AFRICAN HOPES OF REVERSING MARGINALIZATION DEPENDENT ON RECOVERY, GROWTH OF MANUFACTURING, COMMITTEE HEARS

Press Release
GA/EF/2887

AFRICAN HOPES OF REVERSING MARGINALIZATION DEPENDENT ON RECOVERY, GROWTH OF MANUFACTURING, COMMITTEE HEARS

Africa’s main challenge was to reverse its marginalization from the global economy, Carlos Sersale di Cerisano, Assistant Director- General for United Nations Affairs, United Nations Industrial Development Organization (UNIDO), told the Second Committee this afternoon as it began its survey of industrial development cooperation and business and development.

Introducing the report of the Secretary-General on implementation of the programme for the Second Industrial Development Decade for Africa (1993-2002), he said that the only way to achieve that aim was through strong, sustained and sustainable industrial growth. Recovery and consequent growth of manufacturing were a priority for the region. Programmes should be tailored to specific country needs, with the focus on competitiveness, productive employment and access to and development or adaptation of sound technologies. The UNIDO was concentrating its efforts in that direction, including support for the private sector in Africa.

Guido Bertucci, Director of the Division for Public Economics and Public Administration, Department of Economic and Social Affairs (DESA), introduced the Secretary-General’s report on business and development. The report, he said, was representative of the commitment of the United Nations system in the promotion of entrepreneurship and a wider participation of the private sector in the development and peace processes. The various types of implementation modalities cited in the report reflected recognition by the United Nations system of the diverse nature of the relationship between business and development. The business sector had indeed become a major actor, partner and provider of inputs and support to the United Nations, particularly in the implementation of the Global Conferences.

Also this afternoon, the representative of Guyana (on behalf of the Group of 77 developing countries and China), introduced a draft resolution with regard to implementation of the commitments and policies agreed upon in the Declaration on International Economic Cooperation.

The Committee will meet again at 10 a.m. tomorrow to begin debate on industrial development cooperation and business and development.

Committee Work Programme

The Second Committee (Economical and Financial) met this afternoon to start its consideration of industrial development cooperation and business and development.

The Committee had before it a report of the Secretary-General on implementation of the programme for the Second Industrial Development Decade for Africa (1993-2002) (document A/54/320), prepared pursuant to resolution 52/208 of the General Assembly of 18 December 1997, which requested a report on progress in the implementation of the Plan of Action of the Alliance for Africa’s Industrialization (AAI).

According to the report, the economies of sub-Saharan Africa witnessed improved growth rates between 1995 and 1998. However, growth prospects for 1999 and 2000 remain modest in the light of the global economic problems resulting from the recent financial and economic crises in other developing regions. If Africa were to reduce poverty by half over the next decade and a half, it would need to attain and sustain an average growth rate of 7 per cent per annum, according to the report. Such high growth rates can only be achieved and sustained if efforts are made to diversify the production base of African economies, particularly the expansion of the manufacturing sector and other industrial activities. Assuming a manufacturing value added (MVA) growth of 4 per cent annually, it will take until 2002 to regain 1991 output levels.

The report notes that in the emerging knowledge-intensive and skill- intensive global markets, a country or region’s share of manufactured exports is a measure of its access to learning and technology. Africa’s heavy dependence on primary commodity exports (accounting for about 80 per cent of total export earnings) is evidence of the low level of human resource development and limited technological capability to take advantage of emerging trade and investment opportunities. Africa’s struggle to achieve rapid economic transformation will be lost or won depending on how effectively industrial development is linked with agricultural development through enhanced MVA, productivity and competitiveness, with an accent on employment and income generation.

When compared with global trends, the report continues, a striking feature of African industrial development in the last two decades has been the fall in productivity. Employment grew faster than output, resulting in over-manning and declining productivity, which in turn helps explain why sub-Saharan Africa is finding it so difficult to break into world export markets for manufactured goods. Costs of factor inputs are abnormally high.

To close the income and technological gap between the region and the rest of the world requires a comprehensive approach, according to the report, including effective public and private investments in industrial infrastructure, strengthening of technological capabilities through human resource development, institution-building and effective economic governance. To achieve the high growth rates required to alleviate poverty and create employment requires a strategic focus on enhancing MVA, promotion of rural industrialization and stronger sectoral linkages between industry and agriculture.

