Wednesday, November 5, 2008

Uganda: Economists Speak Out on Competitiveness

Joseph Olanyo, The Monitor (Kampala), 4 November 2008

African countries will have to diversify their export baskets by venturing into production and export of new dynamic commodities, and acquire modern technologies if they are to sustain the global financial crisis, leading economists have said.

Speaking at a meeting of African Export-Import Bank (Afreximbank), President, Mr Jean-Louis-Ekra, said Africa must diversify away from its traditional markets in order to improve efficiency and competitiveness of its export sector.

"Africa has been traditionally exporting to Europe. May be it is time for Africa to look at China, India and Africa itself and a new horizon to mitigate the downturn," Mr Ekra said.

He said the last seven years have seen an unprecedented rise in commodity prices with some positive consequences for Africa's trade and economic growth performances.

Citing four commodities of trade interest for Africa, namely crude oil, copper, tin and cocoa, he said they averaged respective levels of 384 per cent, 208 per cent, 166 per cent and 45 per cent in 2007, above their average levels in 1994, a period of market rally in commodity prices.

"The well-known challenges to full realisation of the opportunities and benefits offered by the current boom, is the limited capacity of African countries to efficiently manage the windfall from the commodity boom," Mr Ekra said.

He said rapid growth of many emerging economies in Asia and Latin America, has contributed to surge in demand for commodities, offering new export market opportunities to producers.

"It's disheartening to note that African economies, as a group, have been less successful at exploiting the opportunities offered by new technologies, new commodities and new markets in the emerging global trading environment ," Mr Ekra said.

The Afreximbank boss, made his case during the bank's 14th meeting of the advisory group on Trade, Finance and Export Development in Africa, held at Munyonyo Commonwealth Resort from October 30 to November 1. The three-day meeting with the theme: "Value Addition in the Uganda Export Sector" was hosted by Bank of Uganda. Uganda is a shareholder of Afrieximbank.

In his lead paper: "Can Africa Compete?-Defining Factors foe Export success in a Changing World of new Commodities, new Markets and new Technolgies", Prof Jeffrey Sachs, Director of the Earth Institute at Columbia University, said the global recession can be an opportunity to increase export financing for Africa.

Prof Sachs, also a special advisor to United Nations Secretary General on Millennium Development Goals (MDGs), said Africa has to be creative if it has to expand its competitiveness and cope with the global recession.

"By 2015, we are committed to make widespread progress in reducing hunger and diseases. This can be done by Africa exporting more," he said. "The key for Africa like Asia is diversification of exports.

Trade is the entry ticket for sharing the world's advanced technology. I would hope that African exports will continue to grow despite the financial squeeze that has continued to rob the global economy."

Prof Sachs, an internationally renowned economist with extensive theoretical knowledge and professional experience, presented insights into the forces shaping the new relationships that are emerging in the global economy and the possible losers and gainers by region and broad sectors.

Prof Sachs further said Africa has lost its levels of competitiveness because of low levels of agricultural productivity and narrow primary commodity exports.

"Small holder farmers continue to farm with basic implements without access to technologies that can change their lives," he said.

Commenting on the current downward economic spiral sparked by the US financial turmoil, African Development Bank (AfDB), Chief Economic, Dr Louis Kasekende, said AfDB is expressing fears that aid budget disbursement to Africa may go down as donor economies' budgets succumb to the global credit crunch and can no longer live to their obligations.