Fifth International Conference Europe-Africa of the Aspen Institute France on «The contribution of the private sector in the implementation of NEPAD» in Annecy, 29-31 August, 2002. Session I: "The new African political environment overlying the NEPAD"

Introduction by Jorge Braga de Macedo, OECD Development Centre

In responding to the opening statements of President Wade and Professor Nkhulu, and to the first introduction by Madame Traore, I want to begin with three points, agreed upon by thirty some entrepreneurs and civil society representatives after intense discussions at a panel on the role of the private sector in NEPAD held during the annual meetings of the African Development Bank in Addis-Abeba last May. The first point has to do with the national capacity and institution building. The second point has to do with excessive perception of political risk in Africa. As the third links to global issues, it will allow me to deal with the peer reviews proposed in the NEPAD. I will compare these proposed peer reviews with existing multilateral surveillance frameworks (fourth point) and stress both the importance of good governance and the pitfalls of available governance indicators (fifth point).

1. The national capacity- and institution-building is decisive because the private sector and civil society in Africa are not organized. Even in so-called "failed states" the state remains an organization and there is no organization. in the case of business, of civil society. This is the difficulty about the point of entry when it comes to the private sector and civil society in Africa.

Now the private sector is not only important from a national, regional and continental perspective but also from a local perspective, due to the proximity of business and of civil society to people's specific problems. This is of course the reason why the principle of proximity is such an important principle in European integration doctrine (even if some think it is not as important in practice). The local dimension is essential in the credibility of what the private sector may be able to do at national, regional and continental levels.

An adversarial relation between the private sector and civil society and the State is also damaging at all levels. This is why the idea of public-private partnerships become so important at all levels. For example, the OECD has a pilot project in Mozambique attempting to enlarge the knowledge base that is accessible to entrepreneurs, very much in line with the Monterrey Declaration-paragraph 24. Such kind of initiatives could be seen as solving the national capacity and institution building in a credible manner because a broader knowledge base benefits private initiative at national, regional and international levels.

2. Second point, excessive perception of political risk. Here again more information and more transparency are needed, as discussed in point 4 below. In addition to intergovernmental organizations, rating agencies also have a role to play and there is certainly a lot of room for credit rating in Africa. One other important point about perception of the risk is the role of the diaspora in making risk perceptions closer to reality on the ground. There are nowadays a number of African professionals that live abroad and very often they feel a little bit alienated. There is really something that can be done there to increase their visibility at home and the international visibility of their nations or regions.

Both rating agencies and the diaspora can be seen as providing credibility to Africa. Often the lack of credibility comes from ignorance. Greater visibility for African realities would avoid that something that happens in the north of Africa may have completely unjustified ripple effects in the southern part. Of course, this was not uncommon in other continents but it has largely disappeared except in the case of Africa, where confusion is still a source of contagion.

So comparability, visibility and some presence in the media would be a way of going around this excessive perception of risk. And the spread of African risk-sharing institutions, together with rating agencies and the diaspora, will also contribute to earn credibility abroad.

3. The third point, and perhaps the hardest one, has to do with the link to global issues. It has been said that the NEPAD is a road not traveled before and parallels with the conference in Bretton Woods, New Hampshire in 1944 or with the Marshall plan have been used. On the first parallel, maybe a slightly more amenable climate could be Monterrey where, for the first time, the UN system, the Bretton Woods institutions, and the WTO collaborated not just at the end but throughout the process, and we hope this goes on and that the link to global issues is more than rhetoric because if it is more than rhetoric, Africa could help.

The second parallel is also tricky. The analogy only helps if the emphasis is on the system set up to co-ordinate the implementation of the Marshall Plan rather than on the funds themselves. The principle of peer pressure encouraged a learning process between European nations, which was inherited by the OECD and the EU. While a single mutual surveillance framework does not apply to diverse circumstances, peer pressure has shown remarkable resilience and is at the heart of the NEPAD.