The efforts by the United Nations Industrial Development Organization (UNIDO) to develop country programmes has received a significant boost in 1998 and the first half of 1999, with programmes currently in 15 countries and the formulation of an additional 10 to commence during the second half of 1999. It is critical that financial resources be made available for the implementation of these programmes, the report stresses. While a number of donors have been generous in financing some components of the programmes, much more needs to be done to mobilize the total funding of over $150 million that is required.

To complement the technical assistance provided by UNIDO and other United Nations agencies in the field of industrial development, the report recommends a number of private sector-oriented initiatives for the consideration of the General Assembly and donors. These would include: a) strengthening the complementarity between aid and investment, in other words, a new development aid-investment nexus. Development partners need to determine how bilateral or multilateral aid can create the fundamentals that attract foreign private investment in manufacturing in Africa. Africa’s own private sector needs capacity-building and shills upgrading, in order to offer itself as an attractive partner for the international business world; b) investment concessions for private sector venture capitalists willing to invest in the manufacturing sector in Africa, in other words, arrangements whereby foreign investors would be eligible for their home countries. The concession should be granted for those investments that lead to job creation through enhancement of technological capability and human capital development in the recipient African country, and thereby contribute to sustainable livelihood patterns; c) debt-for- industrial-development swaps as a financing mechanism for industrial projects. This could be a complementary but flexible version of other efforts to reduce the external debt burden on highly indebted and poor countries; d) enhancing investments in small- and medium-sized enterprises (SMEs) engaged in manufacturing. Current efforts for financial mediation are too concentrated in microfinance schemes or financing of large-scale ventures. To fill the “missing middle” requires the creative combination of venture capital funds with technical and managerial support to enterprises in order to facilitate start-ups and increase the survival rate of SMEs. It will also be necessary to rapidly implement financial reforms in Africa, including the development of mechanisms for accessing international capital markets.

Also before the Committee was the Secretary-General’s report on business and development (document A/54/451), which provides information on the activities of the United Nations in the promotion of an enabling environment for the business sector, as well as on the increasing efforts for a partnership with business to realize the norms and goals established in the various United Nations conferences of the 1990s. The report is submitted in response to General Assembly resolution 52/209 of 18 December 1997. While recognizing the role of the private sector, the resolution put national specificities into perspective, as well as underscoring the roles of a supportive international economic environment, public sector and informal sector involvement, microcredit, small- and medium-sized enterprises and cooperatives for development.

According to the report, the United Nations system is actively involved in facilitating constructive involvement of the private sector in the development process through a twofold approach.

On the one hand, the system performs the essential role of developing a supportive international "soft infrastructure" for the orderly interaction of business. It also assists Member States, particularly developing countries and countries in economic transition, through a myriad of initiatives to create an enabling environment for private sector development. These activities range from the creation of supportive legal and fiscal frameworks; the development of privatization policies and processes; the liberalization of financial flows; the regulation of capital markets; the adoption of competition policies and laws; deregulation or simplification of regulations and processes applicable to business; and to the development of entrepreneurship.

On the other hand, the report notes, the United Nations system is active in facilitating the participation of the private sector in the pursuance of the goals of the global conferences; in embracing universal principles and norms, including those relating to environment, human rights and gender; and in fostering the involvement of the private sector in promoting economic growth, fighting poverty and rebuilding nations after conflict or crisis.

According to the report, a major task of United Nations organizations consists in identifying and analyzing, in the light of the main features of the institutional framework for international transactions, the major substantive and strategic issues in policy-making. This is with a view, particularly, to advising on modernizing and harmonizing national frameworks, taking into consideration existing regional commitments and, more importantly, applicable multilateral norms, especially within the World Trade Organization (WTO).

The report states that the contribution of the business community to United Nations activities includes participation in debates, technical inputs to norm setting or background papers, secondment of experts, co-organization of workshops and study tours and financing for specific activities. One emerging pivotal role that the private sector has assumed is in post-conflict reconstruction and development. The participation of the business sector in the early stages of post-conflict reconstruction is a prerequisite for a viable economic framework, which can create an environment for recovery and prosperity. The essential contribution of the private sector is investment; physical infrastructure replacement and upgrading; technology; the vital products and services for recovery; and stimulus to employment and local business development. Additionally, the private sector also contributes “economic multipliers” such as distribution networks, financing mechanisms, access to market and training and human resources development.

