)

321,786

(87%)

378,708

(88%)

Other sectors

51,299

(9%)

50,006

(15%)

49,378

(25%)

49,158

(13%)

49,525

(12%)

CO2 Absorption/Sequestration (Gg)

Land use and forestry

548,068

562,679

500,357

496,999

495,334

Net assessment

5,120

232,328

303,561

126,055

67,101

Source: UNFCCC (2009) DRC’s SNC.

(2) Tropical Wet and Dry: Nigeria[23]
The IPCC’s Second Assessment Report of 1995 established a general trend of 0.2ºC-0.3ºC rise in temperature in West Africa per decade. Nigeria’s large size and geographical location affords the country both wet and dry climates. The Niger Delta, the Lagos, Calabar and Ondo regions, belonging to the southern humid tropical zone, expect an increase in both precipitation and temperature.

Expected climate impacts include shift of optimal crop conditions for Nigeria’s most common produce (eg, millet, sorghum, sugar and maize) to less used crops (eg, wheat, rice and potatoes). Meanwhile, the Sudan-Sahel zone, or northern savannah area, expects drought persistence leading to reduced soil moisture and a further desertification processes, with a negative impact on the country’s large livestock numbers (eg, reduced pastureland and declining water resources).

Finally, as the continent’s largest oil exporter, a sea level rise is projected to have adverse effects on offshore oil and gas production facilities, as well as along the coastal areas, both in terms of equipment and infrastructure maintenance. Meanwhile, electricity production in the north, through the Kainji hydroelectric power station on the River Niger, will suffer from reduced rainfall due to an expected decrease in river flow.

(3) Tropical Dry: Namibia[24]
Namibia is one of the driest countries in the world, with low and highly variable annual rainfall, and with water scarcity in a large piece of land, the least densely populated in the continent.[25] Climate scenarios project mean annual temperature increases (depending on region) ranging from 2ºC to 6ºC above the 1961-90 mean temperature, coupled with decreases in rainfall (see Figure 4).

Figure 4. Namibia: Climate Change Projections in Windhoek in Various Climate Scenarios

Figure 4. Namibia: Climate Change Projections in Windhoek in Various Climate Scenarios

Source: UNFCCC (2002) Namibia’s INC.

With lack of water as the key limiting factor for the country’s development, already high solar radiation, low humidity and high temperatures is expected to lead to higher evaporation rates, extreme climatic conditions will directly impact 70% of Namibia’s population, who practise subsistence crop farming and agro-pastoralism on communal land. Climate change is also projected to have an adverse impact on the country’s energy-intensive and key mining sector (diamonds, uranium).

Namibia’s own electricity production is primarily concentrated in the northern border with Angola. The Ruacana hydroelectric power plant significantly depends on the flow of the Kunene River,[26] expected to become drier, thereby leading to curtailed electricity generation. Meanwhile, sea level rise and warming-up of its Benguela current system can negatively impact Namibia’s fishing sector, ie, its second foreign-currency earner (after mining), and with the third-largest output (after both mining and agriculture). Apart from the impact on the coastal infrastructure and declines in pilchard stocks, the effects might be extended to other marine resources.

(4) Mountain: Tanzania[27]
Climate-change projections for Tanzania point to rises in temperature and increases in rainfall in high altitude areas (with decreases in other areas). The impact of these changes will be noticeable in vulnerable sectors of the economy (agriculture, water resources, forestry and livestock). The severity of the impact will depend on the area, with the focus on the mountain climate of the highlands, eg, Mount Kilimanjaro and Mount Rungwe (see Figure 5).

Figure 5. Tanzania’s topography

Figure 5. Tanzania’s topography

Source: Wikipedia.[28]

High-altitude zones may suffer an increase in the occurrence of diseases and pests as a result of higher temperatures and increased rainfall. Maize yields are expected to be reduced by 33% around the country. In the meantime, areas getting less rainfall than normal (in the plateau zone) will require a switch to drought-resistant crop varieties due to evapo-transpiration.

(5) Mediterranean: Tunisia[29]
Tunisia’s location at the junction of the West and East Mediterranean sea, and north of the Sahara, gives the country a mixture of Mediterranean, semi-arid and desert-arid climates. The main focus of the present case study selection is on the former, characterised by a hot and dry summer, and a relatively mild and rainy winter.

An accelerated sea-level rise poses the biggest threat to the economic development of the country, with potential adverse effects on any sector related to the sea or the coast. On the basis of the six climate scenarios from the IPCC, an elevation of the sea level from 38 to 55 cm will occur, thereby affecting the coastal natural and fitted infrastructure of the country’s 1,300 km-long coast.

(6) Middle Latitude Dry: Lesotho[30]
Lesotho is a small landlocked country that experiences harsh climatic conditions. With a resource-poor economy and high levels of environmental degradation, including soil erosion, the growing season for many crops is very limited. Climate scenarios predict a warmer temperature (Figure 6) and lower precipitation, with a drastic water stress and scarcity prospects.

Figure 6. Lesotho’s temperature change scenarios

Figure 6. Lesotho’s temperature change scenarios

Source: UNFCCC (2000a) Lesotho’s FNC.

These conditions will have a severe impact on households and livestock, given the rain-dependent crop yields and the country’s heavy dependence on food imports to satisfy local demand. Meanwhile, Lesotho’s freedom from climate-related diseases, such as those in the tropics (eg, malaria), is projected to shift given drier conditions, with an increased incidence of respiratory infections (eg, tuberculosis).

(7) Humid Subtropical: Mozambique[31]
Mozambique’s tropical climate is characterised by two main seasons: one hot and rainy (October-April) and the other cold and dry (May-September). Extreme events (floods, droughts and tropical cyclones) around the country and sea-level rises on its 2,515 km-long coast line (the third largest in Africa) pose serious threats to the country (eg, flooding of low coastal areas, aggravation of coastal erosion, soil erosion, reduction of agricultural production and a decrease of nutritional value of plants impacting livestock). In addition to the economic impact, longer lasting floods will increase the incidence of malaria, amongst other health issues (Figure D).

Figure 7. Mozambique’s malaria projections

Figure 7. Mozambique’s malaria projections

Source: UNFCCC (2003c) Mozambique’s INC.

(8) Island: Mauritius[32]
Small island states are highly vulnerable to climate change, particularly to sea-level rise. In addition to the natural catastrophic effects, the economic impact on sectors dependant on coastal and water resources is significant.

Mauritius is no exception to these impacts. The effects will be pronounced due to natural phenomena (ie, tropical cyclones and tidal waves) or human-induced (anthropogenic) activities (eg, infrastructure development, sand removal, hazardous construction and poorly designed jetties and harbour facilities).

According to the IPCC, an accelerated sea-level rise is expected to worsen these problems with sea level expected to rise between 15-95 cm (some scenarios in Mauritius project rises from 50 cm to 2m). Apart from the expected land loss, beaches will be eroded (with adverse impacts on the country’s tourism industry), coral reefs will become degraded and wetlands be lost.

(9) Mixed: South Africa[33]
South Africa represents a mixture of at least five climate zones (see Figure 1): (1) humid subtropical; (2) tropical dry; (3) middle latitude dry; (4) mountain; and (5) Mediterranean. Overall climate projections for the country in the next 50 years predict 1ºC-3ºC temperature increases from current levels, broad reductions of 5%-10% of current rainfall (though with regional variations depending on the zone) and a general extension of summer season characteristics.

The impact of the expected climatic conditions also varies depending on location. However, general predictions point to an increase in the occurrence of respiratory and skin-related illnesses (eg, strokes, dehydration, skin rashes and non-melanoma skin cancers). In addition, the extension of summer months is expected to result in the increase of malaria-prone areas and periods, particularly on the humid coastal regions of the Indian Ocean. Furthermore, the overall expected reduction in the amount or reliability of rainfall, coupled with an increase in evaporation from increasing warming, is expected to exacerbate South Africa’s water availability concerns. Water scarcity will directly impact on the country’s maize production.

Meanwhile, global climate change concerns, as well as responses to it, will have an incidence on South Africa’s mineral exports (eg, coal, diamonds and uranium). The implementation of mitigation measures in industrialised countries may be, on the one hand, positive (with the shift from fossil-fuel energy production from the North to the South), and negative (with a decrease of energy imports from these same countries). South Africa needs to carefully manage the expected increase of greenhouse gas emissions fuelling its growth (see Figure 8).

Figure 8. South Africa: GHG emissions

Figure 8. South Africa: GHG emissions

Source: UNFCCC (2000b) South Africa’s INC.


[1] The views expressed in this paper are those of the author and do not necessarily represent those of the United Nations, including UNDP, or their Member States.

[2] Sixteenth session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) and Sixth session of the COP serving as the Meeting of the Parties (MOP) to the Kyoto Protocol.

[3] MDG Report 2010: Assessing Progress in Africa toward the MDGs. UNECA, AU, AfDB and UNDP.

[4] See IPCC (2007), Boko et al.(2007) and UNCCD et al. (2009).

[5] See Lázaro (2010)

[6] Eriksen et al. (2008).

[7] The Bali Action Plan (BAP) or Bali Roadmap emerged from the Thirteenth session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC)/Third session of the COP serving as the Meeting of the Parties (MOP) to the Kyoto Protocol held in December 2007 in Bali (Indonesia).

[8] United Nations Development Programme (UNDP, www.undp.org).

[9] Countries included in the case study selection of the preceding section are shown in bold type.

[10] GEF’s catalytic co-financing approach means that its funding portion is normally around 10% of total project funding (not a fixed share, as it may vary depending on the size of the project and its global importance), with the majority of financing coming from donors, private sector, government, project partners, development banks or other relevant stakeholders. The main thrust behind GEF’s approach is financing the portion of the projects which will support interventions geared towards accruing incremental net benefits (for instance, from a business-as-usual or baseline scenario to an adaptation/mitigation scenario).

[11] MMA (2010).

[12] Sixteenth session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) and Sixth session of the COP serving as the Meeting of the Parties (MOP) to the Kyoto Protocol.

[13] The Africa Group is only matched by the Asian Group, with the same number of member states.

[14] Seventeenth session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC)/Seventh session of the COP serving as the Meeting of the Parties (MOP) to the Kyoto Protocol.

[15] See Lázaro (2010) for a summary of commitments and agreed individual and joint reductions by various countries resulting from the Accord.

[16] For example, the ALBA group (Venezuela, Bolivia, Ecuador, Nicaragua and Antigua & Barbuda).

[17] IISD (2010), ‘Summary of the Tianjin Climate Change Talks: 4-9 October 2010’, Earth Negotiations Bulletin.

[18] This includes: (a) a Technology Executive Committee; (b) a Climate Technology Centre; and (c) a global Technology Network.

