“Mobilizing Aid for Trade: Focus on Africa” - Interview with TZFO ResRep, Sipho Moyo
"Mobilizing Aid for Trade: Focus on Africa", is the central theme of a high–level conference scheduled to take place on October 1-2, 2007, in Dar es Salaam, Tanzania, under the auspices of the African Development Bank (AfDB), the UN Economic Commission for Africa (UNECA), and the World Trade Organization (WTO) in cooperation with the World Bank. Click here for more.
Question: Why is this meeting important to poor countries like Tanzania and what it is expected to achieve?
Answer: First of all, as you may be aware, the upcoming high-level conference is the third and last in a series of regional conferences on Mobilizing Aid for Trade — following the first one in Lima, Peru, two weeks ago and the second one in Manila, Philippines last week all as part of a global initiative launched by WTO in 2005 to scale up international financial assistance for trade capacity building in developing countries.
This event, which is organized by the African Development Bank, the UN Economic Commission for Africa and the World Trade Organization in cooperation with the World Bank and hosted by the Government of Tanzania will bring together finance and trade ministers, development partners, regional economic communities, and key private-sector actors to focus on trade-related challenges in Africa. The idea is to encourage governments, donors and the private sector to address specific challenges for the region, to prioritize AFT needs, and to move towards shared solutions to trade-related challenges.
There are serious supply-side constraints facing African countries that severely limit their ability to benefit from the current trading system.
Specifically, technical capacity notably when it comes to formulating, negotiating and implementing trade policy and related agreements
The Aid for Trade Initiative seeks to help developing countries to build the trade related capacity and infrastructure they need to take advantage of trade liberalization and enhance a more effective participation in the world trading system.
The objective of the meeting is to build support for the global Aid for Trade initiative in which the WTO plays a central role by (i) raising awareness about the importance of trade for growth in developing countries, (ii) create a forum for sharing of information on best practices, and (iii) to helping African countries build the capacity they need to take advantage of trade. In essence the conference will bring attention to the issue so that all of our governments, donors, and private sector can find a way of working together in addressing these trade related challenges towards solutions that are both comprehensive and strategic. In this respect the meeting will seek to encourage African countries to make trade a key development priority while appealing to development partners to scale up trade-related development assistance – i.e. more and better Aid for Trade.
Question: More specifically how is Aid for Trade supposed to achieve this?
Answer: As I’ve said African countries, lack the technical and institutional capacity to successfully integrate into and navigate the sophisticated world trading system. Aid for Trade can help to train African trade officials so they can more effectively participate in WTO activities. But it is also needed to improve trade related infrastructure in Africa where our countries lack the basic infrastructure that facilitates trade i.e. modern transport corridors; ports, rail, telecommunications networks to connect exporters to world markets; modern customs facilities for efficient clearance of goods; exports meet international standards.
To put it differently, without capacity building and without improved infrastructure African countries will not be able to harnesses the benefits of globalization in the same way that Asians have achieved in order to provide an engine for growth that leads to higher living standards and poverty reduction.
These are the kind of gaps that Aid for Trade can help to fill and thus provide a catalyst for the increased trade, investment and growth so that developing countries can share in the world trading system. Ultimately what Africans want and desperately need is a fair world trading order.
In terms of this conference what we would like to see as an outcome is African ministers making trade capacity and infrastructure a national priority taking full consideration of the regional dimensions simply because trade by definition crosses borders. This calls for close collaboration with the RECs such as EAC, SADC, ECOWAS etc and also means finding new ways to finance and implement projects regionally.
On the part of donors the challenge is how to mobilize the requisite financing and deliver it more efficiently and effectively. That also means incorporating trade and growth in their own strategic planning to ensure long-term poverty reduction through increased trade and economic growth.
Question: What exactly do you mean by Fair Trade?
Answer: As important as development assistance and debt relief are, African countries want a fairer system which can help them to grow their economies, reduce aid dependence and take charge of their own social-economic transformation thru adequate health and education. The reality however is that although African trade has continued to grow, increasing almost five fold in twenty years and with exports growing by an average of 15% annually since 2000, despite this, Africa’s share of world trade has fallen remarkably. The ADB's research findings which were recently highlighted by President Kaberuka shows that in 1950, Africa's share was 10%, and by 1980 it had dropped to 6 percent. Today, that share is less than 3%. now to illustrate how important and urgent fair trade is, let me being in another statistic: according to DATA and NGO which focuses on debt, aid and trade for Africa, if Africa could regain just an additional 1% share of global trade, it would earn $70 billion more in exports each year - several times more than what the region currently receives in foreign aid. Just imagine that – it’s simply mind boggling!
But as you know, progress has been slow because the developed countries continue to protect their markets against exports from poor African countries and equally constraining, they continue to subsidize their farmers heavily, thus distorting trade and making it impossible for African farmers to compete internationally. How can they compete? But the truth is that fairer trade will benefit everyone, not just Africa.
But on the other hand Africans must diversify their exports from primary commodities like coffee, cocoa, sisal, copper etc and add value to create products that meet international standards and that can earn more money.
Question: What is the role of the private sector?
