4 December 2017 – You have held several economic research and managerial positions at the Bank. You were the Bank’s Resident Representative in Sudan and are currently Country Manager in Ethiopia. From your experience, how would you link governance and economic growth and to what extent would you say the Bank has pushed the governance agenda in these countries to help them achieve successful structural transformation?
From my experience as a development banker, I see good governance as the manner in which public officials and institutions acquire and exercise the authority to shape public policy and provide public services, including basic social services, or simply the ability of the state to create and capacitate institutions that support economic growth, reduce poverty and improve the welfare of the people. Over the years, evidence suggests a strong link between rapid economic growth and good governance capacities of states. Good governance, especially good economic governance, is shown to have given states the capacity to achieve and sustain higher rates of investment, and to implement policies that encouraged innovation and the acquisition of efficiency-enhancing technologies that placed such states on higher growth trajectories. Nearly all states that have attained successful economic transformation have had governance capacities that could execute these functions.
Given the structural limitations of markets in many developing countries, which could limit the benefits of market-enhanced governance, the success of our development efforts requires improved governance capacities of states to accelerate productivity growth (growth-enhancing governance) and promote wealth creation. This is evidenced by the success of East Asian countries in the last five decades, where state governance capacities created the conditions for the emergence of market-generated efficiency gains that enabled them to sustain economic growth, with significant advances in improving human welfare.
The Bank is well cognizant of the relevance of good governance for the development of African Regional Countries (RMCs) and has long taken formidable steps to catalyze and strengthen state capacity to build good institutions and improve governance capacities of RMCs. The Bank’s governance mandate is discharged through the second ‘Governance Strategic Framework and Action Plan (GAP II)’, which is crafted on three complementary pillars, namely public sector and economic management; sector governance; and investment and business climate. Governance and accountability also feature very prominently among the core operational priorities of the Bank’s Ten Year Strategy 2012–2023. In partnerships with other key players, the Bank has supported initiatives that have improved accountability and accelerated progress in the delivery of basic social services (health, education, water and sanitation) and helped countries better manage their natural resource wealth to attain greater diversification, competitiveness, and above all create productive employment. The Bank also championed technical assistance and channeled resources to good governance operations, strengthened revenue collection and expenditure planning systems, public financial management and private sector reforms, complemented by initiatives to monitor transparency, and empowering civil society to address demand-side constraints for good governance in African countries.
In Ethiopia, for instance, the Bank has been relentless in its support and engagement with the Government to improve governance and accelerate the implementation of the country’s Growth and Transformation Plans (GTPs), which aims to sustain higher GDP growth rates that accelerate industrialization and structural transformation. With these efforts, the Bank has prioritized the ‘Promotion of Economic Governance’ as a key pillar of the Country Strategy Papers (CSPs) for both 2011-2015 and 2016-2020, which seek to facilitate the effectiveness of delivery of basic social services and improves the business environment for rapid private sector development. The focus on good governance lays a solid foundation for promoting ‘Infrastructure Development’ which is the second pillar of these CSPs – with strong emphasis on energy, transport, and water and sanitation, which are now key accelerators of Ethiopia’s economic transformation.
Through its consecutive ‘Basic Service Delivery Programs’ with other partners, the Bank has prioritized support to good governance in Ethiopia, with financing of about US $1 billion approved since 2006, which has become catalytic in improving decentralized basic service delivery to achieve key targets of the country’s Growth and Transformation Plans. The program has supported capacity building in Public Financial Management (PFM), fostered financial transparency and accountability in the allocation and use of public resources and enhanced social accountability by empowering citizens in the process of basic service delivery. This is completed by studies and economic and sector work that have informed the creation of a public-private partnership (PPP) unit and the drafting of a PPP legislation that is awaiting parliamentary ratification. Once adopted, the legislation will significantly enhance the role of the private sector in complementing government efforts and ensuring effective and accountable delivery of basic services. The Bank is implementing similar programs in other African countries, with differential focus and governance priorities based on country needs.
There is a need for researchers at the 2017 African Economic Conference in Addis Ababa, to establish a proper link between economic governance and the multiple threats faced across Africa every day: terrorist attacks, natural disasters and young Africans who desperately want to cross the Mediterranean Sea in search of a better life. In your view as an economist, when are we going to see effective inclusive growth on the continent?
The uprising in Arab countries that erupted in late 2010 and the rapid pace with which it spread, reconfirmed that Africa’s growth over the past decade was neither sufficient nor sustainable nor inclusive – it failed to create jobs and thus excluded too many Africans, especially young Africans. The Bank had long realized the narrowly concentrated nature of Africa’s growth, largely confined to extractive sectors in many countries, with little interaction with the real sectors, or economic diversification that could create jobs and make growth more inclusive. With Africa’s youth bulge reaching its peak amid stagnating or dwindling economic opportunities, the pressure on African countries to accommodate the youth will continue to rise unless targeted and deliberate efforts are made to create employment opportunities.
