Foreign Aid, Self-Reliance, and Economic Development in West Africa:

FOREIGN AID, SELF-RELIANCE, AND ECONOMIC DEVELOPMENT IN WEST AFRICA

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FOREIGN AID, SELF-RELIANCE, AND ECONOMIC DEVELOPMENT IN WEST AFRICA R. Omotayo Olaniyan

FMEGER

Westport, Connecticut London

Library of Congress Cataloging-in-Publication Data Olaniyan, R. Omotayo. Foreign aid, self-reliance, and economic development in West Africa / R. Omotayo Olaniyan. p. cm. Includes bibliographical references and index. ISBN 0-275-95501-X (alk. paper) 1. Economic assistance—Africa, West. 2. Sustainable development— Africa, West. 3. Africa, West—Economic policy. I. Title. HC1000.O43 1996 338.966—dc20 96-10425 British Library Cataloguing in Publication Data is available. Copyright © 1996 by R. Omotayo Olaniyan All rights reserved. No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher. Library of Congress Catalog Card Number: 96-10425 ISBN: 0-275-95501-X First published in 1996 Praeger Publishers, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc. Printed in the United States of America

The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48-1984). 10 9 8 7 6 5 4 3 2 In order to keep this title in print and available to the academic community, this edition was produced using digital reprint technology in a relatively short print run. This would not have been attainable using traditional methods. Although the cover has been changed from its original appearance, the text remains the same and all materials and methods used still conform to the highest book-making standards.

To My Wife, Grace Olufunke Olaniyan and Children, Oluwatoyin, Olayemisi, Oluwadamilola, and Oyebola Olaniyan.

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Contents

Abbreviations Acknowledgments

ix xiii

1.

Introduction

2.

General Theories of Foreign Aid and Economic Development

13

3.

Foreign Aid in West Africa

27

4.

Self-Reliance in West Africa

97

5.

Critical Issues in Foreign Aid, Self-Reliance, and Economic Development

127

Conclusion

179

Selected Bibliography

187

Index

197

6.

1

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Abbreviations

ACP

African, Caribbean, and Pacific States

ADB

African Development Bank

ADF

African Development Fund

AID

Agency for International Development

BCB

Banque Beninoise pour le Development

BIAO

Banque Internationale pour PAfrique de TOuest

BNP

Banque Nationale de Paris

CARICOM

Caribbean Community

CEAO

Communaute Economique de T Afrique Occidentale (West African Community)

CEDEAO

Communaute Economique des Etats de PAfrique de TOuest

CIDA

Canadian International Development Agency

CILSS

Commite Permanent Inter-Etats de Lutte contre la Secheresse dans le Sahel

CMB

Cocoa Marketing Board

CMEA

Council for Mutual Economic Assistance

COMESA

Economic Community of Eastern and South

Abbreviations

X

African States DAC

Development Assistance Committee

DANIDA

Danish International Development Agency

EC

European Community

ECOMOG

Economic Community of West African States Ceasefire Monitoring Group

ECOWAS

Economic Community of West African States, or Communaute Economique des Etats de P Afrique de POuest (CEDEAO)

EDF

European Development Fund

EIB

European Investment Bank

ESAF

Expanded Structural Adjustment Facility

EU

European Union

FUR

Federal Institute of Industrial Research

GDP

Gross Domestic Product

GEF

Global Environmental Facility

GNP

Gross National Product

GTZ

German Agency for Technical Cooperation

IBRD

International Bank for Reconstruction and Development

ICA

International Commodity Agreement

IDA

International Development Association

IDC

Industrial Development Centre

IFAD

International Fund for Agricultural Development

IFC

International Financial Corporation

ILO

International Labour Organization

IMF

International Monetary Fund

JICA

Japan International Cooperation Agency

JAIDO

Japan International Development Organization

MRU

Mano River Union

NAFTA

North American Free Trade Agreement

NGOs

Nongovernmental Organizations

NISER

Nigerian Institute for Social and Economic

Abbreviations

XI

Research NLC

National Liberation Council

NRC

National Redemption Council

NTF

Nigerian Trust Fund

OAU

Organization of African Unity

ODA

Official Development Assistance

ODF

Overseas Development Fund

OECD

Organization for Economic Cooperation and Development Operation Feed the Nation

OFN OIC

Organization for Islamic Conference

OMUS

Organization de Mise en Valeur du Fleuve Senegal

ONAHA

Organisation Nigerien de PAmenagement Hydro Agricole

OPEC

Organization of Petroleum Exporting Countries

OPVN

Office des Products Vivriers du Niger

PRODA

Project Development Institute

SADC

Southern African Development Community

SAP

Structural Adjustment Program

SONARA

Societe National de Commercialisation de PArachide

UN

United Nations

UNCC

Union Nigerienne de Credit et de Cooperation

UNCED

United Nations Conference on Environment and Development

UNCTAD

United Nations Conference on Trade and Development

UNDP

United Nations Development Programme

UNECA

United Nations Economic Commission for

UNECLA

United Nations Economic Commission for

Africa Latin America and the Caribbean UNEP

United Nations Environment Programme

Abbreviations

XII

UNPAAERD UNSO USAID WFP

United Nations Programme of Action for African Economic Recovery and Development United Nations Sudano-Sahelian Office United States Agency for International Development World Food Programme

Acknowledgments

The idea of this book emerged in the mid-1980s when most African countries embarked on economic reforms in the attempt to arrest economic recession and promote economic growth and development. The West African subregion was of particular interest to me, as it embraces a variety of countries at different levels of economic development. The subregion is made up of countries with varying colonial experience—British, French, and Portuguese. The main motive was to inquire into what went wrong with development policies and development in the West African subregion, which is endowed with considerable natural resources and which in the early 1960s experienced economic growth. The book represents a major research study that I initiated as Head of the Division of International Economic Relations at the prestigious Nigerian Institute of International Affairs, Lagos, Nigeria. I would like to acknowledge the constructive criticisms of the research colleagues at the institute, which were useful in shaping well the conceptual aspect and the scope of the book at the initial stage. Also, I would like to acknowledge the vital financial support of the institute, without which the field trips to West African countries, France, and Britain would not have been possible. The field study enhanced the quality of the book as it led to greater exposure to the practical development problems of a number of West African countries, in particular, in the collection of information and access to up-to-date data. In this connection, I would like to thank the Librarians of the British Museum and Library, London and OECD, Paris, for their invaluable assistance. In the same vein, the author also wishes to express his profound gratitude to the librarians of the UN Library, New York, for their

XIV

Acknowiedgments

cooperation and readiness to assist at all times. Furthermore, I would like to acknowledge the invaluable secretarial support provided by Olayemisi, Oluwadamilola, and Oyebola Olaniyan in the preparation of the tables. The views expressed in this book are entirely those of the author and not of those of the Nigerian Institute of International Affairs or the Organization of African Unity.

1 Introduction

The persistence of the deplorable economic situation in the West African subregion has been a major reason for the relentless search for realistic and durable solutions by the various West African political leaders. In recent years, this search has subsumed the application of disparate economic tools and concepts of which foreign aid and self-reliance have been very prominent. But these tools and concepts have not been without their own limitations in a rapidly changing national and international environment. Generally, the importance of foreign aid has always been recognized in the process of economic development by the governments of West African countries, as in the cases of other developing countries. Foreign aid, in conjunction with foreign investment, the expansion of foreign trade, and the application of technology are expected to play leading roles in the process of economic development. In particular, foreign aid is needed to fill investment-savings gap in economic development programs.1 Saving is perceived as a critical deficient factor in the process of economic development; it is scarce as a result of the chronic prevailing low level of incomes. This phenomenon has been well articulated in the concept of the "vicious circle" of poverty, an aspect of the famous modernization theories of the 1960s.2 The need for foreign aid in the West African subregion has, in the past decade, been reinforced by the fact that underdevelopment has been unimaginably accentuated by the global economic recession. The global economic recession has its roots in the world oil price shock of 1973. Its implications were far-reaching and with very devastating effects on the foreign exchange earnings and reserves of the feeble economies of the nonoil-producing countries in West Africa. Officially, seven of the sixteen

2

Foreign Aid and Seif-Reiiance in West Africa

countries in West Africa are classified among the least developed countries in the world according to the UN categorization. These countries include: Benin, Burkina Faso, Cape Verde, Gambia, Guinea, Mali, and Niger. Three of the seven countries are landlocked (Burkina Faso, Mali, and Niger). The problems of these countries were aggravated by their remoteness from the world and the attendant transport and transit costs.3 The depressing economic situation in West Africa has been aptly illustrated by the basic economic indicators. Over the period 1970-1982, the average annual growth of the Gross Domestic Product (GDP) was 3.5 percent. Within this, Cote dTvoire and Mali had an average annual growth rate of 5.7 and 4.3 percent, respectively, as against -0.5 and 0.9 percent for Ghana and Liberia.4 The average Gross National Product (GNP) per capita of West Africa, in 1984, was US$410.5; that is, one-fourth that of Brazil or one-twenty-fifth that of Japan.5 The annual average rate of inflation for West Africa over the period 19701982 has been a disappointing 15 percent. This suggests that the standard of living of West Africans, during this period, has been unduly depressed. For some countries, the impact has been more severe; this is especially well illustrated in the cases of Ghana and Nigeria, for which annual average rate of inflation was calculated to be approximately 40 percent.6 West Africa's export performance since 1970 has been generally disappointing. The volume of exports has fallen by 1 percent per year. In this respect, the poor performances of Benin, Ghana, and Sierra Leone have been remarkable, both recorded an annual decline of 4.4, 4.7, and 6.6 percent, respectively. In Benin and Ghana, the reluctance of the marketing boards to pay prices closer to the world level discouraged production for export. In Sierra Leone, the volume of diamond exports decreased as a result of the increases in the number of illegal diggings. But a few exceptions to this trend were highlighted in Burkina Faso, Cote dTvoire, Mali, and Niger, whose annual growth rates were 9.1, 2.2, 6.6, and 20.8 percent, respectively.7 Both Burkina Faso and Mali benefited from the expansion of the cotton industry and a steadily rising trend in the world prices of cotton. The performance of Cote dTvoire was good because of its export diversification. The government made substantial progress in the implementation of import substitution industrialization policies that enabled the export of industrial products to increase significantly. But Niger's exports growth was largely due to the expansion of its uranium industry. Thus, for most West African countries, the period 1970-1982 has been very traumatic; the process of economic development was severely constrained with the diminution of exports and foreign exchange earnings. Under this circumstance, it became imperative that more external financial assistance would be required in order to arrest further deterioration and avoid the collapse of the economies of the seriously handicapped West African countries.

Introduction

3

It has however, not been very difficult to understand why export trend assumed this pattern. In thefirstplace, all West African countries are principally primary producers, essentially exporting few agricultural and mineral products. Secondly, the difficulties of some of the countries were due to circumstances beyond their control. For example, the Sahelian countries suffered from the bouts of drought. The decreases in the international prices of crops accounted, in most cases, for reduced'export revenue earnings. Thirdly, the actions of monopsonist marketing boards through the payment of a small proportion of the global price to farmers contributed to the attractiveness of subsistence agriculture rather than export production.8 The development in imports was remarkably different. Between 1970 and 1980, import volumes in West Africa grew at a rate of 7.5 percent per annum. However, after 1981, following the rise in the global price of oil, there was a substantial reduction in import volumes. This new level of import was largely sustained through external borrowings.9 The massive incursion of West African countries into external borrowing for the import of capital and consumption goods has, however, not been devoid of its own problems. It resulted in the rapid growth of external debt and rising debt burden. This was, for example, estimated at 37 percent in 1982. The rising debt burden has been a major cog in the wheel of economic development in the subregion, since a smaller and smaller proportion of foreign exchange earnings became available for development purposes within each West African state. What is more, the recent global developments have indicated that West African countries, like other African countries, are geared toward harder times in the 1990s. Perestroika and glasnost initiated in the former Soviet Union in 1986, have been well embraced in other Eastern European countries that hitherto have been itching for political and economic reforms. In the view of the former president of the Soviet Union, Mikhail Gorbachev, perestroika implies the opening up of the Soviet Union's economy to allow in more foreign investments. Foreign investments, especially on a joint venture basis, should be considered the corner stone for the promotion of economic growth in a transformed Soviet Union. Along with this, glasnost, the decentralization of authority and greater freedom of the press, was designed to ensure the effective implementation of the economic reforms.10 As a result of these developments, foreign investments were increasingly diverted to the Soviet Union and to the other more profitable Eastern European countries.] [ This was inevitable because foreign capital would naturally flow to arears of maximum returns on capital. Furthermore, the consolidation of the European Community (EC) through the Single European Act effective from 1992 raises problems about the potential growth of West African exports to the community, which absorbs over 60 percent of the subregion's exports. The prospects for increases in financial support to the subregion are not attractive. A possible economic growth in the EC after 1992 may not lead to corresponding increase in its imports from West

4

Foreign Aid and Self-Reliance in West Africa

Africa because the demand for primary products is not highly responsive to increases in economic growth. In addition, the EC's financial assistance to West Africa would be undermined not just because of its diversion to Eastern Europe, but because available capital would be directed to more productive and profitable areas within the EC itself.12 In the effort to solve these problems, the imaginative approach adopted by most governments has increasingly indicated the crucial role of increased foreign aid if the economic crisis in West Africa is to be reversed. By 1985, the various forms of austerity measures and economic stabilization arrangements that prevailed in the early 1980s have been effectively transformed into structural adjustment programs (SAP). SAP was largely inspired by the World Bank and the International Monetary Fund (IMF). Across the board, West Africa's SAP essentially aims at the restoration of the balance of payments equilibrium while ensuring sustained balanced economic growth. However, the success of SAP in the subregion over the years could at best be described as modest. The program, in a number of countries, has effected negligible growth in both the industrial and agricultural sectors. This is particularly so while it is observed that most countries in West Africa continue to be confronted by an increasing menace of high rates of inflation and rising unemployment. It has become clear that the success of the monetary-based program would largely depend on greater increases in concessional inflows from the multilateral international financial institutions. This demand, however, raises considerable questions since the record of foreign aid flows to the developing countries has not been impressive in the past. Also, there were divergent views on the contribution of foreign aid to economic development in the developing countries. As early as 1968, the United Nations, actively interested in the promotion of equitable global development had resolved on the objective of 1 percent of the GNP for the net transfer of resources to LDCs including private flows, and with 0.7 percent as a target for Official Development Assistance (ODA).13 The ratio between these two figures reflects the relative flows at that time, and the ODA target was largely a political goal. When this target was discussed, most of the developed countries accepted it, some with a time frame. For example, this was the case for Belgium, the Netherlands, and Sweden. The former Federal Republic of Germany accepted it in principle. Whereas others, including the United States did not commit themselves.14 While the 1 percent norm for overall net flows (including private investment and commercial lending) has been reached, the hopes aroused for the ODA target have been dashed. The average performance, for example, of the Organization for Economic Cooperation and Development (OECD) countries was only 0.36 percent of the GNP in 1984. The contribution of the United States had fallen from 0.5 percent in 1960 to 0.24 percent in 1983. The Federal Republic of Germany at 0.49 percent in 1983 remains at a low level. In the same

Introduction

5

vein, the performance of the former Soviet Union and other members of the Council for Mutual Economic Assistance (CMEA) has been disappointing. This was only in the order of 0.18 percent in the early 1980s.15 The exception to this pattern of performance has been that of the Organization of Petroleum Exporting Countries (OPEC), whose increased oil revenues have resulted in 3 percent of GNP contributions. The relative performance of different countries in meeting this target may, however, not even be absolutely easy to compare. This is particularly the case because certain donors have argued that while their aid performance has been low their trade policies have been liberal. Some that have shown better performance include expenditure on overseas commitments that in proper evaluation should not qualify as aid. Quite a number of donors allocate their aid on need-based criteria, while others prefer to aid those countries with which they have special historical, commercial, or other ties. Foreign aid from the Eastern European countries was essentially directed at the public sector, the area that received less aid from other donors. Beyond this, the Eastern European countries also take goods in repayment for debt. As to the relevance of foreign aid to economic development, K. B. Griffin and J. L. Enos have argued that it may not necessarily lead to increases in growth rate, since it is primarily used to supplant domestic savings.16 Foreign aid they added, is associated with the decline in domestic savings. This occurs because foreign aid permits a government to relax efforts in savings and to increase its consumption expenditure, or because private foreign investment usurps domestic investment opportunities that would reduce savings to the extent that savings becomes dependent on investment opportunities.17 The disillusionment with the inflow of and role of foreign aid in the 1960s led to the consideration of "self-reliance" as part of the strategy to overcome underdevelopment in developing countries in the early 1970s. Generally, most West African governments have identified with this concept since it was proclaimed at the nonaligned movement's conference convened in Lusaka, Zambia, in 1971. The idea was further accorded a central position in the celebrated 1980 Lagos Plan of Action and Final Act of Lagos for accelerated economic development in Africa. Both the Organization of African Unity (OAU) and the United Nations Economic Commission for Africa (UNECA), the principal architects of the plan felt that the path of self-reliance was the most realistic toward meaningful economic development in the continent. The experience of African countries following the world oil price shock of 1973 and the subsequent global inflation have influenced thinking in the OAU and UNECA that the prospects of economic development in Africa would be better enhanced through a greater inward-looking policy and reduced dependence on the industrially developed countries. The importance that most West African governments attached to the idea is well illustrated in their reference to it in their several development plans and annual budgets over the past fifteen years.

6

Foreign Aid and Self-Reliance in West Africa

Basically, self-reliance requires developing countries to substantially and fully utilize their natural resources for the promotion of economic development. Among other things, it entails the construction of indigenous models of economic development. This may involve withdrawing from the international economic system in order to reduce the vulnerability of the national economy. A corollary would be diminishing the role of foreign aid. Naturally, this approach has itself been a subject of increasing debate among the observers of the development process in the developing countries. The basic issues are not so much in the ability of these countries to control and manage their resources for development but in their intricate linkage and high dependence on the developed countries. For example, most West African countries export primary products and principally rely on the proceeds for the import of capital and consumption goods for economic development. Besides, there are questions of the irrevocable commitments of the developing countries to the international community, in particular, to major international political and economic institutions. Thus, like foreign aid, self-reliance in the context of the development process in the developing countries has some basic limitations that should be properly addressed if it is to serve as the building block for accelerated and sustained development. Beyond all these however, it has now been recognized that self-reliance and economic development should in the contemporary world development process be appropriately conceptualized in the context of sustainable development. In a world conference in Rio de Janeiro, Brazil, from June 3 to 14, 1992, the international community, including West African countries, came to the conclusion that development is multidimensional and intricately linked to the environment. Economic development would in this context have more meaning when it is considered together with its political and social ramifications. But then, all these will have to be considered in the framework of the relationship with the environment. What is implicit in this proposition is that development should not occur at the expense of the environment and the future of mankind. All these were wrapped up in the concluding package, Agenda 21. In its social and economic dimensions, Agenda 21, among other things, calls for: (1) international cooperation to accelerate sustainable development in developing countries; (2) the eradication of poverty; (3) a change in consumption patterns; (4) demographic dynamics and sustainability; (5) the protection and promotion of human health conditions; and (6) the integration of environment and development in decision making. On the conservation and management of resources for development, there would be international cooperation in the following areas: (1) the protection of the atmosphere; (2) an integrated approach to the planning and management of land resources; (3) the combating of deforestation; (4) the management of fragile ecosystems, especially of combating desertification and drought as well as sustainable mountain development; (5) the promotion of sustainable agriculture and rural development; and (6) the conservation

Introduction

7

of biological diversity. The agenda further calls for an international consolidation of the role of major groups in the effort to ensure sustainable development. In this connection, there should be an international support in the following areas: (1) global action for women toward sustainable and equitable development; (2) children and youth in sustainable development; (3) recognition and the strengthening of the role of the indigenous people and their communities; (4) the strengthening of the role of non-governmental organizations, especially those involving partnership for sustainable development; (5) local authorities' initiatives in support of Agenda 21; and (6) the strengthening of the role of workers and their trade unions.18 In order to accelerate sustainable development in developing countries, states have decided to establish a new partnership. This partnership commits all states to engage in a continuous and constructive dialogue to achieve a more efficient and equitable world economy. Economic policies of individual countries and international economic relations both have great relevance to sustainable development. It is assumed that the reactivation and acceleration of development requires both a dynamic and a supportive international economic environment and determined policies at the national level. And it is also assumed that international cooperation in this area should be designed to complement sound domestic economic policies. Thus, among other things, a supportive international climate should be provided to facilitate an increase in financial resources flow to developing countries and thus lead to the reduction in the external debt of developing countries.19 Many developing countries have experienced a decade-long situation of negative transfer of financial resources, during which their financial receipts were exceeded by payments that they had to make, in particular for debt-servicing. Consequently, domestically mobilized resources had to be transferred abroad instead of being invested locally in order to promote economic development. Also, the burden of debt-service payments in those countries has imposed severe constraints on their ability to accelerate growth and eradicate poverty and has led to a contraction in imports, investment, and consumption. External indebtedness has emerged as a main factor in the economic stalemate for the developing countries. Thus, it could be observed that Agenda 21 provides an integrated comprehensive approach that could have significant influence on the process of economic development in West African countries. However, if implemented, its benefits to the countries in West Africa are likely to come in the areas of poverty eradication, the protection and promotion of human health conditions, the promotion of sustainable human settlement development, and the integration of environment and development in decision making. But the question that still remains unsatisfactorily answered is how the countries in West Africa would find the money to meet the additional costs that the program entails. This is particularly worrying when the prospects for a better and new partnership for increased financial assistance are not very bright. Most of the donor countries

8

Foreign Aid and Self-Reliance in West Africa

are weary of increasing their financial assistance flows to the developing countries, especially those in Africa. Given these premises, therefore, four basic assumptions are fundamental to this study. First, that structural transformation implicit in the process of economic development cannot entirely be a function of capital formation as generally stipulated in the various theories of economic growth. Economic development is a multidimensional process, explainable not strictly in the context of economic variables but, to a large extent, within the framework of numerous interrelated political, social, and cultural factors. Secondly, that academic theories generally provide a sound explanatory arrangement of the pattern of phenomena and are valuable if they sufficiently incorporate local variables of the areas where they are applied. Hence, the general theories on foreign aid and economic development are useful only to the extent that their basic assumptions are relevant to West African economic development. Thirdly, it is assumed that foreign aid could be an important ingredient in the process of economic development if it flows into the subregion under the right conditions and in the appropriate quantity. It will furthermore be a catalyst to economic development in West Africa if it is properly directed to priority subregion or national projects. For most countries in the past, economic growth and development have been significantly assisted by external financial support. For example, in the Middle Ages, England—clearly an underdeveloped country—profited from the technical assistance provided by the Norman masons, Flemish weavers, and Italian bankers. In the nineteenth century, British investments and French loans helped the United States and the former Soviet Union to lay the foundations of their modern economy. Moreover, in the twentieth century, the rapid recovery and development of Western Europe, after its devastation from World War II, was facilitated through the massive inflow of foreign aid from the United States under the Marshall Plan. Thus, foreign aid is historical in the relationship of states and vital for the procurement of their accelerated economic growth and development. Fourthly, self-reliance represents a realistic approach toward sound economic development in West Africa. The subregion is well endowed with natural resources. Some of the important minerals found in West Africa include diamond, gold, iron ore, bauxite, coal, uranium, and petroleum, to mention a few. A significant part of the land in West Africa, in the areas of savannah and tropical rain forests, is arable. The population of West Africa is over 150 million. This could be a vital market for the disparate national economies as integration proceeds under the arrangement of the Economic Community of West African States (ECOWAS). The economies of West African countries, like those of other African countries, are highly vulnerable because of their over-dependence on the economies of the industrially developed countries of the West. West African countries depend on the export of their primary products to the markets of the

Introduction

9

industrially developed countries and depend on the import of capital and consumption goods. The import of food has, in recent years, assumed significant proportions in the wake of global economic crises and bouts of drought. Furthermore, the increasing protectionism of the industrially developed countries on certain agricultural and industrial products is not in the interest of West African countries. In view of these circumstances, it would be important to harness internal resources for well-founded development and reduce external dependence. However, the approach would be more useful when its limitations are fully acknowledged and sufficient efforts are made to reduce them. It would be more useful as an approach if it is first concerned with the sector in which countries have the natural ability to effect rapid transformation. A typical example would be the agricultural sector that hitherto has been the most important sector for the primary commodities countries of West Africa. The sector should be transformed to increase productivity in cash crops and adequately cater for the food needs of each country. The development of this sector could have positive demonstration effects on the other sectors of the economy. Thus, the problems of foreign aid and self-reliance would need to be more imaginatively addressed in the subregion. Given the development experience in the subregion since the mid-1970s, the main objective of this study is to examine the prospects for increased external financial assistance and the feasibility of self-reliance as an approach to tackling the problems of underdevelopment in West Africa. Thus, Chapter 2 is concerned with the general theories of foreign aid, self-reliance and economic development. In this chapter, focus is, among other things, on the political and economic theories of transaction that articulate the interests of aid users and how such interests are pursued. Transfer theory examines resources transfer, which leads on to the identification of other resources such as savings or foreign exchange earnings with which aid may be supposed to interact. Also, this chapter analyzes developmentalism with its strong emphasis on industrialization and dependency, which highlights the operation of transnational enterprises as a critical factor in the underdevelopment of developing countries. Chapter 3 is concerned with the nature and impact of bilateral and multilateral aid to West Africa since 1975. The chapter will seek to analyze the essential nature of the flows from the two sources. It assesses the magnitude of inflows and the areas to which they are directed in the various West African economies. The chapter attempts to highlight the principal objectives of donors in West Africa, and examines the extent to which aid has been effectively utilized in West Africa. It seeks to bring to the fore the political, economic, social, cultural, and institutional limitations that are peculiar to the subregion in the administration of foreign aid. Chapter 4 essentially focuses on the examination of self-reliance in West Africa. It identifies the key areas of the economy where economic development

Foreign Aid and Self-Reliance in West Africa

10

has been synonymous with self-reliance. For most countries, this would, among other things, include agriculture, industry, foreign trade, and regional integration. What has been the extent of the success of self-reliance in these areas? Also, what have been the critical limitations and how can these be resolved? In Chapter 5, the critical issues in foreign aid and self-reliance are put in sharper perspective. Foreign aid and self-reliance are not necessarily mutually exclusive factors in the process of economic development. The increases in foreign aid and the successful implementation of a self-reliance scheme in the future may hinge on clearer perception and the provision of solutions to certain fundamental problems. For example, in the context of foreign aid, it would be desirable to critically examine donors' interests and foreign aid management in West Africa. Also, under self-reliance, the relevance of the structural adjustment program should be accorded a more careful analysis. Furthermore, the problems of commodity prices, drought, and regional integration schemes should be more rigorously examined in order to arrive at possible solutions that could assist in the process of West African development. In Chapter 6, conclusions are drawn and recommendations made on the basic issues raised in the study. The high priority issues in West African development are identified and action-oriented policies suggested as initial steps toward the promotion of economic development in West Africa. NOTES 1. G. M. Meier, The International Economics of Development, Theory and Policy (London: Harper and Row, 1968), pp. 97-8. 2. R. Nurkse, Problems of Capital Formation in Underdeveloped Countries (New York: Oxford University Press, 1953), p. 57. 3. Other important impediments to development include inadequate water management and the survey of natural resources, the menace of diseases and epidemics. For example, the limited water in the arid and semi-arid areas undermines efforts in the improvement of agricultural production. Many of the least developed countries hold considerable deposits of economic and strategic minerals but lack the technological know-how and financial resources to carry out adequate surveys to determine the extent and quantity of their reserves or even export what is known to be available. The solution to the water problem may involve adequate drainage or an irrigation system. The effective tackling of the exploitation of natural resources may be a function of the establishment of a proper permanent mineral resources center to carry out research and exploration. For further readings, see Independent Commission in International Development Issues, The Prospects of the Least Developed Countries in Africa, August 7,1978, WG-LDC2. 4. World Bank, World Development Report 1983 (Washington, D.C.: World Bank, 1983), Statistical Appendix. 5. World Bank, World Development Report 1986 (Washington, D.C.: Word Bank, 1986), Statistical Appendix. 6. World Bank, World Development Report 1983 (Washington, D.C.: World Bank, 1983), Statistical Appendix.

7. Ibid.

Introduction

11

8. African Economic Handbook (London: Ecromorator Publications Limited, 1986), p. 92. 9. Ibid. 10. M. Gorbachev, "Perestroika Is the Concern of all Soviet Peoples" (Speech at a meeting with working people in Kiev, February 23, 1989) (Moscow: Novosti Press Agency Publishing House, 1989), p. 8. 11. G. G. Blakey, "Investment in Nigeria—A European Perspective." Paper delivered at a public lecture organized by Equity Securities Limited at the Nigerian Institute of International Affairs, Lagos, March 8, 1990, p. 4. 12. M. Davenport, "The Developing Countries and 1992." ODI Briefing Paper, November 1989, London, p. 1. 13. Willy Brandt, North-South: A Program for Survival (London: Pan Books, 1980), pp. 221-222. 14. Ibid. 15. J. C. Wheeler, Development Cooperation: Efforts and Policies of the Members of the Development Assistance Committee (Paris: OECD, 1987). 16. K. B. Griffin and J. L. Enos, "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, 18(3), April 1970, p. 31. 17. UNCTAD Secretariat, Domestic Savings in Developing Countries, TD/B/C.3124/Supp. 1, September 12, 1975, p. 16. 18. United Nations, United Nations Conference on Environment and Development, Rio de Janeiro, June 3-14, 1992, A/COIF.151/4 (Parts I, II, and III). 19. United Nations, United Nations Conference on Environment and Development, A/COIF.151/4 (Part I), p. 6.

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2

General Theories of Foreign Aid and Economic Development

INTRODUCTION For the purpose of this study, "foreign aid" will be defined as cooperation with a foreign state or autonomous political unit with the objective of assisting that state or autonomous political unit in furthering economic growth development and social progress or that part of capital inflow that is not based on normal market incentives but is instead made on concessionary terms.1 Thus, grants of freely convertible currency constitute aid in the full sense; loans contain only an element of aid (the aid component being greater the longer the grace and maturity periods and the lower the interest rate); and private foreign investment and short-term capital movements are excluded.2 The term "self-reliance," a national strategy for economic development, would be defined as a process of selective disengagement from international transactions, restructuring of the fundamental economic and political relationships, values, and institutions, and of partial reestablishment of hitherto economic and political links with the industrially developed countries.3 It assumes disengagement in the international system in the areas of trade, aid, investment, technology, information, and manpower exchanges and these are to be supplemented by reliance on internal capabilities. Restructuring is not only at the international level but at the national level. And at the time of reassociation, the nature of the national and international economic systems will be transformed to place the country adopting the self-reliance strategy in an advantageous position.4

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Foreign Aid and Self-Reliance in West Africa

"Economic development" refers to a process of structural change in the patterns of production and consumption and of change in institutions or as the creation of more interdependence between the different industries and activities within a country.5 The result of that is a gradual movement from an underdeveloped situation to a more satisfactory situation as typified in the theories of the stages of economic growth postulated by W. W. Rostow, A. O. Hirschman, and others.6 In the more satisfactory situation, there should be a reduction in poverty, unemployment, and inequality since this promotes the fulfillment of human potentials.7 An important factor in the trend toward the more satisfactory situation is the reduced need for imports, especially basic foods, petroleum and its products, capital equipment, and expertise. The idea of foreign aid originated in the late 1950s to essentially describe the flow of resources of many different kinds from institutions in North America and Europe to institutions and people of Africa, Asia, and Latin America. But as from the early 1960s, when most developing countries began to agitate for rapid economic development, the nature and aim of foreign aid became more clearly defined. For example, Africa though rich in human and natural resources, lacks the skilled manpower and technological knowledge necessary to procure economic development on the continent. Also, Africa suffers from a high rate of illiteracy and an underdeveloped infrastructure such as transportation and communications. However, in the context of development planning, which most African countries—including those in West Africa—embarked upon, the assumption of the political leaders and bureaucrats was that foreign capital has a dual role in enabling the recipient country to raise its level of

investment and increase its level of imports. The developed countries also encourage the practice of development planning as a prerequisite for the receipt of foreign aid. Furthermore, it may also be noted that the idea of foreign aid was compatible with the central theme of economic development in Africa since the early 1960s. The idea of rapid industrialization nurtured by the United Nations Economic Commission for Latin America and the Caribbean (UNECLA) in the early 1950s was accepted by the UNECA and African political leaders. Rapid industrialization was seen as the quick escape root from the straitjacket of underdevelopment characterized by underdeveloped infrastructures and dualistic economies. But industrializing, even at the level of import substitution, required a significant amount of investments and technology. The required amount of investments could not be made with the low savings and government revenue, hence foreign capital, especially aid, was seen as compatible with economic development objectives. Let us now examine some of the main influential theories, namely: (1) supplemental theories, (2) donor-oriented theories, (3) developmentalism, (4) dependence theory, and (5) self-reliance.