[19] Principle 7 of the Rio Declaration emerging from the 1992 UNCED ‘Earth Summit’.

[20] IISD (2010): South Africa, for the Africa Group, offered a proposal to insert a collective mid-term goal and then agree on a process to negotiate pledges reducing emissions by at least 40% by 2020.

[21] UNFCCC (2009) Democratic Republic of Congo’s Second National Communication to the UNFCCC (DRC’s SNC).

[22] These climate projections are based on the MAGICC-SCENGEN global circulation models, proposed by default by the IPCC for this part of the world.

[23] UNFCCC (2003a) Nigeria’s First National Communication under the UNFCCC (Nigeria’s INC).

[24] UNFCCC (2002) Namibia’s Initial National Communication to the UNFCCC (Namibia’s INC).

[25] Namibia, with a total land area of 824,268 km2 (the size of France and Germany put together) is the second least-densely populated country in the world after Mongolia with an approximate population of 2 million inhabitants.

[26] Namibia’s electricity demand roughly doubles its in-country generating capacity –Ruacana (249 MW capacity), Van Eck (120 MW) and Paratus (46 MW)–, thus also relying on imports (mainly from South Africa).

[27] UNFCCC (2003b) United Republic of Tanzania’s Initial National Communication to the UNFCCC.

[29] UNFCCC (2001) Tunisia’s Initial National Communication to the UNFCCC.

[30] UNFCCC (2000a) Lesotho’s First National Communication to the UNFCCC (Lesotho’s FNC).

[31] UNFCCC (2003c) Mozambique’s Initial National Communication to the UNFCCC (Mozambique’s INC).

[32] UNFCCC (1999) Mauritius Initial National Communication to UNFCCC.

[33] UNFCCC (2000b) South Africa’s Initial National Communication to the UNFCCC (South Africa’s INC).

]]>
<![CDATA[ The ‘Resource Curse’: Theory and Evidence (ARI) ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari172-2010 2010-12-15T02:58:30Z

Mineral and fuel abundance does not determine either the political or economic trajectory of less developed countries.

]]>
Theme: Mineral and fuel abundance does not determine either the political or economic trajectory of less developed countries.

Summary: This paper undertakes a critical survey of the ‘resource curse’ –the idea that mineral and fuel abundance generates poor economic performance in less developed countries–. It examines the proposition that mineral and fuel abundance generates growth-restricting forms of state intervention and extraordinarily large degrees of rent-seeking and corruption, which are generally argued to be negative in terms of the economic growth outcomes they generate. The analysis surveys the Dutch Disease, rentier state, and rent-seeking versions of the resource curse and finds they have significant shortcomings in terms of both theory and evidence. It also discusses particular growth strategies that have been effective in producing long-run economic growth in mineral- and fuel-abundant developing countries.

Analysis

Introduction
One of the more influential ideas in recent development discourse and policy is the so-called ‘resource curse’. The big idea behind the ‘resource curse’ is that mineral and fuel abundance in less developed countries (LDCs) tends to generate negative developmental outcomes, including poor economic performance, growth collapses, high levels of corruption, ineffective governance and greater political violence. Natural resources, for most poor countries, are deemed to be more of a ‘curse’ than a ‘blessing’.

In terms of intellectual history, this negative view of mineral and fuel abundance goes against much of the earlier thinking on the subject. Many analysts suggested a historically positive association of natural resource abundance and industrial growth in many now advanced countries. For instance, the ‘staple thesis’ demonstrated that growth in backward areas commonly began through the initial stimuli that primary product exports brought in terms of attracting capital and labour and inducing a more diversified production structure (Innis 1930; Watkins 1963). Also, natural resource rents, to the extent they are appropriated by state governments, can relax common resource constraints to growth –namely the savings, foreign exchange and fiscal constraints (Gelb & Associates, 1988, p. 17-18)–.[1]

This paper provides a critical survey of the theory and evidence with respect to some of the main versions of the ‘resource curse’. It focuses on the extent to which mineral abundance affects economic performance.[2] It suggests some of the reasons why much of the evidence is inconclusive.[3] It also provides some policy implications that emerge from the discussion.

Variants of the Resource Curse Argument
(1) The Dutch Disease Model: the economic concept of Dutch Disease refers to the potential negative effects natural-resource windfalls and accompanying appreciations of exchange rates can have for the rest of the economy. One of the potential dangers of oil booms, for example, is that exchange-rate appreciation renders the non-oil-tradeable sectors such as manufacturing less competitive and thus can generate de-industrialisation.

The logic of the simple Dutch Disease theories can be described as follows. In an economy in full employment equilibrium, a permanent increase in the inflow of external funds results in a change in relative prices in favour of non-traded goods (services and construction) and against non-oil traded goods (manufacturing and agriculture), leading to the crowding out of non-oil tradeables by non-tradeables. That is, an appreciation of the exchange rate leads to a decline in the competitiveness, and hence production and employment, of the traded-goods sector.

The mechanism through which this change takes place follows directly from the model’s assumptions of full employment equilibrium and static technology. With these assumptions, the external funds (from an oil boom) can be translated into real domestic expenditure only if the flow of imports increases. However, since non-traded goods cannot be imported easily (or only at prohibitive costs), a relative contraction of the traded-goods sector is inevitable, otherwise the resources needed to enhance the growth of the non-traded sector would not be available. Thus, the model predicts that de-industrialisation is the inevitable structural change that occurs as a result of oil booms.[4] A second mechanism through which manufacturing can become less competitive in this model is through the increase in manufacturing wage rates that result from increases in aggregate demand for labour that the oil booms can generate. In the short-run, when productivity levels are fixed, unit labour costs in manufacturing rise, which can, in the absence of compensating policies, lead to a loss in manufacturing competitiveness.

The association of ‘de-industrialisation’ as a ‘disease’ stems from the unique growth-enhancing characteristics the manufacturing sector can potentially embody (Kaldor, 1967). The potential dynamism that manufacturing can generate, however, opens up an important role for policy in affecting the growth outcomes of oil booms. In the simple Dutch Disease model, technology is assumed to be given (ie, it is a ‘blueprint’), which means that additional foreign exchange is not of particular relevance from the point of view of economic growth. However, when a late-developing country faces a technological gap, additional export revenues, if channelled by an appropriate industrial policy, can play an important part since the additional foreign exchange can accelerate the process of importing advanced technology and the machines that embody them. Additionally, if the industrial strategy promotes ‘learning’, additional revenues can theoretically accelerate the growth process. For instance, during the boom, the government could promote industry by channelling resources to toward that sector through protection, subsidies, financial incentives and investments in infrastructure. This can serve to modernise the manufacturing capital stock which in turn can improve productivity.

As a result, structural change against non-oil tradeables, such as manufacturing, is not inevitable; rather, the outcomes resource booms depend on state policy responses. Neary & van Wijnbergen note: ‘In so far as one general conclusion can be drawn [from our collection of empirical studies] it is that a country’s economic performance following a resource boom depends to a considerable extent on the policies followed by its government… [E]ven small economies have considerable influence over their own economic performance’.[5] Evidence from Venezuela, for instance, suggests that policy responses (such as industrial policy and exchange-rate management) determine how oil booms affect the growth prospects of the economy.[6] What the Dutch Disease literature does not address is why growth-enhancing policies are chosen in some contexts and not others and, more importantly, why some leaders do not correct ineffective policies.

(2) Models of the Rentier State: rentier-state models move beyond economic models of the resource curse, such as Dutch Disease models, by attempting to endogenise policy-making and institutional formation. In particular, they attempt to explain why state decision-makers in natural resource-rich economies create and maintain growth-restricting policies.[7] These models are part of a growing trend of reviving the ‘staples thesis’ –the notion that natural factors endowments or technology shape the relations of production, or institutional evolution of a society–.[8]

In the rentier-state model, oil and mineral abundance is assumed to generate growth-restricting state intervention and extraordinarily large degrees of rent-seeking, where these rent-seeking contests are assumed to be uniformly negative in terms of the developmental outcomes they generate. There are several important propositions that are developed within this framework. First, the existence of a higher level of mineral rents increases rent-seeking and corruption relative to economies with lower mineral abundance. Secondly, increases in rent-seeking and corruption generate lower growth. This is in part due to the fact that with corrupt transactions, the need to keep bribes secret reduces the security of property rights, which lowers investment in long-gestating projects. Third, oil rents provide a sufficient fiscal base of the state and thus reduce the necessity of the state to tax citizens. This in turn reduces political bargaining between state and interest groups, which makes governance more arbitrary, paternalistic and even predatory. Fourth, the absence of incentives to tax internally weakens the administrative reach of the state, which results in lower levels of state authority, capacity and legitimacy to intervene in the economy.

Supporters of the rentier-state model suggest that reducing a state’s ‘unearned income’ from mineral rents will enhance the prospects of peace. Policy recommendations include advocating greater transparency in the payments made by multinationals in extractive industries to host governments in poor countries (Center for Global Development, 2004, p. 56-7), or avoiding extractive industries altogether and concentrating efforts in order to diversify mineral-dominant economies towards agriculture and manufacturing (Ross, 2001).

Modern theories of rent-seeking and corruption form a substantial part of the intellectual foundation of the rentier-state model. The basic idea behind these models is that there are substantial costs to the workings of an economy when the allocation of resources is channelled primarily through state leaders, who have discretionary authority, rather than through bargains between private economic agents.[9] In oil economies, because most revenues originate in the central government, the level of state discretion in allocating resources and regulating the economy tend to be higher than in most non-oil economies. In the rentier-state model, the predominant view is that oil economies are subject to a higher level of rent-seeking and corruption in comparison with non-mineral abundant economies.

Critiques of Rent-seeking Theory
The extent to which mineral economies generate both higher rent-seeking costs and less developmental rent-seeking outcomes is ultimately an empirical issue. There are several pieces of evidence to suggest that large inflows of resources (whether through oil or aid) lead to a worsening in economic performance. Let us consider these issues in more detail.

First, the rentier-state theory cannot explain the long-run variation and change in growth of mineral abundant economies (eg, Botswana, Malaysia, Venezuela and Nigeria). Secondly, the variation and change in economic growth in non-mineral rich economies is not well explained (eg, India, China, Tanzania and Malawi) either. Third, recent growth accelerations in aid-dependent economies is not well explained (eg, Mozambique, Uganda, Tanzania and Ghana). The fact that aid-dependent economies may be pursuing more liberal economic policies demonstrates that policy matters more than levels of rents in the economy, although there is considerable debate as to whether liberal economic policies are best for less-developed countries.

