[AU-Monitor] Fwd: ECA Media Advisory ERA 2006

[Firoze Manji]

Sorry for cross-posting, but thought this media advisory would be of  
interest

Firoze

Begin forwarded message:

> From: Abraham Tameru <ATameru at uneca.org>
> Date: 5 January 2007 02:17:00 pm GMT
> To: Abraham Tameru <ATameru at uneca.org>
> Subject: ECA Media Advisory ERA 2006
>
> ECA Media Advisory ERA 2006
> January 05, 2007
>
> The 2006 edition of the Economic Report on Africa: Capital Flows  
> and Development Financing in Africa places capital flows at the  
> centre of the debate on development financing and examines how  
> external capital can help countries accelerate growth and reduce  
> poverty.
>
> Despite growth rates above 5 per cent from 2004 to 2006, this is  
> not sufficient to meet the Millennium Development Goals (MDGs).  
> Constraining the ability of African countries to accelerate and  
> sustain growth and reduce poverty are various imbalances in the  
> areas of trade, resource flows and investment. African countries  
> thus need to mobilize more domestic and external financial  
> resources to fill the financing gaps.
>
> Capital flows to Africa in the form of aid, remittances and foreign  
> direct investment have increased considerably over the past four  
> years, says the Report. However, they are unevenly distributed  
> among countries. In addition, capital flows to Africa are highly  
> volatile and unpredictable, increasing macroeconomic uncertainty  
> and undermining government's ability to design and sustain long- 
> term development plans.
>
> The Report makes the following recommendations in aid of increasing  
> capital inflows and more efficient usage:
>
> - African countries need to improve the investment climate to  
> encourage both domestic and foreign investment. Consolidation of  
> reforms will alleviate political and macroeconomic uncertainty and  
> reduce sovereign risk. In addition, there is a need to minimize  
> factor costs, especially through reliable energy supply and  
> adequate public infrastructure.
>
> - Each country needs to identify and target sectors that have high  
> potential for employment creation. Countries need quantitative  
> measures of the employment impact of investment across sectors.  
> Governments can then use this information to design incentive  
> mechanisms that will help channel foreign capital into sectors with  
> the highest employment creation potential.
>
> - Promoting regional financial integration will help overcome the  
> constraint of underdeveloped financial markets. There is a need to  
> capitalize on existing regional integration arrangements to foster  
> financial integration, which will expand the scope for investment  
> and resource mobilization, increasing the attractiveness of African  
> markets in the eyes of foreign investors.
>
> - African countries need mechanisms for monitoring and managing  
> capital flows to minimize the risks of financial instability. To  
> achieve this, African governments should develop adequate  
> statistical capacity to track capital flows and monitor warning  
> signs of financial fragility.
>
> - African countries need to design strategies to increase the  
> contribution of the Diaspora to economic development. African  
> governments should establish mechanisms and incentives to increase  
> the volume of remittances and encourage higher allocations of  
> remittances to investment.
>
> - Development partners have to honour their commitments with regard  
> to the Monterrey Consensus. Developed countries should make every  
> effort to reach the target of 0.7 per cent of Gross National Income  
> (GNI) for Official Development Assistance (ODA) as soon as possible  
> and to reduce aid volatility. They should also step up measures to  
> facilitate the flow of Foreign Direct Investment (FDI) to African  
> countries, especially in non-oil sectors.
>
> Even as African countries seek ways to increase the inflows of  
> official and private capital, they need to be aware of the  
> potential negative effects of a surge in these inflows on their  
> economies. ERA 2006 points out that with appropriate capital  
> management strategies, African economies could absorb higher  
> external capital with minimal adverse effects. In other words,  
> there is ample room for scaling up external resources to support  
> Africa's efforts to accelerate growth and reduce poverty.
>
> (END)
>
> Issued by the ECA Information and Communication Service
>
> PO Box 3001
> Addis Ababa
> Ethiopia
> Tel: +251 11 551 58 26
> Fax: +251 11 551 0365
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>
>