Foreign Aid and Economic Development Theories

15

SUPPLEMENTAL THEORIES One important feature of supplemental theories consists of its tenacious link to certain factors in economic development. In the 1950s, this was generally taken to be savings. However, in the 1960s, attention shifted somewhat from savings to other developmental factors, notably the need for foreign exchange and skills. In spite of these however, the influence of savings within the discussion of supplemental theories remains preponderant. It was argued that foreign aid could supplement savings and thereby enable the country to maintain the level of investment desirable for economic growth. As the economy grows, and incomes grow, the country can afford to set aside an increasing proportion of its income in the form of savings. Eventually, it reaches the point at which savings are sufficient to finance the volume of investment needed to maintain the desired state of growth without further aid. In this context, supplemental theories are essentially directed at the attainment of "self-sustaining growth." Self-sustaining growth is held out as a device and promise that foreign aid would be of limited duration: a time would arrive when the developed countries would not need further disbursement of aids to developing countries.8 The assumption about the growth of the economy and the capacity to save enough for the desired level of investment to a large extent ignores some of the basic impediments to economic growth in West African countries and other developing countries. The capacity to grow remarkably over the years has largely been affected by the paucity of appropriate technology, inadequate economic policies, and adverse weather conditions. Also, while the extent and level of foreign financial assistance necessary for the attainment of self-sustaining growth are generally known for the countries in the subregion, there are problems in the attainment of the envisaged appropriate level. Inflows are generally based on other reasons, which are mainly political and strategic, rather than in the economic interests of the West African countries. In other words, there are considerable problems of exclusion of other basic factors and deficiency in the emphasis on the size of relevant inflow. Furthermore, much of the disaffection with supplemental theories arose from a suspicion that they could be used to rationalize the erosion of long-term commitment to assist developing countries. Also, there were doubts about the relevance of the weak aggregative models of economic growth on which these theories rested. The dominant influence in the construction of growth models as a basis for supplemental theories has been the Harrod-Domar model and W. W. Rostow's theory of the stages of growth. This has been used to reinforce the notion that a massive dose of aid over a relatively short period will, in developing countries that have already reached the appropriate stage, rapidly bring them to the point at which foreign aid would no longer be required. The five stages of growth of the Rostow theory are as follows: (1) the traditional society; (2) the

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Foreign Aid and Self-Reliance in West Africa

long period when the preconditions for growth are evolved; (3) the relatively short period of take-off into self-sustaining growth; (4) the rapid drive to maturity; and (5) the era of high mass consumption. The role of donors is expected to be very significant in the third stage, covering a period of about twenty years.9 However, this assumption has been refuted by R. F. Mikesell, who emphasized that it is impossible in the history of both the developed and developing countries to identify any unique and relatively short historical phase as the period of take-off.10 The theory of the stages of growth, he added, is highly aggregative and can be misleading when used to identify a crucial area of activity within the national economy. Thus, it has led to foreign aid being viewed as part of a short, sharp effort to overcome just one crucial hurdle. DONOR-ORIENTED THEORIES

The main thrust of donor-oriented or international relations theory is that donors have other objectives apart from the promotion of economic development in the recipient countries. The long-term interest in the welfare of the developing countries might be both political and economic.11 In political terms, the developed countries might be interested in the stability of the developing countries. The basic assumption here is that hunger breads discontent, and discontent breeds instability. However, this is not totally convincing for most West African countries or other developing countries. The causes of instability in most countries in the West African subregion since the late 1960s are to be found more in tribal division within countries, the inordinate ambition of military leaders, and irredentism among the countries. In economic terms, the developing countries might be interested in a world economy organized on principles of comparative advantage and the international division of labor, hoping the developed countries will specialize in what they do best. In principle, the economic case is stronger than the political case. The developed countries do not perceive their own interests in these terms. In the 1960s, the process to which foreign aid contributed tended to be one of import substitution rather than export promotion, especially in Africa and Latin America. Subsequently, partly influenced by the work done under the auspices of the OECD Development Center, some aid agencies put more emphasis on promoting the developing countries' export industries. But in general, they were unwilling to adopt the logical corollary of opening up their markets for the industrial products of developing countries. The nature of the interest of developed countries in the general welfare of the developing countries is seldom specified; it is difficult to see how such interest would be sustained, except on a very high plane of moral argument, which is not what foreign policy is usually about. Moreover, as Mikesell partially further admits, international relations have derided the notion that the development of

Foreign Aid and Economic Development Theories

17

underdeveloped countries in any general sense serves the interest of the United States.12 International relation theories, therefore, are likely to fall back on the more conventional and much more convincing identification of specific foreign policy objectives that the donors pursue, such as the maintenance of military alliances or trading and investment relationships. DEVELOPMENTALISM

In 1950 Raiil Prebisch, leading the UNECLA technocrats, argued that unfavorable terms of trade resulted in less capacity for capital accumulation in the "periphery," since saving is primarily dependent on productivity. Progress in capital accumulation could be possible only if there is an alteration in the terms of trade permanently loaded in favor or the "center." Industrialization through import substitution and protectionism in his view represented the best strategy for the accumulation of capital.13 The assumption that the terms of trade lead inevitably to low capital accumulation has been criticized by Professor G. Haberler, who maintains that a deterioration in a country's terms of trade in the international market within a given period does not necessarily mean that the country's accumulation of capital and economic development will be adversely affected by the end of the period. There may also be unequal distribution of gains in favor of the center via foreign trade and, at the same time, as a result of increases in productivity. Furthermore, there may be capital accumulation and economic development in the periphery.14 Rapid industrialization may not be promoted in developing countries even through a policy of import substitution and protectionism because of the limitations of the market and inefficiency. The UNECLA technocrats themselves were not slow to appreciate the limitations of narrow markets in such countries as Argentina, Brazil, and Mexico, where import substitution and industrialization progressed rapidly in the 1950s and early 1960s. Thereafter, it became increasingly difficult to substitute domestic production for imports once the stage of light manufacturing was passed.15 Markets for capital equipment and major consumer durables are too small in any Latin American economy for the production of those goods. A reasonably large market was clearly required to ensure rapid industrial development.16 The case for most West African countries that have since the early 1960s, embarked on import substitution industrialization as a strategy for promoting economic development is not substantially different. Apart from Nigeria and Ghana, the markets of West African countries are small and the acknowledgment of this impediment has resulted in the establishment of a number of economic cooperation arrangements. One of the most important of these is the ECOWAS, which was established on May 28, 1975 to integrate the disparate subregional

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Foreign Aid and Self-Reliance in West Africa

economies. The main objectives of the ECOWAS, among other things, include the promotion of industrial development, trade expansion, agricultural development, and cooperation in scientific and cultural issues.17 Also, the progress in import substitution industrialization has been significantly undermined as a result of poor management of industries. For example, most industries in Nigeria produce under full capacity and rely to a great extent on imported raw materials. The rectification of these lapses has been part of the main objectives of the federal military government's structural adjustment program.18 Protectionism, as W. Baer further postulated, inevitably leads to the development of inefficient and costly industries in developing countries, as illustrated in his study of the automobile industry in Latin America, where the existence of numerous firms had ruled out the possibility of economies of large-scale production.19 Thus, in the late 1960s, the annual output of cars and trucks by ninety firms in eight Latin American countries was 600,000 or an average of 6,700 per firm. Hence, protectionism per se is not a single important factor in the process of industrialization; effective entrepreneurship is also required, as well as capital and skilled labor. Apart from these, the nature of economic development was, in the late 1950s, given a new dimension as the Transnational Enterprises made massive incursions into the economies of developing countries. Prebisch himself, however, argued that foreign investment was beneficial and had to admit to its consideration as a vehicle of dependence on the industrially developed countries.20 This view was widely held by prominent Latin American economists within the UNECLA and became crystallized in the celebrated theory of dependence. DEPENDENCE THEORY

Two principal traditions emerged within the theory of dependence or "dependencia" in Latin America. The first, and more influential, stems from the UNECLA structuralist perspectives associated with F. Cardoso, E. Faletto, and C. Furtado. The second stems from the marxist perspectives with which T. dos Santos and A. G. Frank are associated.21 According to both Professors F. Cardoso and E. Faletto, there was dependence on the industrially developed countries through the mechanism of direct foreign investment and its institution, the Transnational Enterprises. The placing of foreign investment in the sector producing consumer durables results in the accumulation cycle being completed at world level. Keeping up the pace of economic growth implies increases in the importation of capital goods.22 Subsequently, this formed an important part of the general theory of economic development in Africa and other developing countries. Thus, the late Kwame Nkrumah, the President of Ghana, postulated that the underdeveloped countries, even when fully independent politically, continue to be a source of capital accumulation for the imperialist states.23 The enterprises

Foreign Aid and Economic Development Theories

19

established by the Transnational Enterprises are vertically integrated with the parent company and have few forward and backward linkages with the local economy. Where production of import substitution is undertaken, there is often a high import content to inputs, reducing the net foreign savings, an effect that is further reinforced by the practice of transfer pricing between subsidiaries of the same parent company. Transfer pricing, along with licensing fees and services controls by the parent company, reduces the declared profits and hence the contribution to public savings through taxes paid, when these taxes have not been disallowed as part of the fiscal incentives offered to investors.24 The structural theory of dependence as formulated by F. Cardoso and others attempts to explain the series of events and situations that occur together and to make empirical situations understandable in terms of the way internal and external structural components are linked. The practical usefulness of the theory in the developing countries including those in Africa is still doubtful. As H. M. Sandstromn himself pointed out, "Everything is connected to everything else but how and why remain obscure and this makes policy issues for economic development ambiguous."25 Thus it is not clear, for instance, if Transnational Enterprises in Latin American countries are to be nationalized or to be controlled by an Andean Pact-style foreign investment code, nor which specific policies are to be followed with regard to transfer and technological development and income distribution. The main policy advocated is that of changing internal structure to obtain national development.26 By the early 1970s, however, the problems of economic development in African countries and other developing regions became more acute. The basic indicators of economic growth, for example, showed that the GNP in the developing countries over the years had risen at a negligible rate in comparison with the rate of the industrially developed countries. Whatever the success of the development efforts of the 1960s, whatever the trickle-down effect, the gap between the North and South did not become any narrower: while per capita real income (at 1973 prices) in the industrially developed countries doubled from about US$2,000 to US$4,000 in the period 1952 to 1972, in the developing countries, it rose by a mere US$125, from US$175 to US$300. In other words, real income per head in the developing countries amounted to approximately 9 percent of that in developed countries in 1952 and to approximately 8 percent in 1972.27 While the internal problems of underdevelopment were recognized, considerable attention was paid to the external issues as a result of increasing global interdependence in the wake of rapid technological advancement in the two decades after World War II. To most developing countries, the international and regional development efforts, and in particular, the mechanism of the international economic system, had failed to promote equitable global economic development. According to UNCTAD: "The fact that economic development declined in the developing countries when the developed countries experienced remarkable rapid expan-

20

Foreign Aid and Self-Reliance in West Africa

sion "indicated the existence of basic weaknesses in the mechanisms which link the economies of the two groups of countries. The weakness of this structure, the inadequacy of the mechanisms by which growth in the developed countries is transmitted to the third world, are manifested in each of the major areas of economic relations between developed and developing countries—in the trade in commodities and in manufactures, in the transfer of technology, and in the provision of financial resources through the international monetary and financial system."28 Thus, in their search for solutions to these problems, the developing countries embraced the concept of "self-reliance" enunciated at the 1971 summit of the Heads of State and Government, and subsequently elaborated at the 1972 conference of Foreign Ministers in Georgetown, Guyana.29 SELF-RELIANCE

Generally, self-reliance as an analytical concept has been treated in various ways. This notwithstanding however, there is a consensus that it should be perceived both as a strategy and the description of an objective.30 The main objectives of a strategy of national self-reliance are the elimination of undue external dependence and the promotion of rapid economic development. Broadly, the strategy of self-reliance is categorized into three phases. The first phase involves the partial disengagement of a country from the existing global political and economic relations.31 Disengagement from the present global political relations would involve severing relations with global political institutions. For example, it would involve the rejection of multilateral-aid offers or International Monetary Fund (IMF) financial transfers that eliminate the possibility of political leverage. Also, disengagement from the global institutions would involve a refusal to participate in UN peace-keeping forces to avoid potentially costly international involvements. But disengagement from the present international economic system would imply the erection of trade barriers to restrict the magnitude and influence of foreign goods. Comprehensive limitations on the amount of foreign investment and expatriate manpower are also an important component of disengagement, as is deliberate rejection of aid offers from the industrially developed countries. The development of new technologies, or the adaptation of existing methods, is also an important aspect of the process of disengagement. In this respect, foreign expertise is rejected, and emphasis is placed on the local design of equipment and methods of production. The technological modifications essentially suggested by the workers would lead to more appropriate methods of production that are better suited to local supplies of raw materials.32 Disengagement is a call for a partial reduction in the magnitude of international economic transactions with the industrially developed countries and for the achievement of self-sufficiency only in particular sectors. For example, self-sufficiency in basic needs such as food, energy, or national defense.

Foreign Aid and Economic Development Theories

21

The second phase is restructuring both at the international and national levels. This itself is partly induced by the disengagement process or is brought about by a deliberate governmental policy. The structuring of basic international relationships of underdeveloped countries away from their traditional ties to industrially developed countries is generally described as "collective self-reliance," and this refers to increased cooperation and exchanges of commodities and skills among developing countries. Cooperation could be within the context of regional economic integration arrangements. Some restructuring effects at the global level could also be political and institutional. A typical case could be joint action in the UN negotiations, particularly on trade and investment issues. Similarly, another dimension is in the context of the coordination of negotiating positions vis-a-vis multinational corporations. However, at the national level, restructuring would, among other things, involve the modification of consumption values, the development of new and "appropriate" technologies and institutions that support the basic principle of relying on local efforts and initiatives, the decentralization of decision making, and the increase of political participation. This is generally referred to as "individual self-reliance." Individual self-reliance therefore reinforces collective self-reliance.33 The third phase describes the process of reassociation. This implies partial reestablishment of previous relations with the industrially developed countries on a new basis. The previous basis of dependency has been altered. Disengagement and restructuring have transformed countries pursuing self-reliance to such an extent that they can afford to reestablish political and economic relations with the industrially developed countries without fear of dependence.34 Albeit, there are still considerable questions unanswered about the assumptions of self-reliance, especially how this could be relevant to rapid economic growth and development in West Africa. One of the fundamental assumptions of the disengagement process, for example is that foreign aid should be rejected in order to keep in abeyance the political influence of donors of even multilateral international financial institutions. It is hard to see how this could be significantly justified in the context of West African countries, where the paucity of capital has been a critical limiting factor in the process of capital formation and economic growth. The general low level of income in the subregion has not permitted adequate savings for the required level of investment for economic growth. The case for external financial assistance has further been reinforced by economic recession and decline in foreign exchange earnings. The OAU and UNECA were themselves very quick to realize this; thus, it was explicitly stipulated in the Lagos Plan of Action of 1980, a blueprint for an accelerated economic growth and development in Africa, that outside contributions are "supplements to own efforts and cannot be substitutes."35 Also, it stipulates that external contributions "must be supplements genuinely relevant and substan-

22

Foreign Aid and Self-Reliance in West Africa

tially meaningful in terms of the purpose and programs the member states have collectively resolved to pursue."36 Thus, external financial assistance will inevitably play a critical role in the efforts of West African countries at effectively using external resources for the promotion of sustained economic growth and development. In the disengagement phase, it is assumed that the erection of trade barriers should facilitate the acceleration of industrial development, especially of the establishment of new industries. While the case for the protection of new industries is incontrovertible because of the undue competition from similar products produced in the industrially developed countries, there are, nevertheless, increasing doubts as to whether this has assisted import substitution industrialization in West African countries or other developing countries. Overprotection of infant industries has generally resulted in inefficient industries largely characterized by poor quality in output. This has been an important factor that has dogged the success in industrial take-off, especially in Nigeria. The restructuring phase, among other things, assumes that regional economic integration would proceed satisfactorily in order to effect judicious utilization of resources and the meaningful promotion of sustained economic growth and development. The role of economic integration arrangements cannot be underestimated in the process of economic growth and development of developing countries as they could procure trade expansion and industrial development. Nevertheless, one should be cautious of their timely positive contributions to economic growth and development during the restructuring phase. This is particularly so because economic integration arrangements among developing countries are fraught with several difficulties. These, to a large extent, explain the stagnation of the ECOWAS, Southern African Development Community (SADC), Economic Community of Eastern and South African States (COMESA) and the Caribbean Community (CARICOM) to mention a few. Rapid progress in the ECOWAS for example, has been hindered by the fact that the Community has to undertake the provision of the basic infrastructures such as telecommunications systems, and the network of roads and railways—things normally taken for granted in the integration arrangements among developed countries, such as the EC or the Council for Mutual Economic Assistance (CMEA).37 Moreover, integration has stagnated in the ECOWAS because of the lack of commitment of the member states to the ideals of the community. Integration inevitably involves the erosion of national sovereignty, where the basic mechanisms include trade liberalization and the establishment of common external tariffs. These two issues imply the surrender of the basic instruments of economic policies by the component states. Most states substantially depend on customs duties as a source of revenue. Thus, there has been considerable reluctance in the implementation of the relevant protocols adopted at the summits of the heads of state and governments.38 Under this circumstance therefore, the catalyst role of regional economic integration schemes in the

Foreign Aid and Economic Development Theories

23

phase of restructuring in self-reliance strategy should be viewed with some reservations. Furthermore, the assumption about a "hitch free" reestablishment of relations with the industrially developed countries in the reassociation phase remains doubtful. The global economy is in a perpetual state of transformation, growth, and development. The bottom line in international economic relations is that the main objectives of states are to secure maximum benefits especially in the area of trade, investments, and technology transfer. In fact, the need to attain these objectives is further reinforced particularly when these countries are in the throes of economic crisis. National economic growth and development have to be sustained in order to ensure internal cohesion and political stability and the sustenance of influence in the international milieu. For example, the reestablishment of relevant trade relations may be problematic with the industrially developed countries. It is in this context that one could understand the tariff and nontariff barriers of the industrially developed countries against the industrial products of the newly industrializing countries of Southeast Asia and Latin America. Protectionism was deemed necessary, particularly from the early 1980s, in order to protect jobs and raise the standard of living of the people. The case for protection against the products of a self-reliant country may further be reinforced by the fact that it is involved in integration schemes in which the developed countries are excluded and have no direct benefits of trade expansion. Thus, there are still significant unresolved issues in the concept of self-reliance as a strategy for the promotion of accelerated and sustained economic growth and development in the developing countries.

CONCLUSION The general theories of foreign aid and development clearly has limited applications in contemporary economic situations in developing countries, including those in West Africa. A number of critical variables peculiar to some countries do not wholly justify the conclusions and inferences drawn from these theories. Besides, the universality of the theories are constantly challenged as a result of the emerging new patterns of international cooperation in recent years due to rapid advancements in science and technology. The world has become a "global village," characterized by high interdependence, increasing division of labor, high movement of capital, and intense competition among countries. As far as supplemental theories are concerned, foreign aid may not necessarily be the critical factor for the attainment of the desirable level of investment for sustainable economic growth. In the modern-day global economy, technological know-how and the availability of basic skills are some of the fundamental prerequisites. The donor-oriented theories may fit well into the basic conceptions in international division of labor, but this is hardly sufficiently justifiable when the objectives of the donors and recipients do not often

24

Foreign Aid and Self-Reliance in West Africa

converge. For example, foreign aid/investments and development would suffer abysmally in a situation where the donors are interested in assistance to alleviate poverty and promote political stability and the recipients are interested in financial and technical cooperation to promote rapid industrialization. Also, while the case for developmentalism remains unassailable for rapid development in the developing countries, one is nevertheless, naturally wary of a number of other associated difficulties. For example, undue protectionism for import substitution industrialization may in itself hamper economic growth and development by making these industries uncompetitive in the global market. Besides, the limited internal markets of most of the developing countries constitute major barriers to the effective establishment and growth of import substitution industries. Even if the answer to this lies in regional economic integration arrangements, it is yet to be seen how the already created ones could adequately provide the solutions. Furthermore, the theory of self-reliance, although sounding realistic and sometimes irresistible, is loaded with a lot of difficulties even at the stipulated first stage of its operation which primarily entails reduction in external dependence in the process of economic growth. For many developing countries, particularly those in Africa, this concept appears almost impractical given the turn of events in the international economy in the last two decades. Autonomous external resources could not be maintained or increased in the last two decades following the catastrophic decline in the world price and demand for primary commodities. Besides, there has been disturbing deterioration in their terms of trade while inflow of funds has not increased substantially in real value. And when this is taken together with the necessity to service the increasing volume of external debt, it is clear that the capacity to initiate autonomous growth has been seriously eroded. In the same vein, collective self-reliance has proved very difficult to implement in many developing regions, especially in Africa. The sacrifices and political will necessary to put economic integration into full operation are disappointingly lacking in Africa. NOTES 1. W. G. Zeylstra, Aid or Development: The Relevance of Development Aid to Problems of Developing Countries (Leyden, The Netherlands: A. W. Sijthoff, 1977), p. 16. 2. G. M. Meier, The International Economics of Development, Theory and Policy (London: Harper and Row, 1968), p. 95. 3. T. J. Biersteker, "Self-Reliance in Theory and Practice in Tanzanian Trade Relations," International Organization, 34(2), Spring 1980, pp. 235-236. 4. For details, see J. Galtung et al., Self-Reliance: A New Development Strategy (London: Bogle-L'Ouverture, 1980). 5. J. A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest and Business Cycle (Cambridge: Harvard University Press, 1934), pp. 15-66.

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25

6. W. W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (London: Cambridge University Press, 1960); A. O. Hirschman, The Strategy of Economic Development (New Haven, Conn.: Yale University Press, 1958), Chapters 1 and 2. 7. D. Seers, "The Meaning of Development," in D. Lehman (ed.), Development Theory: Four Critical Studies (London: Franc Cass & Co. Limited, 1979), pp. 9-29. 8. For details, see J. White, The Politics of Foreign Aid (New York: St. Martins Press, 1974). 9. Rostow, The Stages of Economic Growth. 10. R. F. Mikesell, The Economics of Foreign Aid: Treaties in Modern Economics (London: Weidenfeld and Nicolson, 1968). 11.1.M.D. Little and J. M. Clifford, International Aid: A Discussion of the Flow of Public Resources from Rich to Poor Countries with Particular Reference to British Policy (London: Allen &Unwin, 1965). 12. Mikesell, The Economics of Foreign Aid, p. 20. 13. R. Prebisch, Towards a New Trade Policy for Development (New York: UNCTAD, 1964). 14. G. Haberler, "The Terms of Trade and Economic Development," in H. S. Ellis (ed.), Economic Development for Latin America (New York: St. Martins Press, 1961). 15. UNECLA, Towards a Dynamic Development Policy for Latin America, E/CN.12/680/Rev.I, 1963. 16. S. Macario, "Protectionism and Industrialization in Latin America," Economic Bulletin for Latin America, 9, March 1964, pp. 61-101. 17. ECOWAS Secretariat, The Treaty of ECOWAS, Lagos, Article 2, 1 975. 18. Federal Republic of Nigeria, Structural Adjustment Program for Nigeria: July 1986June 1988 (Lagos: Federal Ministry of Information, 1986). 19. W. Baer, "Import Substitution and Industrialization in Latin America: Experience and Interpretations," Latin American Review, 7(1), Spring 1972. 20. R. Prebisch, Towards a New Trade Policy for Development. 21. F. Cardoso and E. Faletto, Dependencia y Desarrollo (Mexico City: Siglo XXI, 1967); See also, F. Cardoso, Report on Dependence in Relation to Development, (ECLA [ILPES], 1965); C. Furtado, "Dependencia externa y teoria economica," El Trimestre Economico, April-June 1971; A. G. Frank, Capitalism and Underdevelopment in Latin America (New York: Monthly Review Press, 1969). 22. Ibid. 23. K. Nkrumah, Neo-Colonialism: The Last State of Imperialism (New York: St. Martins Press, 1965). 24. A. Mclntyre, "Some Issues in Trade Policy in the West Indies," in N. Girvan and P. Jefferson (eds.), Readings in the Political Economy of the Caribbean (Mona, Jamaica: New World Group, 1977). 25. H. M. Sandstromn, Dependency Theory in the Caribbean, Annual Meeting of the Caribbean Studies Association, St. Lucia, January 1976. 26. Ibid. 27. UNCTAD Secretariat, New Directions and New Structures for Trade and Development, Report by the Secretary-General of UNCTAD to the Conference (TD/183), April 14, 1976, p. 4. 28. Ibid. 29. Guyana Ministry of Foreign Affairs, Main Documents Relating to Conferences of Non-Aligned Countries (Georgetown: Author, 1972). 30. Galtung, Self-Reliance. 31. Biersteker, "Self-Reliance in Theory and Practice," p. 230. 32. Ibid., p. 231. 33. Ibid., p. 234.

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Foreign Aid and Self-Reliance in West Africa

34. Ibid., p. 235 35. UNECA, \Jlan of Action for the Implementation of the Monrovia Strategy for the Economic Development of Africa, E/CN. 14/781/Add.l, p. 4. 36. Ibid., p. 4. 37. R. Omotayo Olaniyan, "Nigeria and Economic Community of West African States: A Role and Problem Analysis," in G. O. Olusanya and R. A. Akindele (eds.), Nigeria's External Relations: The First Twenty-Five Years (Ibadan: University Press Limited, 1986), pp. 129-130. 38. Ibid., pp. 134-136.

3 Foreign Aid in West Africa

INTRODUCTION Many West African countries entered the second half of the 1970s with considerable handicap as a result of the oil price shock of 1973. The steep rise in the price of oil precipitated economic recession in the subregion. This became aggravated by the early 1980s as a result of the adverse impact of several other factors, such as the decline in the global price of primary commodities, the increased burden of foreign debt, inadequate internal economic policies, and drought, to mention a few. This development implied that West African countries had to mobilize both their internal and external resources in order to bring their economies back on course for economic growth and development. The need for an increase in financial assistance was also recognized by the developed countries, which felt that the international community should assist in the arrest and alleviation of the growing poverty in Africa. This naturally led to some renewed cooperative efforts at both bilateral and multilateral levels: direct assistance from governments and from international financial institutions. In addition to this, several nongovernmental international organizations have also shown tremendous interest in the ways to eradicate poverty in West Africa. However, while the need for external financial assistance has been recognized as urgent in the subregion, it remains highly doubtful if these responses have been commensurate with the demands of West African countries. Also, there is considerable skepticism over whether the available inflows in recent years have been efficiently utilized by the recipient West African countries for economic growth and development. The critical underlying factors on the impact of

28

Foreign Aid and Self-Reliance in West Africa

foreign aid in West African economic growth and development remain the foreign aid policies of the industrially developed countries and the management of foreign aid by West African countries. Thus, for example, the general tendency for the metropolitan powers, especially Great Britain and France, to maintain their influence in their former colonies continue to prevail, yet this must be linked to their economic interests. Special considerations are accorded to the benefits of the private sector in aid flows to developing countries: it is essentially deemed imperative to be linked to domestic industrial output and growth. This was necessary while the metropolitan countries were themselves confronted with unemployment and inflationary problems. Besides, the types of political and economic policies that West African countries pursue are strong determinants of the size of financial aid that they receive from the developed countries. The tendency has generally been to assist those countries with overt commitment to democratic political arrangements and liberal economic policies. (See Table 3.1.) In other words, while the developed countries have shown interest in the predicament of West African countries, they have at the same time indicated that foreign aid would make positive impact on their economies in the right political environment—essentially, in the framework of democratic systems that permit peaceful changes and provide full guarantees for human rights. In the same vein, the developed countries have seen a relationship in aid flow and economic policies. The West African countries would need to put in place adequate economic policies such as structural adjustment programs that could correct imbalances in their economic structures and provide the basis for durable economic growth. The importance of such programs has been linked with laying the foundations of economic growth and therefore of the effective utility of foreign aid. Structural adjustment programs would enable the governments to establish more market-oriented economies, better infrastructures, and institutions that would enhance the absorptive capacity of these countries. However, the position of the developed countries on these issues, in the view of some observers, remains highly contentious as they raise controversial questions of interference in the internal development processes of the developing countries. Furthermore, the issue of foreign aid in West Africa relates to the question of coordination. How has this been coordinated to ensure maximum utilization? Foreign aid is, generally, from diverse sources for different purposes. It must be properly coordinated and directed to national development priority areas in order to have maximum positive impact on economic development. Let us now look first into the pattern of bilateral aid flows into some West African countries. The analysis will treat the volume of flows, the types and end use of flows. But the full appraisal of the impact of the flows on economic development is outside the scope of this study.

Table 3.1 Net ODA from DAC Donors to West Africa, 1980-1989 USSMills., Current Prices and Exchange Rates 1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

BENIN

36

45

41

41

40

48

73

77

93

138

BURKINA FASO

151

158

147

128

122

122

175

196

219

208

CAPE VERDE

39

36

43

45

39

41

76

63

59

49

COTE DIVOIRE

152

91

102

141

114

110

138

221

226

260

GAMBIA

16

19

24

21

32

31

59

51

54

56

GHANA

107

87

65

61

95

96

120

131

236

350

GUINEA

32

31

27

27

42

60

98

120

160

192

48

48

54

COUNTRY

GUINEA-BISSAU

34

42

34

LIBERIA

60

86

32

30

24

41

85

88

108

64

69

51

48

39

MALI

131

133

96

97

224

251

204

222

260

301

MAURITANIA

54

67

62

72

69

100

105

98

111

160

NIGER

105

123

123

107

102

206

184

215

242

200

NIGERIA

17

17

17

29

15

16

39

51

97

310

SENEGAL

182

214

189

212

246

196

316

359

368

536

SIERRA LEONE

57

34

56

36

22

30

51

44

52

72

TOGO

52

37

50

49

53

53

92

86

128

108

TOTAL WEST AFRICA

1,225

1,220

1,161

1,186

1,353

1,448

1,840

2,033

2,401

3,033

TOTAL AFRICA

6.007

5,960

6,177

6,047

6.818

7,543

8,738

9.872

11.131

10.978 1

Source: UNDP/World Bank, African Development Indicators (Washington. D C : UNDPAVorld Bank. 1992), p. 295.

30

Foreign Aid and Self-Reliance in West Africa

BILATERAL AID Benin Traditionally, bilateral foreign aid has been an important aspect of foreign aid to West African countries. The continued interest of the metropolitan powers in the economic development of the former colonies has engendered assistance to them. Also, other developed countries have shown interests in bilateral assistance in the subregion when this would enhance their national objectives, such as political influence, economic growth, and strategic considerations. Benin is one of the economically weak West African countries. It has a high degree of dependence on agriculture, which accounts for over 40 percent of its GDP and about two-thirds of all employment. The country has been highly susceptible to vagaries in the international economy. As a result of these features, there has been substantial dependence on foreign financial aid for economic growth. The global economic crisis of the early 1970s further accentuated this problem by the mid-1970s, and heightened the need for increased foreign aid to meet the gap created by decreasing foreign exchange earnings. In this respect, however, the role of bilateral assistance could at best be described as modest. This was essentially the case as far as the rural and infrastructural objectives of the country went by the late 1970s. The major bilateral donors include France, Germany (former West Germany), Denmark, Canada, Norway, and the United States. These countries have shown continuous interest in the development problems of Benin with a view to alleviating the deterioration of poverty. From 1979 to 1988, total foreign aid flow into Benin increased from US$87.5 million in 1979 to US$98.1 million in 1985 and US$103.5 million in 1988 (see Table 3.2). As a proportion of total flows, bilateral aid had declined substantially during this period. In 1979, it accounted for 55.4 percent of total foreign aid receipts. By 1982, it declined to 50.1 percent and further to 31.5 percent in 1986, but rising slightly to 35.7 percent in 1988. The decline in total bilateral flows was, essentially, accounted for by the negative flows from Norway and the United Kingdom. In the case of the former, it was US$-3.5 million in 1985, but it rose steadily in the following three years, rising to US$46.7 million in 1988. In the case of the United Kingdom, it was US$-1.8 million in 1985, rising to US$-11.4 million in 1987, but subsequently declining to US$-4.2 million in 1988. During this decade, Germany emerged as the leading bilateral donor to Benin, displacing France. Its aid to Benin multiplied threefold between 1979 and 1988. Whereas France has, on the whole, only managed to maintain an average annual disbursement of about US$19 million. However, there were aberrations of two major low disbursements of US$6.1 million and US$6.8 million during this period. If the grant elements are considered, it could be further observed that the total flows from the Federal Republic of Germany from 1985 to 1988 were 100

Foreign Aid in West Africa

31

Table 3.2 Benin: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES AUSTRALIA AUSTRIA

1986

1987

1988

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

5.7

1.5

0.6

0.3

2.6

2.0

0.3

0.3

.

.

1979

1980

1981

1982

. .

. .

. .

0.0 0.0

0.5

0.5

0.6

13.0 0.4

1985

BELGIUM

0.5

CANADA

4.9

1.5

7.3

2.4

DENMARK

5.3

1.6

0.4

0.0

4.7

FINLAND

.

.

0.0

.

.