In terms of the relationship between corruption and growth, there is also little support for the rent-seeking variant of the ‘resource curse’. Table 1 suggests that mineral-abundance economies do not appear to be more corrupt than non-mineral abundant economies. Moreover, the evidence in the Table suggests that corruption rates are indeterminate with respect to long-run growth.

Table 1. Growth and Corruption in Mineral-Abundant and Non-Mineral Abundant Developing Countries, 1965-2000

1965-1990

1. Mineral-Abundant

2. Non-Mineral-Abundant

 

Developing Countries (2)

Developing Countries (2)

 

(13 observations)

(19 observations)

Median GDP Growth

4.3

5.6

Rate 1965-90

(2.5 - 12.4)

(1.5 - 9.5)

(Range)

 

 

 

 

 

Median Corruption

3.9

3.6

Index 1980-85 (1)

(0.2 - 6.5)

(0.7 - 8.8)

(Range)

 

 

 

 

 

1990-2000

1. Mineral-Abundant

2. Non-Mineral-Abundant

 

Developing Countries

Developing Countries

 

(13 observations)

(19 observations)

Median GDP Growth

4.0

3.7

Rate 1990-2000

(1.6 - 7.0)

(-0.6 - 10.3)

(Range)

 

 

 

 

 

Median Corruption

3.3

3.2

Index 1996

(0.7 - 6.8)

(1.0 - 5.0)

(Range)

 

 

(1) A corruption index of 10 indicates minimum corruption, an index of 0 indicates maximum corruption.
(2) Mineral-abundant is defined as those economies where mineral/fuel exports in total exports in 1980 is equal or greater to 35%; non-mineral abundant is defined as those economies where mineral/fuel exports in total exports is less than 35% in 1980.
Sources: World Bank, World Development Indicators; Subjective Corruption indices from Transparency International.

In the period 1965-90 the median annual average growth of the non-mineral abundant developing economies (5.4%) did outpace the mineral-abundant economies (4.3%). However, in the same period, the median corruption rate of the non-mineral dominant economies was slightly higher than the mineral-dominant economies. In the period 1990-2000 the mineral-dominant economies grew slightly faster and were slightly less corrupt than the non-mineral dominant economies. None of this evidence provides much support for the rentier-state and rent-seeking models.

Critiques of Rentier-State Theory
There are several assumptions of the rentier-state argument as developed by Terry Karl that drive the results. First, rulers are assumed to ‘own’ the natural resources. That is, they are assigned the ‘property rights’ over resources. How rulers appropriate and maintain power is not analysed. By assigning ‘rights’ to leaders, the whole problematic of how to manage ‘common pool resources’ is neglected, when the real problem of common pool resources is, in fact, analysing the processes through which rights are assigned, enforced, maintained and changed (Ostrom, 1990). In other words, it is assumed that there are no collective actors within the society that can impose some domestic conditionality on how those who occupy the state exercise their power.

Secondly, leaders are assumed to have predatory as opposed to developmental aims. The neglect of the political processes through which a leader appropriates power limits our understanding of the motivations of state leaders. The state is not a thing, such as ‘a predator’ or ‘rent-seeking maximiser’, but a set of social relations. Why a particular coalition in power will not use oil revenues to diversify production is not addressed.

Third, by choosing oil booms as the point in which state formation takes place in late-developing oil economies, Karl’s model is subject to selection bias. By definition, most countries that do not have a diversified agricultural and manufacturing base become mineral dependent. In historical terms, almost all countries began as mineral-dominant economies. For instance, the US, Canada, Norway, Sweden, the Netherlands, Australia and Malaysia were, in earlier stages of development, more mineral-dominant, less-diversified economies. Not only that, natural resources generally played a growth-enhancing role in stimulating capital accumulation and growth throughout the now advanced countries in the period 1870-1914 (Findlay & Lundhal, 1999).[10]

Finally, rentier-state theorists do not examine the possibility that mineral abundance can be central to the development of manufacturing industry in particular. For instance, Wright & Czelusta (2007) examine how and why technological development and collective learning positively affected the development of natural resources in the US economy. They demonstrate  how large-scale investments in exploration, transportation, geological knowledge and the technologies of mineral extraction, refining and utilisation in natural resources contributed to long-run economic growth and industrialisation in the US. Other authors explore how the development of natural resources led to increasingly high-tech industrial production in Sweden and Finland during the 19th and 20th centuries.[11] The key policy question to ask is why natural-resource revenues are used in ways that sustain economic growth and diversification in some countries and not in others. Lack of economic diversification and poor economic growth are why economies are mineral dependent. If that is the case, then it makes sense to ask why, for example, political conflicts or past economic policies prevented growth in some mineral dependent economies and not in others.

Addressing the Challenges of Growth in Mineral-Abundant Countries: The Role of Dual-Track Development Strategies
Since the role of the government is generally more pronounced in oil and mineral-rich less developed countries, there is likely to be significant amounts of pressure for patronage among contending groups and classes. Much of the rent-seeking indeed leads to the creation of ineffective public spending and subsidisation. However, the distribution of rents and privileges, especially to elites, is often central to the maintenance of political stability (North et al., 2007). In such cases, a trade-off between economic growth and political stability can emerge since those with access to state resources may be politically powerful but not necessarily effective, risk-taking and dynamic producers.

In this context, the introduction of a dual-track growth strategy may be promising. The basic idea of this strategy is to promote an emerging dynamic sector run (Track 1) where competition and risk-taking are promoted while maintaining the bulk of the protected and/or distorted sectors, often in protected agriculture and industrial sectors with aim of reducing social tensions and maintaining political stability (Track 2). Examples of Track 1 strategies are export-processing zones and industrial parks. Such a dual-track strategy postpones confrontation with established rent-seekers while the dynamic sector drives competitive diversification of the economy and also builds a pro-reform political constituency. The main challenge of this strategy is to insulate/ring-fence the Track 1 sector from political and clientelist predation and capture. In general, this strategy can be seen as a transitional path to more growth-enhancing institutional reforms.

There are a range of countries that have attempted dual-track-strategies. These include Malaysia, Indonesia, China and Mauritius.[12] What is noteworthy in all these cases is the existence of strong national political parties and organisations underpinning executive authority. Strong, disciplined national parties not only enable the state to centralise patronage and make credible bargains and side-payments to contending groups, they also provide a focal point around which collective action and lobbying can occur in a relatively predictable manner. They also are central to providing the institutional mechanisms for distributing patronage to regional elites and to important political constituencies in ways that either prevent challenges to authority and/or maintain cohesion of the ruling coalition. Moreover, because national parties need to build cross-ethnic and cross-regional alliances, which reduces the possibilities that significant politically-destabilising horizontal inequalities will develop. Thus, one important threshold for this strategy to work in mineral-abundant economies would appear be the existence and/or construction of viable national political parties.

Conclusion: The proposition that oil abundance induces extraordinary corruption, rent-seeking and centralised interventionism and that these processes are necessarily productivity- and growth-restricting is not supported by comparative or historical evidence. Similar levels of state centralisation and corruption coincided with cycles of growth and stagnation in mineral and fuel-dependent economies. Explaining governance and state capacity in such economies needs to be consistent with this basic evidence. The extent to which mineral and fuel abundance generate developmental outcomes depends largely on the nature of the state and politics as well as the structure of ownership in the export sector, all of which are neglected in much of the research-curse literature. Much more research is needed to examine why some economies are able to effectively use mineral and fuel rents in productive ways. A further exploration of which threshold effects are decisive in affecting the development path of resource-rich developing countries may provide some useful policy insights.

Jonathan Di John
School of Oriental and African Studies (SOAS), University of London

Bibliographical References

Auty, R. (2007.), ‘Patterns of Rent-extraction and Deployment in Developing Countries: Implications for Governance, Economic Policy and Performance’, in G. Mavrotas & A. Shorrocks (Eds.), Advancing Development: Core Themes in Global Economics, Palgrave, Basingstoke.

Blomström, M., & A. Kokko (2007), ‘From Natural Resources to High-Tech Production: The Evolution of Industrial Competitiveness in Sweden and Finland’, in D. Lederman & W. Maloney (Eds.), Natural Resources: Neither Curse nor Destiny, The World Bank; Palo Alto: Stanford University Press, Washington DC.

Brunnschweiler, C. (2008), ‘Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth’, World Development, nr 36 (3).

Center for Global Development (2004), CGD Report 2004. On the Brink: Weak States and US National Security, CGD, Washington DC.

Bruton, H. (1992), The Political Economy of Poverty, Equity and Growth: Sri Lanka and Malaysia, Oxford University Press, New York.

Di John, J. (2007), ‘Oil Abundance and Violent Political Conflict: A Critical Assessment’, Journal of Development Studies, nr 43 (6), p. 961-986.

Di John, J. (2009), From Windfall to Curse? Oil and Industrialization in Venezuela, 1920 to the Present, Penn State University Press, University Park, PA.

Engerman, S., & K. Sokoloff (1997), ‘Factor Endowments, Institutions and Differential Paths to Growth among New World Economies: A View from Economic Historians in the United States’, in Stephen Haber (Ed.), How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico, 1800-1914, Stanford University Press, Stanford.

Findlay, R., & M. Lundhal (1999), ‘Resource-Led Growth: A Long-Term Perspective’, WIDER Working Paper 162, United Nations University/World Institute of Development Economics Research, Helsinki.

Findlay, R., & S. Wellisz (1993), The Political Economy of Poverty, Equity and Growth: Five Small Open Economies, Oxford University Press.

Flatters, F., & G. Jenkins (1986), Trade Policy in Indonesia, Harvard Institute for International Development, Cambridge, MA.

Gelb, A., & Associates (1988), Oil Windfalls: Blessing or Curse?, Oxford University Press, Oxford.

Innis, H. (1930), The Fur Trade in Canada, Yale University Press, New Haven.

Kaldor, N. (1967), Strategic Factors in Economic Development, New York State School of Industrial and Labor Relations, Cornell University, Ithaca, NY.

Karl, T. (1997), The Paradox of Plenty: Oil Booms and Petro States, University of California Press, Berkeley.

Khan, M., & K.S. Jomo (Eds.) (2000), Rents, Rent-Seeking and Economic Development, Cambridge University Press, Cambridge.

Lederman, D., & W. Maloney (2007), ‘Trade Structure and Growth’, in D. Lederman & W. Maloney (Eds.), Natural Resources: Neither Curse nor Destiny, The World Bank & Stanford University Press, Washington DC & Palo Alto.

Mahdavy, H. (1970), ’The Patterns and Problems of Economic Development in Rentier States’, in M. Cook (Ed.), Studies in the Economic History of the Middle East, Oxford University Press, London.