Draft Resolution

Before the Committee was a draft resolution, introduced by Guyana on behalf of the Group of 77 developing countries and China, on implementation of the commitments and policies agreed upon in the Declaration on International Economic Cooperation, in particular the Revitalization of Economic Growth and Development of the Developing Countries, and the implementation of the International Development Strategy for the Fourth United Nations Development Decade (document A/C.2/54/L.20).

By the terms of the draft resolution, the General Assembly would request the Secretary-General, in collaboration with all concerned organs and organizations of the United Nations system, including the Bretton Woods institutions and other relevant international organizations, to submit to the General Assembly for its consideration at its fifty-fifth session an analytic report containing a final evaluation of the implementation of the commitments and policies agreed upon in the Declaration and the Strategy, including the progress achieved and the constraints encountered therein.

The Assembly would request the Secretary-General, in collaboration with all concerned organs and organizations of the United Nations system, in particular the Committee on Development Policy, to submit to the General Assembly, through the Economic and Social Council, a draft text of an international development strategy for the first decade of the new millennium, with the aim of giving further impetus to international cooperation for development and of monitoring long-term trends in the global economy, as well as the attainment of internationally agreed targets, taking into account: a) the dynamic changes in the world economy as a result of globalization, interdependence and liberalization and the rapid advances in science and technology; and b) the outcome of the Agenda for Development, the major United Nations conferences and summit meetings held during the current decade, and any other relevant ongoing processes on international cooperation for development.

Introduction of Draft Resolution

GEORGE WILFRED TALBOT (Guyana), on behalf of the Group of 77 developing countries and China, introduced the draft text on implementation of the commitments and policies agreed upon in the Declaration on International Economic Cooperation (document A/C.2/54/L.20). He said the draft addressed an issue of great importance to development and to developing countries. The current decade on development would end in 2000. The countries on whose behalf he spoke were of the view that they would benefit from the final evaluation of the decade. Such an evaluation should inform the thinking on successor arrangements to the development decades.

Introduction of Reports

CARLOS SERSALE DI CERISANO, Assistant Director-General for United Nations Affairs, UNIDO, introduced the Secretary-General’s report on implementation of the programme for the Second Industrial Development Decade for Africa. He said that Africa’s main challenge was to reverse its marginalization from the global economy. The only way to achieve that aim was through strong, sustained and sustainable industrial growth. Africa’s share of world exports was only 1.8 per cent, its contribution to world industrial production 0.3 per cent, and its share of foreign direct investments (FDI) less than 1 per cent of the total world inflow.

Recovery, and a consequent growth of manufacturing, were a priority for the region. Programmes should be tailored to specific country needs with the focus on competitiveness, productive employment and access to and development or adaptation of sound technologies. The UNIDO was concentrating its efforts in that direction, which included support for the private sector in Africa, he said.

The report before the Committee also provided information on UNIDO’s assistance to African countries in implementing the Industrial Development Decade for Africa (IDDA) at the policy level, the programme level and the financial level, he said. He highlighted some of the report’s general recommendations, including: supporting capacity-building activities at all levels; strengthening the complementarity between cooperation for development aid and investments in the manufacturing sector; and enhancing investments in small- and medium-sized manufacturing enterprises.

GUIDO BERTUCCI, Director of the Division for Public Economics and Public Administration, Department of Economic and Social Affairs (DESA), introduced the Secretary-General’s report on business and development. It was representative of the commitment of the United Nations system in the promotion of entrepreneurship and a wider participation of the private sector in the development and peace processes. The various types of implementation modalities cited in the report reflected recognition by the United Nations system of the diverse nature of the relationship between business and development. In the activities and services undertaken by the United Nations system since the Assembly’s fifty-second session, the underlying consideration had been the increasing importance of the private sector in the development process, and the role of the State in providing the enabling environment for the development of the private sector and for maximization of the benefits to be derived from it.

Member States had also shown interest and concern in the relationship between business and the United Nations in fulfilment of the Organization’s goals and the pursuit of universal principles and norms, he said. That relationship had become more intense in the 1990s, and was manifested in the global compact, proposed by the Secretary- General at the World Economic Forum in January. The business sector had indeed become a major actor, partner and provider of inputs and support to the United Nations, particularly in the implementation of the Global Conferences. Therefore, the report also covered the various initiatives of the United Nations system in fostering that partnership.

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