FRANCE

18.4

16.7

19.2

14.2

6.1

23.8

6.8

22.8

GERMANY (FED. REP.)

10.4

10.4

11.4

13.2

17.5

26.8

30.5

29.0

.

.

.

.

.

.

_

. .

ITALY

0.1

. .

0.2

0.3

0.5

2.6

2.7

14.7

JAPAN

0.0

0.0

1.8

0.2

1.5

2.7

3.8

6.5

NETHERLANDS

1.0

1.0

2.2

3.3

6.9

-5.9

2.5

5.8

NEW ZEALAND

.

.

.

.

.

.

.

NORWAY

4.1

2.3

0.2

2.7

-3.5

14.7

16.3

46.7

SWEDEN

.

.

.

.

.

.

.

.

SWITZERLAND

0.8

0.6

1.1

1.2

2.3

6.2

2.0

2.2

UNITED KINGDOM

0.1

0.2

0.1

0.1

-1.8

-8.6

11.4

-4.2

IRELAND

3.0

1.0

2.0

2.0

3.0

3.0

3.0

4.0

TOTAL

48.5

35.8

46.4

40.1

50.5

30.3

27.3

36.9

MULTILATERAL

36.9

56.3

38.7

38.7

44.7

63.3

64.5

65.5

OPEC COUNTRIES

2.1

1.8

1.3

0.0

_

.

.

38.3

52.0

43.4

44.0

97.2

78.8

98.1

96.3

92.5

104

UNITED STATES

EEC + MEMBERS

50.0

43.9

43.1

GRAND TOTAL

87.5

93.9

86.4

-

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1984 and 1985/88), pp. 36 and 60.

percent grants. Whereas, in the case of France during the same period, this rose from 65.5 percent in 1985 to 89.3 percent in 1987, but falling to 73.2 percent in 1988.1 This, to some extent, implies that the flows from Germany may have been more advantageous for economic development purposes. With the significant part of flows from France being tied and involving repayments, they may not necessarily facilitate economic development. And as a corollary, this

32

Foreign Aid and Self-Reliance in West Africa

development could enhance the building of Germany's influence and its economic interests in Benin. But this trend has, in part, been seen in the context of the development within the country itself. By 1977, the government of President Matthew Kerekou had, through the document Loifondamentale, confirmed Marxist-Leninism as the official ideology, and socialism as the strategy for economic development. The government instituted a regime that was calculated to lead to "popular democratic dictatorship." Major powers were vested in the Parti de la Revolution Populaire du Benin (PRPB). The government's essential tool of developing the agricultural sector was collectivization that was also extended to the commercial sector. This development inevitably elicited different reactions in Europe. The reservations of France under Valery Giscard d'Estaing to the socialist path in Benin was made manifest in the cool relations between the two countries. Partly because of this, the Kerekou government in 1979 linked the French government with the presence of mercenaries in Benin. While this persisted, foreign aid to Benin was put in question. Although the Mitterand administration, which replaced it in 1980, shared a similar ideological orientation, this did not do much to raise the level of bilateral aid flow to Benin. Hence, the stagnation in the flow of foreign aid to Benin. Apart from this, one observation about the flow of bilateral assistance to Benin after 1985 has been its general decline. This development has undoubtedly been disappointing since this was the period of acute economic decline when foreign aid was needed most in order to rejuvenate the economy. Thus, there appears to be a conviction on the part of bilateral donors that more of this form of aid would not be beneficial to economic recovery. To Benin, this represented a great blow to economic recovery and the alternative to this would inevitably be multilateral aid. But it remains to be seen how Benin can benefit from this source in the face of increasing global competition. Burkina Faso In contrast with Benin, Burkina Faso has been more favored in the disbursement of foreign aid. But like Benin, Burkina Faso in the late 1970s sought foreign aid essentially to solve the problems of rural development, agricultural transformation, and drought. Four major bilateral donors may be identified vis-a-vis Burkina Faso; namely, France, Germany, the United States, and the Netherlands (see Table 3.3). The United States had a steady rise in the first five years by doubling its bilateral aid to Burkina Faso, reaching US$44.0 million in 1985, but thereafter declined to US$17.0 million in 1988. The Netherlands, during this period, maintained an average bilateral flow of about US$22.0 million. On the whole, total bilateral aid to Burkina Faso increased significantly during the decade of the 1980s.

Foreign Aid in West Africa

33

Table 3.3 Burkina Faso: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates 1979

1980

1981

1982

1985

1986

1987

1988

_

-•

.

_

.

0.0

.

0.1

AUSTRIA

1.3

0.6

0.5

0.3

-0.1

-0.1

-0.2

-0.2

BELGIUM

2.2

1.6

0.9

1.8

0.9

2.1

2.9

1.7

CANADA

13.3

8.2

7.3

9.8

9.1

12.1

10.7

29.4

DENMARK

0.6

3.4

0.5

3.6

2.8

8.9

1.2

0.5

FINLAND

.

.

0.1

0.0

.

0.2

_

.

FRANCE

35.6

67.5

53.4

51.3

19.3

33.9

58.3

50.1

GERMANY (FED. REP.)

27.7

31.3

32.7

25.9

22.5

36.2

43.0

.

.

.

.

.

.

.

.

DAC COUNTRIES AUSTRALIA

IRELAND

12.2

ITALY

0.1

0.0

0.1

7.4

5.4

35.2

20.6

40.0

JAPAN

0.1

1.9

0.2

0.2

5.3

4.3

7.7

7.9

NETHERLANDS

24.8

18.1

19.2

26.5

13.7

17.7

26.9

25.9

NEW ZEALAND

.

.

.

.

.

1.4

0.2

2.0

0.0

3.6

SWEDEN

.

.

0.2

0.1

0.0

.

. . .

.

NORWAY

. .

1.4 0.5

SWITZERLAND

1.7

2.0

2.2

1.7

1.9

2.7

3.1

4.1

UNITED KINGDOM

0.1

0.2

0.1

0.0

-0.5

-0.3

0.3

0.6 17.0

UNITED STATES

23.0

28.0

39.0

26.0

44.0

26.0

19.0

TOTAL

132

163

158

155

114

169

187

222

MULTILATERAL

65.8

63.0

56.4

61.7

73.5

104

86.1

79.9

-

-

-

3.9

-

-

-

-

OPEC EEC + MEMBERS TOTAL

112

133

126

136

68.6

129

161

185

198

226

215

221

192

284

280

305

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 218.

Furthermore, it is significant to note that the aid flows from Germany, the United States, the Netherlands, and Italy were, from 1985 to 1988, full grants. This been a result of the full recognition of the economic handicap of the country. However, on the contrary, the French flows have been about 80 percent grant in content.2 Thus, the French government has again underscored the need that its external aid should be anchored to domestic economic benefits.

34

Foreign Aid and Self-Reliance in West Africa

The continued favorable treatment of Burkina Faso in bilateral aid appears more to be based on its apparently weak economy. It is one of the least developing countries of the West African subregion. It is densely populated and prone to the Sahelian drought. Agriculture, dominated by subsistence farming of sorghum and millet on small plots, supports over 90 percent of the population. The need for foreign aid in the country has been further highlighted by the increasing foreign trade deficit. The gap increased from US$44 million in 1960 to US$224 million in 1983.3 The increasing deficit resulted from the increases in food imports, the rise in petroleum prices, and costs of capital equipment for road construction. It has been observed that a steady flow of financial assistance especially at the bilateral level would be required to avoid the degeneration of poverty. Thus, for these same reasons, the pattern of flow remained unchanged in spite of the socialist ideological orientation introduced by the Sankara government from 1983 to 1987.

Cape Verde The geographical location and low level of economic development in Cape Verde in West Africa strongly suggest that it should be a significant recipient of foreign aid. It has been noted that bilateral aid accounted for over 50 percent of total aid flows to Cape Verde from 1985 to 1988 as may be observed in Table 3.4. Cape Verde largely depends on the goodwill of bilateral donors for its economic development. Within this period, all foreign bilateral aid has 100 percent grant content apart from France, whose grant elements were estimated at 61.4 and 95.8 percent in 1985 and 1986, respectively.4

Cote d'lvoire The position of Cote dTvoire is unique among francophone West African countries. It is one of the more economically advanced francophone countries in the West African subregion, with close links to France. However, like many other West African countries, it began to experience economic difficulties beginning in the late 1970s. The windfall earnings from coffee and cocoa in 1976 and 1977 encouraged heavy borrowing by the government from abroad. Partly as a result of this, its external debt rose to US$8.5 billion in 1988, from a low level of US$1.7 billion in 1975. At the same time, the country's debt service ratio rose from 9 percent in 1976 to an uncomfortable level of 40.8 percent in 1987. In view of the rapid economic growth in the 1960s, Cote dTvoire has been an important recipient of foreign capital. However, this became reduced as the recession set in the 1980s. The major bilateral donors include France, Germany, Canada, Belgium, the United Kingdom, and the United States. And in recent times, the Japanese and the Italians have also increased the volume of their

Foreign Aid in West Africa

35

Table 3.4 Cape Verde: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1985-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES AUSTRALIA AUSTRIA

1985

1986

1987

1988

.

.

.

.

1.5

1.7

2.3

1.6

BELGIUM

1.5

0.8

4.1

2.3

CANADA

0.4

0.2

0.4

0.0

DENMARK

0.0

3.3

1.5

0.1

FINLAND

0.1

0.5

1.6

1.0

FRANCE

6.2

5.8

4.9

4.2

6.2

6.1

13.2

7.1

.

.

.

.

GERMANY (FED. REP.) IRELAND ITALY

7.5

37.9

8.6

8.3

JAPAN

1.1

1.8

2.3

6.4

NETHERLANDS

3.7

5.7

8.2

9.5

NEW ZEALAND

.

.

.

.

NORWAY

0.5

0.6

1.4

0.9

SWEDEN

6.6

5.3

8.1

11.6

SWITZERLAND

1.2

1.6

1.6

2.1

UNITED KINGDOM

0.0

0.0

0.1

0.1

UNITED STATES

4.0

8.0

6.0

4.0

TOTAL

40.5

79.3

64.1

59.1

MULTILATERAL

28.3

31.4

23.1

25.0

EEC + MEMBERS

28.2

70.3

46.6

37.8

TOTAL

70.6

112.4

88.3

85.3

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 218.

bilateral aid to Cote d'lvoire, making them important donors to the country. Bilateral assistance constitutes the major part of total flows to Cote d'lvoire. In 1979, it accounted for about 68 percent of total flows. Bilateral assistance has ironically diminished with increasing economic difficulties at the close of the 1980s, as illustrated in Table 3.5. Foreign aid was essentially directed to the social and administrative infrastructures, economic infrastructures, production, technical cooperation, program assistance, and debt reorganization. In 1985, for example, 50 percent of total inflow went to economic infrastructures. This declined to 10 and 11 percent

36

Foreign Aid and Self-Reliance in West Africa

Table 3.5 Cote d'lvoire: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES

1979

1980

1981

1982

1985

1986

1987

1988

AUSTRALIA

0.0

.

.

.

.

-

_

.

AUSTRIA

0.2

0.0

0.0

0.0

-3.7

-5.0

-6.0

-6.0

BELGIUM

11.8

10.0

4.9

6.2

-21

-19

-20

-19

CANADA

16.4

9.4

10.6

1.0

13.0

6.0

9.3

23.9

i DENMARK

3.0

0.2

-0.2

0.4

-0.2

-0.2

FINLAND

0.0

_

.

.

0.0

0.0

. .

FRANCE

107

133

78.9

114

185

280

-36

-52

GERMANY (FED. REP.)

20.3

39.6

12.2

12.0

11.7

17.8

6.6

16.1

.

.

.

.

.

.

.

.

IRELAND

0.0 0.1

ITALY

-4.0

-3.9

-1.0

1.2

3.0

18.8

-15

11.7

JAPAN

0.1

0.2

2.5

1.8

12.1

16.5

6.7

25.5

NETHERLANDS

3.4

2.1

0.6

0.3

-4.6

-9.3

6.0

-23

NEWZEALAND

.

.

.

.

.

.

.

NORWAY

0.2

0.0

0.2

0.1

SWEDEN

.

-

0.3

.

-

.

-

0.2

0.3

0.2

0.2

UNITED l KINGDOM

6.2

3.6

5.2

i UNITED STATES

1.0

28.0

9.0

TOTAL

165.3

223

123

MULTILATERAL

78.1

148

66.1

-

-

-

0.0

161

200

125

166

177

329

-13

169

371

241

435

327

335

SWITZERLAND

OPEC COUNTRIES EEC + MEMBERS TOTAL

243

1 370

189

0.3

-

0.2

.

-1.6

0.2

0.5

0.4

2.3

-1.2

3.1

4.3

26.6

-5.0

11.0

4.0

-3.0

28.0

135

204

313

-45

31.9

236

36.9

122

372

303

|

-

-

-

-

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 118.

in 1986 and 1987, respectively, but rising to 58 percent in 1988. Production has been second in importance. It accounted for 29 percent of total flows in 1985, but falling to 16 and 21 percent in 1986 and 1987, respectively. It rose again to 27 percent in 1988. Furthermore, technical cooperation has been the third in the order of priorities to bilateral donors. It was 9 percent in 1985, rising to 15 and 17 percent in 1986 and 1987, but falling to 11 percent in 1988.5 Thus, a

Foreign Aid in West Africa

37

significant part of foreign aid has been directed to the critical sectors of the economy that are vital to economic growth. The costs of economic infrastructures, such as roads, railways, and telecommunications, are very high and the government could not have entirely financed them under the current economic situation. At the same time, they are indispensable to successful industrialization. Also, increased aid in the production sector should be important in times of recession when increased production in the industrial and agricultural sectors would be fundamental to economic recovery. Additionally, technological cooperation would also go a long way in the creation of the basis for sustained industrialization in Cote d'lvoire. However, it could be observed that the decline in the proportion of production had been a major setback to the government in 1986 and 1987. More aid in this sector could have assisted in the rejuvenation of the industrial sector, which was deep in crisis. Cote d'lvoire, like many other francophone West African countries, also had the benefit of almost 100 percent grant element in bilateral flows from ODA countries. The only exceptions, from 1985 to 1988, being France and Germany. For example, in the case of France, the grant element decreased substantially. This was 80.6 percent in 1985, 67.8 percent in 1986, and 52.9 percent in 1987, but rising slightly to 55 percent in the following year.6 Thus, in the views of the French and German governments, Cote d'lvoire may not necessarily be treated as one of the economically weak West African countries that seriously lag behind in economic development because of their structural limitations. But it would seem that Cote d'lvoire may benefit well by seeking improved relations with Canada, Japan, and the United States, which have shown interest in its economic development through somewhat increased bilateral flow. The more the content of grant elements, the better would be the prospects for economic growth and development.

Gambia Gambia represents one of the feeble anglophone West African countries. It emerged from colonial partition as an independent anglophone state on the banks of the river Gambia intruding deeply into francophone Senegal.7 The economy has, since independence in 1965, experienced a somewhat modest growth. These gains in growth were, essentially, utilized for the expansion of the public sector; in particular, of government industries, education, health, public works, and agriculture. However, there continues to be several limitations to rapid economic growth and development. The first limitation emerges from its small size and undiversified productive base. The Gambian economy is open and highly sensitive to shortfalls in agricultural production and to changes in the external terms of trade. The country is dependent on trade for up to one-half of its food requirements, and it imports most manufactured goods and all fertilizers, fuel, and

38

Foreign Aid and Self-Reliance in West Africa

equipment. The second, important constraint on the economic growth and development of Gambia is its high rate of population growth and underdevelopment of human resources. The April 1983 census revealed that the population was growing at a rate of about 3.4 percent per annum, compared with the 2.2 percent rate derived from the 1973 census. The rate of adult literacy in Gambia is estimated to be only 20 percent. Maternal and infant mortality rates remain high as a result of widespread seasonal malnutrition and chronic infectious diseases.8 The third important factor relates to the bouts of adverse weather conditions that impede economic development. For example, in 1977, the country was hit by severe drought. This was followed by seven years of below average rainfall and another serious drought in 1983/84. As a result of these conditions, the production of the main food crops—rice, sorghum, millet, and maize—was reduced by half. On the whole, total foreign aid to Gambia increased substantially from 1979 to 1988. But within this overall flow, the proportion of bilateral aid did not increase significantly (see Table 3.6). The major bilateral aid donors to Gambia include the United Kingdom, the United States, Germany, France, and the Netherlands. The Japanese and the Italians have however since 1982 and 1985 been more active in the disbursement of bilateral aid to Gambia. The drastic fall in total bilateral aid was due essentially to the reduction in aid from two important donors, the United Kingdom and France. But it may be noted that the United States has been more consistent in its aid to Gambia more than the other donors. Like a few other countries in West Africa, bilateral aid to Gambia is basically in the form of grants. From 1985 to 1988, all aid flows from bilateral sources were 100 percent grants. The only exceptions include those from Norway, with 54 percent grant element in its aid flows to the country in 1987. In 1988 France allowed only 55.3 percent of its flows to Gambia as grants.9 The government of Gambia would, as such, be better off maintaining good relations with the United States and the United Kingdom. The government should also seek to strengthen its relations with Japan and Italy, which could significantly, in the near future, raise the level of bilateral aid to the country. It has further been observed that unlike Cote d'lvoire, foreign aid for Gambia was primarily concentrated in the area of technical cooperation. The preeminence of this was very evident in 1985, when it accounted for 55 percent of the total aid flows to the country. Production, economic infrastructure, and food aid accounted for 14.1 and 11 percent, respectively, in 1985. However, the proportion to technical cooperation diminished later, to 19 percent in 1987, but rising slightly to 22 percent in 1988. Also, production proportion fell substantially to 7 percent in 1987 but rose to 20 percent in 1988. As far as economic infrastructure was concerned, there was a significant rise after a dive in 1986 to 7 percent. By 1987, it accounted for 22 percent and rose again to 28 percent in the following year. Thus, there appears to be a good response to the long-standing infrastructural deficiencies of the country during this period. The proportion of

Foreign Aid in West Africa

39

Table 3.6 Gambia: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES

1979

1980

1981

1982

1985

1986

1987

1988

AUSTRALIA

0.0

0.0

0.0

0.1

0.0

0.0

0.0

0.0

AUSTRIA

0.0

0.0

0.0

0.0

-0.3

0.0

0.0

0.0

.

BELGUIM

0.0

.

0.1

0.0

-0.1

0.1

0.1

CANADA

0.0

0.1

0.2

0.6

0.9

0.2

1.2

0.3

DENMARK

0.1

0.6

2.4

0.0

0.3

0.1

0.1

4.0

0.0

0.0

0.0

FINLAND FRANCE GERMANY (FED. REP.) IRELAND ITALY JAPAN NETHERLANDS

. .

-

-

-

.

3.2

0.6

0.9

3.6

11.3

5.6

0.9

4.7

5.0

5.0

7.1

5.2

6.0

8.5

6.3

. . .

.

-

0.1

„

. .

0.0

0.6

3.8

2.1

0.6

1.3

1.0

. .

0.0

0.2

0.1

0.0

1.7

15.3

9.2

8.2

1.2

1.6

4.5

3.8

3.0

6.0

1.9

9.0

.

.

.

-

.

.

NORWAY

-

0.2

. .

0.1

-1.6

1.4

4.4

SWEDEN

.

.

0.1

0.2

0.2

0.0

0.1

0.2

SWITZERLAND

0.1

0.0

0.0

0.0

0.1

0.1

.

-

UNITED KINGDOM

5.2

4.5

4.0

3.7

2.5

9.5

10.7

-12.4

UNITED STATES

2.0

4.0

5.0

6.0

10.0

9.0

10.0

11.0

NEW ZEALAND

TOTAL

14.2

18.4

19.2

23.5

28.5

57.6

53.3

36.0

MULTILATERAL

19.9

36.6

35.9

21.8

19.7

42.8

47.6

28.0

.

OPEC COUNTRIES

4.2

7.0

21.0

3.5

.

.

.

EEC + MEMBERS

18.1

23.5

27.0

19.4

18.5

58.7

43.7

24.5

TOTAL

38.3

62.0

76.1

48.8

48.9

99.5

100.9

62.0

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 88.

food aid decreased to 4 percent in 1986 but rose sharply to 9 percent in the following year. Albeit, food aid somewhat diminished with the reduction in the adverse impact of drought in 1984. Ghana The serious decline in Ghana's economy in the 1970s and early 1980s in no doubt elicited concern and diverse support from a number of DAC countries.

40

Foreign Aid and Self-Reliance in West Africa

Ghana's economy, throughout the 1970s and early 1980s, declined in all major sectors. The acute shortages of basic food, goods, and services that followed aided political instability and the poor management that frightened the international community from investing in the country. The drought problem that affected the country in the 1980s did not only create problems in the agricultural sector but also prevented the Volta dam from attaining the required water level needed for power production for both internal consumption and exports. It therefore followed that at the beginning in the 1980s, the economy was in a state where it required substantial foreign financial assistance in order to return to the course of growth. The volume of foreign aid flow to the country increased significantly in the 1980s. Table 3.7 shows that bilateral aid generally constituted a substantial part of total aid flow to Ghana. Thus, in comparison with Burkina Faso or Cote d'lvoire, the proportion of bilateral aid to total aid flow has been lower in Ghana. However, unlike these two countries, more DAC countries have shown greater interests in bilateral assistance. The key countries in the bilateral cooperation with Ghana are the United Kingdom, Germany, Canada, the Netherlands, Japan, the United States, and France. Switzerland began to increase its bilateral assistance to the country during the second half of the 1980s. Since 1985, assistance from the DAC countries has been concentrated in the areas of economic infrastructure, production, social and administrative infrastructure, and technical cooperation. From 1985 to 1988, the proportion of economic infrastructure has essentially been about 33 percent. Program assistance rose from 25 percent in 1985 to 33 percent in 1987, but fell to 13 percent in the following year. For many of the small bilateral donors, the grant element has been total in their flows to Ghana in the second half of the 1980s. But in the cases of France, the United States, and Germany during this period, the grant elements were clearly defined. In the case of France, for example, only 38 percent of its bilateral aid to Ghana was in the form of grant in 1985; 62 percent was tied to purchases. But the grant element rose to 49.4 percent in 1987 and to 92.4 percent in 1988.10 Thus, it could be observed that the bilateral financial flows from the DAC countries have been very valuable to Ghana's economic growth and development. In this context, the United Kingdom, Germany, Japan, and the Netherlands are reliable partners the country could count on for support in the future with the continuation of good relations and better prospects for growth. However, the country will need to encourage the United States and France, major sources of substantial bilateral aid, to increase their flows to it in the future.

Foreign Aid in West Africa

41

Table 3.7 Ghana: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates 1979

1980

1981

1982

1985

1986

1987

1988

AUSTRALIA

1.9

0.7

0.7

0.5

0.3

0.4

0.3

0,

AUSTRIA

0.2

0.1

0.1

0.1

-0.3

0.2

0.3

0.3

0.1

0.2

0.2

DAC COUNTRIES

BELGIUM

0.2

0.1

0.1

0.2

-0.1

CANADA

18.7

16.3

7.6

7.5

17.4

20.2

17.9

20.1

DENMARK

-0.7

-0.4

-0.3

-0.3

-0.1

-0.2

0.0

10.9

FINLAND

0.0

0.0

0.0

0.1

0.0

0.1

0.1

0.1

FRANCE

.

3.3

2.2

2.3

-0.1

14.8

18.6

12.0

13.4

26.1

32.3

28.1

16.2

21.5

18.2

26.1

_

_

.

.

0.0

0.1

0.1

0.0

GERMANY (FED. REP.) IRELAND ITALY

0.5

0.5

0.3

-1.3

-2.5

-2.7

10.4

16.0

JAPAN

5.6

2.5

5.3

5.2

20.4

24.9

. 20.8

65.2

NETHERLANDS

6.6

5.3

2.8

2.2

0.8

16.1

17.9

24.4

NEW ZEALAND

.

.

.

.

.

.

.

.

NORWAY

0.7

1.2

0.2

0.2

0.5

4.6

3.7

1.5

SWEDEN

0.5

0.4

0.2

0.1

.

.

.

0.5

SWITZERLAND

0.1

0.2

0.2

0.2

9.7

3.1

3.8

10.6

UNITED KINGDOM

21.2

34.8

13.3

8.8

15.9

40.2

71.8

55.2

UNITED STATES

19.0

14.0

17.0

4.0

10.9

7.0

13.0

-3.0

TOTAL

88.0

104.9

82.0

57.9

88.1

141.2

196.9

237.9

MULTILATERAL

91.4

83.2

67.8

81.4

117.8

255.1

268.0

233.2

OPEC COUNTRIES

16.6

25.2

14.3

3.0

-

-

-

-

EEC + MEMBERS

48.6

81.3

73.7

82.1

41.6

127.7

147.1

165.1

TOTAL

196.0

213.4

164.2

142.3

200.1

399.7

460.1

484.3

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 90.

Guinea Notwithstanding its potential resources in minerals and agriculture, Guinea is classified among the twenty-five countries with the lowest per capita incomes in the world.l {The erratic global prices of minerals has generally made earnings from them highly undependable for sustainable economic growth and development. Also, in the past decade, the export of agricultural products has stagnated

42

Foreign Aid and Self-Reliance in West Africa

in spite of subsidies granted to the producers of coffee, bananas and palmnuts. Part of the difficulties here arose from the reluctance of farmers to participate effectively in the cooperative arrangements of the government and the adverse conditions of the climate. While this had been the lot of the country, the structure and poor state of the economy taken together with its professed socialist orientation had not encouraged substantial foreign investment. Hence, there has always been the need for some forms of foreign aid to facilitate the process of economic development. The DAC countries have shown extensive interest in the economic predicament of Guinea. At the bilateral level, this became very evident during the second half of the 1980s. Total bilateral aid from the DAC countries increased by more than 50 percent from 1980 to 1985. By 1988, the total bilateral inflow was again over three times the level attained in 1985. These are well illustrated in Table 3.8. Also, as from 1986, the volume of bilateral inflow became bigger than multilateral inflow. The major bilateral donors have been France, Germany, Japan, and the United States. In 1985, Canada began to make remarkable contributions to the bilateral assistance to the country. The contributions of France became very significant from 1980. In particular, the grant element of the aid from France also increased during this period as the relations between the two countries improved and the French government gained more confidence in the regime in Guinea.12 Other important bilateral donors to the country include the Arab countries and the member states of the Council for Mutual Economic Assistance (CMEA). For example, in 1981, the flow from the former was US$371 million, making Guinea the largest single recipient of Arab aid in sub-Saharan Africa for that year.13 The aid flows to Guinea in the second half of the 1980s were, to a large extent, directed at the areas of economic priorities while the objectives of the donors have been preserved. In 1985, 30 percent of foreign aid was toward the production sector, 23 percent to social and administrative infrastructure, 19 percent to economic infrastructure, 13 percent program assistance, and 9 percent to technical cooperation. Although economic infrastructure suffered a decline to 6 percent in 1986, it nevertheless rose to 40 percent the following year but declined to 28 percent in 1988. Donors have thus come to the conclusion that the economic infrastructure should be improved if meaningful economic growth and development were to occur. By 1986, program assistance rose to 36 percent as Guinea implemented economic measures that donors envisaged would lead to economic growth. Although this dramatically fell to 3 percent in the following year, it nevertheless rose substantially to 20 percent in 1988 once the commitment to the implementation of market-oriented measures became stronger. It is important to underscore at this point that the increases in bilateral flow from France were largely accounted for by the improvement in relations with

Foreign Aid in West Africa

43

Table 3.8 Guinea: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates 1979

1980

1981

1982

1985

.

.

0.0

0.0

. .

.

AUSTRIA

. .

0.0

BELGIUM

0.2

-0.4

-0.2

0.2

1.5

CANADA

0.0

0.0

0.1

0.6

.

.

0.0

FINLAND

0.3

0.0

FRANCE

0.8

GERMANY (FED. REP.)

1.0

.

ITALY

0.4

JAPAN

2.9

1.9

NETHERLANDS

1.5

0.3

. . .

. . .

0.0

DAC COUNTRIES AUSTRALIA

DENMARK

IRELAND

NEW ZEALAND NORWAY SWEDEN SWITZERLAND UNITED KINGDOM UNITED STATES

1986

1987

1988

.

.

.

0.0

0.0

0.1

9.3

2.7

2.6

11.2

2.8

4.8

6.6

0.0

0.7

3.6

2.9

1.1

0.1

.

0.0

.

0.0

0.1

6.5

12.9

13.8

20.0

35.9

51.0

86.8

11.4

2.0

6.0

6.7

11.6

24.8

11.4

.

.

.

.

.

.

.

0.2

1.9

-0.2

3.2

7.0

7.6

31.4

3.0

2.3

5.0

3.2

22.5

26.6

0.1

0.2

1.2

0.8

0.4

0.6

_ . .

. . .

.

.

.

0.2

2.6

1.5

.

.

.

0.2

0.1

0.0

0.1

-5.6

5.9

0.4

0.6

-

-

0.0

0.1

0.4

0.4

0.7

1.2

3.0

6.0

13.0

2.0

8.0

12.0

23.0

13.0

2.5

10.0

26.0

32.9

25.1

52.5

95.2

142.4

184.5

MULTILATERAL

47.5

63.6

57.8

35.6

57.5

67.1

70.6

80.0

OPEC COUNTRIES

9.3

0.1

-0.3

3.6

-

-

-

-

EEC + MEMBERS

12.5

38.9

39.4

30.4

44.1

83.5

103.5

145.7

TOTAL

66.8

89.6

90.4

64.3

112.1

166.6

225.0

278.1

' TOTAL

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 96.

it. At independence in 1958, Guinean President Sekou Toure took the country out of the French colonial empire. The Guinean government nationalized many French investments and the French government retaliated by suspending financial aid and technical assistance to Guinea. By 1977, however, the Guinean government agreed to compensate the French firms whose assets were nation-

44

Foreign Aid and Self-Reliance in West Africa

alized. Subsequently, the French President Valery Giscard d'Estaing visited Guinea from December 20 to 22 in 1978. This signified a revival of cooperation and hence the increases in the flow of aid to Guinea thereafter. In another gesture, France agreed to participate in the construction of dams on the Konkoure River and Elf-Auitaine.14 Apart from these, France also welcomed Guinea's change in government and the adoption of free market enterprise system. The military coup of April 3, 1984 brought an entirely new, open market philosophy. This new orientation facilitated the introduction of a structural adjustment program to resolve the fundamental economic development problems. By the end of 1985, monetary reforms were introduced to bring Guinea back to the franc zone. Subsequently, on January 7, 1986, there was a change over from the syli to the Guinean franc. A two-tier exchange rate system was adopted, the Guinean franc was devalued to put it at parity with the CFA franc. All state banks found to have misappropriated their customers' funds were wound up in December of the same year. Three French banks, subsidiaries of the BIAO, BNP, and Societe Generate were further established. In addition to these, the government carried out the pruning of the civil service employment in which about 84,000 ghost civil servants were alleged to be on the payroll. Thus, as a result of these developments the French Minister for Cooperation, Michel Aurillae signed four aid agreements in Conakry with Guinea on June 20, 1986. The agreements covered town planning, gold prospecting, assistance in the establishment of a new bank, and the restructuring of the public sector enterprises. In other words, better external relations and economic policies are vital to the future inflow of bilateral aid. The more this is maintained, the better the prospects for economic growth in Guinea.

Guinea-Bissau Guinea-Bissau is one of the economically weak least-developed countries in Africa. Its main exports are groundnuts and palm kernel, which account for about 70 percent of total exports. The country lacks substantial industries, apart from few small plants for brick-making, groundnut-shelling, baking, rice-milling, and the production of groundnut oil, foam mattresses, fabricated housing, fruit juices, jams, and soft drinks. The implementation of budgets in GuineaBissau requires continuous injection of foreign aid. However, foreign aid inflows have been very modest. In comparison with Guinea, Guinea-Bissau has been less favorably considered by donors in the 1980s as illustrated in Table 3.9. Generally, bilateral aid represents significant part of the foreign aid inflow to Guinea-Bissau. In 1979, it accounted for 64 percent of total inflow. Unlike Guinea, the major bilateral donors to Guinea-Bissau are the Scandinavian countries, notably Sweden and the Netherlands. Italy has increased its aid to Guinea-Bissau since 1986, making it the most prominent donor by 1988. However, the United States, United Kingdom, France, and Japan, have yet to

Foreign Aid in West Africa

45

Table 3.9 Guinea-Bissau: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMilI s., Current Prices ami Exchanj»e Rates DAC COUNTRIES AUSTRALIA

1979

.

1980

1981

1982

1985

1986

1987

1988

. •

.

.

.

.

.

.

0.1

0.0

0.1

0.2

0.2

AUSTRIA

0.0

0.0

0.1

BELGIUM

-0.3

0.2

0.4

0.3

-0.1

0.3

0.7

0.5

CANADA

0.0

0.1

0.1

0.1

0.6

0.1

0.3

0.3

DENMARK

'•'

2.1

1.3

0.8

0.4

0.2

0.3

1.4

FINLAND

.

0.0

.

.

.

.

.