Neary, P., & S. van Wijnbergen (1986), Natural Resources and the Macro Economy, MIT Press, Cambridge, MA.

North, D., J. Wallis, S. Webb & B. Weingast (2007), ‘Limited Access Orders in the Developing World: A New Approach to the Problems of Development’, World Bank Policy Research Working Paper nr 4359, The World Bank, Washington DC.

Ostrom, E. (1990), Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press.
Qian, Y. (2003), ‘How Reform Worked in China’, in D. Rodrik (Ed.), In Search of Prosperity: Analytic Narratives of Economic Growth, Princeton University, Princeton, NJ.

Ross, M. (2004), ‘What Do We Know About Natural Resources and Civil War?’, Journal of Peace Research, nr 41 (3), p. 337-56.

Ross, M. (2001), ‘Extractive Sectors and the Poor’, An Oxfam America Report, Oxfam America Report, Washington DC.
Sachs, J., & A. Warner (1995), ‘Natural Resource Abundance and Economic Growth’, NBER Working Paper nr 5398, National Bureau of Economic Research, Cambridge, MA.

Watkins, M. (1963), ‘A Staple Theory of Growth’, Canadian Journal of Economics and Political Science, vol. 29, nr 2, p. 141-158.
Wright, G., & J. Czelusta (2007), ‘Resource-Based Growth: Past and Present’, in Daniel Lederman & William F. Maloney (Eds.), Natural Resources: Neither Curse nor Destiny, The World Bank & Stanford University Press, Washington DC & Palo Alto.


[1] Findlay & Lundahl (1999) find a generally growth-enhancing role of natural resource-rich countries in the period 1870-1914.

[2] The issue of whether mineral abundance generates greater political violence has been treated elsewhere (see Ross, 2004; Di John, 2007).

[3] Sachs & Warner (1995) find, in the period 1971-89, that mineral exporters, on average, grew more slowly than the average growth of non-mineral exporters. However, Lederman & Maloney (2007), using the Sachs & Warner data, find that there is not robust evidence to suggest that resource abundance negatively affects growth.

[4] Dutch Disease models are summarised in Neary & van Wijnbergen (1986).

[5] Neary & van Wijnbergen (1986, p. 10-11).

[6] Di John (2009, p. 35-76).

[7] For example, see Mahdavy (1970), Karl (1997) and Auty (2007).

[8] For example, see Engerman & Sokoloff (1997).

[9] For a critical survey of rent-seeking theory, see Khan & Jomo (2000).

[10] The problem of selection bias renders many of the econometric studies, suggesting a positive correlation between resource abundance and poor economic growth, spurious (Brunnschweiler, 2008).

[11] Blomström & Kokko (2007).

[12] On Mauritius, see Findlay & Wellisz (1993). On Malaysia, see Bruton (1992). On China, see Qian (2003). On Indonesia, see Flatters & Jenkins (1986).

]]>
<![CDATA[ Links between Resource Extraction, Governance and Development: African Experience (ARI) ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari171-2010 2010-12-14T01:49:48Z

This ARI addresses the analytical and empirical links between resource extraction, governance and development, with a focus on the resource-curse thesis. The rent curse is rooted in policy failure, which the theory of rent cycling attributes to the impact of rent on elite incentives and also on development trajectory. The paper provides some examples of conditions that have facilitated this process in the context of Sub-Saharan Africa.

]]>
Theme: This ARI addresses the analytical and empirical links between resource extraction, governance and development, with a focus on the resource-curse thesis. The rent curse is rooted in policy failure, which the theory of rent cycling attributes to the impact of rent on elite incentives and also on development trajectory. The paper provides some examples of conditions that have facilitated this process in the context of Sub-Saharan Africa.

Summary: The so-called resource curse is part of a broader rent curse that can be triggered by regulatory rent and foreign aid (geopolitical rent) as well as by natural resource rent. Although resource-driven growth challenges macro management due in part to commodity price volatility, the policies required to limit adverse impacts such as the Dutch disease effects are well known. Consequently, the rent curse is rooted in policy failure, which the theory of rent cycling attributes to the impact of rent on elite incentives and also the development trajectory. The theory argues that high rent incentivises the elite to deploy rent through patronage channels for immediate personal enrichment, but this represses markets and distorts the economy, which lowers investment efficiency and triggers a growth collapse that is protracted because rent recipients resist economic reform. The risk of the economy falling into this ‘staple trap’ development trajectory increases in the presence of point source resources (notably minerals), statist policies, ethnic tension and democracy that is youthful. This implies that initial conditions were unpropitious for most African countries (especially the mineral economies) at independence because they were typically ethnically-mixed, resource-rich, new democracies with a predilection for fashionable state control. Most African economies did experience protracted growth collapses from the 1970s but some, like the Ivory Coast and Kenya collapsed later than most. Just two economies, Botswana and Mauritius, evaded the curse. Botswana’s conditions appear unique but Mauritius’s pursuit of a dual-track growth strategy offers a useful model for other African governments.

Analysis

Introduction
This paper draws upon the literature to analyse, first, why most resource-rich African economies have under-performed since independence and, secondly, how to improve their development outcomes. Early explanations for the resource curse stressed the Dutch disease effects arising from the over-rapid domestic absorption of commodity rents, which leaves economies vulnerable to negative trade shocks because it shrinks the share of non-mining tradeables in GDP (Sachs & Warner, 1995). However, the policies required to manage commodity-rent soundly are well known, and they centre on establishing funds to sterilise the rent in order to smooth the revenue flow so that the rate of absorption matches domestic absorptive capacity (Gelb et al., 1988). Consequently, the explanation for the resource curse lies in policy failure and its causes.

This paper draws upon the emerging theory of rent cycling, which synthesises the resource-curse literature, to argue that high rent can adversely impact both the incentives of the elite and the development trajectory. First, high rent incentivises the elite to cycle rent through patronage channels for immediate personal gain rather than through markets to promote long-term economic growth. Secondly, the resulting misallocation of resources lowers investment efficiency and triggers a growth collapse. Growth collapses are protracted because once rent recipients are established they resist economic reform because it shrinks their scope for rent extraction. This implies that for it to be successful, economic reform requires an explicit political component to align the interests of the elite with those of the majority in providing public goods and efficiency incentives to make the economy grow through the long term. This paper analyses the development since independence of Kenya, the Ivory Coast, Botswana and Mauritius in search of a blueprint for reform.

The structure of the paper is as follows: it first explains African under-performance with reference to rent cycling theory, then it analyses the four case-study economies in order to identify policies to limit the adverse effects of high rent and, finally, it summarises the conclusions.

Rent Cycling Theory and Growth Collapses
The emerging theory of rent cycling suggests that the scale of rent relative to GDP impacts both the incentives of the elite and the development trajectory (Auty, 2007). Critically, low rent incentivises elites to grow the economy because that increases the level of taxation, which in the absence of sizeable rents is the principal source of discretionary expenditure, and one that the elite frequently benefit from disproportionately. In contrast, high rent deflects elite incentives towards cycling rent in order to boost elite patronage from which the elite derive more immediate (and assured) personal rewards than from the long haul of wealth creation. As a source of revenue that can be separated from the activity that generates it, rent is up for grabs and therefore triggers political contests for its capture.

The low-rent economy pursues a development trajectory of competitive industrialisation that provides a useful counterfactual with which to understand the staple track trajectory of the high-rent economy that has been typical of sub-Saharan Africa. Low rent aligns the incentives of the elite with those of the majority in growing the economy by providing public goods and efficiency incentives for the reasons noted earlier. This strategy relies on markets rather than patronage channels so that the economy adheres to its comparative advantage, which in low-rent economies initially lies in early competitive labour-intensive manufactured exports, a development trajectory that launches three mutually reinforcing economic, social and political virtuous circles. The economic circle sees export production rapidly absorb surplus rural labour, which raises wages[1] and automatically drives diversification into skill-intensive and capital-intensive sectors. The social circle reflects the early urbanisation caused by early industrialisation that accelerates the demographic cycle to reduce the dependent/worker ratio and thereby raise the share of investment in GDP, which accelerates per capita GDP growth (Bloom & Williamson, 1998). Finally, the associated rapid structural change drives a political circle as social groups proliferate, which constrains policy capture by any one group. It also strengthens three sanctions against anti-social governance as: (1) firms protect their investment by lobbying for property rights and the rule of law (Li et al., 2001); (2) unsubsidised urbanisation strengthens civic voice (Isham et al., 2005); and (3) the government relies for revenue on taxing income, profits and expenditure in the absence of commodity rent, which spurs demand for accountable public finances (Ross, 2001). Overall, incomes rise rapidly and equitably, and democratisation occurs incrementally.

In contrast, high rent incentivises the elite to pursue immediate self-enrichment by channelling rent through patronage networks at the expense of markets, which distorts the economy. Commodity exports drive the economy and over-rapid domestic rent absorption sustains an exchange rate that impedes competitive industrialisation so surplus labour persists and governments deploy rent to create employment that markets would not support in protected industry and an over-expanded bureaucracy. The accelerating demand of the subsidised sector for transfers eventually outstrips the rent (due to structural change or falling commodity prices) and absorbs returns to capital as well as rent so the economy becomes locked into a staple trap of reliance on a weakening primary sector. Declining investment efficiency slows the GDP growth rate, triggering a growth collapse that is protracted because rent recipients resist reform. The growth collapse arrests the demographic transition and exacerbates unemployment, which boosts income inequality and social tension. Finally, the three main sanctions against anti-social governance languish as: (1) businesses find it more profitable to lobby for political favours than for the rule of law; (2) urban dwellers are heavily dependent on government expenditure; and (3) government reliance on rent for revenue dampens pressure for fiscal accountability.

Rent cycling theory recognises that the adverse impacts of high rent are exacerbated (and therefore more intractable) in the presence of: statist policies, high ethnicity, concentrated commodity linkages and young parliamentary democracies. This implies that conditions for effective rent deployment were unpropitious in most African economies at independence since most were statist-leaning, ethnically-mixed resource-rich (and sometimes mineral-dependent) democracies. First, statist ideology amplifies the adverse effects of high rent by boosting the scope for governments to override markets and extract rent (Van der Walle, 1999). Secondly, ethnic tension encourages the use of rent to win political support so that ethnicity is negatively associated with the rate of investment, the rate of economic growth and the quality of government (Montalvo & Reynal-Querol, 2005, p. 294). Third, when domestic commodity linkages concentrate rent on governments and elites, as with mining especially, rent is deployed less effectively than when it is dispersed across many economic agents, as with peasant cash cropping (Baldwin, 1956; Bevan et al., 1999).