4. This analogy with the Marshall plan is a convenient transition to the fourth point I wanted to make, which draws on a comparison of the mutual surveillance frameworks of the IMF (Article IV consultations), the OECD (Economic Development Review Committee or EDRC country reviews) and the EU (Broad economic policy guidelines). As Neils Thygesen stated at a seminar at the OECD, these three frameworks provide elements of peer pressure in somewhat different ways. As a lending institution, the IMF has particular clout in the case of program countries – and to some extent in emerging economies too. The OECD has to rely on the quality of ideas and the relevance of comparative policy analysis. The EU processes go well beyond surveillance or peer pressure, in particular through the evolution of the comprehensive "rule book" and the greater involvement of many high-level national decision makers than at the other institutions.

While each framework serves a particular purpose, the ownership by the country is least in the IMF, whereas the EU is most predicated on the common goal of integration. The mutual surveillance by OECD has the greatest diversity, from overall economic policy to structural and sectoral issues in health, education, corporate governance etc. The EDRC and the Development Assistance Committee (DAC), for example, have different mechanisms which apply to the different objectives and the different mandates of the respective committees. This diversity of models relates to the different mandates and the different degrees of commitment from soft co-ordination to mutual help.

The idea for peer review in NEPAD is very ambitious for it includes both economic management and political governance. It should be borne in mind in this connection that the lack of data is a major barrier to assisting with policy formulation in Africa; in the European Union Treaty, the one area where subsidiarity does not apply is the compilation of data – it had been recognized that unless there was agreement on the facts under consideration it would not be possible to move discussion on to the next stage. The challenge is therefore how to apply OECD methods when the data are poor. The publication of the African Economic Outlook, modeled on the OECD’s Economic Outlook, presents information on national economies in a comparable manner. Done in collaboration with the African Development Bank it is a first attempt at doing this with respect to economic and political governance (covering the macroeconomic and structural issues).

As such, it has been seen as a helpful instrument for the NEPAD peer review process as part of the exchange of views and experience on peer review mechanisms and the requirements necessary for African countries to effectively apply them mentioned in the OECD/NEPAD Ministerial communiqué of May 2002. The idea of launching an exchange network on peer reviews mechanisms is being considered , through which the OECD would share its experience with NEPAD countries in a pragmatic and cost efficient manner.

5. The fifth point refers to the pitfalls of peer pressure on good governance when indicators are not supported by data and analytical knowledge on the issues. The importance of comparable data is crucial to peer pressure , otherwise wrong conclusions could be reached. This is why the suggestion has been made to separate high quality analysis and surveillance and then have the information made available for peer pressure exerted at the regional level The IMF has already provided information to feed peer pressure in a regional context such as that which has taken place among: Latin American finance ministers (notably in the context of the Brazil crisis); ASEAN finance ministers; ASEAN + 3 (China, Japan, Korea); and, in the context of the Euro Area’s monitoring framework as well as that of the EU as a whole.

The regional framework is promising as peer pressure is more naturally organized among smaller groups than in the context of global institutions. In the NEPAD context, the principle of self selection should help set initial standards that would not compromise the credibility of the exercise.

In effect, many of the available governance indicators are very arbitrary and their use could damage peer pressure instead of promoting it.Actually, the unavailability of data and inadequate analysis are not the only reasons for the danger of available governance indicators damaging instead of promoting peer pressure. There is a third danger, which pertains to culture. The culture of sharing is in Africa's cultural inheritance, and it should be taken into account. The example that is very clear here is the role of the family. Institutions such as the family are very different in different parts of the world. We have to find a way of incorporating them in the way in which we build this new development paradigm coming from Monterrey. This is featured in the work program of the OECD Development Centre for 2003/04.

Greater attention to data, analysis and culture will not be effective if it does not take place at the national, regional and continental levels as envisaged in NEPAD. In fact, the experience with Poverty Reduction Strategy Papers could be helpful in making peer pressure more effective. When they are successful, these programs are done at the national level, taking into account local culture but, of course, have a link with global issues.