Author
Abstract
Trade, aid, and investment are more inextricably linked in sub-Saharan Africa than anywhere else in the world, contends the author, whose survey of sub-Saharan Africa's prospects for trade, aid, and investment lead to the following broad conclusions. Developing an outward orientation, improving competitiveness, and recapturing its lost share in world markets offers a higher potential payoff than any other strategy for growth and sustainable development in sub-Saharan countries. If the region had maintained internal competitiveness and retained its 1970 share of world exports, successfully defending against new entrants, its 1990 level of exports would have been at least $50 billion higher than actual earnings - assuming that the composition of sub-Saharan exports would have changed to reflect changes in world trade. If the region continued to rely on exports of commodity products alone, the relative gains would have been much smaller. In the last decade, sub-Saharan Africa has become increasingly dependent on external resource flows for investment, imports, and development. But there is little chance of sustained high levels of aid because of budget constraints in the OECD countries, competing demands from new claimants, and the new conditionalities imposed by bilateral donors (for democratization, reduced military spending, and improved human rights). Most African countries must mobilize domestic resources and increase domestic savings rates by reducing public sector dissavings, the financial losses of public enterprises, and other nonproductive spending. Certain low-middle-income African countries can attract a significant amount of foreign direct investment, but most resource-poor countries - especially in the Sahel and the Horn of Africa - will continue to depend on foreign aid. There must be a more durable solution to Africa's debt problem. Only half of the debt service due can be paid, suggesting the urgent need to reduce the debt stock and thus debt servicing obligations, in alignment with debt servicing capacity. Many current proposals under discussion, if implemented, can bring considerable relief. Several sub-Saharan countries can attractsignificant investment because of their location, low labor costs, natural resource endowments, and the size of their domestic market. But productive investment levels in most African countries have remained depressed, and even where economic policy reform has been implemented, the investor response - both domestic and foreign - has been poor. Uncertainty, fears of policy reversals, lack of credibility and continuity, the contagion effect, and more attractive opportunities elsewhere reinforce such structural weaknesses in sub-Saharan Africa as poor infrastructure, inefficient services, and a weak human resource base to deprive Africa of new investment.
Suggested Citation
Husain, Ishrat & DEC, 1993.
"Trade, aid, and investment in sub-Saharan Africa,"
Policy Research Working Paper Series
1214, The World Bank.
Handle:
RePEc:wbk:wbrwps:1214
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Citations
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Cited by:
- Samuel K. Gayi, 2006.
"Does the WTO Agreement on Agriculture Endanger Food Security in Sub-Saharan Africa?,"
WIDER Working Paper Series
RP2006-60, World Institute for Development Economic Research (UNU-WIDER).
- Andri Kopperschmidt & Jacint Matutes, 1997.
"Assessment of trade liberalisation in sub-Saharan Africa,"
Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 32(4), pages 193-202, July.
- Musisi, A.A., 2006.
"Physical public infrastructure and private sector output/productivity in Uganda: a firm level analysis,"
ISS Working Papers - General Series
19182, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
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