Finally, with respect to the political state, Collier & Hoeffler (2009) find that in the presence of high rent democracies underperform autocracies in terms of economic growth whereas the reverse is true in the presence of low rent. They suggest that high rent makes it politically more profitable for democracies to channel public revenue through patronage networks to secure the support of swing votes, rather than into public goods, which confer no electoral edge since they benefit supporters and opponents alike. In addition, Keefer (2007) identifies the age of a democracy as significant: young democracies cannot make credible pre-election promises to voters so they are less trusted than both autocracies and established democracies. Political parties in young democracies therefore under-provide non-targeted goods (like universal education, property rights or access to information), which benefit all while they over-provide targeted goods (like employment and public work projects) that clearly deliver favours to key voting blocs. They are also more corrupt than mature polities. None of the other explanations that Keefer evaluates (political institutions, ethnicity, voter information and civil conflict) cause under-provision of non-targeted public goods. Many, if not all five, of the conditions that are unpropitious for effective rent deployment characterised the sub-Saharan African economies at independence so it is unsurprising that most experienced growth collapses. The next section examines two initially successfully economies, Kenya and the Ivory Coast, and two that avoided sustained growth collapses in order to explain their relative success.

Policies to Improve Resource-Driven Outcomes
Almost all the economies of sub-Saharan African traced a staple trap trajectory and experienced growth collapses through the 1970s and early 1980s. Maladroit resource-rent deployment played a central role, but the resource curse is part of a broader rent curse that can be triggered by regulatory rent in resource-poor economies (as in the Sahel) and by foreign aid (geopolitical rent) in economies seeking to recover from growth collapses. One implication of this is that case studies may provide more reliable insights than multi-country regressions, which have failed to take account of non-resource rent. A second implication is that resource-constrained African economies such as those of the Sahel could experience growth collapses due to misallocation of regulatory rent and aid.

Kenya and the Ivory Coast initially averaged useful rates of per capita GDP growth until the late 1970s when they were destabilised by mismanaged commodity booms. The elite in both countries was initially drawn from wealthy peasant farmers and their post-independence governments espoused open trade policies, cautious macro policy and limited direct state involvement in production. In 1968, however, Kenya enacted legislation that encouraged elite investment in urban activity, which triggered a shift to an inward trade policy that eroded Kenya’s erstwhile impressive export manufacturing competitiveness (Sharpley & Lewis, 1990). A coffee boom conferred a rent windfall of 8% of GDP annually in 1975-79 on Kenya (Cuddington, 1989) and a cocoa boom of 16% of GDP annually in 1976-80 on the Ivory Coast (Ghanem, 1999). The governments of both countries absorbed the windfall revenue too rapidly: the Ivory Coast by expanding state industry to compensate for the absence of industrialists who were nationals and Kenya by stimulating public consumption. In doing so they created entitlements that proved difficult to trim when the booms ended and so they accumulated debt they could not service. Each experienced a growth collapse that destabilised the polity and proved protracted, with evidence from Kenya that an increase in foreign aid intended to ameliorate the growth collapse merely intensified corruption and reduced pressure for reform.

Botswana and Mauritius avoided growth collapses and their experience reinforces the early post-independence lessons from Kenya and the Ivory Coast regarding the benefits of pursuing cautious macro management and open trade policy to facilitate private-sector wealth creation. Botswana inherited from the UK at independence in 1966 a market economy and parliamentary democracy that was strengthened by a tradition of consensual politics. The elite initially relied on cattle exports, which disposed them towards open trade policies. However, somewhat uniquely, the associated elite bias towards caution was reinforced when the economy grew to rely on diamonds and little else. The diamond rent depended upon the survival of a controversial monopoly and the government reacted to the risk of an abrupt collapse in diamond prices as if it managed a low-rent economy. The government targeted long-term wealth creation, counting on prudent rent management to sustain its authority. It established funds in 1972 to stabilise the mineral rent (Maipose & Matsheka, 2008, p. 523), which increased four-fold from 1973-93 and offset falling aid to yield a net total rent flow of one-fifth to one-quarter of GDP. The government typically allocated two-fifths of the revenue to offshore investments and financial reserves reached 125% of GDP by 1998 (IMF, 1999).

Although mining revenue lifted public expenditure to two-thirds of GDP (Harvey & Jefferis, 1996) the Botswana government resisted fashionable policies to create unsustainable entitlements by protecting ‘infant’ activity, expanding state enterprises or subsidising prices. Instead it consciously converted diamond rent into human capital and economic infrastructure, eliminating the backlog from colonial neglect. The government also deployed rent to nurture the private sector by sub-contracting goods and service purchases and encouraging foreign investment. It stimulated the rural economy, which until the late-1990s employed the majority of Tswanans, by supporting not only cattle-rearing but also until the 1990s small-holder agriculture through a cautious policy of food self-sufficiency.

Diamond expansion drove rapid economic growth in 1970-90 with an efficient ICOR of 2.3. Sustained PCGDP growth raised all boats and, although income distribution was skewed, the gini coefficient remained stable at around 0.51 (Sarraf & Jiwanji, 2003, p. 15). High PCGDP growth helped the ruling party to retain a parliamentary majority whereas its largest opponent, a left-leaning urban party, typically held one-sixth of the seats. The ruling party offset the slow contraction of its bedrock rural constituency by accommodating social pressure rather than buying it off with opaque rent cycling.

But Botswana enjoyed unique advantages not only for its ethnic homogeneity, consensual tradition and suspicion of state enterprises, but also from quirks of its rent. Diamond rent not only engendered caution because it was precarious, but it also proved unusually stable, so Botswana’s institutional resilience remains untested. The absence of rent surges has avoided the sudden ignition of political pressure for government spending, while also evading the need for abrupt and draconian rent rationing as was required in Kenya and the Ivory Coast in the early-1980s. Moreover, Botswana’s economy has struggled when mine expansion has slowed because it remains mineral-driven.

Although Mauritius was already land-scarce by the 1960s, rent was still 7% or more of GDP annually and was derived from foreign aid and privileged market access for sugar and textiles. Mauritius’s rent deployment provides a policy blueprint for injecting the required political component into African economic reform. In the 1960s Mauritius was a mono-crop economy that depended on sugar plantations for 98% of exports, 35% of GNP (compared with 10% for other agriculture) and 35% of employment when its land frontier closed. Per capita cropland was a mere 0.13 hectares, similar to land-scarce north-east Asia and double that of Bangladesh at the time. A 1961 Commission of Enquiry recommended economic diversification through import substitution industry but the ‘infant’ industry failed to mature and merely expanded rent seeking: even in 1980 sugar rent subsidised rates of effective protection averaging 185% (Findlay & Wellisz, 1993). The protected industry also tended to be capital-intensive, which led the government to expand public sector employment to one-sixth of the workforce by 1967.

Nevertheless, amid the threat of ethnic conflict at independence in 1968 the elite brokered a coalition government that prioritised wealth creation and cycled a high fraction of the rent via markets. It did so by deploying rent as part of a dual-track strategy that expanded a dynamic market sector but weakened opposition to economic reform by shrinking the rent-seeking sector only slowly. In contrast to Kenya, foreign aid was steadily phased out after an initially modest flow. But Mauritius still drew rent from favoured access to markets: the Commonwealth Sugar Agreement conferred rent averaging 4.5% of GDP annually during 1977-2000 and the Mutli-Fibre Agreement yielded 0.5% of GDP in 1984, rising to 2.9% of GDP in 1996 as clothing exports grew (Subramanian & Rodrik, 2003, p. 223). But unlike its counterparts in most African countries, including Kenya and the Ivory Coast, Mauritius’s government responded to an unexpected windfall (in sugar revenue) equivalent to an extra 7.4% of GDP annually during 1972-75 (Greenaway & Lamusse, 1999, p. 214) by limiting windfall taxation to 5%-12% so that most of the 1970s’ sugar windfall flowed to private producers.

The planters responded prudently: gross saving jumped from 15.2% by 1970-72 to 34.2% of GDP during 1974-75 (Findlay & Wellisz, 1993) and although investment lagged, it increased by one-half to average 23% of GDP on a rising trend. The planters invested some windfall revenue in an export processing zone (EPZ) that the government established in 1970 as Track 1 of its dual-track strategy to promote a dynamic market sector of labour-intensive export manufacturing and tourism. Track 2 was the rent-supported state-dominated sector, where social spending increased during the sugar boom from 6% of GDP to 10% in order to undercut the political opposition. Social tension eased through the 1970s as the dual-track rent deployment drove per capita GDP at 6% annually. However, spending outstripped revenue in the late 1970s, forcing the government to turn to the IMF, which advised curbing social expenditure and dismantling all trade controls.

Thereafter, as part of its dual-track strategy the government still channelled one-third of its geopolitical rent (some 2.5%-3% of GDP annually) into a social safety-net, while private producers cycled much of the rest (5%-6.5% of GDP) into wealth-generating activity. As population growth fell to 1% EPZ expansion drove per capita GDP at 5.7% annually through the 1980s. Consistent with the competitive industrialisation model, manufactured exports increased from one-quarter of the total in 1980 to two-thirds in 1990, ending sugar’s dominance. EPZ employment trebled and unemployment fell from 21% to 4%, creating labour shortages by 1990. By the mid-1990s, Mauritius textile wages had reached four times those of China and Vietnam, prompting diversification into IT in the EPZ to sustain productivity growth (Chernoff & Warner, 2002). Services became the main driver of the economy in the 1990s, mainly by tourism and financial services.

Mauritius’s dual-track rent deployment successfully diversified its economy from an unsustainable resource-dependence into competitive industrialisation, despite initial conditions that also included acute ethnic tension and a young parliamentary democracy. Its achievements confirm the benefits of cautious macro management and cycling rent through markets and the private sector. The threat of a growth collapse initially motivated the Mauritius elite and its Tswanan counterpart to promote growth over rent seeking. Such a threat holds lessons for the elite of African economies struggling to re-establish growth: policies to sustain growth promise greater security for all, elite and majority alike.

Conclusion: The resource curse is part of a broader rent curse that can be triggered by foreign aid (geopolitical rent) and regulatory rent as well as by natural resource rent. Since the policies to avoid the problems of commodity-driven growth such as the Dutch disease effects are well established, the challenge created by rent is to neutralise the incentive it gives to the elite to circumvent markets and deploy rent through patronage channels for immediate and personal gain at the expense of sustained long-term economic growth. The literature shows that this incentive is especially strong in the presence of point source resources (notably mining), ethnic tension, statist policies and new democracies. This implies that initial conditions were unpropitious for African countries because most embarked on independence as ethnically-mixed resource-rich democracies with a predilection for state control.

