Millennium Development Goals, Peer Review and African divergence Jorge Braga de Macedo Faculty of Economics, UNL and Tropical Research Institute (IICT)

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Millennium Development Goals, Peer Review and
African divergence Jorge Braga de
MacedoFaculty of Economics, UNL and Tropical
Research Institute (IICT)

• Panel on policies, institutions and convergence
• OECD Paris 16 January 2006

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Outline

• Question Can the African Peer Review Mechanism
  serve as a convergence instrument?
• Answer No, but it sure beats the Millennium
  Development Goals, whose African record is
  dismal.
• Intervening Topics
• Tristes tropiques
• FfD vs. MDGs
• Policy convergence
• NEPAD-AU vs. APRM

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Systematic Quantification of Comparative Economic
Performance

• Maddison (2002) provides a millenial perspective
  on the world economy with a message of divergence
  in space and time the West and the Rest.
• This has to be adjusted to the rise of the BRICs.
  
• In the same vein as celebrated GS car race,
  Whalley (2005) has BRICs (South Africa, ASEAN
  and Mexico) at 20 or 60 of OECD GDP in 2004
  depending on valuation.

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Overtaking the G6 China Moves into Pole Position
Dreaming with BRICs

Source Goldman Sachs (2003) courtesy of Roopa
Purushothaman
Source Goldman Sachs (2003) courtesy of Roopa
Purushothaman
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Tristes tropiques or Is Africa becoming a global
ghetto?

• On slightly different definition of West from
  Maddisons, East in 2015 reaches same as 1913,
  5 points above 1950 trough while the gap between
  West and South (AfricaLatin America) falls over
  20 points during same period.
• According to Maddison (2004), Africas average
  GDP per capita in 2001 was 1500 and Latin
  Americas 6000 (both in 1990 international )!

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GDP cap in different regions as West (excluding
Japan, Russia, Turkey)

• Year WMad East South
• 0 98 99 92
• 1000 102 112 103
• 1500 100 80 58
• 1820 102 53 43
• 1913 103 22 26
• 1950 100 17 29
• 2001 110 19 9
• 2015 107 22 8
• Note WMad includes J, RU T here they are
  included in East. South is AfricaLatAm. Numbers
  in Maddison (2004) differ somewhat

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institutions survive the presence of geography,
and vice versa

• Gylfason (2006) explains growth differentials
  across countries by
• Private initiatives (investment, fertility)
• Public policies (education)
• Institutions (democracy)
• Geography (natural resources)
• Total effect of natural capital on growth is
  negative as long as wealth per head is below
  150K
• No African dummy.
• Contrast Sachs (2000) Perhaps the strongest
  empirical relationship in the wealth and poverty
  of nations is the one between ecological zones
  and per capita income.

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Policy convergence

• According to Sachs and Warner (1995), countries
  whose policies related to property rights and to
  integration of the economy into international
  trade do not qualify as appropriate do not
  converge.
• In published version they dropped property rights
  and overstated their argument.
• Cohen (2002) shows that there is not a unique
  factor behind the poverty of nations.
• Poor countries are "slightly" disadvantaged in
  each one of the factors behind prosperity. But
  the combination of these slight weaknesses
  results in huge income gaps.

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From 25 to 6 of the West

• Excluding Sub-Saharan Africa, Cohen finds average
  income per capita in poor countries is only 1/4
  that of rich countries even though the level of
  human capital, its ratio to physical capital and
  total factor productivity are each 2/3 of the
  rich countries'.
• Sub-Saharan Africa has only 40 of the Wests
  level of human capital, physical capital and
  productivity but this implies that average income
  is just 6 that of the West.

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Financing for development and MDGs

• The persistence of tropical underdevelopment has
  led to internationally agreed goals such as the
  Millennium Development Goals incorporated in the
  2002 Monterrey Consensus (sometimes called
  Washington consensus with a sombrero).
• Clemens et al. (2004) argue that the MDGs may
  undermine the cause of helping the worlds poor
  by over-reaching on the targets and overselling
  the efficacy of aid.
• This is even more true when international
  organizations (UN, IMF, World Bank, WTO) are
  unable to work together, as indeed seems to have
  been the case (The FfD conference in Monterrey
  was the exception).
• In Zedillo report, the call for more aid is
  supplemented by innovative forms of financing,
  described by Reisen (2004).

