When industrial policy fails to produce structural transformation: the case of Ethiopia
Despite the increasing foreign investment in many African economies, their participation in trade, and the economic growth that follows from it, structural transformation has remained limited. This blog takes a look at Ethiopia’s industrial policy and argues that the government has failed to sufficiently emphasize innovation in—and technology transfer to—domestic firms, leading to minimal “upgrading” of low to high value-added activities.
Avoiding too little, too late: debt relief for a green and inclusive recovery
The COVID-19 crisis has been a significant setback for global development. In October 2020, the World Bank estimated that the pandemic “could push up to 40 million people into extreme poverty” in Africa alone in 2020, “erasing at least five years of progress in fighting poverty” (Zeufack et al., 2020: 1). Public debt — which was already unsustainable in many developing countries before COVID-19 — is increasing rapidly and constraining government responses to the health, social, and economic crises caused by the pandemic. The ability of many developing nations to mobilize resources has been hampered due to severe economic contractions,. Many are using 30 percent to 70 percent of what little government revenue to service debt payments (Bárcena, 2020). Indicative of a looming debt crisis, there have been more credit rating downgrades for emerging markets and developing countries in 2020 than in all previous crises over the past 40 years. According to the International Monetary Fund (IMF), almost half of low-income developing countries were at high risk of debt distress or in debt distress at the end of September 2020 (IMF, 2020a). This analysis does not comprise middle-income countries, many of which are also under severe strain. Many emerging markets and developing economies are facing serious obstacles in obtaining the fiscal space to combat the virus, protect the vulnerable, and mount a green and inclusive recovery. While developed countries have been able to respond forcefully to the crisis — through fiscal policy, loans and loan guarantees to businesses, and quantitative easing policies — the responses of emerging markets and developing countries have been on average much smaller. For many of them, calls for “building back better” ring hollow unless they receive international support to do so. Without a resolute global debt relief effort, the goals set out by the international community in the 2030 Agenda for Sustainable Development and the Paris Agreement on climate change will not only be missed, but the progress made to date will be lost.
Covid-19 Crisis: G20 and debt sustainability in Sub-Saharan Africa
COVID-19 has further exacerbated the debt situation in sub-Saharan Africa (SSA). Prior to the pandemic about half of low-income countries (LICs) were at high risk of debt distress or in debt distress, including a large number of LICs in SSA. To cope with the severe economic consequences of COVID-19, the international community, particularly the G20 countries have a key role to play in providing short-term liquidity and debt relief to SSA. The International Financial Institutions (IFIs) have already provided financial assistance to SSA by extending and reforming existing facilities. Further scaling up of funding by the IFIs is needed by eligible SSA borrowers with demonstrated capacity to use funds transparently, well, and on account of debt sustainability considerations. For these reasons, the G20 has a key role to play. Already there is a chorus for a global Special Drawing Rights (SDR) reallocation initiative led by the G20. This will require strong political ownership and commitment by G20 countries who collectively own the largest share of SDRs. By donating or agreeing to lend part of their shares, the G20 could considerably support LICs in SSA and elsewhere to meet their infrastructure and human capital needs. The G20, the Paris Club, and the IFIs have established two processes for providing timely liquidity to developing countries: the “Debt Service Suspension Initiative” (DSSI) and the “Common Framework for Debt Treatments beyond the DSSI”. G20 countries assume a crucial role in providing bilateral grants and loans to LICs because at the end of 2019 they held 91 percent of the bilateral debt of countries that are eligible for the DSSI. In addition to this liquidity provision, the G20 should support countries in SSA through non-financial measures, including capacity building and responsible lending. The international community and the G20 have a shared responsibility to contribute to debt sustainability in LICs, including in SSA.
We need to upgrade the United Nations: towards a more effective sustainable development governance
The authors call for the forthcoming report of the UN Secretary-General, 'Our Common Agenda,' to specify the necessary steps toward establishing more effective, agile and accountable sustainable development governance by the UN. In addition to welcoming moderate reforms, the analysts argue that "riding things out" is not an option when the need for action is so pressing. A UN Sustainable Development Council – created by upgrading and transforming ECOSOC – could become the centerpiece of more ambitious reforms.
A new multilateralism for the post-COVID world: What role for the EU-Africa partnership?
Multilateralism has been in trouble for a while, particularly at the global level. Yet, the European Union (EU) and its member states have remained among its staunchest supporters. In their June 2019 Council Conclusions, EU leaders drew the outlines of a common European vision to uphold, extend and reform the multilateral system. Against an increasingly complex and contested geopolitical backdrop, these goals were further developed in the recent EU Communication on Multilateralism, published in February 2021. Key messages: • In the wake of COVID-19, European leaders have reaffirmed their support for multilateralism and their hope of reforming and carrying forward the multilateral system. This was most recently stated in the EU’s Communication on Multilateralism of February 2021. Strengthening multilateral cooperation will require partners. The African Union (AU) with its 55 member states could be an important partner, but it cannot be taken for granted. • To build meaningful cooperation with African actors and work together towards constructive multilateralism, the EU and its members must accept that African states have their own views of shifts in the global order and the desirability of further change. For greater legitimacy of the multilateral system, the EU must move beyond simply protecting the status quo, combining its stance as a defender of human rights and other universal norms and values with support for reforms and efforts to strengthen meaningful African participation in multilateral fora. • The EU must support reform of the UN Security Council to ensure that Africa gains proper representation. In the meantime, the EU should take further steps towards substantive cooperation. This includes improving internal coordination; increasing outreach to the A3, the AU and concerned African states; and working with the A3 early in the drafting process for resolutions that affect Africa. • The EU should make the most of the G20 Italian Presidency in 2021 to facilitate participation of African actors in this forum, which has increasing sway over a range of sensitive issues for African countries, such as debt relief. The G20 should seek to build consensus around an inclusive recovery agenda, to “build back better” and advance structural cooperation in the financial and health sectors. • COVID-19 has demonstrated the importance of health as an urgent area of multilateral cooperation. The EU should seek to work closely with African actors to reform and improve multilateral structures in the health domain, to respond effectively to the ongoing crisis and for future preparedness. This should include supporting African countries in developing local bio manufacturing capabilities, working together to reform and strengthen the World Health Organization (WHO) and to fully implement the “One Health” approach. • The EU should engage with African countries now to formulate a common and mutually beneficial vision and position for the international climate and environmental negotiations set for this year. Particularly, this concerns decisions on the post-2020 biodiversity framework and post-2025 climate finance target and reporting standards. Key topics include the role of nature-based solutions in addressing and integrating multiple environmental issues and provision of more funds for climate adaptation.
Die neue Schuldenkrise als Chance
In der Pandemie-Zeit sind viele Entwicklungs- und Schwellenländer in die Situation geraten, ihre Schulden nicht zurückzahlen zu können. Ein geregelter Erlass könnte zu mehr Klimaschutz und Gerechtigkeit führen.
Wie Wissensnetzwerke ihr transformatives Potential entfalten
Die Pandemie macht die Bedeutung von Wissensnetzwerken als Instrument deutlich. Um erfolgreich zu sein, müssen sie interdisziplinär und transnational ausgerichtet sein, sowie eine globale Vision verfolgen.