Almost all African economies did experience protracted growth collapses, but a handful delayed the curse and two avoided it by espousing cautious macro policies and cycling much rent through competitive private firms. After promising starts, Kenya and the Ivory Coast slipped into unsustainable public expenditure in deploying their rent windfalls in the late 1970s but Botswana and Mauritius escaped the resource curse. Mauritius’s experience is especially instructive, whereas Botswana singularly benefited from the diamond rent’s manifest precariousness, which incentivised the elite to promote growth and in the event delivered a uniquely stable rent stream. Mauritius deployed its more modest rent through a dual-track strategy in which Track 1 grew a dynamic market economy by facilitating diversification of the private sector into first competitive manufacturing and then services. Track 2 maintained social programmes in the rent-dependent sector to undercut political opposition until the scale of the dynamic sector and its pro-growth political coalition reduced rent recipients to a minority.

Scope to pursue the dual-track strategy increased in sub-Saharan Africa when the growth collapses heightened dependence on the IFIs through the 1980s and 1990s. However, IFI influence has since weakened because incentives for elite rent seeking expanded due to the 2003-08 commodity boom and also increased Asian investment in African resources. Nevertheless, the consequences of previous growth collapses should prompt elites in Kenya, the Ivory Coast and elsewhere to reflect that they can prosper more securely by adapting the dual-track strategy of Mauritius (as well as Botswana, Chile, China, Indonesia and Malaysia) than by prioritising rent-seeking activity.

Richard M. Auty
Professor Emeritus of Economic Geography at Lancaster University

References

Auty, R.M. (2007), ‘Patterns of Rent-extraction and Deployment in Developing countries: Implications for Governance, Economic Policy and Performance’, in G. Mavrotas & A. Shorrocks (Eds.), Advancing Development: Core Themes in Global Economics, Palgrave, London, p. 555-77.

Auty, R.M. (2009), ‘Elites, Rent Cycling and Development: Adjustment to Land Scarcity in Mauritius, Kenya and Cote d’Ivoire’, paper presented at the UNU/WIDER Conference on Elites in Economic Development, Helsinki, 12-13/VI/2009.

Auty, R.M., & A.H. Gelb (1986), ‘Oil Windfalls in a Small Parliamentary Democracy: Their Impact on Trinidad and Tobago’, World Development, nr 14, p. 1161-1175.

Baldwin, R.E. (1956), ‘Patterns of Development in Newly Settled Regions’, Manchester School of Social and Economic Studies, nr 24, p. 161-179.

Bevan, D., P. Collier & J.W. Gunning (1987), ‘Consequences of a Commodity Boom in a Controlled Economy: Accumulation and Redistribution in Kenya’, World Bank Economic Review, nr 1, p. 489-513.

Bloom, D.E., & J.G. Williamson (1998), ‘Demographic Transitions and Economic Miracles in Emerging Asia’, The World Bank Economic Review, nr 12, p. 419-55.

Collier, P., & A. Hoeffler (2009), ‘Testing the Neo-con Agenda: Democracy in Resource-rich Societies’, European Economic Review, nr 53, p. 293-308.

Cuddington, J. (1989), ‘Commodity Price Booms in Developing Countries’, World Bank Research Observer, nr 4, p. 143-65.

Findlay, R., & S. Wellisz (1993), Five Small Open Economies: The Political Economy of Poverty, Equity and Growth, Oxford University Press, New York.

Gelb, A.H., & Associates (1988), Oil Windfalls: Blessing or Curse?, Oxford University Press, New York.

Ghanem, H. (1999), ‘The Ivorian Cocoa and Coffee Boom of 1976-70: The End of a Miracle?’, in P. Collier, J.W. Gunning & Associates, Trade Shocks in Developing Countries. Volume I Africa, Oxford University Press, Oxford, p. 142-162.

Greenaway, D., & R. Lamusse (1999), ‘Private and Public Sector Responses to the 1972-75 Sugar Boom in Mauritius’, in P. Collier, J.W. Gunning & Associates, Trade Shocks in Developing Countries. Volume I Africa, Oxford University Press, Oxford, p. 207-225.

Harvey, C., & K. Jefferis (1995), ‘Botswana’s Exchange Controls: Abolition or Liberalization?’, IDS Discussion Paper, nr 348, IDS, Brighton.

IMF (1999), IMF Staff Country Report 99/132: Botswana: Selected Issues, International Monetary Fund, Washington DC.

Isham, J., L. Pritchett, M. Woolcock & G. Busby (2005), ‘The Varieties of Resource Experience: How Natural Resource Export Structures Affect the Political Economy of Economic Growth’, World Bank Economic Review, nr 19 (1), p. 141-164.

Li, S., S. Li & W. Zhang (2000), ‘The Road to Capitalism: Competition and Institutional Change in China’, Journal of Comparative Economics, nr 28, p. 269-292.

Keefer, P. (2007). ‘Clientelism, Credibility and Policy Choices of Young Democracies’, American Journal of Political Science, nr 51(4), p. 804-821.

Maipose, G.S., & T.S. Matsheka (2008), ‘The Indigenous Developmental State and Growth in Botswana’, in B.J. Ndulu et al. (Eds.), The Political Economy of Economic Growth in Africa 1960-2000: Volume 2, Cambridge University Press, Cambridge, p. 511-46.

Montalvo, J.G., & M. Reynal-Querol (2005), ‘Ethnic Diversity and Economic Development, Journal of Development Economics, nr 76, p. 293-323.

Ross, M. (2001), ‘Does Oil Hinder Democracy?’, World Politics, nr 53/3, p. 325-61.

Sachs, J.D., A. Warner (1995), ‘Natural Resources and Economic Growth’, mimeo, HIID, Cambridge MA.

Sarraf, M., & M. Jiwanji (2003), ‘Beating the Resource Curse: The Case of Botswana’, Environment Department Papers, nr1, World Bank, Washington DC.

Sharpley, J., & S. Lewis (1990), ‘The Manufacturing Sector in the Mid-1980s’, in R.C. Riddell (Ed.), Manufacturing Africa, James Currey, London, p. 206-41.

Singh, R.J., M. Haacher & K. Lee (2009), ‘Determinants and Macroeconomic Impacts of Remittances in Sub-Saharan Africa’, IMF Working Paper, nr 09/216, IMF, Washington DC.

Subramanian, A., & D. Roy (2003), ‘Who Can Explain the Mauritian Miracle? Meade, Romer, Sachs or Rodrik?’, in D. Rodrik (Ed.), In Search of Prosperity: Analytic Narratives of Economic Growth, Princeton: Princeton University Press, p. 205-243.

Van de Walle, N. (2001), African Economies and the Politics of Permanent Crisis, 1979-1999, Cambridge University Press, Cambridge.


[1] It also constrains income inequality by putting a floor under the wages of the poor even as rapid skill diffusion caps the skill premium.
]]>
<![CDATA[ The Policy Challenge for Sub-Saharan Africa of Large-Scale Chinese FDI (ARI) ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari169-2010 2010-11-30T09:19:40Z

The existence of large state-owned Chinese firms and private investors engaged in investing primarily, but not exclusively, in resource and infrastructure sectors in SSA (Sub-Saharan Africa) is a major preoccupation in economic and political circles. In order to understand it, Chinese investment has to be differentiated into four different types, and its distinctive characteristic unpacked –ie, the bundling together of aid, trade and FDI (foreign direct investment)–. This has major policy implications for how SSA should relate to Chinese investors in order to maximise available opportunities.

]]>
Theme[1]: The existence of large state-owned Chinese firms and private investors engaged in investing primarily, but not exclusively, in resource and infrastructure sectors in SSA (Sub-Saharan Africa) is a major preoccupation in economic and political circles. In order to understand it, Chinese investment has to be differentiated into four different types, and its distinctive characteristic unpacked –ie, the bundling together of aid, trade and FDI (foreign direct investment)–. This has major policy implications for how SSA should relate to Chinese investors in order to maximise available opportunities.

Summary: There is widespread economic and political interest in the impact of Chinese investment in Sub-Saharan Africa (SSA). This paper distinguishes between four different types of Chinese foreign direct investment (FDI), primarily focusing on SSA’s engagement with large state-owned Chinese firms investing in SSA’s resource and infrastructure sectors. Although there is a paucity of published research, it also provides evidence on private Chinese FDI in wholesale/retail, manufacturing, and services. The available evidence drawn from a variety of sources –macro, micro, firm surveys and country reports– on the extent of different types of Chinese investment is discussed. The distinctive character of large-scale state-owned Chinese investors is summed up in the bundling together of aid, trade and FDI, in contrast to traditional western trends which seek to unbundle these factors. The paper concludes that SSA countries should maximise the opportunities opened to them by their resource-base by adopting a similarly integrated and focused response to Chinese (and other large) investors who seek to draw on the continent’s natural resources.

Analysis

Why Chinese FDI is Important
Chinese Foreign Direct Investment (FDI) into Sub-Saharan Africa (SSA) has grown rapidly in recent years. After identifying the different streams of FDI, this paper focuses on the family of predominantly state-owned Chinese firms (SOEs) operating in the resource and infrastructure sectors, pointing to their integration with Chinese aid and trade. It is here that Chinese FDI is placed into global context and suggested that it is distinctive when compared to Western FDI in the resource and infrastructure sectors in SSA.

The Dynamics of Chinese FDI Flows to SSA
China’s relations with Africa in the modern era have undergone three phases. The first followed the Bandung Conference of Non-Aligned Nations in 1955, where China, partly driven by its rivalry with the USSR, offered support to decolonising Africa. This analysis covers the second phase, of the mid-1990s and onwards. Following a substantial growth in trade with Africa and a growing need for resources, large and predominantly state-owned Chinese enterprises (SOEs) entered SSA as investors and as contractors to Chinese-aid-funded projects in infrastructure and public buildings. The third phase of Chinese interaction with SSA is one involving small- and medium-sized, predominantly private-sector, enterprises. Some are incorporated in China and have extended their operations to SSA and others have been started ab initio in SSA.

The three types of Chinese investors in SSA are shown in Figure 1. ‘State-owned’ and ‘private’ are unclear, since one of China’s unique characteristics has been the fuzzy lines drawn between the state and private sectors in ownership. Many ‘SOEs’ function as conduits for private gain, in that profits are appropriated by key individuals who are not formal owners of the firms. Similarly, the returns from many ‘private’ firms are partial reflections of state decision-making. Thus, ownership in China is a complex amalgam which Nolan characterises as an ‘ownership maze’ with ‘vaguely-defined property rights’ (Nolan, 2005, p. 169).