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Reisen on global taxes and special funds

• Global taxes seek to finance a global public
  good (development) by imposing a tax on a
  global bad, such as speculative international
  finance, pollution or the arms trade. They have
  widespread public support, notably among civil
  society groups but face the opposition of crucial
  govts.
• Topic-specific funds, like the Global Fund to
  Fight AIDS, the Vaccine Fund and the Global
  Environment Facility, can serve as focal points
  for finance for specific urgent global problems
  but they may also result in a less coherent
  response to global problems, since they may
  duplicate existing structures or introduce new
  ones into what is already a cumbersome and
  complex management system.

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The International Finance Facility (IFF)

• The IFF would be built on a series of pledges by
  donors (each lasting 15 years) for a flow of
  annual payments to the IFF. On the back of these
  pledges (its assets) the IFF would issue bonds in
  its own name (its liabilities). However, real
  liquid public assets would bolster the
  credibility of the Facility.
• The IFF could boost aid to as much as 100
  billion per year during the crucial 2010-2015
  period.
• Yet agreement about the IFF has not been reached
  within the G8. The United States, in particular,
  have favoured a bilateral approach, increasing
  foreign aid by 50 per cent over the next three
  years by creating a Millennium Challenge Account
  (MCA).

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Quoting Clemens et al. (2004)

• What poor countries need from rich ones is
  broad-based, sustained, moderate engagementnot
  emotional, moralistic, centralized big bangs. Aid
  can work, but it must be dramatically improved.
• Innovations like the Global Health Fund or the
  Millennium Challenge Account are a great start,
  but we need much more such experimentation and
  evaluation before scaling up makes any sense.
• And we need to go far beyond aid,
• investing in key technologies (such as vaccines),
  
• opening our markets,
• finding creative arrangements for win-win labor
  mobility,
• and many other avenues to support ongoing efforts
  by poor countries themselves.

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Eight MDGs from 1990 to 2015

1. halve extreme poverty (1a) and hunger (1b)
2. achieve universal primary education (indicators
   are rates of enrollment 2a and reaching grade 5
   2b)
3. promote gender equality (3a) and empower women
   (3b)
4. reduce under-five mortality by two-thirds (4)
5. reduce maternal mortality by three-quarters
6. reverse the spread of HIV/AIDS, malaria and other
   diseases
7. halve the proportion of people without access to
   safe drinking water (7a), ensuring environmental
   sustainability
8. develop a global partnership for development with
   targets for aid, trade and debt relief.

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MDGs and Africa

• At current rates, the fraction of world
  population living under 1 a day will be halved
  in 2015, due to spectacular progress in China and
  India.
• It will not be the case in Africa, where extreme
  poverty will fall from 48 in 1990 to 39 in
  2005, while the MDG is 23. Only six countries
  mostly from North Africa will reach the goal.
  The hunger target has been achieved in Ghana,
  Libya, Namibia, Nigeria and Tunisia.
• At end 2005, African outlook remains mediocre, in
  spite of numerous initiatives on the part of the
  UK presidency of G8 EU and of continued world
  growth.
• Russian G8 Presidency goals (energy, education,
  health) not targetted to Africa.

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MDGs performance ratio in Africa

• Goals achieved and on track as of total
  (includes slightly off, far behind, slipping back
  and no data, the latter is indicated in
  parentheses)
• 1b. halve people suffering from hunger 28 (11)
• 2a. all children enroll in primary education 59
  (6)
• 2b all children reach grade 5 13 (74)
• 3a promote gender equality 55 (23)
• 3b empower women 36 (40)
• 4. reduce under-five mortality by two-thirds 21
  (2)
• 7a halve the proportion of people without access
  to safe drinking water 51 (28)

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African Economic Outlook

• Joint report by OECD Development Centre and
  African Development Bank Publication began in
  2001 thanks to grant from European Commission.
• Modeled on OECD Economic Outlook, includes
  overview of 29 countries representing close to
  90 of population and GDP and a statistical annex
  which includes social indicators.
• Special themes each year Privatisations in 2003
  Energy in 2004 financing of small and medium
  entreprises in 2005.