FRANCE

2.5

3.2

2.9

5.5

6.8

5.6

-2.8

6.9

GERMANY (FED. REP.)

1.6

1.4

0.8

0.3

0.5

11

2.0

.

.

.

.

.

.

.

u -

ITALY

0.1

0.1

0.6

1.2

2.1

10.5

10.6

35.7

JAPAN

.

0.0

0.9

1.1

1.3

1.5

1.2

2.1

8.2

14.1

12.6

8.4

4.3

6.3

9.5

8.7

.

.

.

_

.

0.0

0.1

. .

. .

IRELAND

NETHERLANDS NEW ZEALAND

-

NORWAY

2.8

0.3

0.3

0.3

-

SWEDEN

14.9

11.3

12.1

11.1

8.8

11.1

12.7

14.8

SWITZERLAND

0.1

0.3

0.4

0.4

0.3

0.8

4.0

4.1

UNITED KINGDOM

0.4

0.1

1.5

0.4

-

0.1

0.1

0.1 2.0

1.0

2.0

8.0

4.0

2.0

3.0

4.0

TOTAL

33.4

34.4

41.4

33.7

26.8

40.8

44.0

78.9

MULTILATERAL

17.0

28.5

25.4

28.8

33.5

27.5

53.1

44.4

OPEC COUNTRIES

1.9

1.4

0.1

7.7

.

.

.

.

UNITED STATES

EEC + MEMBERS | TOTAL

25.5

31.0

25.6

27.0

20.2

30.3

32.6

62.4

52.2

64.3

66.9

70.3

63.3

71.9

102.1

129.4

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 98.

react more positively to the financial requirements of Guinea-Bissau at the bilateral level. In 1985, 33 percent of aid inflows from the DAC countries were directed to technical cooperation, which was very significant in the context of the long-term manpower development needs of the country. Production occupied the second position since one of the principal problems of the country in the early 1980s has been low productivity. Food aid came next with 19 percent. This was

Foreign Aid and Self-Reliance in West Africa

46

inevitable in view of the fact that Guinea-Bissau has continued, since 1979, to experience severe food shortages because the state-operated agricultural cooperative arrangements have been far from effective. Also, the bouts of drought in 1979-80 and 1983 seriously undermined food production. Debt reorganization and social and administrative infrastructures were other important targets in 1985.15 The level of technical cooperation was somewhat maintained till 1988, apart from 1987, when it fell to 15 percent. Food aid declined with improved food production. It occupied only 2 and 1 percent in 1987 and 1988, respectively. However, the contrary has been the case in social and administrative infrastructure, which rose steadily. It rose by 16 percent in 1986 as against the previous year and to 46 percent in 1988. Thus, there seems to be an increasing concern on the building of a genuine basis for meaningful economic development. Guinea-Bissau has not benefited significantly in the foreign aid of the United States and the United Kingdom, partly because of its political instability. During this period, it was one of the most unstable countries in the West African subregion. The government did not grant a wide degree of political freedom to its citizens. No opposition parties were allowed to exist. The government had monopoly over the media and the expression of dissent is not tolerated. On November 14, 1980, Mr. Joan Bernard Vary became the president after a successful coup d'etat. On February 16, 1981, the government announced a sixteen-member provisional government. However, members of this cabinet have been changed at a very rapid rate as a result of the highly fluid political situation. Some were expelled for the embezzlement of money.16 But then this had not prevented further coup attempts. On November 7,1985, the government identified one of such coups with the first vice president and minister of justice who ranked second in the party. Thus, there has been considerable uncertainties about political development in Guinea-Bissau. The United States and the United Kingdom have further felt uneasy on the commitment of aid when the human rights and professed socialist philosophy of Guinea-Bissau remain problematic.

Liberia The 1980s was essentially one of remarkable assistance to Liberia. There was lack of enthusiasm in the Liberian economy while it was emersed in a political crisis of large proportions. By April 1980 when Sergeant Samuel Doe came to power after a bloody coup d'etat, the Liberian economy was already in very serious difficulties. At the end of the 1970s, there was a slump in the global price of rubber, one of the principal cash crops. l7 As a result of this, production became uneconomic and an estimated 5,000 Liberian planters were put out of business. By 1981, rubber prices dropped by a third and exports reached a low level of about US$51.6 million in 1982 compared with US$102.2 million in 1980. In other words, an injection of foreign financial assistance was desirable

Foreign Aid in West Africa

47

Table 3.10 Liberia: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES AUSTRALIA AUSTRIA

1979

1980

1981

1982

.

. .

. .

. .

0.0

1985

1986

1987

1988

0.0

.

.

0.0

. .

. .

BELGIUM

0.1

0.1

0.1

0.1

40.0

-93.7

-98.8

-98.6

CANADA

-3.2

-9.7

-7.2

-2.9

-0.8

-0.8

5.6

2.3

0.0

.

.

0.2

0.2

4.3

5.1

0.0

1.2

0.6

-6.5

0.0

.

33.5

0.8

0.8

1.1

-32.8

-73.6

76

-0.6

-5.0

3.8

13.3

14.5

-3.0

-17.5

-49.7

51.5

.

.

.

.

0.0

0.1

0.1

0.0

ITALY

-0.9

-0.9

0.0

2.5

0.9

0.9

0.7

22.1

JAPAN

1.7

13.9

2.5

7.1

-234

12.1

-267

354

NETHERLANDS

1.0

0.8

1.8

-9.7

-0.2

24.5

3.9

.

. .

.

.

0.1

. _

.

NORWAY

. .

-2.3

-0.3

-1.4

0.1

SWEDEN

0.2

0.3

0.1

-0.2

0.2

-0.4

-6.5

-6.3

.

0.0

.

.

-0.4

.

0.0

0.0

UNITED KINGDOM

2.5

0.8

3.5

1.7

-40.0

-40.7

-32.0

-0.9

UNITED STATES

6.0

29.0

68.0

60.0

-41.0

-71.0

28.0

42.0

DENMARK FINLAND FRANCE GERMANY (FED. REP.) IRELAND

NEW ZEALAND

SWITZERLAND

0.0

. .

1.0

2.4

38.8

84.0

85.4

-335

-285

-316

408.5

MULTILATERAL

57.6

53.0

39.3

29.5

47.1

27.9

27.0

22.9

OPEC COUNTRIES

14.8

9.2

2.4

1.3

.

.

.

.

-69.9

-13.3

-289

431.4

i TOTAL

EEC + MEMBERS

15.9

12.6

24.8

23.4

-41.3

-221

TOTAL

74.8

101.0

125.7

116.1

-288

-257

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 138.

if Liberia was to meet its development objectives. However, as it turned out, Liberia was one of the few countries in West Africa that experienced severe decline in foreign bilateral assistance during this period as indicated in Table 3.10. The principal bilateral donors include the United States, Germany, Japan, France, and Belgium. By 1985,40 percent of the foreign aid received by Liberia was committed to program assistance, 21 percent for technical cooperation, 12 percent each for

48

Foreign Aid and Self-Reliance in West Africa

social and administrative infrastructures and production, 6 percent for food aid, 5 percent for economic infrastructure, and 4 percent to debt reorganization. Thereafter, however, the commitment to program assistance declined, falling to 24 percent and 7 percent in 1987 and 1988, respectively. While on the contrary, the commitment to technical cooperation increased appreciably to 48 percent in 1987 and 55 percent in 1988. Similarly, commitment to economic infrastructure was on the increase to 6 percent and 14 percent in 1987 and 1988, respectively. Hence, there seems to be a modest response to some of the priority areas of the Liberian economy.

Mali Mali is one of the poorest countries in West Africa. It was badly affected by persistent drought since 1971. Its GNP per capita of US$140 makes it one of the least developed countries on the African continent. In the 1970s, the government focused primarily on the agricultural sector to promote economic growth and development. Albeit, the drought of the late 1970s and 1983/84 severely affected government's program of agricultural output. As a result the country was compelled to be dependent on food importation. An important aspect in Mali's economy is that there is a persistent budgetary deficit due to its poor revenue earning capacity and its heavy expenditure on a disproportionately large bureaucracy. About 70 percent of its current spending is on manpower. From 1968 to 1981, the budget deficits were made good by the French public treasury. The government was unable to prune spending or generate more revenue during the drought years. In addition, Mali has a persistent deficit on its balance of payments and trade. This situation was aggravated shortly after independence when it left the franc zone to establish its own currency. Consequently, foreign aid continues to constitute a major factor in the development process of the country. At the bilateral level, the dominant donors include France, Germany, the United States, the Netherlands, and Canada. But Italy, in the second half of the 1980s, increased its flow to Mali to enhance the development process as may be observed from Table 3.11. This in itself may not be unconnected with the 1981 coup attempt, which was an indication that the Traore government was under pressure and that political stability may not necessarily be taken for granted in Mali. Bilateral aid from Arab countries played important roles in the second half of the 1980s. It rose from US$26.8 million in 1985 to US$40.9 million in 1986, but thereafter declined to US$8.6 million and US$5.4 million in 1987 and 1988, respectively.18 The commitments of the ODF were essentially directed at social and administrative infrastructures, economic infrastructures, production, technical cooperation, and program assistance. For example, the flows from France in 1980

Foreign Aid in West Africa

49

Table 3.11 Mali: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES AUSTRALIA AUSTRIA

1979

1980

1981

1982

1985

1986

1987

1988

.

.

.

.

.

0.0

.

.

0.0

0.0

0.2

0.0

0.0

0.0

0.3

0.2

[

2.9

1.8

8.0

12.8

DENMARK

.

FINLAND

_

. .

FRANCE

34.3

45.0

53.0

GERMANY (FED. REP.)

27.7

27.0

33.5

.

.

BELGIUM 'CANADA

1.4 1 11.2 0.0

.

1.5

4.1

9.4

15.1

1.7

4.1

2.1

13.5

21.6

12.5

1.5

0.6

0.2

3.7

.

0.3

28.5

124.8

63.8

63.8

85.6

29.0

27.3

23.7

29.0

31.2

.

.

.

0.0

0.0

. .

1

-

.

ITALY

0.0

0.1

. .

0.2

9.5

26.4

20.9

33.2

JAPAN

1.9

4.1

5.1

4.7

3.7

5.3

8.9

9.8

NETHERLANDS

5.4

12.5

6.4

3.6

15.5

20.0

22.4

21.8

NEW ZEALAND

.

.

.

.

.

.

.

NORWAY

0.5

0.6

0.5

2.7

4.5

2.4

10.3

SWEDEN

.

.

.

. . .

.

.

SWITZERLAND

1.9

4.1

3.8

6.4

5.4

8.2

10.1

9.0

UNITED KINGDOM

1.0

0.5

0.6

0.2

-0.3

-0.7

-0.8

-1.5

IRELAND

UNITED STATES

14.0

23.0

18.0

13.0

44.0

30.0

33.0

36.0

TOTAL

97.7

131.8

133.8

96.6

253.2

197.4

215.8

254.0

MULTILATERAL

93.6

103.7

88.7

75.1

100.9

127.2

135.4

162.8

.

.

.

OPEC COUNTRIES

13.3

17.3

6.4

24.7

.

EEC + MEMBERS

102.6

128.7

120.1

81.1

207.1

156.4

172.6

199.0

TOTAL

204.6

252.7

228.6

196.5

380.9

365.5

359.8

422.2

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 146.

were utilized for the establishment of a canning factory, an Institute of Rural Economy to house 7,000 documents relating to rural development, and a water development project. Other projects financed by France include the new national museum, the National School for Posts and Telecommunications, and the construction of the fruit and vegetable section of the Office des products agricoles du Mali (OPAM).19 In response to its economic recession in the mid-1980s, commitments to social and administrative infrastructures accounted

Foreign Aid and Self-Reliance in West Africa

50

for 26 percent in 1985; this declined to 22 and 14 percent in 1986 and 1987, but rose to 28 percent in 1988. But commitments to economic infrastructures declined precipitously from 23 percent in 1985 to 10,4, and 5 percent in 1986, 1987, and 1988, respectively. This represented a setback in the drive toward self-reliance, since the country hitherto lacks the basic infrastructures for development. The costs of these structures, such as roads and telecommunications networks, are huge given the vastness of the country and the manner in which towns are distantly located. The flow to production on the other hand increased from 19 percent in 1985 to 30 percent in 1986, but thereafter slightly declined to 29 and 27 percent in 1987 and 1988. Also, the flows to technical cooperation rose from 20 percent in 1985 to 38 percent in 1987, but declined to 13 percent in 1988. Program assistance rose from 4 percent in 1985 to 8 percent in 1987 and to 24 percent in 1988. In other words there was a good response to projects under economic reforms in 1988 only. The bilateral aid from the DAC countries from 1985 to 1988 was essentially untied. The only exception was the case of France whose bilateral aid, in 1985, had 89 percent grant element. It rose to 99.2 percent in 1987 but declined to 78.8 percent in the following year.

Mauritania Like Mali, drought has been another major factor in Mauritania's economic development. It was essentially severe in the early and late 1970s and again from 1982 to 1984. Mauritania's chronic trade deficits in the years up to 1965 were transformed with the arrival of the mining industry, but the huge investment required in this sector, the rising cost of oil imports and manufactures, and the cost of the war against Polisario put the budget and the balance of trade back into deficit. The deficit persisted throughout the late 1970s until the first trade surplus was established in 1983. Thus, the need for foreign financial assistance has always manifested itself in Mauritania's economy. At the same time, however, the inflow of foreign financial assistance to the country has generally been very modest. The principal sources of bilateral foreign aid are France, Germany, the United States, and Italy. Table 3.12 shows the trend in the pattern of foreign aid flows into Mauritania in the 1980s. A substantial part of French aids in 1982 were for the projects on hydroelectric irrigation and pasture development in Lake R'Kiz region near Senegal Valley, improvement of the Nouackchott city water supply, oceanographic resources research, the establishment of an orthopedic medical center, and various administrative needs. The United States contributed 20,000 tons of grain, increased its project aid from US$2.7 million in 1980 to US$8 million and US$9.7 million in 1981 and 1982, respectively. Furthermore, the United States contributed to the Senegal River agricultural development projects.20 The Arab countries have also been major sources of bilateral foreign aid

Foreign Aid in West Africa

51

Table 3.12 Mauritania: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMil Is., Currer t Prices arid Exchan ?e Rates 1979

1980

1981

.

.

.

AUSTRIA

0.1

0.1

BELGIUM

1.0

CANADA

1982

1985

1986

1987

.

0.0

.

.

0.1

0.0

0.7

0.2

0.2

0.2

0.3

0.2

0.4

1.0

-0.1

1.1

0.6

0.8

0.9

1.1

.

FINLAND

. .

0.1

_ .

FRANCE

16.7

19.9

GERMANY (FED. REP.)

9.1

ITALY

. .

JAPAN

0.2

NETHERLANDS NEW ZEALAND

DAC COUNTRIES AUSTRALIA

DENMARK

IRELAND

1988

2.0

4.7

0.2

1.7

3.4

0.8

0.4

0.4

10.6

2.2

0.1

.

.

.

.

39.1

24.1

43.1

30.9

38.2

50.9

11.8

7.8

13.6

8.3

15.1

5.9

15.8

.

.

.

.

.

.

0.0

. .

0.2

10.2

20.0

10.8

10.4

0.1

2.4

8.1

3.9

11.0

4.5

3.9

0.6

4.7

4.5

1.0

2.5

8.4

6.4

1.6

.

. . .

. . .

. . .

.

.

.

.

0.1

0.3

1.9

0.5

.

.

.

.

NORWAY

0.3

SWEDEN

.

SWITZERLAND

0.6

0.5

0.4

0.3

0.8

0.0

0.1

0.3

UNITED KINGDOM

-0.1

0.1

0.8

0.1

0.7

-2.1

-0.5

0.3

UNITED STATES

5.0

15.0

20.0

13.0

37.0

18.0

10.0

9.0

TOTAL

34.3

53.3

76.3

63.7

113.3

102.3

90.7

99.0

MULTILATERAL

81.2

36.7

66.5

85.4

52.7

48.3

75.1

73.9

OPEC COUNTRIES

62.4

126.3

100.0

68.3

.

.

.

•

EEC + MEMBERS

85.8

44.3

77.9

62.7

81.0

86.1

80.1

98.8

TOTAL

177.8

216.4

242.8

217.4

237.5

210.4

176.5

171.0

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 148.

for Mauritania. In 1981, Kuwait gave technical assistance in telecommunications, mining, and highway development. In the same year, Libya assisted in hydroelectric, road, and water projects, especially in the desert area around the historic town of Chinquetti. Also, Libya provided subsidies for the new university, agricultural works, and a job scheme for emigrant Mauritanian workers.21 In 1985, total aid flows from these countries amounted to US$71 million.

Foreign Aid and Self-Reliance in West Africa

52

However, thereafter the volume of flows declined, falling to US$ 10.7 million in 1987. Since 1985, a major part of ODF flows have been directed at technical cooperation. This accounted for 26 percent of ODF commitments to Mauritania. It rose 30 percent in 1988. ODF commitment to food aid has, on the other hand, declined since 1985 as the drought abated and some solutions were found to problems of food shortage. It declined to 3 percent in 1988 from 22 percent in 1985. Social and administrative infrastructure, which received much attention, accounting for 19 percent in 1985, ebbed in the following two years but rose significantly to 28 percent in 1988. Production has had increasing support since 1985. It accounted for 16 percent of total ODF flows to Mauritania in 1985, rising significantly to 37 percent in the following year but declining in the following two years to 23 percent and 19 percent, respectively. But program assistance was not significant until 1987, when the government embarked on more fundamental economic reforms. Since 1985, a substantial part of the flows from the DAC countries have had almost 100 percent grant element and therefore are of considerable benefit to Mauritania's economic development.

Niger Like Mauritania, Niger is one of the typical Sahelian economies in the West African subregion. It has probably been more affected by the drought of the early 1970s and 1980s than any other country in West Africa. It is poor in spite of the discovery and exploitation of uranium. Niger's economy is highly dualistic. The modern sector, which operates within an established legal framework, exists next to an informal sector composed of a multitude of small establishments that often have no legal accountability. In 1988, the modern sector supplied 27 percent of GDP, yet it employs just 3 percent of the labor force.22 The modern sector is composed primarily of governmental administration, mining, transport, and commerce, which contributed 45, 22, 13, and 12 percent of modern-sector activity, respectively, in 1988. Niger's economic policies have been biased in favor of primary activities (agriculture, livestock rearing, and mining) and in favor of import-substitution rather than export-promotion activities.23 A five-year development plan established in 1979 had the following major goals: (1) self-sufficiency in food production; (2) the development of a basic infrastructure; (3) the improvement of social services; and (4) the expansion of the mining operation. Niger's 1987-91 five-year plan essentially continues the same goals but places more emphasis on agriculture and the extension of irrigation and less on mining to reflect the downturn in the world prospects for uranium. Uranium brought hefty budget surpluses at end of the 1970s but these gave way to deficits as uranium sales fell away at the very time the economy was geared to investing more and trying to cope with the droughts of the early 1980s.

Foreign Aid in West Africa

53

A drop in uranium revenues from 1980 onward caused the budgets to move progressively from surplus to deficit. At the same time, the trade gap soared from less than US$17.6 million in the late 1970s to nearly US$1.1 billion in 1983 as a result of the rapid increase in the imports of investment goods and petroleum as well as declining uranium revenues. Thus, under these circumstances, the need for foreign financial assistance in Niger cannot be over emphasized. However, compared with Mauritania, Niger has not been a large recipient of foreign aid. The dominant sources of bilateral aid are France, Germany, Japan, the United States, Canada, and Itqjy. From 1979 to 1981, French aid to Niger increased substantially, rising to a record level of US$88.1 million in 1981 from US$40.4 million in 1979. The aid flow more than doubled during those three years. The country has in no doubt been viewed with considerable interest by France because of its large deposits of uranium. Also, Niger's strategic position has further enhanced its position in the competition for aid from France. It is strategically placed, astride the frontier between Arabo-Berber and Black West Africa. Furthermore, Niger, unlike many other West African francophone states had hitherto enjoyed a measure of political stability. Although Germany has been an important donor, it is evident that its flows to Niger has decreased since the end of the 1980s as illustrated in Table 3.13, suggesting the disillusionment of the German government on the relevance of aid flow to the country's development. But this view could hardly be sustained in light of the harsh economic conditions in Niger, especially during the second half of the 1980s. In 1985, the flow from the United States attained an all-time high of US$84 million. This appeared to be a prompt response to the emergency needs of Niger as a result of the drought of 1981/82, which again reemerged in 1984/85. The droughts devastated substantial food and cash crops and therefore threatened the economic survival of Niger. A substantial part of the windfall was directed at solving the problems generated by the droughts. However, thereafter the flow from the United States declined precipitously, amounting to only US$19 million in 1988. In 1987, the flow from Japan reached a record level of US$84.6 million. The Japanese massive inflow was in no doubt a reaction to the persistent economic deterioration of Niger and the acknowledgment of the suitability of the measures adopted by the government to solve the economic problems. Such magnitude of aid was what Niger essentially needed at this time, since tied aid would have been less useful. However, this turned out not to be the case. In the following year, the flow from Japan declined to US$41.8 million, thus putting many of the initial projects in jeopardy. Since the mid-1980s, the flows of the ODF to social and administrative infrastructures has increased significantly. It rose from 13 percent in 1985 to 25 percent in 1986, but fell to 19 percent in 1988. At the height of the economic

54

Foreign Aid and Self-Reliance in West Africa

Table 3.13 Niger: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills.. Current Prices and Exchange Rates 1979

1980

1981

1982

1985

1986

1987

1988

.

.

.

.

.

.

.

.

AUSTRIA

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

DAC COUNTRIES AUSTRALIA

BELGUIM

6.6

10.1

12.2

3.5

5.9

4.9

4.9

5.7

CANADA

2.5

3.7

3.6

6.0

16.2

17.2

28.4

14.5

DENMARK

0.3

0.2

2.1

1.3

0.7

2.7

FINLAND

.

_

.

0.3

0.1

0.1

. .

FRANCE

40.4

55.4

88.1

48.4

44.7

47.5

62.1

21.9

GERMANY (FED. REP.)

29.2

20.7

32.2

37.5

21.6

20.5

20.8

24.5

.

.

.

.

.

.

.

.

ITALY

0.1

0.2

0.0

0.0

9.8

26.4

15.2

33.6

JAPAN

IRELAND

13.0 0.0

16.5

6.3

1.1

7.3

-1.0

3.8

84.6

41.8

NETHERLANDS

4.0

3.3

2.0

3.0

3.7

7.5

7.9

12.9

NEW ZEALAND

.

.

.

.

.

.

.

.

1.0

0.4

1.4

0.9

2.6

3.2

1.7

2.4

SWEDEN

0.1

_

.

-0.3

.

-0.4

-0.2

-0.2

SWITZERLAND

1.2

1.5

2.0

2.8

3.5

5.4

5.2

7.3

UNITED KINGDOM

2.0

0.1

0.1

0.1

-1.2

-1.7

-1.6

-2.2

UNITED STATES

16.0

9.0

10.0

21.0

84.0

33.0

41.0

19.0

119.8

111.0

154.6

131.9

190.7

170.0

270.0

194.2

74.3

81.5

67.1

44.6

96.2

118.4

127.6

117.5

84.8

.

_

.

.

NORWAY

TOTAL MULTILATERAL OPEC COUNTRIES EEC + MEMBERS | TOTAL

1

0.6

1.7

27.8

112.7

101.5

151.0

107.7

112.7

133.6

126.6

129.8

194.7

194.2

249.6

261.2

288.3

295.6

406.1

315.3

j

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 162.

crisis in 1985, the flows into technical cooperation amounted to 30 percent of total ODF inflow. But this declined to 19 percent in 1988 as aid was diverted to more pressing issues. This was aptly explained in the rising allocation to program assistance, the basic development projects that came up in the wake of Niger's economic reforms. The commitments to production fell to 17 percent in 1987 from 23 percent in 1985, but rose slightly to 22 percent in 1988.

Foreign Aid in West Africa

55

However, there was no doubt that this was one of the principal areas where foreign aid should be directed in order to ensure the rejuvenation of the economy. Agricultural production was adversely affected by drought. The government at the time needed to increase the few processing industries and embark more aggressively on import-substitution industrialization in order to reduce the import of consumption goods and save foreign exchange. Thus, while welcoming the assistance of»France, the government could benefit significantly from strengthening cordial relations with Canada and Japan.

Nigeria Nigeria, unlike Niger, is one of the more developed countries in the West African subregion. The economy was buoyant in the 1970s as a result of the oil boom. But beginning from 1980, the economy began to run into crisis. The principal factor that set this in motion was the decline in the price of petroleum. In 1979, the price of petroleum was US$40 per barrel, this fell to US$30 per barrel in 1980. This, in effect, reduced the foreign exchange earning of the government and therefore reduced its capacity to support internal development efforts, especially in the industrial and agricultural sectors. It led to the reduction of output in both sectors. Unemployment increased with the underutilization of industrial capacity. Also, the rate of inflation increased with the reduction in industrial output and limitations on the import of consumption goods. Furthermore, by the mid-1980s, external debt rose to a record level of US$19 billion with a higher level of debt burden. All of these events demonstrated that the country requires additional external financial support in order to reverse the trend in the recession and promote sustainable growth. Traditionally, the federal government has not emphasized or encouraged the inflow of foreign aid as a basic requirement for the economic growth and development of the country. This derived fundamentally from the ideological orientation of the federal government and the assumed well-being of the country as perceived in the oil boom. Thus, up to the 1970s, as far as foreign assistance concerned, the government emphasized technical assistance that was deemed necessary to provide skilled manpower in several special areas where there were shortages in the economy. It was for this reason that the flow of aid, even at the bilateral level, was very sporadic in the 1980s. During this period, the Japanese were more consistent in their aid disbursements to Nigeria as indicated in Table 3.14. Thus, Japanese aid increased almost in response to national economic needs as from 1982. It became more significant as the federal government embarked on structural adjustment programs to arrest economic recession and promote economic growth. The attitude of the French government was very positive to the Nigerian federal government during this period, with two remarkable flows of US$119.6 million and US$527 million in 1985 and 1987, respectively. But these were subsequently followed

56

Foreign Aid and Self-Reliance in West Africa

Table 3.14 Nigeria: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchange Rates DAC COUNTRIES

1979

1980

1981

1982

1985

1986

1987

1988

AUTRALIA

0.3

0.3

0.2

0.2

0.4

0.3

0.3

0.7

AUSTRIA

0.8

0.5

6.8

0.3

-12.8

-22.0

-32.6

-32.6

BELGIUM

0.5

0.5

0.3

0.3

-20.1

-18.7

2.1

2.2

CANADA

0.7

0.3

0.8

1.3

1.4

0.6

1.2

2.6

DENMARK

0.1

0.4

21.9

5.8

11.3

-8.9

-13.2

-11.2

FINLAND

0.1

0.0

0.1

0.1

0.2

527.0

-374.6

190.6

285.9

0.1

0.1

0.1

FRANCE

3.2

37.1

4.1

4.0

119.6

-81.3

GERMANY (FED. REP.)

7.6

20.8

12.3

60.3

-60.5

-84.6

.

.

0.0

0.1

0.0

0.0

-29.6

-22.6

-68.6

24.3

IRELAND ITALY

. 0.3

6.1

1.7

8.9

JAPAN

1.5

0.3

0.0

3.7

35.2

129.0

358.1

66.8

NETHERLANDS

2.5

3.4

1.0

1.0

-39.8

-28.4

16.6

-67.6

NEW ZEALAND

.

.

_

.

0.0

.

.

0.0

NORWAY

1.2

0.4

0.3

0.3

-3.7

-4.2

-4.7

-0.2

SWEDEN

.

0.3

0.3

0.1

0.0

0.0

0.4

0.2

.

0.1

0.0

0.0

.

0.0

3.5

17.3

241.4

-199.6

-368.0

SWITZERLAND

0.0

UNITED KINGDOM

2.3

_

3.9

2.5

UNITED STATES

-3.0

-3.0

7.0

-3.0

-116.0

552.0

628.0

295.0

TOTAL

18.0

71.3

59.1

84.8

-97.3

652.9

1.406

-176.5

MULTILATERAL

49.1

64.4

72.4

141.0

255.6

474.3

296.3

78.9

.

.

.

0.1

.

.

.

.

OPEC COUNTRIES EEC + MEMBERS

19.5

76.8

46.4

95.0

4.6

10.3

478.8

-513.9

TOTAL

67.1

135.7

131.4

225.9

-241.6

1.127

1702

-97.4

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 164.

by outflows from Nigeria to it: US$84.6 million in 1986 and US$374.6 million in 1988, which could have been invested in Nigeria to facilitate the process of recovery. Germany also substantially increased its aid flows to Nigeria during this decade: from US$7.6 million in 1979 to US$60.3 million in 1982, and to US$190.6 million in 1987 and US$ 285.9 million in 1988. The major aid flow

Foreign Aid in West Africa

57

from the United Kingdom occurred in 1986, which amounted to US$241.4 million. Thereafter, this was followed by a reverse flow to it. However, the more significant aid assistance in the second half of the 1980s came from the United States. By 1986, this amounted to US$552 million and rising to US$628 million in the following year. But it fell to US$295 million in 1988. Even with this, the United States remained foremost in bilateral aid to Nigeria. It is also important to note that the strenuous attempt by the military government to establish closer links with the Organization for Islamic Conference (OIC), especially during the second half of the 1980s, did not result in significant aid flows from the Arab countries as envisaged by the government. In fact, from 1985 to 1988, when Nigeria was in the throes of economic recession, these countries did not disburse any aid to the country. About 96 percent of the ODF flows to Nigeria in 1985 were directed at social and administrative infrastructures. However, in the subsequent years, this shifted to economic infrastructures, this accounted for 31, 79, and 31 percent, respectively, in 1986, 1987, and 1988, respectively. Also, with the structural adjustment program being implemented, beginning from 1986, program assistance took a larger chunk, 51 percent. In 1988, it rose to 58 percent. Thus, it was evident that there seemed to be some responses to the development needs of Nigeria during the second half of the 1980s principally because the developed countries had faith in the economic reforms of the federal government.

Senegal In Senegal, the basis for foreign aid in the 1980s was reinforced as a result of the drought that occurred in the subregion during this period. The drought led to a substantial reduction in the output of agricultural products, both of food and cash crops. In 1983 the government had to cope with a budgetary deficit of US$ 1.6 billion. At the same time, its external debt at the end of 1983 amounted to a huge sum of US$1.2 billion. Like Cote dTvoire, Senegal represents a major recipient of foreign aid among the francophone West African countries. Table 3.15 illustrates the pattern of bilateral aid flows to Senegal in the 1980s. The preeminence of France is very obvious. France provided bilateral assistance amounting to US$85.3 million or 55 percent and 62 percent of total bilateral and in 1979 and 1982, respectively. Senegal enjoys special relations with France which enables it to secure substantial part of its aid to Africa. Senegal's link with France economically and culturally remains one of the strongest among the francophone West African countries. The financial support that Senegal receives from France goes a long way in facilitating its economic development process. Canadian aid to Senegal increased significantly during the decade: from US$13.7 million in 1979 to US$23.9 million in 1988. Similarly, aid from Italy increased substantially during this period. The flows from Italy rose from US$4.6 million in 1982 to a record level of US$50.2 million in 1988.

58

Foreign Aid and Self-Reliance in West Africa

Table 3.15 Senegal: Official Net Receipts from DAC Countries, Multilateral Organizations,

and OPEC, 1979-1988

USSMills., Current Prices and Exchange Rates 1979

1980

1981

1982

1985

1986

1987

1988

AUSTRALIA

_

.

.

0.0

.

.

.

_

AUSTRIA

0.1

0.2

0.4

0.5

0.3

0.6

0.7

1.4

BELGIUM

7.7

6.4

5.5

8.7

8.1

3.4

5.0

5.0

CANADA

13.7

6.4

13.3

15.2

13.8

17.1

25.5

23.9

DENMARK

0.0

.

0.4

6.4

0.1

12.7

9.6

3.0

FINLAND

.

0.1

0.2

0.3

0.1

0.2

0.7

2.1

FRANCE

85.3

194.0

127.4

160.5

82.4

225.9

175.7

77.8

GERMANY (FED. REP.)

9.7

11.1

10.8

16.9

14.3

19.5

14.3

21.3

.

_

.

.

.

.

. 50.2

DAC COUNTRIES

IRELAND ITALY

-0.9

-1.2

1.2

4.6

18.6

31.2

48.5

JAPAN

3.4

4.6

8.2

5.9

9.9

12.7

23.8

35.0

NETHERLANDS

2.3

5.0

5.6

3.4

3.3

14.7

16.1

22.8

NEW ZEALAND

.

.

.

.

.

.

.

.

NORWAY

1.5

0.2

0.3

0.4

1.9

-10.7

-0.8

-2.3

SWEDEN

.

.

.

0.2

.

.

.