The SOEs, predominantly investing in resource extraction and infrastructure, can be segmented between those owned by the Central Government and those accountable to provincial governments. Central government SOEs tend to operate under formal state-to-state agreements and hence are expected to take the government’s strategic objectives into consideration in their African operations. The provincially-owned firms reflect the initiatives of their decentralised state administrations, often built on regional diasporas in SSA (see Gu, 2009), and are under pressure to operate profitably so as to contribute revenue to provincial governments. The private sector firms cover the spectrum of SMEs incorporated in China and investing in SSA, perhaps as a first venture outside their home base. They also include a limited number of very large firms, such as Huawei in telecoms. The large- and medium-sized China-based firms generally operate in the manufacturing and communications sectors, as well as in wholesale trading. The other end of the private spectrum involves small to micro enterprises, either in petty manufacturing or in small-scale retail.

This paper is primarily focused on the Chinese SOE FDI in SSA.

Figure 1. Four types of Chinese investors in SSA


Predominantly State-owned

Central State

Normally accountable to State Council

Tender for Central Government funded EXIM Bank financing

Predominantly in resource sector, infrastructure projects and construction

Involves formal State-to-State (ie, China host government) agreements

Provincial State

Often loyal to Provincial rather than Central Government objectives

Tender for Central Government funded EXIM Bank financing

Predominantly in resource sector infrastructure projects and construction

Generally some form of twinning between China provinces and SSA governments

Predominantly private-owned

Incorporated in China and SSA

Predominantly in manufacturing and services

Largely self-financed

Act independently of Chinese central government

May be supported by Chinese provincial government

Incorporated in SSA only

Predominantly in trading and services

Self-financed

Act independently of Chinese central and provincial governments

May not be legally incorporated

Familial contacts important

Source: adapted from Corkin (2009) and Gu (2009).

Chinese FDI in SSA
Estimates of FDI flows are notoriously inaccurate. The weak recording practices in SSA increase the unreliability of data on Chinese investment flows there. There are four sets of estimates of the extent and nature of these flows: (1) official and public-domain estimates of the extent and distribution of Chinese FDI in SSA; (2) AERC study estimates of the extent and distribution of Chinese FDI in SSA; (3) UNIDO’s survey of FDI in SSA; and (4) primary studies of small private-sector Chinese FDI.

  1. Official and public-domain estimates of the extent and distribution of Chinese FDI in SSA. Official estimates of China’s FDI flows to SSA are contradictory and understate their true significance. Drawing on a variety of official sources, Besada et al. estimate that Chinese FDI flows into Africa exceeded US$500 million in 2006, rising from US$400 million in 2005 (Besada et al., 2008). UNCTAD data suggest inflows rising from US$1.5 million in 1991 to US$61 million in 2003 and US$1.6 billion in 2005. In terms of relative shares, Gelb (2010) draws on the Chinese Ministry of Commerce database (MOFCOM) to differentiate real Chinese FDI from flows and holdings in the Cayman Islands (CI) and British Virgin Islands (BVI) as well as round-tripping through Hong Kong (HK). Africa then accounts for 40% (the largest share) of Chinese FDI in 2008. Chinese FDI is concentrated in the Sudan, Algeria, Zambia, Nigeria and South Africa, accounting for 71% of Chinese FDI in Africa.
    Between 1979 and 2000, 46% of Chinese FDI was in the manufacturing sector (mostly clothing), while services, mainly construction, accounted for 18% and resource extraction accounting for 28%. China’s FDI in oil and gas exploration has been concentrated in Nigeria, Angola, Equatorial Guinea, the Sudan and Gabon. In 2007 the State-owned Industrial and Commercial Bank of China invested US$5.4 billion acquiring a 20% strategic stake in Standard Bank of South Africa.
     
  2. AERC Study estimates of the extent and distribution of Chinese FDI in SSA. In 2006-07 the African Economic Research Consortium (AERC) undertook studies in 21 SSA countries to assess their trade, aid and investment relations with China. In 2009-10 a further 20 studies in 14 countries were completed.

    The research (www.aercafrica.org/publications/category.asp) outlines three groups: those in which Chinese FDI plays a relatively significant role, a moderate role and a low-significance role. They show that oil-gas and mining investments are of considerable significance in some economies. In agriculture, the primary sector of Chinese involvement is cotton, but only in Zambia. Chinese FDI in telecoms is widespread throughout the 20 economies. There are significant investments in utilities. It is the construction and infrastructure sector where Chinese FDI is most pervasive, some of it in show-piece construction –government buildings and sport stadiums–. FDI in manufacturing is primarily in labour intensive activities –garments dominate–. There is also a spread of investments in small-scale manufacturing enterprises, which do not surface in official statistics but, like Chinese retail traders, may have a more substantial socio-economic impact. Small-scale petty-trading by Chinese migrants is widespread in almost every economy, but is often unrecorded. The AERC studies reveal limited gains in local employment creation and a significant use of an expatriate labour force.
     
  3. UNIDO’s survey of FDI in SSA. In 2005 UNIDO conducted a survey of 1,216 foreign enterprises operating in 15 African economies. Comparing Chinese, Indian and South African and Western investors, Chinese firms were younger, had lower sales per worker (but with higher sales growth), were more export-oriented and had low investment rates and low annual wages. Chinese respondent firms were clustered in low value-added export-oriented low-wage assembly operations (eg, garments).
     
  4. Primary studies of small private sector Chinese FDI. Chinese FDI that is much harder to track, but with increasingly significant socio-economic impact, is in the private sector. Gu (2009) reports Chinese EXIM Bank estimates of around 800 China-incorporated firms that have established operations in SSA as a whole. However, she estimates the number of private firms to be more than 2,000. Although no numbers are provided on employment, most of these firms appear to be small- or medium-sized. A second set of primary research on Chinese private sector firms is Brautigam (2008) on small-scale investments in Mauritius arising from a history of Chinese immigration –reinforcing the importance of diasporas in private-sector FDI–.

    The AERC studies provide a third window into China’s small scale investors through their links as suppliers to large-scale SOEs in the infrastructure and resource sectors. The Sudan is a particularly illuminating case. Between 2000 and 2007, 97 Chinese SMEs provided inputs for 13 SOEs in the oil sector.

    Finally, we have research looking at small-scale firms operating predominantly in manufacturing and services, small construction firms and petty manufacturing. A large and unrecorded number of Chinese individuals operate as small scale entrepreneurs (Mohan & Kale, 2007; Mohan & Power, 2008; Dobler, 2008). A relatively new set of trading entrepreneurs are Chinese wholesalers who act as a platform for associated retailing activities in neighbouring countries by other small-scale migrant entrepreneurs (‘platform economies’). These, too, are observed but are not systematically recorded.

How Distinctive is Chinese FDI in SSA?
The SOE category of Chinese FDI in SSA is predominantly clustered in large-scale resource-oriented ventures (Burke & Corkin, 2006; Broadman, 2007, p. 275; Ajakaiye et al., 2008) and predominantly bundled with Chinese aid in projects designed to meet China resource needs.

  1. Terms of trade reversal and the growing importance of resources. Since at least the 1870s there has been a trend for the terms of trade to turn against the commodities export sector. Prices of manufactures have usually risen faster. However, between 2002 and 2008 prices boomed across the spectrum of commodities. This ‘super-cycle’ comprised a longer period than previous spikes. There are sound reasons to believe that it will last, despite the financial-sector induced bust after August 2008. Unlike previous periods, the current boom is fuelled by a massive demand in the Asian driver economies which have a high income-elasticity of demand for commodities (IMF, 2007; Farooki, 2009). This affects the demand for energy (with spin-offs into agriculture for bio-fuels), minerals and food crops (FAO, 2007; Freeman, Holslag & Weil, 2009). Primary commodities are therefore likely to remain in short supply globally, and prices are likely to be sustained.

    Africa is especially well favoured by these developments, not so much in terms of its existing commodities, but for its potential exports. It is the primary base for the future of many mineral commodities. In many mineral commodities, Africa is the primary resource base for the future. In energy, it is not so much Africa’s share of global reserves which is so strategically important, but its reserves of unallocated reserves.

    According to McKinsey, nearly one-quarter of Chinese FDI in the extractive industry is also involved in infrastructure development and resource processing, (McKinsey Global Institute, 2010). A large part of these investments are focused on providing transport routes for the export of resources. Since 2005, Chinese total infrastructure commitments to SSA have exceeded those of the World Bank (McKinsey Global Institute, 2010).
     
  2. The strategic integration of Chinese operations in SSA. With the exception of small-scale copper mining smelters in Zambia and the DRC, all of these resource-based Chinese investments have been large in scale and have involved Chinese SOE (both Central-State SOEs and Provincial-Government SOEs). In all these sectors, particularly in infrastructure for trade (Foster et al., 2008), Chinese aid has complemented these trade and FDI flows.

    The close link between trade, FDI and financial flows has historical precedents. In the colonial era these three vectors were fused and the imperial powers’ interests in SSA were closely coordinated. As Africa was decolonised, the aid, trade and FDI vectors were increasingly separated because of an increasing opposition from SSA countries, who saw the integration as too costly since tied aid generally led to much higher-cost inputs. New economic actors were emerging (notably the US) and the integration of vectors locked them out of markets. There was growing public opposition in the OECD economies against what was seen as an exploitative framework and multilateral aid was growing in importance, so that the International Financial Institutions insisted on the delinking of aid, trade and FDI.

    China’s presence in SSA departs from this recent orthodoxy and represents a reversion to the patterns of historical colonial links between mother countries and SSA colonies. Particularly in the case of large-scale infrastructural and mining projects, this takes the form of the strategic integration of various inputs from China. It is therefore impossible to unbundle what constitutes Chinese ‘aid’ and ‘FDI’ (Ajakaiye et al., 2008). The so-called ‘Angola-model’ has become a framework for much of China’s SOE activity in SSA. It describes an integrated package in which China’s EXIM Bank provides a line of credit at subsidised interest rates. Chinese firms then tender for infrastructural projects, tied to the use of Chinese inputs with intensive use of Chinese skills. The bulk of these ‘aid’ funds never leave China but are transferred from the EXIM Bank to the firms which have won the tenders. These funds are repaid by the recipient country as a drawdown on commodity exports back to China. Not all aid follows the ‘Angola-model’. China also provides for politically sensitive and prestigious projects but often where it has a direct resource interest and where it seeks to build a long-term presence.
     
  3. China’s investment in SSA: a departure from trend? The most-used framework for assessing the drivers of FDI was developed by Dunning (2000) who identified three primary explanatory factors, the so-called OLI framework: ownership, location and internalisation. The ‘ownership’ factor describes special competences, motivations and power to control foreign affiliates, which reflect the nature of the firms involved. ‘Location’ explains why they operate in a particular country. This may be because of market possibilities (‘market-seeking FDI’), resource-seeking FDI or because the country has low operating costs (‘cost-reducing FDI’). ‘Internalisation’ explains why foreign firms prefer to own their operations as opposed to licensing or selling their technologies.