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Macroeconomic Indicators from AEO 2005
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AEO Message NEPAD

• AEO Message since 2002/2003 has been that
  economic challenges are rooted in domestic
  governance rather than on external factors.
• Monterrey Consensus explicitly acknowledges the
  role of good governance and peer pressure. NEPAD
  does the same as it based on the twin concepts of
  ownership and partnership, whereby Africans
  themselves are in charge with the support of
  their development partners.
• This has led to 5 African Partnership Fora
  meeting in Africa and in the G8 presidency
  country.
• More importantly the key to NEPAD is its African
  Peer Review Mechanism (APRM), reviewed by Kanbur
  (2004).

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NEPAD, AU and good governance

• NEPAD has led to a new dialogue between African
  leaders and their development partners but also
  to a new impetus for African integration.
• The pressure for appropriate policies has
  increased and stronger commitments have been made
  in connection with sustainable development and
  social and economic programmes socio-economiques
• AU-NEPAD Ministers for Science and Technology met
  in Dakar in Sept 2005. These meetings are usual
  in EU especially as a new framework program is
  being approved in Parliament.

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26 countries have signed up for APRM

• 26 countries have signed the APRM Memorandum (or
  are about to so at the 5th Summit to be held in
  Sudan next week) Algeria, Angola, Burkina Faso,
  Cameroon, Congo, Ethiopia, Gabon, Ghana, Kenya,
  Mauritius, Mali, Mozambique, Nigeria, Rwanda,
  Senegal, South Africa, Uganda, Benin, Malawi,
  Lesotho,Tanzania, Sierra Leone, Sao Tome, Sudan
  and Zambia.
• The review of Ghana and Rwanda will be concluded,
  to be followed by Kenya et de Mauritius, then
  Uganda, Nigeria, Algeria and Senegal.
• So far no announced peer review date has been
  met the 5th Summit was supposed to take place in
  November 2005.

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APRM spread itself too thin

• APRM provides a forum that speaks with an African
  voice to African nations but Kanbur (2004)
  cautions it must not spread itself too thin to
  meet the three criteria of competence,
  independence and competition.
• There are 93 indicators in the 4 sub-areas listed
  of governance. This cannot be covered
  competently, no matter how good the staff.
• The success of the APRM depends on the seeds of
  its assessment of a country falling on the
  fertile soil of a vibrant civil society dialogue
  in that country.
• Better links with other multilateral surveillance
  procedures (IMF, OECD and EU) would help. This is
  the purpose of the Africa Partnership Forum,
  launched in Paris in 2003, now under Russian and
  Nigerian co-chair.

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Annex Kanburs criteria for peer review 1.
Competence

• Technical competence is essential.
• Academic peer review relies on the competence,
  authority and reputation of journal referees and
  editors.
• The OECD secretariat is central to the
  functioning of its peer reviews.
• The IMF is criticized more when it steps outside
  of its basic competence in macroeconomics.

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2. Independence

• Any suggestion of influence on the reviewers,
  either from those reviewed or from forces
  extraneous to the review, would undermine the
  integrity of the review.
• In academic review, anonymity assures this
  independence, as well as the professional stature
  of the reviewers and editors.
• OECD peer reviews explicitly include a political
  phase where the reports and their conclusions are
  discussed, and negotiated, but there is
  independence of the technical work.
• The IMFs independence from the interests of its
  major stakeholders is widely questioned by
  governments and civil society in poor countries.

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3. Competition

• Peer review mechanisms work best when they are
  part of a wide range of assessments. When a
  review is perceived to be the only game in
  town, the high stakes set up a dynamic of
  pressures that can undermine trust.
• There are many academic journals to which authors
  rejected from one journal can take their paper
• OECD peer reviews feed into a rich and ongoing
  policy dialogue and debate in the reviewed
  country
• IMF reviews work like OECD reviews in rich
  countries not using IMF resources, but not so in
  poor countries dependent on them.