Indeed, rapid economic growth is necessary for substantial reduction in poverty, but this growth must be sustained over a prolonged period and cut across sectors for it to become inclusive, whereby it creates jobs for a significant proportion of the labour force. This implies a direct link between the macro and micro determinants of growth, and thus captures the importance of structural transformation for economic diversification and competitiveness. Thus, policies for inclusive growth are an important component of any government strategy for sustainable growth.
This recognition positioned ‘inclusive growth’ at the center of the Bank’s Ten Year Strategy (TYS) 2012–2023 as one of its twin objectives, with a gradual transition to ‘green growth’ as the second. The TYS principally focuses on four elements of inclusive growth, notably economic inclusion, social inclusion, spatial inclusion and political inclusion. The strategic and operational emphasis is on wider access to economic opportunities for Africans across age, gender and geographic divides. Thus, the role-out of the TYS reaffirms Bank commitment to enabling RMCs to broaden economic opportunities for women, especially for the youth and for transition states, and supporting countries as they build safety net programs.
The Bank’s inclusive growth agenda, which is now being operationalized in several African countries, is positioning these countries to make strides in addressing the problem of ‘youth desperation for migration’ at its source, by creating targeted youth employment opportunities in-country. In particular, the Bank’s adoption of the High 5 priority objectives from the TYS (the High 5s) engendered high impact-oriented flagship programs, such as the ‘Jobs for Youth in Africa’ (JfYA) program and the program on Empowering Novel Agri-Business-Led Employment (ENABLE) for the Youth, or ENABLE Youth. With these specially targeted programs at the verge of being operationalized in several countries, including Nigeria and Sudan, the continent is striving to acquire a solid foundation to address the issue of youth emigration head-on.
Of course, the issue of good governance remains central in creating the right environment for these programs to contribute to the countries’ economic transformation agenda, as spelled out in their national development plans. While flagship programs by the Bank and key partners will remain a catalyst for increased economic activity and productivity growth, and create jobs for youth as a disincentive to emigration, it will take structural transformation to achieve higher and sustained growth rates to create jobs on a scale that will permanently address the problem of African youth emigration. To this end, good governance, especially economic and financial governance, will continue to be imperative for achieving and sustaining such economic growth, through investments and vibrant private sector activities that will diversify economies, and create jobs on a scale that will effectively respond to the growing unemployment of the youth.
Generating and sharing knowledge constitute the cornerstone of every development initiative, in which the AfDB has already taken the lead. Could you provide concrete examples where the Bank, as a knowledge broker, has contributed to improving governance through knowledge-sharing? As the Bank Group President has said, we shall not be only “providers of funding”.
The inability of policy-makers and economic agents in most sectors and industries to collect, collate, analyze, and apply knowledge to improve productivity and achieve structural transformation, is a key constraint to developing economies at large, particularly in African countries. The Bank has long taken note of this gap and assumed leadership in having it addressed. The African Economic Conference (AEC), a forum of knowledge sharing among researchers, development experts, policy-makers and civil society, is classical example of such leadership.
The Bank is indeed complementing its convening power to leverage financial resources with a concerted effort to generate, promote and disseminate high-quality, policy-oriented research and knowledge to strengthen its policy advice, technical assistance and program operations. It has long consolidated this role as it encourages and supports learning by all development stakeholders, ensures that the best and most up-to-date knowledge from economic and other social sciences, is continually available, customized, owned, and used effectively in operations and to inform policy-making in African countries. The recent restructuring, and the Bank’s new development and business delivery model, gave due attention to the prominence of this role and reinforced it.
The Bank recognizes knowledge generation and development intervention as mutually reinforcing. This explains the high priority that knowledge generation, dissemination and utilization have received lately at the Bank. The increased emphasis on policy dialogue, informed by high quality economic and sector work and demand-driven studies have positioned the Bank to become a first port of call for economic policy advisory services in many countries. This dialogue, also at very high levels, is further informed by experiences and lessons which ensure that development experiences provide direct feedback into the identification of research priorities, while research findings in turn inform policy-making and priority setting in the choice of development intervention options.
Complementing the demand-driven economic and sector work of the Bank’s operational departments, the Bank’s Research Department undertakes and disseminates research on priority issues related to African social and economic development, with particular emphasis on growth, poverty reduction, and accelerating the process of regional economic integration. The Statistics Department generates high-quality data and statistical advisory services to African countries, and monitors key economic indicators and trends that are important for policy-making both in the Bank and in Regional Member Countries. The training department also plays an important role in knowledge dissemination and capacity building activities that facilitate the uptake and utilization of knowledge in policy-making and in development operations. It is the need to enhance this mutual interaction among research knowledge as it guides policy options (both in the Bank and in African countries) and operational priority-setting and intervention options, that the President of the Bank seeks to emphasize when he says, “we shall not be only providers of funding”. But it refers also to knowledge that will guide policy and operational priority setting.
African Development Bank