    Mathews (2002) has suggested a fourth factor, the ‘linkages’ driver, to explain FDI from the Asian Tigers, especially in relation to their investments in high-income economies insofar as firms invest abroad not to exploit their firm-competences, but in order to augment these competences by learning from their overseas operations. While it is debated whether this ‘leveraging’ is really new (since it arguably reflects firm-competences in business strategy and technology acquisition –Dunning, 2006; Narula, 2006–), there does seem to be a new flow of FDI from low- and middle-income economies like China, India and Brazil.

    Utilising the Dunning framework (as augmented by Mathews), is it possible to compare the investments by Chinese SOEs with those of the historically-dominant Western firms? With respect to the strategic integration of aid, Chinese SOE FDI in SSA is distinctive and differs markedly from the global trend to unbundle investment from aid. Most FDI from China has reflected a relatively tight bundling of investment with tied aid, designed to facilitate the export of natural resources, predominantly directly to China.

    In terms of ownership characteristics, Western firms investing in SSA are usually funded through stock markets. The emphasis on ‘shareholder value’ means that they have a short-term profit objective and are very risk-averse. By contrast, with cheap (and often subsidised) long-term capital, Chinese SOEs operate with long-term time-horizons and are less risk-averse (Tull, 2006; Zeng & Williamson, 2007). The exception to this has been small investments by Chinese private firms, for example in Zambian and DRC copper smelting. Finally, most Western firms are constrained by accords like the Paris Declaration, affecting labour rights and general practices. By contrast, Chinese SOEs operate in a relatively unfettered environment.

    In terms of location-specific factors, resource-seeking investments are found in both Western and Chinese FDI. However, many Western TNCs have operations in SSA to meet the needs of domestic consumers and many of these investments are long-lived. By contrast, a small component of Chinese FDI has been market-seeking. The use of SSA as a low-cost export platform is largely confined to the garments sector, and reflects tariff preferences in major Western markets.

    Learning factors also play a more important role for Chinese firms using SSA as a test-bed for overseas investments. Finally, although some Chinese garment exporters incorporate their SSA garments operations in their clothing exports, these are only very isolated examples of their integration of SSA subsidiaries in global value chains. Some Western firms integrate their African subsidiaries in their global value chains.

Conclusion

Policy Implications for Engaging with Large Chinese Dragons
What are the optimal responses to ensure that the entrance of Chinese FDI is turned into developmental opportunity? This requires a focus on the development of strategic capabilities and the roles played by key developmental actors.

a) Developing strategic capabilities: SSA is not without its attractions to Chinese investors. The key, therefore, is for it to use its commodities to its best advantage and use this power to leverage advantageous terms in agreements with China. In developing a strategic agenda, they can benefit from integrating the aid, trade and FDI. Meeting China’s trade needs should be conditional upon their providing aid to exploit these commodities, as well as meeting SSA’s developmental and infrastructural needs.

b) Policy actors: who in SSA is going to drive this strategic agenda? It will necessarily involve individual governments as they hold the levers which determine access to their economies. They each need to coordinate an integrated strategic response to offer access to their resources in a way which meets their country’s needs. Formal written strategies which are not implemented effectively are much less use than dynamic and active coalitions of local interests interacting effectively amongst themselves and with emerging country partners.

Another arena for integrated response is in regional forums –SADC, ECOWAS and the AU–. These multi-country organisations are important in their aggregation of African countries in the bargaining process and in the protection of countries with fewer commodities, so as to develop intra-regional trade capacity.

In conclusion, although we have pointed to the distinctive character of Chinese SOE-driven FDI in SSA, and the opening this creates to negotiating aid and economic assistance with China, this only partially addresses the problem. Undertaking the necessary research and developing policies is not enough. The question is how can it ensure that such policy and strategies stick? The real issue is whether SSA countries have the human resource capacity and institutional capability to negotiate these agreements effectively, as well as the political will and legitimacy to enforce, and gain maximum advantage from them. Institutional governance is one of SSA’s greatest challenges. Without this implementing capacity, the agreements are likely to be notional, nothing more than granting advantage to China in its interaction with Africa and its global diplomatic strategic initiatives under the cloak of a developmental agenda.

Raphael Kaplinsky
Development Policy and Practice, The Open University

Mike Morris
PRISM, School of Economics, University of Cape Town

References

Ajakaiye, O., F.M. Mwega & F.F. N’Zue (2008), ‘Seizing Opportunities and Coping with Challenges of China – Africa Aid Relations: Insights from AERC Scoping Studies’, Policy Issues Paper nr 1, African Economic Research Consortium, Nairobi.

Besada, H., Y. Wang & J. Whalley (2008), ‘China’s Growing Economic Activity in Africa’, NBER Working Paper, 14024.

Brautignam, D. (2008), ‘“Flying Geese” or “Hidden Dragon”? Chinese Business and African Industrial Development’, in D. Large, J.C. Alden & R.M.S. Soares de Oliveira (Eds.), China Returns to Africa: A Rising Power and a Continent Embrace, Christopher, London.

Broadman, H.G. (2007), Africa’s Silk Road; China and India’s New Economic Frontier, The World Bank, Washington.

Burke, C., & L Corkin (2006), China’s Interest and Activity in Africa’s Construction and Infrastructure Sectors, The Centre for Chinese Studies, Stellenbosch University, Stellenbosch.

Corkin, L. (2009), ‘Presentation to Making the Most of Commodities Programme’, University of Cape Town, Cape Town.

Dobler, G. (2006), ‘South-South Business Relations in Practice: Chinese Merchants in Oshikango, Namibia, www.ids.ac.uk/asiandrivers, accessed 5/IV/2006.

Dunning, J. (2000), ‘The Eclectic Paradigm as an Envelope for Economic and Business Theories of MNE Activity’, International Business Review, vol. 9, nr 1, p. 163-90.

Dunning, J. (2006), ‘Comment on Dragon Multinationals: New Players in the 21st Century Globalization’, Asia Pacific Journal of Management, nr 13, p. 139-141.

FAO (2007), ‘Implications for World Agricultural Commodity Markets and Trade of Rapid Economic Growth in China and India’, Committee of Commodity Problems, Sixty-Sixth Session, FAO, Rome.

Farooki, M. (2009), ‘China’s Structural Demand And The Commodity Super Cycle; Implications for Africa’, Paper presented at the China-Africa Development Relations Research Workshop, Leeds University, Leeds, http://asiandrivers.open.ac.uk/(AD%20webpage)%20China's%20strucutral%20demand%20and%20the%20commodity%20super%20cycle.pdf.

Foster, V., W. Butterfield, C. Chen & N. Pushak (2008), Building Bridges: China’s Growing Role as Infrastructure Financier for Africa, Trends and Policy Options: Infrastructure nr 5, The World Bank, Washington.

Freeman, D., J. Holslag & S. Weil (2009), ‘China’s Foreign Farming Policy: Can Land Provide Security?’, BICCS Asia Paper, vol. 3, nr 9, Brussels Institute of Contemporary China Studies, Brussels.

Gelb, S. (2010), ‘Foreign Direct Investment Links between South Africa & China’, Paper for AERC, Nairobi.

IMF (2007), World Economic Outlook, International Monetary Fund, Washington, http://www.imf.org/external/pubs/ft/weo/2007/01/pdf/.

Kaplinsky, R. (2009), ‘China, Commodities and the Terms of Trade’, in D. Greenaway, C. Milner & Shujie Yao (Eds.), China and the World Economy: Consequences and Challenges, Palgrave, London.

Kaplinsky, R. & D. Messner (2008), ‘Introduction: The Impact of the Asian Drivers on the Developing World’, World Development Special Issue on Asian Drivers and their Impact on Developing Countries, vol. 36, nr 2, p. 197-209.

Kaplinsky, R., & M. Morris (2008), ‘Do the Asian Drivers Undermine Export-Oriented Industrialisation in SSA’, World Development Special Issue on Asian Drivers and their Impact on Developing Countries, vol. 36, nr 2, p. 254-273.

Mathews, J.A. (2002), ‘Competitive Advantages of the Latecomer Firm: A Resource Based Account of Industrial Catch-up Strategies, Asia Pacific Journal of Management, nr 19, p. 467-488.

McKinsey Global Institute (2010), ‘Lions on the Move: The Progress and Potential of African Economies’, http://www.mckinsey.com/mgi/publications/progress_and_potential_of_african_economies/pdfs/MGI_african_economies_full_report.pdf.

Mohan, G., & M. Power (2008), ‘New African Choices? The Politics of Chinese Engagement in Africa and the Changing Architecture of International Development, Review of African Political Economy, vol. 35, nr 1, p. 23-42.

Mohan, G., & D. Kale (2007), ‘The Invisible Hand of South-South Globalisation: A Comparative Analysis of Chinese Migrants in Africa’, Report to the Rockefeller Foundation, Development Policy and Practice, Open University, Milton Keynes, http://asiandrivers.open.ac.uk/documents/Rockefeller%20Report%20on%20Chinese%20diasporas%2010th%20Oct%203.pdf.

Narula, R. (2006), ‘Globalisation, New Technologies, New Zoologies, and the Purported Death of the Eclectic Paradigm, Asia Pacific Journal of Management, nr l23, p. 143-151.

Nolan, P. (2005), Transforming China: Globalization, Transition and Development, Anthem Press, London.
Review of African Political Economy Special Issue, vol. 35, nr 115.

Tull, D.M. (2006), ‘China’s Engagement in Africa: Scope, Significance and Consequences’, Journal of Modern African Studies, vol. 44, nr 3, p. 459-479.

UNCTAD (2006), Trade and Development Report, United Nations, Geneva.

UNCTAD (2007a), Asian Foreign Direct Investment in Africa: Towards a New Era of Cooperation Among Developing Countries, UNCTAD, Geneva.

UNCTAD (2007b), World Investment Report 2007; Transnational Corporations, Extractive Industries and Development, UNCTAD, Geneva.

UNIDO (2007), Africa Foreign Investor Survey 2005, United Nations Industrial Development Organisation, Vienna.

World Development Special Issue on Asian Drivers and their Impact on Developing Countries, vol. 36, nr 2.

Zeng, M., & P.J. Williamson (2007), Dragons at Your Door, Harvard Business School Press, Boston.


[1] This ARI is drawn from Raphael Kaplinsky & Mike Morris (2009), ‘Chinese FDI in Sub-Saharan Africa: Engaging with Large Dragons’, European Journal of Development Research, vol. 21, nr 4.
]]>