0.7

SWITZERLAND

2.3

2.5

3.1

2.8

3.8

11.5

12.7

4.5

UNITED KINGDOM

2.1

0.5

0.6

0.9

1.1

4.9

1.7

1.7

UNITED STATES

29.0

34.0

35.0

33.0

44.0

39.0

49.0

35.0

TOTAL

156.1

263.6

212.1

259.5

201.6

382.5

382.4

281.9

MULTILATERAL

168.1

105.2

152.6

90.2

63.9

222.7

242.1

168.9

OPEC COUNTRIES

1.4

2.1

56.7

11.4

.

.

.

.

EEC + MEMBERS

214.5

239.7

211.8

245.8

134.4

374.9

341.5

242.9

TOTAL

325.7

370.9

421.4

361.2

311.8

638.8

654.6

474.5

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 182.

While the cold war prevailed, Senegal was one of the half-dozen African countries with which the United States tried to ensure a special relationship for political and strategic reasons. Its flow of bilateral assistance to Senegal rose from US$29 million in 1979 to US$44 million in 1985, and to US$49 million in 1987. But the flow of aid declined in 1988 to US$35 million. The Reagan administration in effect ensured that the level of aid was sufficient to guarantee

Foreign Aid in West Africa

59

continuous benign relations with Senegal.24 However, it must be underscored that this factor may not hold any longer. Since 1992 the cold war has effectively ended. In the mean time, the Russian Federation, the successor to the Soviet Union, is currently interested in Senegal's internal economic reforms and the promotion of economic growth. Also, the United States' urge to strengthen its strategic position in Africa has somewhat diminished. Arab countries constitute important sources of bilateral assistance to Senegal. In 1981, for example, Saudi Arabia gave US$25.5 million in aid. Of this sum US$21.6 million was directed at the relief of Senegal's internal and external debts. In the same year, the Saudis also provided another special sum of US$ 19.0 million to assist in the implementation of the Organisation de Mise en Valeur du fleuve Senegal (OMUS) project. In 1984, five projects in hydraulic, roads, and industrial cultivation were executed by Saudi Arabia. Similarly, Kuwait has been an important Arab aid donor to Senegal. The decisions of Saudi Arabia and Kuwait to aid Senegal essentially derived from the assumption that Senegal, an important Islamic country, represents a moderate country to counter the influence of Libya and the Polisario Front, and with views on the Palestinian problem not diametrically opposed to those of Saudi Arabia. Technical cooperation occupies a prominent position in the overall bilateral aid flow to Senegal. The French workers in Senegal in 1984 were estimated to be 1,280. About 90 percent of these were paid for by France while the remaining 10 percent were catered for by Senegal. Besides, about 600 French nationals worked in 1984 in Senegal for scientific or technical organizations such as the Volunteers for Progress.25 In the early 1980s, most of the U.S. aid assistance to Senegal went to rural development, particularly to the rivers Senegal, Siloum, and Casamanie, which offer important potential for the development of irrigation schemes. Part of the aid from Germany, in 1981 and 1982, went to the OMUS scheme to construct a dam at Manatali. Canada's aid to Senegal during this period also assisted this project and the project on an Inter-African telecommunications network. With this assistance Senegal was able to complete its part of the project in 1982. In 1985, technical cooperation represented a significant part of the commitment of the ODF. It accounted for 37 percent of its total flow to Senegal. However, this declined to 18 percent in 1987, but rose slightly to 20 percent in the following year. It was a trend that needed to be reversed if Senegal were to solve the problem of shortage of experts, which has been a major constraint to rapid economic development. On the other hand, the ODF made a major commitment to program assistance from 14 percent in 1985 to 28 percent in 1987. But it declined slightly to 24 percent in 1988. Flows have basically been directed to major projects emanating from the economic reforms that the Senegalese government embarked upon since 1985. Albeit, more support is required in this area if the economic reforms are to be successfully implemented. As it is, the Senegalese government has a number of projects that could lead to

60

Foreign Aid and Self-Reliance in West Africa

the creation of more employment opportunities. In this context, it would seem that donors acknowledged that the inflationary and unemployment problems could be realistically and effectively tackled through increased production. Thus, bilateral assistance represents the major part of the foreign assistance to Senegal. It increased significantly in the 1980s unlike in many francophone West African countries. France, the United States, Italy, Japan, Canada, and Saudi Arabia represent important bilateral donors whose support would count significantly in the promotion of sustained economic growth in Senegal.

Sierra Leone Sierra Leone has not been a highly favored recipient of foreign financial assistance in spite of its weak economic position and the impact of economic recession. Sierra Leone's economy has been in serious crisis since the mid1970s. The closure of iron ore mines, a major foreign exchange earner, caused severe strain on the poor economy. The high food import bill that followed only worsened the situation. The economy did not get better because of excessive public spending, and it became aggravated in 1980 when the government hosted the Summit of the Heads of State and Government of the Organization of African Unity. Thus, the necessity for foreign financial assistance was accentuated by the combination of these factors. However, as may be observed from Table 3.16, total bilateral flows from the DAC countries rose from US$27.5 million in 1979 to US$57.2 million in 1982, but fell to US$22.1 million in 1985. It rose to US$73.2 million in 1987 but fell again to US$64.1 million in 1988. The principal bilateral donors were Germany and the United States. The decline after 1986 may be partly attributed to the ascendancy of the military regime of Major General Joseph Momoh on January 26, 1986, as military regimes have already proved incapable of dealing with the economic development problems in other countries of the subregion, particularly as illustrated in the case of Nigeria. The aid flows from the United Kingdom, Japan, and Canada have not been substantial when viewed against their flows to other West African countries. Nevertheless, the OPEC countries have been very valuable as far as bilateral aid was concerned during this period, with a disbursement of US$0.2 million in 1985, US$5.8 million in 1986 and US$10.1 million in 1988, respectively. Between 1977 and 1979, a significant part of the aid from Germany went to a wide range of projects, notably, the rural section of the Freetown to Waterloo road, rice production, the timber industry, and the Freetown-Monrovia road. The US$2.1 million that it provided in 1982 was directed at the expansion of the Forest Industries Corporation located at Kenema. In the same year, the United Kingdom's assistance was essentially utilized for the building of accommodation for 100 students at the Njala University College. In the same vein,

61

Foreign Aid in West Africa Table 3.16 Sierra Leone: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchanj?e Rates DAC COUNTRIES AUSTRALIA

1979

1980

1981

1982

1985

1986

1987

1988

0.0

0.0

0.0

0.7

0.0

4.1

5.0

-2.7

AUSTRIA

0.1

0.0

.

0.0

0.0

0.0

0.0

0.0

BELGIUM

0.0

2.5

0.6

0.5

.

0.1

2.3

2.3

CANADA

0.3

0.3

0.6

0.7

0.9

0.5

0.3

0.2

DENMARK

0.5

2.4

0.3

0.9

0.1

6.2

6.9

1.3

0.0

0.0

.

FINLAND

0.0

0.1

0.0

0.0

.

FRANCE

-0.2

5.0

3.4

2.2

0.5

1.3

5.3

5.7

GERMANY (FED. REP.)

5.2

16.2

12.4

16.3

8.5

8.2

20.5

20.4

.

.

.

.

0.1

0.1

0.1

0.1

IRELAND ITALY

0.0

0.0

2.5

11.0

0.1

11.0

9.4

15.6

JAPAN

0.2

18.0

3.0

10.1

2.2

3.9

3.4

4.0

NETHERLANDS

11.6

4.4

1.8

1.5

1.4

2.1

0.9

1.7

NEW ZEALAND

0.0

0.1

0.0

.

.

.

0.0

NORWAY

.

0.0

.

0.6

0.1

-0.4

0.5

0.5

SWEDEN

0.3

0.4

0.1

0.2

.

SWITZERLAND

0.0

.

.

0.0

0.1

0.0

. .

0.0

UNITED KINGDOM

4.5

5.0

5.3

5.4

-1.9

5.0

7.6

6.0

UNITED STATES

5.0

9.0

6.0

7.0

10.0

12.0

11.0

9.0

TOTAL

27.5

63.4

36.1

57.2

22.1

54.0

73.2

64.1

MULTILATERAL

23.2

33.1

27.6

26.5

34.8

27.1

20.9

35.7

OPEC COUNTRIES

4.0

6.3

1.0

0.3

.

.

.

.

EEC + MEMBERS

24.6

43.3

37.4

44.3

17.0

39.8

57.7

70.0

TOTAL

54.7

102.9

64.6

83.9

57.1

86.9

97.8

109.9

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 186.

the United States provided US$1 million, which was used for research into agricultural extension work at the university. Since 1985, a major part of the ODF commitments to Sierra Leone has been to technical cooperation. This accounted for 10 percent of its total flow in that year. It rose to 65 percent in the following year, but declined to 55 percent in 1988. The commitments to social and administrative infrastructures also in-

Foreign Aid and Self-Reliance in West Africa

62

creased: from 5 percent in 1985 to 34 percent in 1987, but declining to 17 percent in 1988. A large chunk, 64 percent, also went to debt reorganization in 1985. It declined to 4 percent in 1986 but rose again the following year to 21 percent. Furthermore, as the country continued to experience decline in food production, food aid increased to meet local demands. In 1985, food aid accounted for 6 percent of the total ODF commitments. This rose to 22 percent in 1986 but declined to 14 percent in 1987, and rose slightly to 16 percent in 1988. The contributions toward program assistance by the ODF was not very significant in the second half of the 1980s. Furthermore, flows into the production sector were negligible, indicating that the DAC countries have not endorsed the reform programs of President Momoh. However, without well-articulated projects, adequately supported by external funds or major increases secured in the productive sectors, it is difficult to see how Sierra Leone could emerge from the dept of recession in which it is neck deep. The DAC countries aside, it is important to underscore that China has also been a vital bilateral donor to Sierra Leone. China assisted in the completion of the sugar plantation and cane mill in the Tonkolili District. The mill has the capacity to produce both granulated sugar for the local market and molassesbased alcohol for industrial use. China has further established thirteen experimental agricultural stations in various locations in Sierra Leone. The aim here was to educate farmers on better techniques of rice and vegetable cultivation. The Chinese gave further assistance to the construction of the Kambia bridge, which links Sierra Leone with Guinea, the latter being part of the Trans-African Highway system proposed by the UNECA in the early 1960s. Thus, the decline in output and the low inflow of bilateral assistance to Sierra Leone have been major blows to the government's efforts to ensure rapid economic recovery. Sierra Leone's prospects for increased bilateral assistance could be enhanced with the consolidation of relations with Germany, the United States, Italy, Japan, and the United Kingdom. Togo The flow of foreign aid to Togo has on the whole been modest like many other West African countries, although the need for it was heightened by the downward trend in its economy in the 1980s. Traditionally, Togo's economy has thrived on the smuggling of manufactured goods into neighboring countries. About half of all export earnings are provided by phosphates. Its foreign debts grew rapidly from the mid-1970s and reached US$1.51 billion in January 1989. Agricultural output, which rose fast in the 1960s, stagnated in the 1970s and declined in the early 1980s partly because of drought. In particular, cocoa output dropped to 9,000 tons in 1982/83 in a drought year compared with a peak production of 28,000 tons in 1971. Coffee production also suffered the same fate in 1984, an output of US$5.9 million as against US$11.8 million in 1979.

Foreign Aid in West Africa

63

Table 3.17 Togo: Official Net Receipts from DAC Countries, Multilateral Organizations, and OPEC, 1979-1988 USSMills., Current Prices and Exchanges Rates DAC COUNTRIES AUSTRALIA AUSTRIA

1979

1980

1981

1982

1985

1986

1987

1988

.

.

.

.

.

.

.

.

0.0

0.0

0.0

0.0

-1.1

-1.5

0.0

0.0

BELGIUM

1.1

4.3

3.5

8.3

1.8

-9.4

-2.7

-3.3

CANADA

8.0 -

0.6

0.3

0.3

8.6

5.2

1.3

2.0

DENMARK

8.9

8.3

0.4

0.2

0.9

1.6

8.4

5.2

.

0.0

.

.

.

.

FINLAND FRANCE

31.3

78.1

29.4

43.9

4.6

9.9

17.0

90.1

GERMANY (FED. REP.)

32.6

19.9

12.3

23.2

11.7

13.7

24.7

24.6

.

.

.

.

.

.

.

_

ITALY

0.1

0.0

0.1

1.1

0.9

2.3

2.4

i.O

JAPAN

0.0

1.3

1.2

0.9

1.7

19.2

3.8

9.7

NETHERLANDS

0.9

0.5

0.5

0.7

0.8

1.3

2.0

0.7

. . .

. . .

. .

.

.

.

.

_

0.2

0.2

1.4

0.2

0.1

0.1

.

0.3

.

. .

SWITZERLAND

7.3

2.3

0.2

0.3

0.3

0.3

0.5

0.4

UNITED KINGDOM

0.1

0.2

0.2

0.1

0.1

0.2

0.2

0.5

UNITED STATES

6.0

3.0

4.0

7.0

8.0

10.0

12.0

7.0

TOTAL

96.2

118.5

52.1

86.4

38.6

53.4

69.6

137.7

MULTILATERAL

69.8

70.6

23.0

20.5

50.5

72.3

33.5

67.7

.

.

.

IRELAND

NEW ZEALAND NORWAY SWEDEN

.

0.0

0.5

3.8

.

EEC + MEMBERS

101.9

131.3

52.9

80.8

28.2

32.7

52.0

125.1

TOTAL

166.1

189.2

75.6

110.7

98.2

133.6

105.6

203.9

OPEC COUNTRIES

Source: OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1985/88), p. 208.

The collapse of the world demand for phosphates in 1981 also significantly reduced the foreign exchange earnings of Togo. In other words, with these developments the economic recovery of the country may well hinge on the inflow or the availability of foreign financial assistance. However, as may be observed from Table 3.17, the trend in the inflow of bilateral assistance was not particularly encouraging. Generally, the flows from

64

Foreign Aid and Self-Reliance in West Africa

the DAC countries have declined in 1980s. The pattern of decline in bilateral aid has been a major reflection of reduced inflow from the two major donors, France and Germany. In the case of France, there was a decline to US$4.6 million in 1985 from a height of US$78.1 million in 1980. It rose slightly to US$ 17 million in 1987. But the massive rise to US$90 million gave a significant boost to the overall bilateral aid flow from the DAC countries in 1988. As far as the United States is concerned, its aid flows to the country rose significantly during this period: from US$3 million in 1980 to US$12 million in 1987, but declined to US$7 million in the following year. The bilateral assistance from the Arab countries was significant in 1985, amounting to US$9.1 million. But this declined substantially thereafter, falling to a low level of US$2.6 million in 1987. Since 1985, ODF commitments have essentially concentrated on production. In that year, that sector alone received 16 percent of total inflow in Togo. Although this declined slightly in the following year, nevertheless, in 1987 it rose to 56 percent. Another area of attraction was technical cooperation. This consumed 9 percent of total ODF flows in 1985, rising to 40 percent in 1986, but falling to 25 percent and 18 percent in 1987 and 1988, respectively. Economic infrastructures also enjoyed a rising trend in receipts. From 1 percent in 1985 to 10 percent in 1986 and 19 percent in 1988. Beyond this, however, the DAC countries have also demonstrated remarkable interest in the economic programs of Togo as is well illustrated in the program assistance. This rose from 1 percent in 1985 to 20 percent in 1986. Although it suffered a major decline to 2 percent in 1987, it recovered to 49 percent in the following year. Thus, Togo, unlike many other West African countries, experienced appreciable decline in the inflow of foreign financial bilateral assistance in the 1980s. This may have more to do with the political stability in the country. There was an increase in the opposition to the rule of President Eyadema who has governed the country autocratically since 1967. For example, in August 1985, a series of bomb explosions rocked various key buildings in Lome in violent protest to his continuity in power.26 MULTILATERAL AID The contributions of multilateral organizations to economic development in West Africa vary from one country to the other. These, to a large extent, depend on several factors, such as the objectives of the organizations, the financial capacity of the organizations, the economic policies and needs of West African countries, as well as the political climate of each country at any given time. From the mid-1970s to the early 1990s, all of these have been strong determinants in the pattern of disbursements to West African countries by the World Bank, the International Monetary Fund (IMF), and the International Development Association (IDA), and the African Development Bank. In addition to

Foreign Aid in West Africa

65

these, the UNDP, an important global development organization of the United Nations, has during this period made major contributions to the development of West African countries. To begin with, it is important to recall that the World Bank, established in 1994, is an institution whose major and best known activity involves the financing of projects. The bank's ideas about influencing the general economic policies of developing countries and its methods of doing so are, however, yet to be properly defined. These have apparently not been formalized since they were not envisaged in the bank's original statutes. Furthermore, in addition to its project-lending policies, the World Bank has also become concerned with the general economic policies of the countries to which it lends money. In principle, the bank now approves both the project and the country before it decides to make a loan available. In the same vein, the IMF was established in 1944 and became operational two years later. Its Articles of Agreement state that the fund's purposes are to promote international monetary cooperation; to facilitate the expansion of international trade and as a result contribute to the maintenance of high levels of employment and income. The IMF will seek to promote exchange stability and maintain orderly exchange arrangements. The IMF is to avoid competitive depreciation of exchange rates. It will assist in the multilateralization of payments and in the elimination of foreign exchange restrictions on current transactions. Since the early 1950s, the IMF has made it abundantly clear that the use of its resources should be regarded as a means of meeting temporary balance of payments difficulties through conditional short-term advances. Its concern with members' domestic policies grew, particularly with those policies considered likely to promote inflation, especially huge investments on social security programs. More recently, the IMF has indicated that members wishing to make drawings from the IMF or stand-by arrangements are to provide a letter of intent, stating in some detail the policies it intends to adopt. In the case of a stand-by arrangement, the member may make a drawing from the IMF only if the IMF considers that it has complied with the conditions of the letter of intent.27 The World Bank and the IMF have always been complementary institutions. But lending for broad improvements in economic policies has led their staffs to interact more intensely in the last fifteen years in order to step up their cooperation. The bank hopes to create a sounder basis for the success of the specific projects it creates, while the fund tries to promote greater international monetary stability. The interest rate on World Bank loans to developing countries changes every six months. Unlike the World Bank and the IMF, the International Financial Corporation (IFC) and IDA operate on a somewhat different principle. The IFC was established in July 1956 to promote economic development in the less developed countries by encouraging the growth of private enterprises in them. Its

66

Foreign Aid and Self-Reliance in West Africa

three principal objectives are to provide risk capital for private enterprises, encourage the development of local capital markets, and to stimulate the international movement of private capital. The IFC attempts to achieve these in two ways: by bringing together investment opportunities, private capital, and experienced management, and more importantly, by itself investing in productive private enterprise when sufficient private capital is not available on reasonable terms. It does this in association with private investors and without any guarantee of repayment. The activities of the IFC are therefore, in many respects, similar to those of an investment banker. The IDA, established four years later, in 1960, aims at assisting in the development of the poorest of the developing countries by providing investment funds on easier terms than are generally available with the World Bank or the IMF. IDA's assistance imposes far less burden on the balance of payments of the recipient countries than conventional loans. Thus, the IDA was established as a "soft" lending agency to meet the special needs of developing countries with acute balance of payments problems. In the 1960s, the IDA mainly financed infrastructure projects.28 However, the poverty reduction strategy introduced in the 1970s expanded the range of investments by placing more emphasis on programs that more directly benefit the poor. During this decade, IDA greatly increased its support for agriculture, rural development, and human resource development. Currently, about a quarter of IDA lending supports structural adjustment reform programs. Successful structural adjustment programs require four essential elements in the policy frame of the IDA. First, the government must be committed to a well-designed program of policy change. Second, the supporting public investment in infrastructure must be undertaken without allowing government borrowing to crowd out new private investment. Third, there must be access to the right amounts of external assistance at the right time. And, fourth, government financing for programs that are essential to the country's longer-term development must be protected. At the regional level, the agreement establishing the African Development Bank was adopted and opened for signature by a Conference of African Finance Ministers held in Khartoum, Sudan on August 4,1963. On September 10, 1964, the agreement came into force when twenty member countries subscribed 65 percent of the capital stock. The main objectives of the bank include: (1) contribution to the economic development and social progress of regional members, individually and jointly; (2) the utility of resources at its disposal for the financing of investment projects and programs, giving priority to projects that concern several member countries; (3) the mobilization of resources through cofinancing with bilateral and multilateral development agencies; (4) the promotion of international dialogue and understanding on development issues concerning Africa; (5) the promotion of government and private investment in Africa through policy reforms; and (6) the provision of technical

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assistance as may be needed in Africa for the selection, study, and preparation of development projects. As of December 31, 1993, the ADB had seventy-five member countries composed of fifty-one independent African countries (regional), twenty-four non-African countries (nonregional) excluding the states that formed the former Yugoslavia, which was a member of the bank.29 The other components of the ADB group are the African Development Fund (ADF) and the Nigerian Trust Fund (NTF). In the context of the ADB charter, all regional member countries are equally eligible for development financing from the bank's resources. However, taking into account the levels of resource endowment and economic development of the various potential beneficiary countries, the bank has singled out the poorest countries as the main target for the allocation of its concessional funds, notably the ADF and NTF. Eligibility for ADF and NTF loans is restricted to regional countries with GNP per capita of not more than US$990. However, eligibility for NTF loans is further subject to case-by-case approval of the Federal government of Nigeria. Thus, it is against this background of institutional policies that the pattern of multilateral aid flows to West Africa could be understood. There are already laid down macroeconomic and microeconomic conditions of flows that these institutions should follow. These conditions are designed to achieve several objectives, such as harmonious growth of the world economy, the survival of the institutions themselves or the interests of the key members of these institutions. As far as the World Bank and the IMF are concerned, there is need for adequate and appropriate economic policies in the recipient countries to justify and guarantee the inflow of funds. It therefore follows that the extent of flows to West African countries may ultimately depend on the extent to which the governments could accept wholly or in part the conditions laid down by these institutions. However, it remains to be seen if national political and economic interests could be placed before global interests in the efforts to secure increased financial inflows. Let us now examine the multilateral flows to a number of West African countries. Table 3.18 illustrates the overall pattern of multilateral ODA flows to West Africa from 1980 to 1989. Although there appears to be a rise in the volume of multilateral flow to the subregion during this period, nevertheless its share of overall flow to Africa somewhat slightly diminished. From 28.7 percent in 1980 to 26.0 percent in 1985 and to 27.0 percent in 1989. This suggests that there are growing tendencies for multilateral donors to divert aid to other regions in Africa and elsewhere. The volume of multilateral aid to West Africa declined during the first half of the 1980s. Some countries have benefited more while a number of others did not. It would seem the preference of multilateral donors depends on a number of circumstances that are best explained in the political and socioeconomic context of the recipient West African countries. For example,

Table 3.18 Net ODA from Multilateral Donors to West Africa, 1980-1989 USSMills., Current Prices and Exchange Rates COUNTRY

1

1980

1981

1982

1983

1984

1985

'

1986

1

63 98

BENIN

53

35

40

43

38

45

BURKINA FASO

61

59

62

55

54

72

1 CAPE VERDE

!

1988

1989

60

67

HI

78

77

73

1987

24

14

11

14

23

27

32

24

26

26

COTED'IVOIRE

58

32

35

15

14

14

49

33

213

153

GAMBIA

31

28

21

20

20

18

43

49

29

38

|GHANA

59

44

73

54

125

113

247

247

225

201

GUINEA

57

51

35

42

51

57

73

82

89

139

24

24

27

26

22

31

27

54

45

46

29

20

22

30

17

21

JMALI

103

90

74

1 MAURITANIA

36

50

49

] NIGER

64

51

1 NIGERIA

18

24

j SENEGAL

79

I SIERRA LEONE

30 39

1 GUINEA-BISSAU LIBERIA

TOGO TOTAL WEST AFRICA j TOTAL AFRICA

26

26

28

27

86

88

102

128

136

162

152

58

57

49

57

73

77

88

44

50

52

96

118

130

124

95

20

19

18

16

20

18

23

36

129

80

62

64

60

218

252

177

103

26

26

30

25

35

30

21

40

29

26

23

60

55

52

75

37

73

76 1,387 5,131

765

703

642

664

732

813

1,306

1,321

1,464

2.668

2.712

2.604

2,610

2.727

3.116

3.718

4.172

4.605

Source: UNDPAVorld Bank, African Development Indicators (Washington, D C : UNDPAVorld Bank, 1992), p. 297.

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while the flows to Benin and Togo increased appreciably, the flows to Cape Verde, Liberia, and Nigeria were essentially stagnant. Benin The failure of Benin to secure sufficient bilateral aid in the 1980s naturally compelled it to seek external aid from multilateral sources in order to cope with the disturbing problems of its economic recession. The problems in the social and public sectors have compounded those of the private sector; the injection of foreign assistance was indispensable if solutions were to be found to the negative effects of these problem on human security in the short and medium term. However, while the government considered the loan policies of the International Bank for Reconstruction and Development (IBRD) and the IMF worthwhile, it does see the entire package as satisfactory in the long-term interest of the country. In 1979, multilateral aid to the country stood at US$36.9 million, but this rose to US$45 million in 1985 and US$67 million in 1988 as illustrated in Table 3.18. The government convened a Donors Conference in Cotonou in March 1983 with the aim of sensitizing donors to the areas of critical demands for multilateral assistance. In the Development Plan for the period 1983-87, the total cost for development was estimated at US$1,800 million. It was expected that external sources would provide US$900 million while the remaining would be raised internally. In effect, the government counted on 50 percent of the cost of development to come in the form of external financial assistance. But donors at the conference seemed to have their reservations on the plan. There were pledges amounting to only one-third of this sum by the ADB and the OPEC Development Fund. Along with them, pledges were made by Belgium, France, and Japan. Other potential donors were reluctant to make pledges because of fears that Benin might not be able to pay back given the fact that its economic recession and development problems then, in spite of strenuous efforts by the government, have defied solutions. Since 1985, the major sources of multilateral assistance to Benin have been the IDA, EU, and the African Development Fund. In addition to these, the UNDP also played a prominent role in the disbursement of multilateral assistance to Benin. IDA flows amounted to US$18.7 million or 36 percent of total multilateral flows in 1985. It rose to US$26.5 million or 61.1 percent in 1986, but dropped to US$21 million or 22 percent in 1988. The flow from the EU, although initially less than that of the IDA, rose substantially during the second half of the 1980s: from US$5.1 million in 1985 to US$11.8 million in 1987 and to a record level of US$28.3 million in the following year. Similarly, flow from the African Development Fund rose from US$3.6 million in 1985 to US$10.4 million in 1986, but thereafter declined to US$5.1 million in 1988. On the contrary, however, the UNDP apparently maintained an average of US$5.5 million per year during this period. Thus, it has been difficult for many

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multilateral agencies to increase their aid flows substantially while there were uncertainties about the prospects for rapid recovery and economic growth. The difficulties of the government were further highlighted in 1988 when it was unable to pay the salaries of its teachers and its civil servants in January 1989. This resulted in strikes that developed into violent incidents where the government had to call in the paratroops to restore order. While these strikes prevailed, the IMF itself could not see how financial assistance could be effectively applied to the country's economic ailments. It was therefore not until late in 1989, when the government outlined acceptable austerity measures, that the IMF approved of financial flows to Benin. The government of Benin, among other things, restructured two ailing main banks in the country, the Banque Commerciale du Benin (BCB) and the Banque Beninoise pour le Development, which were crisis ridden. Consequently, in June 1989, the IMF approved a three-year structural adjustment facility of US$18.3 million for disbursement to Benin. Thus, Benin's economic performance remains the highest consideration by multilateral donors for the granting of financial assistance. When this is right Benin can count on major steady flows from the IDA and the IMF.

Burkina Faso Unlike Benin, Burkina Faso has not attracted substantial foreign financial assistance. However, multilateral aid has by and large constituted only a small proportion of total inflow. Total multilateral aid inflows amounted to US$65.8 million to the country in 1979. This declined to US$62 million in 1982, but rose to US$98 million in 1986. Thereafter, this declined to US$77 million in 1988 and further to US$73 million in the following year. The World Bank was a major source of multilateral aid in 1980. Its affiliate, the IDA, made low-cost loans of US$ 17 million for the Bougouriba agricultural project, US$6.5 million for irrigated rice at Niena, and US$14.5 million for reforestation.30 Since 1985, the major multilateral donors have been the IDA, EU, and the UNDP. Receipts from the IDA amounted to US$20.8 million. This rose to US$31.3 million in 1986, but thereafter declined, falling to US$19.0 million in 1988. In the case of the EU, there was a decline to US$8.1 million in 1986 from US$14.8 million in 1985. By 1987 and 1988, it rose to US$14.5 million and US$22.9 million, respectively. The flows from the UNDP amounted to US$7.8 million in 1985, but the average flow for the following three years was US$ 11.4 million. It also has to be mentioned that Burkina Faso has to some extent benefited from the flows from the African Development Fund. The receipts from it amounted to US$5.5 million in 1985. The flows rose to US$ 12 2 million in the following year but fell drastically to US$4.5 million in 1987. However, it rose again to US$7.7 million in 1988. Thus, it is evident that Burkina Faso has since the mid-1980s received a substantial sum of money from the major multilateral donors. All these have

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been vital to the economy in view of the reforms undertaken by the government to promote economic growth. The country will in the foreseeable future continue to require steady inflow from these institutions for sustainable economic growth and development. However, in order to ensure this, the Burkina Faso government will, as matter of priority, pay increased attention to its absorptive capacity. The structures to make concessional external financial assistance viable must be fully established and maintained in order to ensure the cooperation of the multilateral institutions.

Cape Verde In the early 1980s, Cape Verde attempted through its foreign policy to maximize the inflow of foreign aid in order to provide enough food for the rapidly growing population and sustain an impressive economic development program. For example, the 1982-85 Plan projected an investment amounting to 26 billion CV escudos (US$520 million), a sum three times more than that of the 1978-81 plan. However, as may be noted from Table 3.18, Cape Verde did not, in the 1980s, benefit from the growth of multilateral aid to West Africa. Its receipt plummeted to US$14 million in 1983 from US$24 million in 1980. In 1987, it attained its 1980 level and slightly rose to US$26 million in 1988 and 1989. The major response came essentially from the EU. Between 1981 and 1986, the EU through the European Development Fund provided the sum of US$24 million (EUA17 million). The largest project that received attention during this period was the water distribution and sanitation scheme for the capital city, Praia. This consumed a total of EUA7.5 million. The remaining sum was spent on the improvement of works at the international airport on Sal and the soil and water resources for agriculture in the Joan Varela region. In 1983, the EU and Kuwait financed the project to improve water and sanitation services in Pria and a telecommunication project costing US$11.5 million.31 The precariousness of the islands' economy and their dependence on international food aid encouraged the government to adopt a highly pragmatic approach to foreign policy. Cape Verde is strategically located astride Atlantic shipping lanes. The government of Cape Verde has generally been more inclined to the development of ties with the West. Hence, it signed the Lome Convention and formally acceded to the African, Caribbean, and Pacific (ACP) group in November 1987. The Cape Verde government participates as an observer in the Franco-African Summits. This was covertly encouraged by the former President Valery Giscard d'Estaing for strategic reasons. Also, the government allowed South African Airways to maintain landing rights at the international airport on the Island of Sal to ensure regular revenue. However, with the termination of the cold war the strategic importance of the islands has diminished as decoys for foreign financial assistance. But then, there can be no doubt about the needs

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72

of Cape Verde for more multilateral aid for the development of its weak infrastructures. While the EU assistance is encouraged, the government should endeavor to secure the cooperation of the IDA and ADB.

Cote d'lvoire Cote dTvoire enjoys substantial inflow of multilateral aid for its development when compared with the inflow to other francophone West African countries as may be noted in Table 3.18. The major sources of multilateral assistance to Cote dTvoire are the IBRD, EU, and the ADF. For example, the flows from the IBRD amounted to 75 percent of total multilateral aid flows in 1985 and 78 percent in 1987. The increase in the aid from the EU has been more phenomenal. By 1988, it had virtually replaced the World Bank as the principal multilateral donor to Cote dTvoire. There was also an increase in the inflow from the African Development Fund. The financial flows from it rose from a mere US$0.3 million in 1985 to US$18.4 million in 1986 and to US$104.7 million in 1988. Cote dTvoire's rapid economic growth since 1960 has required significant contributions of capital, managerial, and technical expertise and labor from abroad. Economic growth has again been further aided by the windfall earnings from coffee and cocoa, especially in 1976 and 1977. However, there has been growth reversal since 1980, which resulted in rapid deterioration in the standard of living of the people. The Houphouet-Boigny government did, however, promptly responded to this development. By 1981, it embarked on some forms of structural reforms that included the reduction of wages, cuts in public expenditure, and privatization. The subsequent consolidation of these reforms by the government was seen as a prerequisite for economic recovery and growth by France and other developed countries. Hence, there has been a sustenance of the flow of multilateral assistance. Besides, the comparatively stable government in Cote dTvoire was an encouragement for the inflow of multilateral aid to it.

