Backgrounder: New forms of partnership

(UNECA) Updated: 2014-10-14 10:53

I. Introduction

1. Since the late 1990s, many African economies have grown significantly, and a number of countries continue to benefit from accelerating growth rates. Between 1995 and 2012, the continent's gross domestic product (GDP) doubled in real terms, from $656 billion to $1,369billion in 2005 dollars, while GDP per capita increased by 40 per cent, from $917 to $1,265.1. Impressive as these figures are, a number of challenges continue to impede Africa's transformation.

2. Growth has been largely underpinned by the sustained expansion of extractive industries and the services sector. However, with a few notable exceptions, growth has largely by-passed the agricultural and manufacturing sectors. In fact, between 1995 and 2012, almost 40 African countries witnessed premature de-industrialization, as evidenced by a decline in the value added by their manufacturing sectors as a percentage of GDP. According to the World Bank's 2014 World Development Indicators, the manufacturing sector's contribution to GDP in sub-Saharan countries fell from 15.3 per cent to 10 per cent between 1990 and 2012. Meanwhile, export revenues have increased rapidly, mainly as a result of the price effect, which has resulted in many countries' economies becoming even more dependent on the export of primary products. In turn, this has made it harder for many people seeking employment outside the agricultural sector to find jobs that will allow them to escape extreme poverty. For this reason, structural transformation, and sustained inclusive growth must lie at the core of the African common position on the post-2015 development agenda.

3. In principle, sustained growth and improved economic fundamentals should be strengthening domestic resource mobilization. However, investment as a share of GDP has increased only slightly (from 17 per cent in 2000 to 21 per cent in 2012). Mobilizing development finance will remain a crucial challenge for the region in the medium term, particularly in view of the region's infrastructural and technological gap. National accounting data reveal that Africa's growth acceleration has been accompanied by an increasing reliance on foreign savings for investment financing, which has widened the resource gap in the region to approximately $40 billion, and in non-oil exporting African economies to as much as $100 billion.

4. Against this backdrop, funding Africa's transformation will require innovative development financing mechanisms and major efforts to mobilize additional funds from existing sources of development finance. As recognized in the African common position on the post-2015 development agenda, this will, in turn, require the strengthening of existing partnerships and the

forging of new ones. Public-private partnerships and catalytic mechanisms will also be required with a view to tapping new sources of finance, engaging investors as partners and stakeholders in development, and delivering financial solutions to development problems on the ground.

II. Lessons learned from efforts to achieve Goal 8 of the Millennium Development Goals on the development of a global partnership for development

5. New forms of international partnership must build upon lessons learned, including the fact that several of the Millennium Development Goals, while successfully mobilizing the international community around measurable and time-bound development objectives, are unlikely to be achieved by 2015. In efforts to rethink development partnerships, and mobilize adequate financial resources, stakeholders must seek to address the following three factors, which continue to impede development:

a. The failure of traditional donor-recipient relationships to promote mutual accountability, strengthen ownership of the development agenda, and deliver on Goal 8 promises, particularly with regard to the target of raising official development assistance to 0.7 per cent of a donor's gross national income (GNI);

b. Persistent imbalances in existing multilateral trade and financial systems: the Doha Round remains deadlocked and, with the notable exception of debt relief, progress in the financial sphere remains limited;

c. The inability of existing partnerships to address global challenges, including climate change and economic instability, which underscores the importance of upholding the principle of common but differentiated responsibilities.

III. Adapting to changes on the ground

6. New partnerships must seek to address the factors outlined above and must be able to deal with emerging global economic trends. They should also reflect the ongoing geopolitical and economic rebalancing in favour of developing and emerging economies, particularly Brazil, China and India. Multilateral trade and financial reforms must be enacted so as to give greater focus to development issues and strengthen the voice of developing countries in key forums, including the International Monetary Fund, whose quotas and voting mechanism remain a matter of some contention. At the same time, due consideration must be given to South-South economic relations so as to better exploit opportunities emerging as a result of global trends. In Africa, for example, developing countries' exports and imports have increased in just 15 years from 26 to 43 per cent, and from 33 to 50 per cent respectively. Furthermore, foreign direct investment from the five emerging economies known as the BRICS countries – Brazil, the Russian Federation, India, China and South Africa – reached 25 per cent of total foreign direct investment in Africa in 2010 and continues to increase. There is, moreover, considerable scope to further strengthen Africa's engagement with its southern trade partners in ways that promote structural reform while avoiding the so-called "primary commodity trap" or a "race to the bottom" by countries seeking to attract foreign investment.

7. New partnerships for development must also devote greater attention to ways in which regional integration in Africa can spur development. Though still limited at approximately 10 to 12 per cent of officially recorded exports, intra-African trade is considerably more diversified than Africa's exports to the rest of the world. Manufactured goods, in particular, accounted for 40 per cent of total intra-African trade in goods from 2010 to 2012, but only 13 per cent of the continent's trade in goods with the rest of the world (Source: Economic Report on Africa 2014). However, regional intra-industry trade and trade in intermediate products remain limited, suggesting that regional production networks are still weak.

8. There is also considerable scope for regional initiatives to boost investment in infrastructure and enhance cross-border cooperation, with a view to mobilizing finance for development.

9. New partnerships must also take into account the increasing complexity of development finance. New actors have emerged, including development partners from the global South and private philanthropic foundations, and innovative assistance modalities are now being employed, including debt-conversion mechanisms, which have partially offset the decline in official development assistance that has occurred as traditional donors have come under increasing pressure to cut their aid budgets and insist on "value for money". The new development finance landscape offers greater opportunities for exploiting synergies between, and complementing, initiatives undertaken by various stakeholders. For example, while traditional donors still tend to allocate most of their aid budgets to initiatives promoting social development, southern development partners tend to focus on infrastructure projects and productive sectors. New partnerships should also support the sustainable management of the global commons, safeguard biodiversity and ecosystems, promote global health, strengthen peace and security, support fair, predictable, non-discriminatory and rule-based multilateral trading and financial systems, and address climate change. Moreover, new partnerships must also be able to address development challenges that have emerged or become increasingly urgent since the adoption of the Millennium Development Goals, including climate change adaptation and mitigation, natural disaster prevention and the financialization of commodity markets.