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n Journal of Public Administration - NEPAD : objectives and implications for investment and trade
The New Partnership for Africa's Development (NEPAD) represents a new vision for Africa premised on core principles such as democracy, human rights and the rule of law. It has at its epicentre the reduction and eradication of poverty and the implementation of national strategies for sustainable development in order to halt the marginalisation of Africa.
This long-term vision is dependent on investment that will provide an impetus for Africa's development. The required investment and funding needed to achieve these objectives can only be secured if the commitment, credibility and resolve of African leaders are clearly demonstrated. NEPAD represents such an articulation, though generally formulated. It contains the seminal seeds for the regeneration of the African continent that has been ravaged for long by wars, famine and other innumerable scourges. The task ahead is to concretise the goals and objectives of NEPAD in a way that will ensure its credibility and popularity.
In order to achieve these objectives, Africa must strive to create conditions that are conducive to attracting investment both from outside the continent and inside the continent. NEPAD identifies peace, security, democracy and political governance as core components of such a vision. This paper seeks to build on these elements by focusing on two core components, namely the role NEPAD can play in the mobilisation of investment and trade. Globalisation is characterised by increasingly intensified cross-border trade and increasing financial and foreign direct investment (FDI) flows. Though it has helped world growth and wealth in recent years, it has not done so equally for all countries or continents. Potential investors discount the African continent as a location for investment because of the negative image of the region as a whole. A worsening of imbalances between developed and developing countries had impeded development and aggravated poverty. The marginalisation of African countries is reflected in their small share of world trade, that was barely two percent in 2000 with FDI under one percent.
In order to reverse this trend, Africa must, through NEPAD, create conditions to attract investment into prioritised sectors. Small highly fragmented markets further hamper the attractiveness of Africa as an investment destination, apart from factors such as political instability and armed conflict. Africa simply does not compare favourably as regards a number of basic determinants of foreign investment.
NEPAD must influence policy on a range of issues by creating conditions that foster inter alia faster sustainable growth and poverty reduction; improvement in living standards and most importantly - to gain international confidence in Africa as a whole. The focus should be on building civic social capital, addressing the lack of trade openness, lack of capacity and deficient public service; and also mitigating the high aid dependency of African countries. These are all issues where NEPAD is well positioned to influence policy both on a national and continent wide scale.
A greater proportion of foreign capital flows into Africa consists of FDI and portfolio flows, while ODA has decreased since the 1980s. This dynamic indicates the importance in multinational corporations as major investors through FDI. Tariff liberalisation within the context of the WTO has had a marked impact on international trade flows.
Africa's part of international trade has dwindled in the last 25 years. Though Africa has had preferential access the European market through the Lomè Conventions, it has not been able to expand its capacity in this regard. Intra-Africa trade is very low, evidenced by the fact that African countries trade much more with the outside world than with themselves. In this regard it is worrying to see the imbalance between trade with South Africa, where the latter's exports are four and a half times its imports from the rest of Africa.
Recent years have seen the emergence of regional economic communities (RECs) with the objective to increase market size and the removal of internal obstacles to African trade. Many of these REC's have progressively moved or are moving to greater liberalisation and integration of their respective economies. Due to different levels of economic development, benefits of integration invariably accrue to the most developed member. No mechanisms exist to address these adverse effects of economic integration, especially where LDCs are concerned. NEPAD is perfectly positioned to address some of the shortcomings in current RECs. Compensation mechanisms to offset such losses may be devised, impact studies in conjunction with UNECA and the African Development Bank (AFDB) may further concretise modalities of integration while also building capacity. Overlapping membership and duplication of functions with RECs may also be addressed under the overarching objectives of NEPAD.
As a political draw-card, the timing of NEPAD may also come to influence the upcoming negotiations between the EU and the ACP on programming for EPAs with the Cotonou Agreement. The political credibility of NEPAD may direct greater synchronicity between the respective RECs vis-a-vis a more harmonised approach with the EU, possibly a single negotiating position. A harmonised approach on this front may yield greater results on especially issues like rules of origin and accumulation and market access. Further, the EPA negotiations also present an opportunity aligning regional outcomes with the multilateral rules of the WTO. Other agreements like AGOA, may similarly be influenced by NEPAD. At the moment, AGOA is not a negotiated agreement, but a unilateral act of Congress that may be amended at any time at the will of the American Congress. This is an unhealthy condition under which the African nations are positioning themselves by adjusting production capacity according to the huge increased demand in areas like textiles. NEPAD is well placed to expand America to commit to greater institutionalisation of AGOA and more security for Africa, not only in terms of access to the American market but also e.g. product coverage, investment issues, technology transfer, technical assistance.
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