Gambia Multilateral assistance to Gambia has on the whole been on a small scale during the period under study. The major multilateral sources of aid to Gambia are the EU, ADF, IDA, and the UNDP. Since 1985, the ADF has been a leading source. For example, in 1986 and 1987, it accounted for 21.3 and 37 percent of total multilateral aid to Gambia. During both years, the aid from the IDA was also very significant, accounting for 32.5 and 28.8 percent, respectively. When compared with bilateral inflow, multilateral aid accounts for a significant proportion of total flows into Gambia. In 1979, multilateral aid represented 52 percent of the total inflow. It fell slightly to 47 percent in 1981, but rose to 48

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73

percent in 1987. The political and economic importance of Gambia will need to be brought to the fore if multilateral aid is to increase in the future. Generally, investment under the First Development Plan (1975/6-1980/81) was channeled into basic economic social infrastructure (transport and communications, public utilities, schools, agricultural extension stations, health clinics, etc.). Gambia initially relied on highly concessional foreign loans and grants to finance about 70 to 75 percent of its investment programs under the First Development Plan. The remainder was financed from its current budgetary surplus and from domestic borrowing. The World Bank criticized the public investment program implemented under the First Development Plan for contributing to Gambia's economic deterioration in the early 1980s because of its low rate of return on investment.32 However, with the drought and the deterioration in the terms of trade severely reducing real GDP growth over the two-year period 1979/80 to 1980/81, and export-earnings growth during the three years from 1979/80 to 1981/82, the World Bank allowed the inflow of financial assistance to the country. The IMF followed the World Bank with loans to it from its Trust Fund and Compensatory Financing Loan from 1979 to 1981. There were also further disbursements under the standby program from 1981 to 1984. It is significant to note that the growth of industry is hampered by the poor infrastructure and the extremely small internal market. This, in a way, acts as a major constraint to the inflow of multilateral assistance. Beyond this, the hopes of increases in multilateral aid in the future are not bright, as tourism is not adequately encouraged because the conservative muslims fear that this could over time destroy their culture and accelerate the rate of crime.

Ghana Ghana has since the early 1980s been a major recipient of multilateral assistance from most international agencies and organizations. Total multilateral flows to Ghana increased appreciably during the period considered in this study. In 1975 the government negotiated US$13.6 million for the cultivation of rice and cotton, cocoa rehabilitation, and the provision of feeder roads with the World Bank. It negotiated with the ADB US$3.8 million for the development of the cotton industry. Furthermore, it sought US$5 million from the Arab Bank for African Economic Development for the cocoa industry.33 By 1977, Ghana experienced an unprecedented shortage of food and essential commodities. There was also considerable decline in foreign exchange earnings as a result of the fall in demand for timber and cocoa. In response to these, the EU under its STABEX arrangements granted US$0.63 million to compensate for the shortfall in Ghana's timber earnings. In the same year, a further US$6.9 million from the EU funds was allocated for agricultural projects, road mod-

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74

ernization, energy development, manpower training, regional industrial projects, trade promotion, and industrial cooperation. Apart from these, the Kpong hydroelectricity project estimated at US$24 million represented one of the significant projects from 1977 to 1980. It attractedfinancialsupport from a number of multilateral agencies that felt this was basic to the structuring of the economy for its quick recovery. The World Bank provided US$39 million, which accounted for 23 percent of the whole sum required for the project. Other multilateral agencies supporting the project include the Kuwait Arab Economic Development Bank (US$30 million), the EDF and the EIB (US$11 million), and the Arab Bank for Economic Development in Africa (US$10 million). Canada, the single bilateral donor, gave about US$35 million. Since 1982, there has been a steady increase in the total multilateral flows to Ghana as illustrated in Table 3.18. The preponderance of multilateral assistance was very obvious in the second half of the 1980s. This contrasts sharply with the inflow of bilateral assistance during this period. The major contributors to theseflowswere the ADB, IDA, EU, UNDP, IFC, WFP, and IFAD. The sustenance of large multilateral inflows since the early 1980s has, to a large extent, been due to the posture of the Ghana government on solutions to the country's intractable economic development problems. Flt.-Lt. Jerry Rawlings assumed power for the second time on January 1, 1982.34 He introduced a number of measures calculated to be vital for rapid economic recovery. Among other things, the cedi was devalued beginning from April 1983 in the attempt to increase Ghana's exports. Although his reforms provoked widespread criticism at home, it nevertheless gained general acceptability abroad. The developed countries, in particular, saw the reform measures as essential instruments for laying the foundation for recovery and economic growth in Ghana. Thus, while the economic reforms last and the stable political atmosphere prevails, the government can count on thefinancialsupport of the multilateral agencies.

Guinea In Guinea, multilateral assistance rose from US$47.5 million in 1979 to US$73 million in 1986 and to US$89 million in 1988 as illustrated in Table 3.18. Since 1985, the major sources of multilateral assistance have been the IDA, EU, ADB, and the UNDP. For example, the IDA accounted for 38 percent of multilateral assistance to Guinea in 1985; this rose to 54 percent each in 1987 and 1988. The Arab agencies represent other important sources of multilateral aid to Guinea. However, Guinea may in the future need to consolidate its market economy in order to ensure increased inflow. The critical areas in which multilateral assistance are needed are the infrastructures, which are still inadequate for the promotion of economic growth. Also,

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multilateral assistance is urgently needed in the mineral sector, which requires huge capital and technology.

Guinea-Bissau There was little increase in multilateral assistance to Guinea-Bissau during this period. The IDA, EU, ADB, and the UNDP have been the principal sources of multilateral assistance to Guinea-Bissau. The IDA, for example, accounted for 48 percent of total multilateral assistance to it. But this declined to 32 percent in 1987. The need for increased foreign aid in Guinea-Bissau cannot be emphasized. It had considerable budgetary and payments deficits in the early 1980s. A round table meeting of donors was called in Bissau on April 18,1985, to raise money for the completion of the 1983-86 four-year development plan. In this plan, about US$21 million was required for priority projects on the rehabilitation of health centers, for mining research, and projects in forestry as well as fishing and agro-industry. In the same year, donors pledged US$61.6 million toward some partially financed outstanding projects. However, donors, have generally not adequately fulfilled their pledges. The IMF appears to have been the most reliable source of multilateral assistance after the government took appropriate steps in economic reforms. However, future increases in multilateral flows to Guinea-Bissau may depend on the government's ability to ensure political stability: the 1980s was largely characterized by coups and counter coups, which created substantial uneasiness in the multilateral financial institutions. Also, the government should take proper measures to ascertain that its funds are not mismanaged. Corruption in high places, as illustrated in the reported case of embezzlement by the Minister of Interior in June 1985, should be eradicated in order to guarantee the confidence of multilateral financing agencies.35

Liberia As far Liberia is concerned, the decade of the 1980s was not particularly propitious with respect to multilateral aid. By 1975, the IBRD/IDA and US AID jointly provided US$ 11 million for a rural development project. Also, the IBRD and the ADB provided an additional US$33.5 million for road development. Thus, the total commitment from multilateral agencies was an all-time high of US$80 million in 1975, compared with US$53 million in 1973. All loan commitments were for priority infrastructural and agricultural development projects. However, by 1979 the level of multilateral assistance began to decline. In that year, total inflow amounted to US$57.6 million. It declined to US$22 million in 1982, but rose to US$26 million in 1985. Thereafter, it declined precipitously, reaching a record low level of US$17 million in 1988 (see Table 3.18). It may,

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76

however, be noted that the Liberian economy began to deteriorate from 1982 partly as a result of the fall in the price of its principal export commodities, rubber, iron ore, and hard woods. This, in effect, caused a sharp drop in foreign exchange earnings. Export earnings, from January to September 1982, dropped to US$372.9 million from US$400 million compared with the same period in 1981. Thus, there was a need for increased foreign assistance to cushion the fall in export receipts in order ensure the process of sustained economic growth. It was for this reason that the late President Samuel Doe, on his first trip abroad, laid emphasis on financial cooperation with the developed countries. However, the call bore no fruits while his regime was characterized by overt violations of human rights. For example, on April 6, 1984, thirteen people were sentenced to death, without proper trial process, for an alleged plot to overthrow the government. Besides, the Liberian government did not immediately introduce a concrete reform program to cope with Liberia's economic recession. The government introduced some ad hoc measures: the freeze on all government spending and the suspension of payments to government creditors on February 17, 1986. Later in the same year, the government announced the proposal to privatize eleven public corporations considered nonprofitable. But all these were seen by foreign donors and multilateral financial institutions as palliative measures vis-a-vis the enormous problems of the economy. Thus, there was an evaporation of interest to assist Liberia financially while these factors prevailed. In 1987, the United States indicated, for example, that its pledge of US$11 million to Liberia would not be released until all political prisoners, held since the November 12, 1985 coup, were released.36 However, after 1985, there were modest flows from the ADB, EU, IDA, UNDP, and IFAD. The EU accounted for 26 percent of total multilateral receipts in 1985 and 19 percent in 1987. Also, the contributions of the UNDP although very small, averaged about US$2 million each year from 1985 to 1988.

Mali In the case of Mali, the 1980s was characterized by substantial increases in the inflow of multilateral financial assistance as may be noted in Table 3.18. Beginning from 1985, the major sources of multilateral assistance to Mali were the IDA, EU, WFP, ADB, and UNDP. Besides, Mali, in the second half of the 1980s, also received substantial support from the World Bank, IMF, and the IDA while it rigorously applied the measures of its economic reforms. The increase in the inflow of multilateral aid during the second half of the 1980s was largely explained by the turnaround in the economic policies of the government. The state-dominated development strategy that the government pursued until the early 1980s led to serious inefficiencies in resource mobilization and allocation. Public investment decisions, among other things, gave

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insufficient attention to financial and economic selection criteria, such as debt service and recurrent cost implications. Thus, confronted with unsustainable fiscal and external deficits, the government, in 1982, launched a series of adjustment programs that were supported by the resources of the IMF and the technical assistance of the IDA. Although this led to an initial success, the momentum generated could not be maintained, resulting in a slow down in late 1986. However, two years later, the government embarked on a new medium-term adjustment program. This program, among other things, emphasized policies aimed at fostering an environment conducive to promoting private sector activity, savings and investment, and international competitiveness. While these have sensitized the multilateral donors to increase inflow, it however remains very doubtful if the additional inflows have had major positive impacts on the sectors in which they were concentrated. For example, the development of infrastructure remains disappointingly inadequate. However, with the continuation of reforms by the government and the introduction of a democratic government in June 1992, there should be reasonable hope for sustained inflow of multilateral aid.

Mauritania Multilateral aid to Mauritania in the second half of the 1980s increased substantially with the government undertaking economic reforms in early 1985. The Mauritanian government entered into negotiations with the IMF and official and private creditors and embarked on a comprehensive adjustment strategy designed to redress the large internal and external imbalances that had emerged in the early 1980s. The adjustment program was cast in a medium-term framework. Supported by IDA credits and by an IMF standby, it extended structural adjustment facilities from 1985 to 1990. The adjustment measures focused first on the stabilization of the economy, then restructuring to assure steady growth under the principles of a free market economy. These notwithstanding, it was clear by 1991 that external aid and new economic policies were still a long way away from the provision of satisfactory solutions to the development problems of the country. In 1991 the government was engaged in the drawing up of a comprehensive program that covered, among other things, the management of renewable and nonrenewable resources, demographic growth, public health, desertification, and deforestation. Again, the economic policy of the government in 1993 greatly underscored the need to eradicate poverty and the need to improve the environment. The government's determination to continue with economic reforms and to encourage democratic practices, as illustrated with the introduction of a new constitution in July 1991 and the formation of opposition political parties, are good gestures that are likely to help in the maintenance of the inflow of multilateral aid.

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Niger Multilateral assistance to Niger, unlike Mauritania, dropped during first half of the 1980s: from US$64 million in 1980 to US$52 million in 1984. However, it thereafter rose to US$130 million in 1987 before falling to US$95 million in 1989. The stabilization program launched by the government in 1983 was supported by the IMF and IDA. Further supports were also received from both institutions when Niger embarked on structural adjustment programs two years later. In spite of these programs, however, the economy of Niger remains in the doldrums, mainly because of the failure of the government to sustain meaningful adjustment measures in the face of a competitive decline that amplified the economic and financial crises.

Nigeria Nigeria was not a large recipient of multilateral aid during the 1980s. Apart from Cape Verde, its share of multilateral aid to West Africa was the least. In 1980, total multilateral inflow amounted to US$18 million. Although this rose slightly to US$24 million in 1981, the following four years witnessed a precipitous decline: reaching an all-time low of US$16 million in 1985. However, it picked up in the following year and rising to an all time eight of US$36 million in 1989. The low inflow of multilateral aid to Nigeria is explained by the low priority accorded to it in government overall economic policies. The government counts largely on the receipts from oil exports in carrying out its annual budgets and development plans. In the attempt to arrest economic recession and promote economic growth, the government introduced a far-reaching structural adjustment program in 1986, which combined exchange rate and trade policy reforms aimed at revitalizing the nonoil economy with stabilization policies designed to restore balance of payments equilibrium and price stability. The program stressed downsizing the public sector and improving the efficiency of public asset management. Import licenses and agricultural marketing boards were eliminated, price controls were lifted, and the banking deregulation was initiated. But then the fact that poverty became aggravated in the country in the early 1990s, after seven years of implementation of the program raises several questions about its relevance. By 1993, per capita income fell to US$340 from US$1,000 in 1980. In real per capita terms, consumption and income are now no higher than they were in the early 1970s before the oil boom. Indeed, basic social indicators place Nigeria among the twenty poorest countries in the world. The productive and social infrastructural sectors are still largely inadequate. While steady increases may not be guaranteed from the oil sector, it must be recognized that the development of an effective nationwide infrastructure, for

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example, would entail enormous capital and technological know-how. In this context therefore the increasing role of multilateral aid may not be unduly discounted by the Nigerian government. However, if the government's structural adjustment program in recent years has given some comfort to multilateral donors, the turn of events after the unilateral annulment of the results of the general elections, which could have resulted in the election of a democratic government in June 1993, has introduced new dimensions into the politico-economic scene of the country. The rise in multilateral assistance that seemed to have picked up in the second half of the 1980s may disappear unless a timely and enduring political solution is found.

Senegal On the whole Senegal, unlike Nigeria, received substantial multilateral aid during the decade of the 1980s. It also experienced a considerable increase in inflow during this period. Total multilateral flows to it rose from US$79 million in 1980 to US$129 million in 1981. There was a decline all through the following four years, reaching a low level of US$60 million in 1985—during the period when the first structural adjustment program suffered major setbacks. But it picked up the following year to a record level of US$252 million. However, there were major declines in the subsequent two years, US$177 million in 1988 and US$103 million in 1989, which suggested that multilateral donors may be having difficulties in the effectiveness of aid in Senegal. While a structural adjustment program is yet to be pursued to its logical conclusion, it is obvious, however, that the economy continues to remain in the woods. Since 1990, it has been evident that the key economic sectors have had serious declines. In 1991, fish processing declined in volume terms by 66.4 percent; phosphates by 24.1 percent; textiles by 36.8 percent; and the food processing industry by 45.8 percent. Also, groundnut exports declined in value by 41 percent. Revenues from tourism over the September 1992 to March 1993 season were the lowest since 1985, partly because of the closure of the Casamance region to tourism because of political strife. In other words, Senegal requires an increase in the inflow of multilateral aid if it is to sufficiently cope with the unresolved economic problems.

Sierra Leone Like Gambia, Nigeria, and Cape Verde, Sierra Leone was a low recipient of multilateral assistance in the 1980s. From 1980 to 1984, the average annual multilateral inflow was about US$27 million. In 1985, inflow amounted to US$35 million, but declined to US$21 million in 1987. Although it rose to US$40 million in the following year, it nevertheless fell drastically to US$29

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million in 1989. In other words, multilateral donors appeared to be uncomfortable with the capacity of Sierra Leone to absorb aid in the 1980s. Part of the difficulties here arose from the reluctance of the government to pursue comprehensive economic reforms to cope with an apparently intractable economic recession. It set in after the first oil price shock in 1973 and was characterized by declines in income in the mining sector from 1975 to 1980. The initial responses of the government to these were essentially ad hoc fiscal or monetary measures. The main reform measures did not emerge until 1989 when the government liberalized foreign and domestic trade. It also abrogated the monopoly of the Sierra Leone Produce Marketing Board, whereby private traders were allowed to purchase coffee and cocoa from producers at negotiated prices and retain all export proceeds. Furthermore, all trade licenses except for gold and diamonds were abolished. Nevertheless, the efforts to stabilize the economy were disrupted in mid-1990 by the civil war in neighboring Liberia. The influx of nearly 200,000 Liberian refugees, the equivalent of 5 percent of Sierra Leone's population, and its participation in the regional peacekeeping arrangement, the Economic Community of West African States Ceasefire Monitoring Group (ECOMOG) exerted significant pressure on the finances of the government. These financial crises further found expressions in other sectors of the economy. In particular, there was rapid deterioration in the physical and social infrastructure. Most roads are in poor condition. And the lack of maintenance resulted in severe deterioration of electric power generation systems. Hence, the need for increases in multilateral aid in the 1990s was a foregone conclusion and requires no emphasis. In 1990, for example, the total external assistance of US$72.9 million accounted for 90 percent of the 1989/90 development budget. It is however important to note some of the specific problems associated with aid flow to Sierra Leone. To begin with, even though the government has the primary responsibility for the planning and coordination of aid, there is no central aid coordination mechanism. The Department of Finance, Development and Economic Planning coordinates the assistance from UNDP and all economic aid, including assistance from the governments of France and Germany. The National Aid Coordination Secretariat coordinates aid from the United States, and the National Authorizing Office, attached to the State House, coordinates aid from the EU. Aid from all bilateral sources is managed by the Department of Foreign Affairs. There is thus an urgent need for proper foreign aid coordination in order to ensure maximum utility of inflow. Togo On the whole, the flow of multilateral aid to Togo increased substantially during the 1980s after an initial decline in the first two years. Inflow rose to US$60 million in 1983 from US$23 million in the previous year. Although this

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declined to US$55 million and US$52 million, respectively, in the following two years, it rose to US$75 million in 1986. In 1987, it fell precipitously to US$37 million, but rose sharply to US$73 million in 1988 and US$76 million in 1989. Obviously, this inflow represented a major asset to the ailing economy in the 1980s. They largely represented the faith the multilateral institutions have in the prospects for economic recovery and growth. The first serious economic reform efforts occurred in 1983. It was supported by the IMF standby arrangements. World Bank structural adjustment lending, and debt relief from the Paris and London Clubs. This, to some extent, assisted in ensuring resource mobilization and the reduction of current account and fiscal deficits between 1982 and 1983. The main ingredients of fiscal adjustments consist of civil service salary freezes and early retirements. These reform efforts reversed negative growth as real growth, which fell to -1.7 percent a year over 1980-83, rose to 2.5 percent a year over 1984-86, slightly below the rate of population growth. This notwithstanding, Togo remains confronted with critical development issues, particularly in the productive and social infrastructural sectors that require considerable improvement. But while increases in receipts from the export of the basic commodities—phosphate, coffee, and cocoa—cannot be guaranteed because of their low world prices and erratic demand, there is still need for an increase in the inflow of multilateral aid. In order to ensure this however, the government needs to pay more attention to making the peaceful transition to democracy and avoid protracted long periods of political indecision and social upheavals. On the whole, the need for increases in the inflow of foreign aid to West African countries is incontrovertible in the face of the intractability of their economic development problems. Nevertheless, it is clear that in the foreseeable future, the currently emerging aid policies of the donor countries would be very decisive as new elements have emerged in the disbursement of aid in a changing world economy. Let us now examine the basis, nature, and implications of these policies. POLICIES OF DONORS: THE RECENT TRENDS In the early 1990s, new developments in the international economy have prompted donors to have new perceptions on the policies of international capital movement, particularly of financial flows to the developing countries. The improvements in the recession of the world economy have remained very sluggish. Most of the developed countries are still confronted with a high rate of unemployment apart from Japan and the United States, which have shown remarkable growth. Also, a number of the developing countries are yet to resolve fully the problems of inflation, without which their economies cannot be adequately put on the path of steady growth. More states have been created in Eastern Europe as a result of the collapse of the Soviet Union. These new states,

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being very weak economically, are also seeking the support of the international community for their political and economic survival. On the other hand, the economies of the newly industrializing countries of Southeast Asia continue to indicate further growth and with high demonstrative effects for other developing countries. At the same time, there has been an acknowledgment through Agenda 21, agreed upon by the international community in Rio de Janeiro in 1992, for an environmentally sustainable global development. Along with these factors, the economic development of African countries south of the Sahara, including those in West Africa, has not been very encouraging since the beginning of the 1990s. The several years of application of structural adjustment programs appear to have procured very little positive results on economic growth. In other words, the donors are confronted, among other things, with the choice of judicious application of available resources to increasing and competing demands. Equally, they are concerned that resources made available to countries should be effectively utilized to assist in the promotion of sustainable economic growth and development. This section will attempt to describe the present emphasis of the key donors to West African countries, particularly France, the United Kingdom, the United States, Germany, Japan, Canada, Norway, Sweden, the Netherlands, and Denmark.

Foreign Aid: Institutional Capacity Building and Sustainable Development With greater effectiveness of foreign aid as the common denominator, the emerging policies of donors in the early 1990s have crystallized around the themes of the establishment of institutional capacity building in both recipient and donor countries. The argument here is that previous aid disbursements to developing countries, including those in West Africa, were not effectively utilized essentially because of their deficiency. Also, the argument that additional resources to assist the development process in the developing countries should, particularly, be encouraged where the recipient countries have or are implementing sound economic reforms. Inappropriate economic policies, it would seem, have been seen as part of the failures for the effective utilization of foreign aid in the past. In addition to these, the recipient countries must include their development process the new thinking, "sustainable development," to ensure that the overall global development objective is attained.

France: Technical Assistance and the Strengthening of the Finacial Capacity of Least-Developed Countries By the late 1980s, France's bilateral aid continued to focus on African countries south of the Sahara, particularly, the francophone countries. The financial conditions of French aid, notably to the poorest countries, improved

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in 1989. Aid to the least developed countries within France's traditional area of concentration has, since 1989, been extended either in grant form or in loans on the IDA's terms. The terms of French financial assistance to countries outside France's traditional area of concentration have also softened. Overall, French assistance has been provided on more favorable terms than the thresholds set in the DAC terms recommendations subtarget for the least developed countries. However, in the light of the decisions announced in 1990 by the French government, it seems likely that the target could be achieved in the near future. As already mentioned, program aid consisting of grant budget support, structural adjustment loans, and debt relief extended to countries implementing internationally assisted structural adjustment programs accounts for a significant rising share of France's ODA to African countries south of the Sahara. In May 1989, France announced that it would cancel unconditionally all the outstanding ODA debt, amounting to 16 billion francs (US$2.7 billion at 1988 exchange rates) owed to it by thirty-five poorer sub-Saharan African countries. The Maghreb countries also received substantial amounts of bilateral ODA. Technical cooperation, of which France is the largest source among DAC countries, continues to be a major component of ODA (representing 43 percent of bilateral disbursements in 1988/89), but its share in aid is gradually declining. Technical cooperation is increasingly being extended within the framework of integrated projects and programs. Besides, it has been observed that cooperation with voluntary and nongovernmental organizations has expanded and the appropriations to support their activities have rapidly increased. Also, there has been a growing emphasis on programs to protect the environment in the recipient countries. On the whole, France's contributions to multilateral institutions increased in the 1980s as a result of the increased contributions to IDA and the regional development banks. In the years ahead, it is expected that the government will accord higher priority to the UN institutions, where France's participation has so far been more modest. The aid policy to the least-developed countries in the form of grant or in the terms of IDA loans by France since 1989 appears very realistic in the context of the economic crisis of most West African countries. When this is taken together with the cancellation of the US$2.7 billion debt, these amount to considerable financial relief for these countries as they needed additional financial resources to promote economic growth. But the prospects of development in these countries would be brighter if France were to reach the thresholds established in the DAC terms recommendations, since francophone West African countries are, to a large extent, dependent on the external financial assistance of France.

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Technical cooperation is very important to sustainable self-reliant development in West Africa. This is the very crucial time when an increase in this area is demanded by West African countries for human development.

The United Kingdom: Least-Developed Countries and Sustainable Development Compared with the French program, the British program continued to be characterized by high concessionality. It is largely concentrated on very poor developing countries with a growing emphasis on technical assistance (program aid). The British government gives high priority to projects where environmentally sound development and environmental factors are taken into account from the earliest stage and followed through all subsequent stages up to and including the ex-post evaluation of aid programs. Notably, the share of program aid in bilateral ODA gross disbursements increased from 6 percent in 1984 to 21 percent in 1989, while project aid decreased from 37 to 20 percent in the same period. It has been observed that there was also a marked increase in technical cooperation over the same time period from 37 to 46 percent. The increase in program aid largely reflects a major reprogramming of British assistance to sub-Saharan Africa to permit larger flows of quickly disbursing aid in the framework of structural adjustment programs. British technical assistance is increasingly concentrated on institutional and managerial development, where it often fulfills important tasks in promoting and assisting structural adjustment reforms.37 However, substantial part of British aid remains tied to procurement in Britain and it continues to have one of the highest tying ratios of bilateral aid among DAC members. The British has thus continued to demonstrate interest in the promotion of economic development in the poor African developing countries. Its disbursements to Africa has increased in recent years especially in the areas of technical cooperation. The substantial volume of British aid to the continent attests to its importance. But the benefits of this flow to West African countries in the future would be enhanced the more the aid is untied.

The United States: Concessional Flows and Recipient Absorptive Capacity The foreign aid policies of the United States in the 1980s were watched closely by observers of development in developing countries; hopes were placed on a peace dividend after the termination of the East-West rivalry and a possible peace era with the gradual dismantling of intercontinental ballistic missiles in Russia and the United States. The assumption was that part of the huge expenditure should logically be diverted to global development, especially, for more financial assistance to the less developed countries. But this is yet to be

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seen in an increasingly competitive world where the interests of countries do not at all times converge. To a large extent the financial terms of U.S. aid, which were already highly concessional, softened further in 1989, but the United States was not in compliance with the DAC Terms Recommendations because of the low level of ODA commitments. A US$500 million "development pool" which combined AID and Export-Import Bank resources to finance capital projects tied to procurement in the United States, was established in May 1990. In 1988, because of budgetary constraints, the United States provided only verbal support for theJMF's US$8 billion Expanded Structural Adjustment Facility (ESAF), which was an arrangement to increase concessional resources flows to low-income countries experiencing balance-of-payments difficulties.38 The basic characteristics of the US bilateral aid have remained unchanged. Bilateral aid from the United States is not provided in response to the need of the recipient countries or to the recipients' ability to use it effectively for development purposes. It is generally provided in support of the geo-strategic, political and development objectives of the United States.39 However, since 1989 the US Congress has been reviewing the Foreign Assistance Act of 1961 with the objective of providing a new legislation that will be more relevant to new international economic relations realities. The United States is an important bilateral aid donor to Africa in terms of the volume of its disbursement to the continent. Its contributions toward Africa's development efforts have been very substantial. However, the existing economic realities in West Africa, which has most of the least developed countries experiencing intractable economic recession, require that more aid should be directed at the subregion in order to arrest the aggravation of poverty. The assumption is that the ongoing congressional review of foreign aid legislation will take this into account. With the end of the cold war and a bipolar global system what is more at stake for mankind now is an equitable world economic development.

Germany: Strengthening the Capacity of Least-Developed Countries It is evident that there have not been substantial changes in the foreign aid policies of Germany since the late 1980s. The German government continued to have significant aid presence in all areas of the developing world. In 1987/88, aid to sub-Saharan African countries amounted to about 27 percent of allocable bilateral ODA; aid to southern and Southeast Asia, 41 percent; and for Latin America, 12 percent. Germany had major aid involvements also in North Africa, the Middle East, and European developing countries. The proportion of German aid provided to low-income countries (53 percent in 1987-88) corresponds roughly to the DAC average. The share of German aid channeled through

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multilateral institutions is of the order of 30-33 percent, including contributions to the EU, and about 20 percent if these are excluded. About half of bilateral aid is untied. And like France, there is a growing emphasis on measures to protect the environment with increasing engagement in the forestry sector and on antipoverty actions, including some interesting innovative approaches to channel aid for self-help measures through nongovernmental institutions in developing countries. A relatively large share of bilateral aid supports basic infrastructure projects in energy, communication, and transportation. The volume of technical assistance is comparatively large, but includes a significant proportion of cultural assistance and imputed students' costs. Commodity assistance and local-cost financing tended to increase during the recent past. Disbursements of commodity aid under IMF/World Bank-led structural adjustment programs are small, but they are expected to increase during the next few years. However, to support the economic reforms of developing countries more effectively, a new instrument called "structural aid" was introduced in 1987. The average grant element of German aid meets the DAC terms objectives but remains below the DAC average. Steps have, however, been taken recently to improve financial terms together with debt relief actions. Besides, a number of new initiatives have been taken recently. These include the decision to grant further debt relief to a selected group of low-income countries and an improvement in the financial terms of loans to all low-income countries. Since 1989, recipients, other than least developed countries, have been given grants for self-help oriented measures to fight poverty and for projects in the field of social infrastructure and environmental protection. Together, more than one-third of the recipients of German development assistance will see the terms of their financial assistance improved. Other new initiatives are a reorganization of the Ministry of Economic Cooperation and of the implementing institution for technical cooperation (GTZ), aiming at the strengthening of their capacity for a more strategically oriented country focus approach. Thus, although there appears to be an improvement in the pattern of German aid in recent years, nevertheless it is still not very clear if this could lead to substantial increases in the flows to recipient West African and other developing countries. However, the consolidation of implementing institutions for technical assistance could go a long way in establishing the long-term basis for sustainable economic development in developing countries, including those in West Africa. While this may be the case, there has been increasing focus on Japan, which has emerged as a major global economic power and prominent aid donor among the DAC countries in the early 1980s. With the determination to strengthen its economic position vis-a-vis other developed countries, its aid policies should be seen more in the framework of domestic economic policies. Furthermore, the reunification of East and West Germany suggests there could be new thinking in external financial assistance to developing countries. Huge

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resources would be required for the promotion of growth in the backward areas of the new entity, especially in parts of the former East Germany.

Japan: Consolidating National Aid Institutions and Concessional Aid Japan is currently in the process of strengthening its aid implementation system. The government is doing this by (1) expanding staff and upgrading its developmental expertise through advanced training; (2) reinforcing appraisal and evaluation; (3) intensifying cooperation with nongovernmental organizations; and (4) promoting joint activities with other donors, both bilateral and multilateral. In addition, the government, like the French government, places greater emphasis on environmental protection in aid programs. One remarkable step in 1989 was the establishment of the Japan International Development Organization (JAIDO) with public and private funds to facilitate the promotion of direct private investment in developing countries. This was apparently a followup to the measures taken by the government in 1988 to consolidate aid coordination and management by setting up a cabinet-level Council for Economic Cooperation consisting of fourteen ministers and strengthening the staff both in Japan and in overseas representations. Furthermore, in 1989, the Japan International Cooperation System was established with the aim of improving the procurement and maintenance of equipment financed with JICA (Japan International Cooperation Agency) grants. In addition to this, in 1993 the Japanese government sensitized the international community of the need to reconsider a more realistic strategy to facilitate the development process in Africa. This action resulted in the Tokyo International Conference, October 5-6, 1993 and the Tokyo Declaration on African Development—Towards the 21st Century. It was a declaration that acknowledged the current efforts at the promotion of development in Africa but which, in view of the present predicament of the continent, called for more urgent support from the international community for humanitarian relief and the financial needs of African countries. Japan's contributions to multilateral organizations accounted for 27 percent of total ODA in 1988-89, a ratio close to the DAC average. However, Japan was not in compliance with the DAC Recommendation on the Financial Terms of Assistance in spite of a strong increase in the share of grants in total ODA commitments and a softening of loan terms. But unlike France and the United Kingdom, about 87 percent of ODA loans in 1988-89 were untied for worldwide procurement and 12 percent were available for procurement in developing countries. In addition, a substantial part (51 percent in 1988-89) of bilateral grant was untied. The untying of Japan's aid remains a unique feature in its foreign financial assistance. The more its aid is untied the better the prospects for West African

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countries that are beneficiaries of bilateral assistance from Japan. Even though the growing importance of Japan in global foreign aid is acknowledged, the significance of Canada as a vital donor in the 1990s to Africa's development cannot, at the same time, be underestimated. Most likely the pattern of aid policies will be influenced by the implementation of the North American Free Trade Agreement (NAFTA) and the necessity for Canada to remain competitive in the global economy during the 1990s.