Answer: As you know governments do not trade —it is the farmers, businesses and companies that trade, in short, private sector not governments. That mean private sector has to be part of the solution and partnership for and infrastructure building. That is why you will see many private sector representatives at this meeting because private investment — both foreign and domestic — must be a major part of the answer.
The question is how do we leverage their resource, and what incentives are required to get them to participate.
Question: What is the contribution of ADB to trade related issues in Africa?
Answer: The ADB has an important responsibility in this area because as you may know it has the mandate of the African Heads of state under the NEPAD framework to be the lead agency for infrastructure development on the continent. This means that beyond providing its own resource for development of the sector it also has the responsibility of mobilizing resource from other development partners including public private partnerships (PPP) and others players.
To this end the Bank prepared in 2001/2a program for the rapid development of infrastructure projects that can accelerate sub-regional and continental economic integration. The Short Term Action Plan (STAP) outlines priority infrastructure projects and programs in the energy, transport, water supply and sanitation, and Information and Communications Technology (ICT) sectors. It was basically designed to trigger off and guide the systematic development of infrastructure in Africa. Major step in setting the foundation for a coherent and structured approach to the development of regional infrastructure under the NEPAD. It is a comprehensive strategy which also focuses attention on important infrastructure requirements of the continent, as well as the policy, regulatory and institutional frameworks all of which have an impact on trade capacity and readiness. Of course, the Bank works closely with African Countries, RECs, African Union, Specialized infrastructure development Agencies, the World Bank and other donors in helping to package and structure the financing of infrastructure programs and projects.
The estimated total investment cost of the projects included in the STAP is US $8 billion, half of which are envisaged to be financed by the private sector. To date, the Bank Group has approved funding for 25 Projects/Programs for a total commitment value of US$ 630 million, and mobilized about US$ 1.6 billion in co-financing of these projects. A NEPAD-Infrastructure Projects Preparation Facility has been established as a multi-donor facility to assist regional economic communities, countries and specialized infrastructure development agencies in the preparation of bankable infrastructure projects. The Canadian government supported the creation of this facility with seed funding of C$10 million.
Clearly minding the infrastructure gap will cost money, but the potential benefits are huge. Consider this, according to the World Bank Africa needs cost $20 billion and another $1 billion per year in maintenance. But on the benefit side they have estimated that such infrastructure investment could boost trade by $250 billion within 15 years with the rural poor benefiting significantly!! The figures are compelling and we need to do something about closing the gap. The good news is that donors including MDBs like the ADB and World Bank have stepped forward and are committed to this process. They have also integrated trade in into their poverty reduction strategies.
Question: What about the ADB’s contribution in Tanzania?
Answer: In terms of the overall portfolio, since the Bank Group commenced operations in Tanzania in 1971, to date the total commitment is UA 1,168.39 million (about USD 1.8 billion). Of this infrastructure sector has had the largest share of investment with public utilities accounting for 25 % of total commitments and transport taking about 20%. Together the infrastructure portfolio amounts to UA 487 million (about USD 746.4 million) out of a total commitment of almost USD 2 billion. Agriculture accounts for 19.3% while social sector is close to 12 percent. Indeed I should point out that most of the Bank’s interventions in agriculture, education and health projects have infrastructure components.
Currently, ADB has 5 ongoing infrastructure operations in Tanzania and the commitment is UA 224.34 million (about USD 343.8 million), which constitutes about 67.7% of total commitments on all ongoing operations. Out of the 5 operations in the country, 4 are implemented in Mainland and 1 in Zanzibar. In addition there are three ongoing studies for multinational operations: (a) Arusha-Namanga-Athi River Road Reconstruction covering Tanzania and Kenya (UA 0.5 million), which is financed in partnership with the Japanese Bank for International Cooperation (JBIC); and (b) Isaka-Kigali Railway Feasibility Study between Tanzania and Rwanda (UA 1.66 million), which is underway. The total commitment on these studies amounted to UA 2.60 million.
Actual transport projects are two amounting to UA 55.58 1. Roads Rehabilitation and Upgrading Project (Kagoma-Lusahunga road, 154 km) – 38.65 million and 2. Zanzibar Roads Upgrading Project (87.3 km) including 4 bridges – UA 16.93 million. plus a recently approved project the Singida –Babati – Minjingu road (240 km) for UA 60 million (USD 90 million).
In addition we have three ongoing operations in the public utilities sector amounting to UA 108.76 million and constituting 31.6 % of the infrastructure portfolio. These are 1. Dar es Salaam Water Supply and Sanitation Project – UA 3825 million, 2. Monduli District Rural Water Supply and Sanitation Project – UA 15.51 million and 3. Rural Water Supply and Sanitation Programme – UA 55 million. We are also expecting that before the end of this planning period (2005-2007) the Bank will also extend a support of UA 30 million to Tanzania for implementation of electricity power project in Arusha, Mwanza, Shinyanga and Dar es Salaam regions.
As you know Infrastructure development is Government of Tanzanians priority sector and we at the ADB have made it a point to align our interventions with the MKUKUTA strategy. The ADB is committed to this objective.
Question: Are you happy with GoTz handling of donor resources in the public financial management system?
Answer: Absolutely! That is why Tanzania is one of the largest beneficiaries of the African Development Fund. This comes about through rigorous allocation criteria.