Canada: The Development of Human Resources The Canadian Parliament, in March 1988, approved an aid strategy report entitled "Sharing Our Future." In this report, comprehensive policy guidelines were articulated for future Canadian aid. The highlights of the report, among other things, include the easing of procurement restrictions (45 percent of bilateral ODA commitments were untied in 1988), the decentralization of both CIDA personnel and authority to the field, and a planned significant expansion of activities related to human resources development. In the new aid strategy, high priority was accorded to poverty alleviation. Aid would be concentrated on poor countries, specific sectors, and poor population groups. This new aid strategy has been implemented, however, with little detraction by the aid cut of April 1989 when the government reduced its aid program as part of a general policy of budget restraint. The government temporarily suspended the ODA volume targets that it had accepted in 1986 (0.5 percent of GNP until FY 1990/91 and 0.6 percent in FY 1995/96).40 In 1989, all bilateral assistance was extended in grant form and was concentrated on very poor developing countries with least developed and other low-income countries accounting for 74 percent of bilateral allocable ODA. In 1989, aid to sub-Saharan African countries accounted for about 45 percent of allocable bilateral ODA, aid to southern and Southeast Asia for 30 percent, and Latin America 19 percent. In addition to this, Canada has adapted its aid program to the needs of highly indebted low-income countries and quick-disbursing aid forms were expanded in support of recipients' structural adjustment efforts in cooperation with the IMF and the World Bank. As far as multilateral aid is concerned, the share of Canadian aid channeled through multilateral institutions in 1988 was 33 percent. This slightly fell to 32 percent in 1989. In other words, the Canadian government has a tradition and considerable preference for bilateral assistance to developing countries. But the traditional strong aid assistance from the Scandinavian countries will continue to constitute a major force in the overall DAC disbursements to developing countries, including those in West Africa. How could this policy be maintained when this group of countries is eventually harnessed into the mainstream of EU integration arrangement?

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Norway: Women and Support for Structural Adjustment Programs In 1989, it was clear that Norway continued to maintain its top position among DAC Member countries. Its total ODA as a share of GNP was 1.04 percent in 1989, although it slightly fell from that of the previous year, which was 1.13 percent. Following the declared poverty orientation of the Norwegian aid program, bilateral aid has essentially been concentrated on the poor countries and about 90 percent of bilateral allocable ODA has been channeled to the least developed and other low-income countries, a ratio that was almost twice that of all DAC countries combined. There has been a gradual shift away from Asian recipients to countries in sub-Saharan Africa, which now accounts for two-thirds of bilateral allocable ODA as compared to 52 percent in 1978/79. Like the Netherlands, Norway is committed to the strengthening of international cooperation in environment. Renewed emphasis has also been placed on initiatives aimed at promoting women in development, especially in the agricultural sector. Also, Norway supports structural adjustment measures led by the World Bank and the IMF in main partner countries, notably adjustment-related project aid and commodity import support, as well as through a fund for international debt relief operations. Furthermore, following the policy objective enumerated in the early 1970s, a substantial share of the total aid program (about 40 percent in 1989) was channeled through multilateral organizations. Even then, a significant proportion of Norwegian aid is disbursed without procurement restrictions. Thus, Norway shares the same commitment of aid support to developing countries with the Netherlands. Its increasing focus on aid to poor African countries would be beneficial to West African countries the more the aid is increased and directed at the critical areas of development of the recipient countries in the subregion.

Sweden: Management of Natural Resources and Infrastructure It is important to underscore that Sweden was the first DAC-member country to reach the international 0.7 percent target in 1975, and has since then maintained it for fourteen consecutive years. In 1989, it was 0.97 percent as against 0.86 percent for the previous year. Swedish ODA has been extended entirely in grant form and a relatively large proportion is untied. It is concentrated on least-developed and other low-income countries, with a large emphasis on sub-Saharan Africa. Also, like Norway and the Netherlands, environmental considerations received increased attention in 1988: the protection of the environment was added as a fifth objective to the existing four-principal objectives for Swedish development cooperation.

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On the basis of the findings of a comprehensive study of Swedish aid to sub-Saharan Africa, aid efforts toward it are to be intensified and the guidelines for Swedish development cooperation with Africa in the 1990s was adopted by the Parliament in 1989. In these guidelines, priority has been given to economic growth, improved management of natural resources, strengthened social programs, rehabilitation of existing infrastructure, and institutional building. Furthermore, quickly disbursing commodity assistance for balance-of-payments support has been considered as an essential element in supporting the implementation of structural adjustment policies in a growing number of African countries. An increasing share of it is directly linked to the financing of IMF/World Bank-coordinated macro and sectoral adjustment programs.41

The Netherlands: Concessional Aid, Agriculture, and Rural Development If expressed as a share of GNP, the Netherlands's ODA fell from 0.98 percent in 1988 to 0.94 percent in 1989, but it remained well above the 0.7 percent of GNP target for the nineteenth consecutive year. It is expected that its ODA will continue to be close to 1 percent of GNP (as it has during the past decade), given the Netherlands's determination and commitment to devote 1.5 percent of net national income to development cooperation. The financial terms of the Netherlands are highly concessional. About 40 percent of its total ODA is untied. Some 40 percent of bilateral aid is extended to ten low-income "program countries." Substantial amounts of ODA, mainly in the form of sector assistance, are given to other developing countries. The shares of the least developed and other low-income countries in its GNP and in ODA are well above the DAC average. The government of the Netherlands gives high priority to aid in agriculture and rural development. There is an emphasis on activities designed to promote the role of women in development and to the protection of the environment. In the framework of balance-of-payments support and of cofinancing with multilateral institutions, the Netherlands participates in international efforts to assist low-income debt-distressed countries that are undertaking structural adjustment programs. Multilateral contributions, excluding those to the EU, represented 21 percent of total ODA in 1988/89. Thus, the commitment of the Netherlands to aid support for the developing countries is strong. The Netherlands government has steadily ensured, over the years, that the internationally agreed target for aid flow to the developing countries is adequately met. This commitment has without doubt been an obvious advantage to the recipient developing countries, including those in West Africa. Besides, the financial collaboration of the Netherlands government with the multilateral institutions on their debt and structural adjustment program problems represents further significant benefits where West African countries and other developing countries have been involved. This apart, it has been

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observed that the Danish emerging foreign aid policies have similarities with that of the Netherlands. Denmark: The Alleviation of Poverty The ODA net disbursements from Denmark, in 1988, amounted to US$9.22 million. At 0.89 percent, the Danish ODA/GNP ratio exceeded the 0.7 percent target by a large margin. Danish development assistance is governed by a set of both quantitative and qualitative principles. The most important of these is a strong poverty orientation in the developing countries. Poverty eradication is considered a high priority. Other important objectives are the integration in the development process of environment considerations, of women's roles in the development process, and of respect for human rights. One of the quantitative objectives is that total ODA should be approximately equally divided between bilateral and multilateral aid. Quick-disbursing aid in the form of commodity assistance is provided in support of structural adjustment programs in cooperation with the IMF and the World Bank. The share of bilateral ODA allocated to sub-Saharan African countries is approximately 60 percent. Furthermore, the Parliament, in 1988, approved a draft Plan of Action for Danish Development Assistance up to 1993. The plan includes the decision to abandon loans and thus to provide future aid entirely in grant form. It entails the decentralization of both Danish International Development Agency (DANIDA) personnel and authority to the field. Furthermore, aid will concentrate on a smaller number of recipients (20-25) over a five-year period, and there will be a comprehensive country programming for all aid recipients based on specific country analysis. While Denmark maintains its policy of requiring that about one-half of Danish bilateral aid be procured in Denmark, it has introduced a more flexible procurement policy as well as a new country program system so as to avoid the negative effects of this policy. Beyond these however, important consideration has to be given to the foreign aid from the Eastern European countries. Aid from these countries has played a vital role in West African development especially, in the form of technical cooperation. But the waive of democratization and economic reforms in the mid-1980s, within these countries are factors that cannot be discounted in their foreign aid policies as these countries try to confront their economic growth challenges. The Russian Federation and Eastern European Countries The developments in the former Soviet Union (now Russian Federation) and Eastern European countries in the mid-1980s have also elicited new policies on aid flows to Africa. Hitherto, aid from these countries and other CMEA countries to African countries and other developing countries rose from US$2.83 billion in 1980 to US$4.64 billion in 1986. It rose further to US$5.01 billion in 1987 but declined to US$4.69 billion in 1988. However, as the several

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years of unabated economic recession compelled the Soviet Union and other Eastern European countries to embark on major economic and political reforms, these have, inevitably, had far reaching consequences on their broad external foreign economic policies. In the Soviet Union, beginning from 1988, aid administration was reorganized under the Ministry of Foreign Economic Relations. Following the restructuring of the economy, Soviet enterprises were expected to be self-financing and profitable and were expected to implement projects directly in countries receiving Soviet aid. Emphasis was laid more on efficiency in both Soviet aid administration and in the recipient countries.In former Czechoslovakia (now Czech and Slovak Republics) and GDR (now Germany), students graduating from their universities and technical colleges now work for about two years after the completion of their studies to reimburse the scholarships. Thus, given the ongoing reforms in these countries, West African countries and other developing countries are not likely in the near future to have increased aid inflow from the Russian Federation and other East European countries. MULTILATERAL AID POLICIES: THE RECENT TRENDS In recent years, there have been major policy reviews in most leading multilateral agencies with far-reaching implications for future aid flows to West Africa. In the case of the World Bank, there was a discussion on the extent to which the bank's emphasis on structural adjustment has led it into "quick-disbursing" operations. There has also been a reconsideration of the long-term development process that exists to support, rather than back into the narrow traditional concept of project lending. The emphasis on specific policy priorities, such as poverty alleviation, support for adjustment programs, the environmental aspects of development, and the scope for development of the private sector, has become very strong. The slow growth of multilateral assistance since the mid-1980s took place in the context of a firm consensus among donor countries that the system of multilateral agencies is a central component of intentional development cooperation efforts, and that disbursements generally should be intensified in particular in connection with the debt strategy. In the recent findings, the ADB has been strongly supported by donors, as an expression of their more general concern with Africa's special problems. However, the extent to which bilateral donors and international agencies are now themselves concentrating their efforts on Africa creates a situation in which the particular role of the ADB may be difficult to categorize. As far as realistic development policy is concerned in Africa, the major initiative has come from the World Bank in the context of structural adjustment programs. To be more relevant to Africa's economic development, ADB should consolidate its existing capacities in resource mobilization, project preparation and implementation,

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country programming, and the development of new initiatives in areas of current concern. With respect to the UNDP, new policy directions have been consistently stipulated in the Administrator's reports to the meeting of the Executive Board. In the June 1989 report, the administrator stated that the main role of the UNDP lies essentially in support for developing countries' efforts to enhance their capacities in the management of the development process. Its realization will in time require an improvement in the analytical and managerial capacity of the specialized agencies at the country level, both in the field and at the headquarters. This wider context is implicitly recognized in the UNDP's guidelines for the Management Development Program, where a link has been made with the UNDP's evolving role in aid coordination. More importantly, The UNDP's fifth cycle (1992-1996) country programs stress greater ownership of projects by Africans themselves through national execution and participation by all sectors of African society. Also, the UNDP shares the current view of the "20:20" concept: that at least 20 percent of government spending and 20 percent of development assistance flow into human development priority areas, especially education and health as well as access to credit. The UNDP assumes that this is the realistic strategy of poverty alleviation—employment generation, social stability, and integration, rather than investing in the formation of people's capabilities and enabling them to help themselves.42 However, this may not be easily undertaken by the UNDP. Difficulties may emerge in conflicts of interest between the UNDP in its operational role and the UNDP in its central funding role vis-a-vis other UN agencies.

CONCLUSION The flow of foreign aid to West African countries from the mid-1970s to the early 1990s has, on the whole, been considerable at both bilateral and multilateral levels. However, the volume of inflow varies from one country to another depending on the political and economic circumstances of each country and the relationship with the donors. For most countries, the DAC countries remain the essential sources of bilateral aid. But to this category of donors have been added, in recent years, the donors from the oil-producing countries in the Middle East. At the multilateral level, the World Bank, IDA, IMF, ADB, and the UNDP constitute the essential sources of aid to West African countries with a high inclination to assist in their development process. To a large extent, both bilateral and multilateral aids have been directed at the development of the infrastructures and the strengthening of the productive sectors of the economies of West African countries. However, while many countries in the subregion continue to remain at a low level of economic development, it has not been difficult to conclude that the impact of foreign aid on their development process has been marginal.

94

Foreign Aid and Self-Reliance in West Africa

There are still considerable constraints on the flow and utilization of foreign aid in West Africa. From the side of the donors, greater aid untying should be encouraged to increase the value of aid to West African countries. Also, attention should be paid to the economic interests and special needs of the recipient West African countries. The role of bilateral donors has been remarkable in several emergency situations in West African countries. However, these countries would be better off if they were able to develop the autonomous means to cope with emergencies as they arise. Of course, the recipient West African countries themselves have to take more appropriate steps to eliminate the constraints to the effectiveness of foreign aid. They should, as a matter of urgency, establish appropriate institutional structures for the effective coordination of foreign aid. Also, necessary measures should be adopted to address the questions of mismanagement and corruption in the administration of foreign aid by those countries seriously concerned. The failure to do this in a timely manner may eventually result in the marginalization of the affected countries in disbursement from the donors, since competition for aid becomes more intense from other developing countries and economies in transition. The prospects for increases in foreign aid in the future clearly depends largely on the emerging foreign aid policies of the donor countries. The disappearance of the East-West rivalry and the universal acceptance of democratic principles have introduced new dimensions into the thinking of foreign aid. Strategic considerations now play less of a role in the disbursement of foreign aid bilateral donors. The economic interests of the donor countries have assumed more importance. Besides, the capacity of the recipient countries to absorb aid now plays a critical role. In fact, this thinking has been abundantly shared by the multilateral donors. In its various dimensions, the capacity to absorb foreign aid would, among other things, include the implementation of economic reforms by the recipient West African countries and the strengthening of the institutional support for aid utilization. Furthermore, aid utilization is expected to take on board the idea of sustainable development effectively. The economic growth and development of the developing countries should be environmentally sustainable. The more the development policies and objectives of West African countries reflect this, the better their chances for increased foreign aid from both bilateral and multilateral donors. NOTES 1. OECD, Geographical Distribution of Financial Flows to Developing Countries (Paris: OECD, 1990), p. 61. 2. Ibid., p. 71. 3. Linda Van Baren, New African Yearbook 1991-92 (London: I C Publications, 1991), p. 42. 4. OECD, Geographical Distribution, p. 7. 5. Ibid., p. 101.

Foreign Aid in West Africa

95

6. Ibid. 7. O. R. Davidson, A Study on Development Strategies in Anglophone West African States in the Fields of Education, Science, Culture and Communication (UNESCO: Major Program 1, mimeo, August 1987), p. 14. 8. Carthy L. Jabara, Economic Reform and Poverty in the Gambia: A Survey of Pre- and Post-ERP Experience, Cornell Food and Nutrition Policy Program, Monograph 8, December 1990, pp. 3-4. 9. OECD, Geographical Distribution, p. 127. 10. Ibid., p. 129. 11. Guinea has very large deposits of bauxite, iron ore, and diamond. Mining accounts for one-third of its GDP and nearly all export earnings. Guinea is the world's second largest producer of bauxite after Australia. 12. OECD, Geographical Distribution, p. 139. 13. Linda Van Baren, New African Yearbook, p. 144. 14. Ibid., p. 142. 15. OECD, Geographical Distribution, p. 141. 16. Linda Van Baren, New African Yearbook, p. 150. 17. The other important cash crops are coffee and cocoa. 18. OECD, Geographical Distribution. 19. C. Legum, Africa Contemporary Record 1980/81 (London: African Publishing, 1981), p. B542. 20. C. Legum, Africa Contemporary1 Record 1981/82 (London: African Publishing, 1982), p. B457. 21. Ibid., p. B487. 22. International Labour Organization (ILO), Contribution a Une Politique Nationale de VEmploi Rapport d'Une Mission Multidisiplinaire du BIT (Niamey: Republique du Niger, mimeo, 1990), pp. 20-30. 23. Louis Berger, Etude sur les Mesures d'Incitation a VIndustrie. Report prepared for the Government of Niger, Ministere du Commerce de 1'Industrie et de l'Artisanat (East Orange, N.J.: Louis Berger International Inc., 1989). 24. C. Legum, Africa Contemporary Record 1982/83 (London: African Publishing, 1983), pp. B564-B565. 25. C. Legum, Africa Contemporary Record 1983/84 (London: African Publishing, 1984), p. B569. 26. Linda Van Baren, New African Yearbook, p. 355. 27. T. Hayter, Aid as Imperialism (Middlesex: Penguin Books Ltd., 1974), pp. 25-45. 28. For example, IDA credits helped to finance irrigation and drainage projects in India and Pakistan, where greater agricultural output was vitally needed to keep pace with growing populations. The association also supported the construction of highways and roads in Latin America, financed municipal water supply systems in cities such as Amman and Taipei, and helped build power plants and ports in developing countries. 29. The fifty-one regional member countries include: Algeria, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Cote d'lvoire, Djibouti, Egypt, Equatorial Guinea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya, Arab Jamahiriya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Namibia, Peoples Republic of Mozambique, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zaire, Zambia, and Zimbabwe. The twenty-four nonregional member countries are: Argentina, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, India, Italy, Japan, Korea, Kuwait, the Netherlands, Norway,

96

Foreign Aid and Self-Reliance in West Africa

Portugal, Saudi Arabia, Spain, Sweden, Switzerland, the United Kingdom, and the United States. In 1992, Yugoslavia ceased to be a member of the bank and the fund. According to a decision of the ADB Board of Directors made in early January 1993, the successor states of Bosnia and Herzegovina, Crotia, Mecedonia, Slovenia, Serbia, and Montenegro cannot automatically acquire any legal claim to membership of the bank or fund by reason of their having previously been component organs of Yugoslovakia before its dismemberment. 30. Legum, Africa Contemporary Record 1981/82, p. B570. 31. Legum, Africa Contemporary Record 1983/84, p. B420. 32. World Bank, The Gambia: Development Issues and Prospects (Washington, D.C.: World Bank, 1985). 33. C. Legum, Africa Contemporary Record: Annual Survey and Documents 1974/75 (London: Rex Collings Ltd., 1975), p. B652. 34. Flt.-Lt. Jerry Rawlings was first the head of state and government from June 4 to September 24, 1979, after a military coup d'etat. 35. Linda Van Baren, New African Yearbook, p. 151. 36. Ibid., p. 182. 37. OECD, Development Cooperation: Efforts and Policies of the Members of Development Assistance Committee (Paris: OECD, December 1990), pp. 151-52. 38. Carol Lancaster, US Aid to Sub-Saharan Africa: Challenges, Constraints and Choices, vol. 10, no. 6, Significant Issues Series (Washington, D.C.: Center for Strategic and International Studies, 1988), p. 1. 39. Ibid., p. 2. 40. Ibid., p. 160. 41. OECD, Development Cooperation: Efforts and Policies of the Members of the Development Assistance Committee. Report by J. C. Wheeler, Chairman of the DAC (Paris: OECD, 1980), p. 151. 42. James G. Speth, Seeking a New Consensus on Development, An Address by the Administrator of the UNDP at the NGO/DPI Annual Conference, General Assembly Hall, UN Secretariat September 8, 1993, p. 3.

4 Self-Reliance in West Africa

INTRODUCTION Since the mid-1970s most West African political leaders have made spirited efforts to promote economic growth and development through the policy of self-reliance. The main goals of West African leaders during this period, among other things, consisted of: building the key sectors of their economies, agriculture and industry, on a sustainable basis; and raising the standard of living of their peoples and the alleviation of poverty. The determination of the West African governments in the pursuit of these objectives was irrevocably reflected in their consistent and strong statements on the virtues of self-reliance in their Development Plans and annual Budgets. The call for self-reliant development was inadvertently reinforced by the worldwide economic recession beginning from 1973 after the first world oil price shock. The rise in the price of oil was devastating to most countries in the subregion, which are largely nonoil producing (except Nigeria), because they have to buy oil and manufactured goods at higher prices. The recession became aggravated in the late 1970s as the foreign debt of these countries rose to high levels. Several countries borrowed in the mid-1970s in the effort to meet the increased cost of oil and manufactured imports to sustain the process of economic development. In the wake of this recession, additional new economic policies in the context of structural adjustment programs became inevitable and were applied, in their different forms, across West Africa. While these programs were designed to ensure economic growth, they have not, to a large extent, eroded the vision of self-reliant development in the subregion. The programs, as they were, seemed

98

Foreign Aid and Self-Reliance in West Africa

to reinforce, through some of their measures, the drive toward self-reliance. For example, such major measures on privatization and commercialization, trade liberalization, reduced role of government in the economy, cut in public expenditure, to mention a few, hold promises for self-reliant development if effectively and adequately implemented. However, the attainment of self-reliance in West Africa has proved very difficult and elusive. Progress in this direction has not been significant, in both its individual and collective dimensions. The mobilization of internal resources has not been adequate for the effective development of identified sectors of national economies. As a result, it became necessary to seek external financial resources while not compromising the ideals of self-reliant development. It also became clear that self-reliant development would call, among other things, for an accelerated development of human resources, the provision of better and commensurate health services, a better and higher standard of education with diverse specializations, in particular, in the natural sciences, and technology. Besides, the process of self-reliant development, it would seem, would benefit more in situations where the climatic conditions provide support for the production of food and cash crops to ensure the sustenance of a growing population and higher earnings in revenue. In this connection also, a favorable international trade environment would be an asset. Improvement in terms of trade and better prices for commodity exports are vital to an increase in the import capacity for capital formation by West African countries. Experience during 1970s and 1980s suggests most of the desirable supportive factors for self-reliant development were deficient. These were very obvious in a number of key sectors that were the targets for self-reliant development, namely: agriculture, industry, technology, energy, and foreign trade. In the same vein, the attempts at collective self-reliance or regionalism encountered several political and economic difficulties. This chapter will essentially examine the main initiatives, trends, and problems in connection with self-reliance in the West African subregion. First, however, efforts will be made to describe the pattern of growth of production. Table 4.1 illustrates the average annual growth rate of production in West Africa from 1965 to 1991. It is obvious from the table that the average annual growth rate of the GDP for West Africa declined in the period 1980-91, 2.8 percent as against 3.3 percent for the period 1965-80. This is very significant as it clearly indicates that the various economic policies toward self-reliant development as well as those on structural adjustment have had no real substantial positive impact on the process of economic growth and sustainable development. This is particularly ominous for the subregion, given the fact that the average rate of growth of the population for West Africa during the period 1980-91 was about 3.1 percent.1 In other words, it was a period characterized by a general decline in the standard of living in West Africa. The decline in GDP

Table 4.1 The Growth of Production in West Africa Average Annual Growth Rate (Percent) GDP

AGRICULTURE

INDUSTRY

COUNTRY

1965-1980 1980-1991

1965-1980 1980-1991

1965-1980 1980-1991

BENIN

2.1

2.4

1.8*

4.9

1.4*

3.6

4.4*

4.0

1.0*

3.2

2.5*

3.8

BURKINA FASO CAPE VERDE

.

COTE DTVOIRE

6.8

GAMBIA

.

.

. -0.5

3.3

-1.2

3.2

10.4

1965-1980

4.1*

-1.6

SERVICES

1980-1991

1965-1980

1980-1991

4.8

2.7*

0.5

19.9*

5.4

2.6

.

.

.

.

MANUFACTURING

9.1

8.6

0.8

1.1

6.6

.

GHANA

1.4

GUINEA

3.8

GUINEA-BISSAU

2.4*

LIBERIA

3.3

MALI

3.9

2.5

2.8

2.4

1.8

4.0

MAURITANIA

2.0

1.4

-2.0

0.7

2.2

4.9

NIGER

0.3

-1.0

-3.4

_ . .

NIGERIA

6.9

1.9

1.7

3.5

13.1

-0.4

14.6

SENEGAL

2.1

3.1

1.4

2.7

4.8

3.8

3.4

5.1

4.3

-1.4

5.8

0.9

2.5

5.4

-0.2

3.0

12.0

1.6

1.2

_ 3.7

3.7*

1.4

3.7

2.5

2.6

. .

. 5.0

2.1* 2.2

5.5

4.1

2.8 2.4

10.0

11.4

SIERRA LEONE

2.6

1.1

2.3

2.7

-1.0

-0.8

TOGO

4.5

1.8

1.9

5.3

6.8

1.5

TOTAL

3.3

2.8

1.7

2.8

4.6

1.6

6.9

7.6

2.4

6.5

0.5

3.4 7.6

3.1

1.3

3.0

Note: * = Figures for 1970-1980; - = Figures not available. Source: World Bank, World Bank Report 1989 and 1993 (Oxford: Oxford University Press, 1989 and 1993), pp. 166 and 240, respectively.

2.4

100

Foreign Aid and Self-Reliance in West Africa

has, during the 1980s, been largely due to the catastrophic decline in the average annual growth rate in industry and services. In the 1980s, the average annual growth rate was 1.6 percent as against 4.6 percent in the period 1965-80. Those for the services were 2.4 and 12.0 percent, respectively. On the contrary, there was an improvement in the average annual growth rate in agriculture, 2.8 percent in the 1980s, compared with 1.7 percent during 1965-80. This suggests that, on the average, subregional agricultural development policies in the 1980s have had a somewhat positive impact and that producers of agricultural products could have experienced some increases in income. Such general broad agricultural policies should therefore be consolidated to ensure increased agricultural production in the decade of the 1990s. This is very important in the drive toward self-reliance and sustainable development given the fact that the agricultural sector accounts for over 80 percent of the GDP of the West African subregion and provides livelihood for over 85 percent of the working population. However, it must be underscored that the average annual growth rate for the subregion as a whole does not truly reflect the disappointing decline in many countries. The cases of Nigeria and Cote dTvoire are, for example, very illustrative. The average annual growth rate of the GDP for Nigeria in the 1980s was 1.9 percent compared with 6.9 percent in 1965-80; the corresponding growth rate for Cote dTvoire during these periods were -0.5 and 6.8 percent, respectively. Only very few countries such as Ghana, Senegal, and Guinea-Bissau succeeded in raising their growth rate in the 1980s. AGRICULTURAL DEVELOPMENT

As already noted, the agricultural sector represents a major sector in terms of its contribution to the GDP of West African countries. An advancement in this sector therefore represents a precondition for a meaningful self-reliant development in West Africa. Progress in agricultural development would not just imply an increase in food output but also increases in the production and export of cash crops. Progress in both areas are tied, in the first place, to adequate economic policies and good weather conditions. And as far as cash crops are concerned increases in the world prices and demand for commodities by the industrially developed countries represent important stimulants for higher output. There were some increases in production in the 1980s in the agricultural sector. In what areas were these? What accounted for the increases and what should have been done to ensure higher output, especially in those countries with modest increases in order to enhance the prospects for self-reliance? The major food crops in West Africa consist of rice, maize, yams, cassava, millet, plantains, sorghum, palm oil, palm kernel, and groundnuts. For most countries in the subregion, in the 1980s, the output of these crops increased substantially to meet internal demand. For example, in the case of rice, it may

Self-Reliance in West Africa

101

be noted that Cote dTvoire increased its output from 42,000 metric tons in 1980 to 650,000 metric tons in 1989, an increase of about 55 percent.2 On the contrary however, Burkina Faso, Gambia, and to some extent Sierra Leone experienced decline in their rice output during the 1980s. The output of maize was more phenomenal for a number of countries in which output in 1989 was about double the output in 1980. The cases of Benin, Burkina Faso, Gambia, Ghana, GuineaBissau, Mali, Nigeria, Senegal, and Togo, to mention a few, are very illustrative. However, unlike these countries, Mauritania had general decline in the output of maize, partly as a result of bouts of drought. Other crops with substantial increases in output are sorghum, millet, and cassava. However, on the whole, the output in palm oil and palm kernel were not very substantial during the decade. These are generally good signs for the subregion in terms of the reduction in food importation and the drive to self-sufficiency in food. It implies that some of the countries were, in the 1980s, in the position to conserve foreign exchange earnings for the importation of capital goods. This pattern of development also appeared to have taken shape at the beginning of the 1990s. The aggregate import requirement of cereals in 1991/92, mainly wheat and rice, was estimated at 3.6 million tons, some 3 percent lower than that of 1990/91. But commercial imports, estimated at 2.9 million tons, are anticipated to cover some 80 percent of the aggregate requirement for 1991/92. Food aid needs are estimated at 677,000 tons, which were already fully covered by donor pledges.3 Thus, while some appreciable progress seems to have emerged and constituted a pattern in the 1980s in food crop output in West Africa, the total need of the subregion remained to be comprehensively attained. The efforts of West African governments would, therefore, need to be strengthened in order to reduce food import to the barest minimum or make it superfluous. In the case of cash crops such as cocoa, coffee, groundnuts, and so on, the performance has been characteristically dismal in the 1980s. Table 4.2 shows the value of agricultural exports from 1980 to 1990 in West Africa. The table indicates that total agricultural exports of the subregion declined from US$4.1 billion in 1980 to US$2.8 billion in 1983, but rose thereafter to US$4.1 billion in 1986. However, it again declined precipitously as from 1987 when it amounted to US$3.7 billion and US$3.4 billion in 1990. This decline was largely accounted for by the export decline of the three largest exporters of the subregion, Cote dTvoire, Ghana, and Nigeria. Thus, the decline in agricultural exports during the 1980s was a considerable setback to many West African governments in their efforts to promote self-reliant development. This in effect reduced their capacity to import capital goods for development. It also, resulted in a drastic fall in the income and the standard of living of West African farmers. Besides, it may be added that the lot of the farmers had not been made easier because many of these countries at the same time experienced a steep rise in the rate of inflation. In other words, as a matter

Table 4.2 West African Agricultural Exports, 1980-1990 USSMills., Current Prices and Exchange Rates COUNTRY | BENIN | BURKINA FASO 1 CAPE VERDE COTE D'lVOIRE

1990

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

55

22

20

30

79

73

69

74

77

75

89

80

63

48

53

72

50

51

87

81

97

108

1

2

1

1

0

1

1

1

1

2

2

2,009

1.696

1.412

1,280

1.866

2,144

2.420

2.067

1.737

1,619

1,748

1

GAMBIA

28

18

16

26

29

17

12

7

19

8

13

GHANA

744

436

422

269

382

403

504

538

481

425

387

1 GUINEA

33

28

29

33

21

18

25

25

26

32

22

6

8

7

6

12

8

7

13

11

13

13

GUINEA-BISSAU | LIBERIA

151

124

89

107

129

120

108

107

119

162

68

[MALI

192

201

197

174

228

157

182

226

203

228

287

MAURITANIA 1 NIGER 1 NIGERIA

39

43

41

35

33

36

32

31

33

33

33

86

87

69

46

77

62

65

48

48

49

45

446

429

348

448

348

310

376

251

444

251

255

115

64

167

190

157

103

105

118

132

209

214

1 SIERRA LEONE

59

34

35

28

35

54

49

42

31

22

17

|TOGO

77

67

56

51

77

79

101

99

100

93

82

3.318

3,383

SENEGAL

|TOTAL

4.121

3,322

2.957

2.777

3,545

7.573

4.107

3.734

Source: UNDP/World Bank, African Development Indicators (Washington. D.C.: UNDPAVorld Bank, 1992), p. 230.

3.542

|

Self-Reliance in West Africa

103

of urgency, the governments of West African countries would need to find lasting solutions to the fundamental problems of agricultural exports, both in the demand and the supply dimensions, in order to ensure a sound financial basis for self-reliant development. The patterns of output of both food crops and agricultural exports in the 1970s and 1980s were largely dependent on the specific agricultural policies of the West African governments and a host of other internal and external factors. The cases of Nigeria and Niger are, in this context, very illustrative. In Nigeria, for example, there were consistent government agricultural policies to increase food production. The federal government and the state governments established food production companies: an Agricultural Credit Guarantee Scheme was instituted to complete an earlier Nigerian Agricultural and Co-operative Bank; river Basin Development Schemes were instituted for virtually all of Nigeria's major water resources to bring the federal, state and local governments together in a unique cooperative approach to effective coordination of primary production and supporting services in specific areas; and improved inputs to farmers were provided through the National Accelerated Food Production Program, the Fertilizer Procurement and Distribution Program, the Seed Multiplication Program, and the Tractor Hiring Scheme. In this connection, relevant institutions have also further been established. The growth of farmer's cooperatives has been encouraged as a medium for the introduction of new inputs and new farming techniques. Furthermore, a Land Use Decree was promoted to facilitate the removal of an outmoded land-tenure system and make it easier to attract foreign entrepreneurs and foreign capital into agricultural production. The government went further to complement these with the creation of research institutions, such as the Cocoa Research Institute of Nigeria and the Nigerian Institute for Oil Palm Research, to conduct research into the best ways to control pests and diseases and the production of high-yielding seedlings. These were at the same time complemented by a number of programs, but most of which met with limited success because of economic and social constraints. For example, in 1975 the government launched an Operation Feed the Nation (OFN) campaign in order to increase food production. However, the program did not get off the ground partly because of the failure of the government to channel sufficient funds to it for implementation. In the following two years, the federal government spent just US$61.5 million on the implementation, a sum approximately the size of the recurrent expenditure to maintain the Cabinet Office for one year. Over the same period, the total federal recurrent expenditure on agriculture declined by 49.7 percent, while capital expenditure declined by 38.8 percent—from US$316.8 million in 1976 to US$ 193.8 million in 1978. In the following year, the Green Revolution Program was introduced to replace OFN. This suggests the strong commitment of the federal military government to find a lasting solution to the problem of food production. It was

104

Foreign Aid and Self-Reliance in West Africa

very clear to the government that the country could face considerable difficulties in the near future if dependence on food importation, which had been a main feature in its imports since the mid-1970s, was not removed. However, oddly enough, without learning any lessons from OFN, the Green Revolution collapsed shortly after its formation. The program ran into difficulties partly as a result of poor management, with fertilizers and other inputs not getting to the farmers at the appropriate time. In addition, the program was hastened to its death as a result of massive corruption and mismanagement of its funds by government officials. By 1987, the military government began to look into the problems of food production from a broader perspective. The Directorate of Food, Roads and Rural Infrastructure (DFRRI) was established to look into all aspects of food production. The program attempted not only to increase food production but to also solve the related problems, the supportive structures for production and distribution of food, without which the costs of food would be high. Substantial efforts under this program were directed at the infrastructural aspect. A number of feeder roads were constructed to open up food production areas to consumers or to provide water to rural communities. But by mid-1993, it was clear that the program has done very little for food production. To a large extent, the importation of food still constituted a major aspect of total imports. The difficulties here were not just in over-focusing attention on infrastructural development but also in mismanaging funds. Thus, it was clear that adequate funding and efficient management as well as the identification of priority areas, are prerequisites in the direction of food self-sufficiency in Nigeria. In the case of Niger, agricultural policy, before the introduction of structural adjustment, was characterized by a preference for state monopoly and numerous regulations. The government gave parastatals the legal responsibility for secondary and, in most cases, for primary marketing of nearly all agricultural outputs. Input supply, including provision of credit, was linked to official marketing to reinforce the primary marketing monopoly. Several parastatals were connected with agricultural output and input marketing in Niger. For example, an important one is the Office des Produits Vivriers du Niger (OPVN), which purchases millet, rice, and sorghum, especially from other parastatals. Also, the Societe National de Commercialisation de 1'Arachide (SONARA) purchases peanuts and cowpeas and sells them at its price to industrial establishments. It is important at this point to state that the 1979 to 1983 five-year plan established a national grain reserve stock of 100,000 tons, of which 65,000 tons were to compose a security stock. The security stock served as a buffer to supply grain to deficit areas until commercial or food aid imports could arrive in the event of a food shortfall. This stock was placed under the management of OPVN in order to add to its crop purchase responsibilities. Besides, OPVN was also responsible for the sale of grain to consumers at officially determined prices.

Self-Reliance in West Africa

105

But then, the quantity of grain that could be purchased from OPVN at these prices was always limited, especially in periods of shortage when market prices exceeded official prices. Other important parastatals include the Orginisation Nigerien de l'Amenagement Hydro Agricole (ONAHA), which manages ricegrowing farm cooperatives, supplies inputs and irrigation services. The Union Nigerienne de Credit et de Cooperation (UNCC), which manages the cooperative movement, supplies farmers with inputs and credit through branch subsidiaries (for example, Centrale d' Approvisionnement), and serves as primary agent for SONARA, and OPVN, among others in the primary marketing of crops.4 As a result of the several measures on stabilization and structural adjustment program, a number of changes were advocated for OPVN and SONARA. In 1984, the government ended the monopoly of OPVN in cereal and of SONARA in groundnut. In 1986, OPVN operations were limited to the management of 80,000 tons in security stock. Also, OPVN was confined to the renewing of a third of this stock every year. But this did not entirely solve the problem of pricing and supply. It will be noted that in 1983, the trend in Ghana when the economic recovery program began that has been toward the liberalization of output pricing through Agricultural Commodity Pricing Committee. In Burkina Faso, the agricultural policy of the Sankara administration in the 1980s consisted of nationalizing land, doubling the share of agriculture in budget spending to 40 percent, and raising producer prices for both cash and food crops. Thus, as far as self-reliance is concerned in agricultural development in West Africa, the various governments in the subregion have demonstrated a very high degree of commitment. The common objectives were increases in the output of cash crops and the attainment of self-sufficiency in food production. Increased output of cash crops was desirable in order to increase foreign exchange earnings and provide funds for other development programs within the economy. Also, self-sufficiency in food production was necessary not only to reverse the rising trend of food imports of the early 1970s and save foreign exchange but also to provide a comfortable base for self-reliant development. The determination of the West African leaders to ensure the attainment of these objectives has been illustrated in their consistent articulation of the relevant policies and measures since the second half of the 1970s in their development plans and annual budgets. Such policies and measures have covered several aspects of agricultural production and distribution as well as certain institutional matters. In fact, the policy orientation for increased production in the subregion was further strengthened since the mid-1980s, as many countries in West Africa embarked on structural adjustment programs in order to find a lasting solution to the endemic problem of economic recession and to promote economic growth. Agricultural reforms under structural adjustment programs underscored not just appropriate prices for cash and food crops but,

706

Foreign Aid and Self-Reliance in West Africa

also stressed basic institutional changes in order to open up the sector to market mechanisms of demand and supply. Also, while large-scale farming was encouraged, the governments of many West African countries took steps that would enhance an increase in the participation of the private sector in the agricultural sector. However, as it is today, the results of these efforts across the West African subregion could at best be described as modest. There are little improvements here and there from one country to another, but the problems of increased production of cash crops and self-sufficiency are not comprehensively solved. This is an indication that there are still many unresolved problems. In the first place, it is obvious that the successful implementation of agricultural policies would require increased external assistance. External assistance would be required especially in the areas of inputs and research into high-yield crops and seeds. Secondly, many countries would need to find an immediate solution to the administrative malpractice and corruptions that pervade the administration of inputs into the agricultural sector. Thirdly, better world prices for commodities are still very fundamental for increased production. Higher world prices would enhance the commitment of farmers to the intensification of output. Fourthly, the method of production should be improved to ensure more medium- and large-scale mechanization. But this should not imply the abandonment of the small-scale farmers, which constitute the bulk of the farming population. Fifthly, attempt must be made to find lasting solutions to adverse weather conditions, especially of drought and desertification, which have had far-reaching negative consequences for higher output of cash and food crops, particularly in the Sahelian countries. Of course, progress in industrial development appears not to have brought much relish to West African government. The slow progress in this sector has apparently confounded the observers of economic development in Africa, given the strong potential to make advancements in the sector. INDUSTRIAL DEVELOPMENT

For many West African governments since the early 1960s, rapid industrial development has been at the forefront of the agenda for economic growth and development. This was considered necessary in order to reduce over dependence on the agricultural sector, as well as to extricate the economy from its dualistic structure. Also, it was deemed necessary as the path to an accelerated improvement in the standard of living of their peoples. After independence, West African governments generally felt that the few processing plants established by the metropolitan countries should be rapidly transformed into full manufacturing industries, while new ones would be established to cope with the industrial needs of the peoples. Industrialization, as it was commonly envisaged, would move from import substitution industrialization through

Self-Reliance in West Africa

107

intermediate industries to the level of heavy industries. All these were again restated and put in better focus within recasted industrial policies in the early 1970s, when West African countries emphasized the goal of self-reliant development. It was then more evident that industrial development would enhance their foreign exchange earning capacity and should be part of the cornerstone of the whole plan of self-reliant development. However, as has been observed, most West African countries have yet to make remarkable progress in industrial development. This has particularly been illustrated in the area of manufacturing where most countries are still decades behind newly industrializing countries of Southeast Asia and Latin America, let alone the industrially developed countries. It has become increasingly clearer that progress in this area would necessitate more efforts on the part of the government and the private sector to surmount a number of internal and external formidable political and socioeconomic obstacles. Table 4.3 illustrates the structure of manufacturing value added for West African countries. It is obvious that only a few countries have seriously embarked on manufacturing. Cote dTvoire, Ghana, Mali, Nigeria, and Senegal are the few countries in West Africa where industrialization appears to have made a start. But then, it is obvious that manufacturing activities are essentially in the food, beverages and tobacco, and textile and clothing industries. Machinery and transport equipment as well as chemicals represent a small proportion of total manufacturing establishments. In Ghana, for example, food, beverages, and tobacco accounted for 34 percent of manufacturing value added in 1970. Textile and clothing 16 percent, machinery and transport equipment 4 percent, and chemicals 4 percent. By 1988, food, beverages, and tobacco increased its share to 40 percent of value added in manufacturing while textile and clothing declined to 6 percent. Also, manufacturing value added in machinery and transport equipment declined to 1 percent. But the manufacturing value added in chemicals rose to 7 percent. Cote d'lvoire has a seemingly diversified manufacturing sector. But this structure has not altered over the years. Food, beverages, and tobacco, together with textile and clothing, are very predominant in manufacturing. However, the proportion of manufacturing and transport equipment is substantial. The manufacturing value added of this sector was 10 percent in 1988 as in 1970. It is thus clear that West African countries, by the end of the 1980s, were generally at the level of import substitution. Progress in the areas of intermediate and heavy industries by Cote d'lvoire, Ghana, Mali, Nigeria, and Senegal, which made some incursions into these areas, has been very minimal. Consequently, the external dependence of West African countries on the industrially developed countries for both capital and consumption goods remained very strong at the end of the 1980s. Table 4.4 illustrates the structure of merchandise imports of West African countries. The table shows that machinery and transport equipment together with other manufactures constitute large proportions of the

Table 4.3 West Africa: Structure of Manufacturing Value Added Distribution of Manufacturing Value Added (percentages)

Food, Beverage, and Tobacco COUNTRY

1970

BENIN BURKINA FASO CAPE VERDE COTE DTVOIRE GAMBIA GHANA GUINEA GUINEA-BISSAU

1980 59

69

.

. _ 35

34

37

40

. .

. .

. _ . _ . _ .

27

36

SENEGAL

51

48

NIGER

IERRA LEONE TOGO

.

.

NIGERIA

MAURITANIA

1970

. _ _ . .

35

. . . .

MALI

1988

27

LIBERIA 36

. .

. -

48 65

-

Textiles and Clothing

-

1980

1988

Machinery and Other Transport Equipment 1970

14

Chemicals

1980

1988

1970

0

.

.

1980 '

1988

.

6

16

. . .

.

2

16

11

6

. .

.

.

26

. . . .

. _

19

19

15

2

4

6

6

8

7

. -

.

,

.

.

0

.

.

4

-

-

-

-

4

9

.

. . .

2

.

. .

l

.

10

10

.

0

. .

4

2

1

4

5

.

. .

. . .

.

. .

. 40

. .

4

. .

. .

5

. .

.

1

.

5 3

7

. . . .

1 I

1

6

Note: - = Nol applicable. Source: UNDPAVorld Bank, African Development Indicators (Washington. D.C.: UNDP/World Bank, 1992), p. 249.

.

Table 4.4 Structure of Merchandise Imports of West African Countries, 1970 and 1991 Precentage Share of Merchandise Imports

COUNTRY

1970

Other Primary Commodities

Fuels

Food

1991

1970

Machinery and Other Transport Equipment

Other Manufacturing

1991

1970

1991

1970

1991

1970

1991

BENIN

12

16

4

7

8

11

21

21

55

45

BURKINA FASO

19

23

8

16

8

5

27

24

37

31

CAPE VERDE COTE D'lVOIRE

15

18

5

GAMBIA

.

.

.

GHANA

20

9

6

GUINEA

.

.

28

32

GUINEA-BISSAU LIBERIA

21

3

3

. 33

23

. 31

4

3

26

26

7

7

4

3

44

16

15

-

44

31

45

.

. 18

9

MAURITANIA

.

.

.

NIGER

13

15

4

NIGERIA

8

18

SENEGAL

28

SIERRA LEONE

23

TOGO TOTAL

28

6

34

. .

.

29

MALI

.

.

2

21

25

36

.

.

.

.

43

' 28

"

20

6

6

26

28

51

31

3

,

3

5

37

36

48

41

26

5

20

5

5

25

21

38

29

24

7

28

4

3

22

19

44

46

16

20

4

7

11

6

22

24

47

43

19

20

6

17

6

5

25

24

45

37

Note: - = Not available. Source: World Bank, World Bank Development Report 1993 (New York: Oxford University Press, 1993), p. 266.

110

Foreign Aid and Self-Reliance in West Africa

imports of West African countries. For a number of countries, such as Cote d'lvoire, Burkina Faso, Guinea-Bissau, Nigeria, Senegal, and Sierra Leone, there was a percentage share of merchandise decline in machinery and transport equipment in 1991 as against the figure for 1970. This does not necessarily reflect improvement in this sector, but it is more as a result of economic measures to reduce imports. Even then, for a few countries, there were slight increases in the 1991 figures over that of 1970 figures in this sector. The countries in this category are Niger, Mali, and Togo. This indicates that there has been an increase in dependence by them on the industrially developed countries. Furthermore, the item "Other Manufactures" remains very significant. Although this indicates a decline in 1991 vis-a-vis 1970 for all countries, nevertheless, it is clear that this still accounts for about 40 percent of merchandise imports of most West African countries. This is an indication that the import substitution industries have not been able to completely satisfy the local demands of each West African country. This is in fact not surprising because many industries in West Africa have been relegated to production at very low levels. Production capacities have not been fully utilized because of several input constraints, such as the availability of raw materials and funds for the procurement of spare parts and the expansion of the industries. Besides, the growth of industries has been constrained by a number of other difficulties such as inadequate infrastructures and inefficient telecommunication systems both within and with the external world. The specific case of Ghana offers more insight into these difficulties. It may be noted that from 1983 to 1989, the policy reforms that affected the industrial sector were those that affected the real exchange rate. Other economy-wide measures that had an impact on industry include the decontrolling of prices, periodic adjustment of minimum wages, and change in interest rates. A high priority for government investment in the five years after economic restructuring has been the development of infrastructure: poor network of roads and railways, inadequate supply of electricity and water, lack of adequate schools and hospitals have all directly or indirectly affected industrialization.5 In general, the government wanted to promote private production; once it has removed the major obstacles, it has limited instruments to actually promote private sector investments, particularly small-scale investments. The recovery program did, however, actively seek foreign investment after a decade and a half of discouraging and often prohibiting it. An early step was to draw up a new investment code and to adopt policies that allow easy repatriation of profits. Among the first sectors to attract investment has been mining. For example, the government and Lonhro, assisted by the IFC, put together a US$160 million investment package in 1984, aimed at revitalizing gold mining. As far as manufacturing industries are concerned, the problem has much to do with capacity utilization. As may be noted in Table 4.5, there were production

Self-Reliance in West Africa

111

Table 4.5 Ghana: Estimated Production Rates in Several Manufacturing Industries, Large- and Medium-Scale Factories, 1982-1987 Percentage of Capacity Industry

1982

1983

Textiles Garment Metals Electronics Plastics Bicycle/Motorcycle Assembly Tobacco/Beverages Food Processing Leather Pharmaceuticals Cosmetics Paper/Printing Nonmetal Mineral Manufactures Chemicals Rubber Wood Processing All Manufacturing

10.0 20.2 42.5 31.5 20.0 15.0

16.0 25.0 55.0 44.0 25.0 20.0 65.0 25.0 26.0 35.0 20.0 30.0 22.0 20.0 22.0 20.0 30.0

-

18.0 20.0 15.0 25.0 15.0 15.0 27.0 20.0 21.0

1984

1985

1986

1987

17.3 20.2 20.1 8.3 30.4 7.6 19.5 22.9 11.9

19.7 25.5 16.2 33.2 28.0 19.9 39.6 31.2 21.5 16.6

17.0 27.0

17.3 12.0 22.3 15.0 28.1 18.0

14.5 35.0 20.2 16.0 32.5 25.0

24.0 25.0 42.0 36.0 39.0 10.0 45.0 42.0 15.0 26.0 29.0 30.0 37.0 30.0 28.0 43.0 35.0

-

-

-

30.0 30.0

-

40.0 36.0

-

25.0

-

25.0 23.0

-

25.0

Sources: Government of Ghana, Quarterly Digest of Statistics (Accra: Ghana Statistical Service, 1989); H. Alderman, Downturn and Economic Recovery in Ghana: Impacts on the Poor (Cornell Food and Nutrition Policy Program, Monograph 10, March 1991), p. 70.

increases during the first four years after the introduction of the recovery plan. The short-term increase was due to effective demand increases. Also, it was aided by the deregulation of inputs and intermediary investments. But production in many manufacturing industries remained below 50 percent of capacity four years into recovery. This was, in part, due to several years of mismanagement. Besides, in Ghana, local investorsfindit difficult to obtain capital through either share investment or loans. TECHNOLOGY Technology may be considered as the systematic application of scientific principles acquired through cumulative but systematic research to the solution of problems, especially by exerting control over nature.6 It is a matrix of the knowledge, skills, methods, and procedures that are involved in the production of goods and services intended for the enhancement of the quality and standard of living of man. In this context therefore, four main attributes may be identified. In the first place, it is a major instrument for the creation of wealth. Secondly, it represents an instrument for the easing of the exercise of social control. Thirdly, it affects the modes of decision making to achieve social change. Fourthly, it is a central area where innovations are uncovered.7

112

Foreign Aid and Self-Reliance in West Africa

West African countries have broadly recognized the importance of technology in the process of self-reliant development. It is considered vital in the context of the rapid transformation of the industrial and agricultural sectors for an autonomous development. Appropriate technology should be imported and local technology evolved to reduce the dependence of West African countries on the industrially developed countries, who at the moment have the monopoly on technology. However, it has been observed that this has been one of the areas where West African countries have not made tangible progress because enormous difficulties are associated with the transfer and development of technology. The case of Nigeria provides a vivid example. In Nigeria, the greater part of existing technologies was imported. The dominant mechanism of acquiring technology was by purchase of machinery, equipment, and other artifacts of production. However, the most important question has been the suitability and appropriateness of such technologies. Since the second half of the 1980s, one important objective of the federal military government has been the development and utilization of local technology with a view to promoting self-reliance in technological development. The expectation is that such technologies would be less costly, more readily available, and within the reach of small and medium entrepreneurs who would use them. In order to achieve this goal, an increased application of local Research and Development (R&D) efforts was encouraged. In the view of the government, goods and services produced in the country should reflect its resource endowment. And the technology utilized in the production of goods and services should be more appropriate and sustainable.8 Subsequently, there appeared to be some actions here and there. There was an increase in the use of local raw materials by the large multinational corporations. The existing lines in the flour-milling plants in Nigeria was converted and adapted to handle maize. Similarly, the breweries adapted their processes to sorghum malt consumption in beer production employing technologies developed by the Federal Institute of Industrial Research, Oshodi (FIIRO). On the whole, the national average degree of dependence on imported inputs declined from about 70 percent of total cost to less than 60 percent between 1983 and 1987.9 Also, it has been noted since then that local machine fabricators have been enjoying booming patronage from firms whose only choice has been either to use locally produced machines, spare parts and components, or be forced to close down production lines and bear huge fixed costs. Many of them are now commissioned to produce components and spare parts for the big companies. A good example is the fabrication of machines for the processing of limestone for a company located in Calabar, Cross River State, by another company located in Sapele, in Bendel State. Another important development has been the emergence of local metal-working industries producing capital goods. These are spread throughout the country.

Self-Reliance in West Africa

113

Such capital goods include feed-milling machines; cassava-processing machines; and industrial bakery and allied food-processing machinery such as ovens, dough dividers, auto-mixers, slicers, and soap-making machines. One of the foremost companies in this respect has been the Bus and Refrigerated Van Manufacturers Company (BUREM), located in Lagos, which has produced a bus largely from local inputs and components with local value added of about 80 percent. Institutions such as the Federal Institute of Industrial Research (FUR), the Industrial Development Center (IDC), and the Project Development Institute (PRODA) have also intensified their fabrication of machines and equipment for a variety of uses.10 In the context of institutional development, the government has introduced major innovations to ensure that these are more productive. Interaction between them has been encouraged while collaborative research has been promoted to reduce overlapping efforts. For example, a Raw Materials Research and Development Council, to promote the use of local raw materials by Nigerian industrial establishments, has been created. The council draws up policy guidelines and action programs on the acquisition, exploitation, and development of raw materials; reviews the availability and utilization of raw materials; advises on ways of adopting available machinery and processes for the use of local raw materials; and encourages publicity on research activities through workshops, symposia, and seminars. Also, the initiative for the launching of the National Science and Technology Fund (NSTF) on July 28, 1987, represents another milestone in the drive toward technological self-sufficiency. However, the structural adjustment program of the country has its drawbacks in technological advancement. To begin with, the general increase in costs generated by the Foreign Exchange Market (FEM) resulted in high prices (sixfold in many cases) for agricultural equipment such as harvesters and shredders, which cannot immediately be produced locally. This high cost, taken together with a host of other factors, especially the nonaccessibility of some of these facilities and inputs, reduced the farmers' inclination to adopt improved technologies on the farms. In the same vein, the high import costs of the inputs for many industries resulted in the closure of many plants and the loss of thousands of jobs.11 These notwithstanding, the more general problems in technological advancement have on the whole made major progress difficult in Nigeria. In most cases, a large proportion of imported technologies has proved unsuitable for local conditions due to a number of factors. Prominent among these are the failures to correctly select technologies from the wide range available, and the failure to correctly apply the technologies or combination of technologies to the appropriate stages of the production cycle. Also, there was the problem of complete disregard for the socioeconomic environment of the nation, particularly the resource endowments.

114

Foreign Aid and Self-Reliance in West Africa

There were few training facilities and these were confined to the areas of operational and managerial know-how. Only few establishments were committed to local R&D. In fact, less than 20 percent of the establishments had provisions specifically designed for R&D. Even then, these were meager. In the light consumer-based subsector, for example, total annual expenditure on R&D between 1983 and 1985 was about N1.6 million compared to an estimated total capital input of about N380 million. Consequently, the technologies generated locally from existing manufacturers and R&D establishments were very few. Besides, the efforts of the latter have been severely hampered by the low rate of commercialization of their findings. Because of all these, the process of learning-by-doing, which is just as important now as it was at the beginning of the European Industrial Revolution, was not open to most Nigerians.12 Furthermore, in the view of A. Adubifa, the science and technology system was plagued by many weaknesses: in particular by the lack of modalities for implementation of objectives; grossly inadequate and sometimes misdirected funding; the absence of national programs for the mobilization of the public appropriately for the understanding of science and technology; the lack of any serious effort to develop a national information system for scientific and technological activities; and the inability of the research institutes to recruit and retain appropriate scientific and technical skill.13 These difficulties, which are typical for many other West African countries, should be speedily addressed if West African countries are to make tangible progress in self-reliant development. ENERGY

Energy in its various forms—solids, liquids, gases, electricity, and traditional fuels—constitute important inputs into the process of economic growth and development. They form vital factors in the manufacturing and commercial sectors in the process of production. Also, in the private sector, they are very important factors for daily existence. For self-reliant development, the West African governments have recognized that it is an aspect of the development process that must be accorded a pride of place. The provision of energy at the required quantity would ensure continuous growth. Excessive dependence on external sources would expose the development process to dangers of undue disruptions. Reduced supply or higher prices for imported energy could have the unpleasant effect of reducing output or increasing the cost of output. West African countries are differently endowed with natural resources. The extent of independence in energy supply would in the first place be a function of the ability to exploit the energy resources available to each country. The basic forms of energy required by West African countries include liquids, gases, primary electricity, and traditional fuel. But the countries with requirements for solids are Niger and Nigeria. Solid fuels include hard coal, lignite,

Self-Reliance in West Africa

115

peat, and coke. The countries with large demand for liquids include Nigeria, Cote dTvoire, Senegal, Ghana, and Mauritania. In Nigeria, the demand for liquids rose to 444,000 terajoules in 1990 from 284,000 terajoules in 1980. In the case of Cote dTvoire, it rose from 51,000 terajoules in 1980 to 91,000 terajoules in 1987, but declined to 61,000 terajoules in 1990. There was a considerable increase in the case of Mauritania, from 8,000 terajoules in 1980 to 43,000 terajoules in 1987, but demand declined to 34,000 terajoules in 1990. In Senegal and Ghana, the requirements declined during this period. In the case of Senegal, it fell to 30,000 terajoules in 1990 from 36,000 terajoules in 1980. In Ghana, it was a decline to 26,000 terajoules from 31,000 terajoules in 1980. Apart from Liberia, with a major decline in requirements, possibly as a result of the civil war, all other West African countries generally maintained the level of their requirements for liquids in the 1980s. In the subregion, Nigeria is the only country with requirements for gases. Its requirements increased considerably during the 1980s. It rose to 166,000 terajoules in 1989 from 52,000 terajoules in 1980. But fell to 145,000 terajoules in 1990. The countries with large demand for primary electricity are Cote dTvoire, Ghana, and Nigeria. For these three countries, the demand was more or less stable. As for Cote dTvoire, this was an annual average of about 5,000 terajoules, Ghana 17,000 terajoules and Nigeria 8,000 terajoules. Thus, Ghana had the largest requirements for primary electricity in West Africa in the 1980s. As already noted, the largest energy requirements in West Africa in the 1980s was in the area of traditional fuels. The largest requirements were recorded for Nigeria, Ghana, Cote dTvoire, Burkina Faso, Mali, Senegal, Niger, Benin, and Liberia. For all these countries, there was a steady increase in traditional fuels requirements during this period. In Nigeria, for example, it rose to 977,000 terajoule in 1990 from 725,000 terajoules in 1980. Also, in Cote dTvoire, it rose from 69,000 terajoules in 1980 to 99,000 terajoules in 1990. The high and increasing requirements for traditional fuels in the subregion indicates a failure to provide affordable prices and cleaner forms of energy for domestic use by West African governments. However, this development may need to be halted and reversed in order to ensure sustainable and environmentally sound development to ascertain that the subregion is in the mainstream of current global development efforts. The only exception is Cape Verde, which apparently depends less on traditional fuel, possibly by geographical design and/or governmental efforts, for domestic purposes. However, while the energy requirements of West African countries have generally increased during the 1980s, it has been noted that there has not been corresponding increases in production. For a number of countries, total production fell far short of requirements. During this period, Nigeria was the only country that was able to meet its commercial energy needs, importing a very small proportion of its requirements. Its exports of commercial energy was 4.08

116

Foreign Aid and Self-Reliance in West Africa

million terajoules in 1980, but this declined to 3.24 million terajoules in 1990. Whereas Burkina Faso, Cape Verde, Gambia, Guinea-Bissau, Senegal, and Sierra Leone substantially depended on the import of commercial energy. It therefore follows that for many countries in the subregion, self-reliance in energy production remain an elusive goal. The governments of West African countries would therefore have to adopt more purposeful policies to exploit more meaningfully their resources in this area. This will in no doubt require huge investments of capital and technology. However, careful packages and arrangements with foreign partners are the shortest escape routes from these difficulties. FOREIGN TRADE Foreign trade constitutes an important sector in the process of economic growth and development. Its importance lies in raising funds for economic growth and development. The more the increases in the exports of a country the better are the chances for the promotion of economic growth if the prices the exports do not fall. However, to increase exports on a sustainable basis, it is vital that the components of exports are diversified. Also, the trading partners must be varied to reduce the vulnerability of the exporting country. The diversification of export components is desirable in order to avoid shocks in earnings that may follow from a fall in the price of one or two export items. Trading patterns should also be diversified in order to ascertain that a fall in the demand for an export item does not unnecessarily lead to a drastic fall in the earnings of the country. Self-reliant development, as already noted, involves reduced dependence on foreign trade. Trade disengagement is a call for partial reduction in the magnitude of international economic transactions with the industrially developed countries. Since the objective is to reduce the magnitude and influence of foreign goods, it is normally in the area of imports that policy measures should be directed. Comprehensive trade disengagement must therefore include policies directed at exports. Their objective is not to decrease exports as such but to decrease reliance on export receipts for national income.14 However, it has been very difficult to attain this goal in West Africa. As may be observed from Table 4.6 on the structure of merchandise exports, the subregion has not, at a general level, succeeded in the diversification of exports. The major exports are fuels, minerals, metals, and primary commodities. In 1965, fuels, minerals, and metals accounted for 25 percent of West Africa's exports. Although it fell to 18 percent in 1970, nevertheless, it rose to 34 percent in 1991, which is an indication of the poor performance of the subregion in industrial development in the 1970s and 1980s. Other primary commodities rose to 71 percent in 1970 from 67 percent in 1965 but fell to 55 percent in 1991. The increase in the proportion of the export of fuels, minerals, and metals in the subregion between

Table 4.6 Structure of Merchandise Exports of West African Countries Percentage Share of Merchandise Exports

Machinery and Other Transport Equipment

Other Primary Commodities

Fuel Minerals and Metals

Other Manufacturing

Textiles and Clothing

1965

1970

1991

1965

1970

1991

1965

1970

1991

1965

1970

1991

1965

1970

BENIN

l

0

3

94

89

67

2

3

3

3

8

28

0

6

B U R K I N A FASO

I

0

0

94

95

88

1

1

4

4

3

8

2

0

2

CAPE VERDE

.

.

.

.

.

COTE DTVOIRE

2

2

11

93

92

79

1

2

.

.

.

.

.

.

13

13

15

85

86

_ .

.

.

.

0

0

. .

98

97

72

.

.

25

.

.

1

1

1

0

96

89

93

1

COUNTRY

GAMBIA GHANA

GUINEA GUINEA-BISSAU LIBERIA MALI MAURITANIA NIGER

.

. 1

1

2

4

5

9

1

_

.

.

.

.

.

.

84

1

0

0

2

I

1

0

0

.

. .

.

. .

. .

.

.

.

.

1

0

1

.

3 0

0

2

.

0 0

10

7

I

8

6

0

0

0

4

0

0

1

1

0

4

2

1

1

0

1

0

2

1

1

0

0

0

3

2

15

20

1

6

0

60

63

32

0

0

.

86

5

11

9

1

0

0

86

95

96

12

NIGERIA

32

62

96

65

36

3

0

.

SENEGAL

9

12

22

88

69

56

1

4

SIERRA LEONE

25

15

34

14

22

33

0

.

69

42

1

2

1

3

4

9

0

1

71

55

1

'

2

7

9

10

1

2

49

25

49

TOTAL

25

18

34

67

0

0

88

TOGO

1

1

94

48

1991

1

Note: - = Not available. Sources: World Bank, World Development Report 1988 (New York: Oxford Univcrsily Press, 1988), p. 194; World Bank. World Development Report 1993 (New York: Oxford University Press, 1993), p. 268.

118

Foreign Aid and Self-Reliance in West Africa

1970 and 1991 was largely due to the rise in the export of these commodities by Niger, Nigeria, Senegal, Sierra Leone, and Togo. The fall in the proportion of other primary commodities in the subregion between 1970 and 1991 was essentially due to decreases in the export of these commodities by Niger, Nigeria, Senegal, Sierra Leone, and Togo. The share of the export of machinery and transport equipment rose to 2 percent in 1991 from 1 percent in 1956. This suggests that West African countries have not made tangible progress in the areas of intermediate and heavy industries. The share of other manufactures in exports rose slightly; from 7 percent in 1965 to 9 and 10 percent in 1970 and 1991, respectively. The countries which have, to some extent, increased the share of machinery and transport equipment in their exports are, Benin, Burkina Faso, Cote dTvoire, Mauritania, and Senegal. But as far as other manufacture exports are concerned, Sierra Leone, Benin, Senegal, Mali, and Cote d'lvoire have performed better than the other countries in the subregion. Also, it has been noted that the structure of West African imports has not changed substantially. There is high dependence on the import of food and fuels. The latter, in particular, rose dramatically between 1970 and 1991 from 6 to 17 percent of merchandise imports. In 1991, the subregion virtually maintained the level of the shares in the import of other primary commodities and machinery and transport equipment that was attained in 1970. As regards other manufactures, there was a decline to 37 percent in 1991 from 45 percent in 1970. All countries, except Sierra Leone, had a reduction in the import of other manufactures during this period. From 1980 to 1990, the performances of both exports and imports of West African countries have essentially been on the downward trend for the subregion as a whole. Total exports of West Africa declined to US$15.6 billion in 1983 from US$33.5 billion in 1980. It picked up in 1984 and rose to US$19.3 billion in 1985, but thereafter proceeded on a precipitous decline to US$2.1 billion in 1990.15 This seems to indicate that the structural adjustment programs in many countries in West Africa had only a short-lived effect on the export of primary commodities. Trade liberalization and exchange rate measures have not produced the expected desired result of trade expansion. The bulk of the exports in West Africa is accounted for by few countries, namely, Nigeria, Cote dTvoire, Ghana, Senegal, Niger, Guinea, Liberia, and Togo. The imports of West Africa declined during this period. Although it rose to US$26.5 billion in 1981 from US$22.9 billion in 1980, it fell steeply to US$9.9 billion in 1986. But thereafter, it rose to US$12.5 billion in 1990. This was an indication that economic activity did not pick up in the 1980s to encourage the importation of more capital and consumption goods. Given this similar pattern of downward trend in both exports and imports, the subregion recorded deficits in its balance of trade from 1981 to 1983, but had surpluses in its trade balances in all other years. However, this does not

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119

reflect the true situation across the subregion. In a number of the economically weak countries such as Benin, Burkina Faso, Cape Verde, Gambia, Guinea-Bissau, Mali, Niger, Sierra Leone, and Togo, trade deficits were common features in their trade balances during this period. In addition to these countries both Ghana and Senegal experienced trade deficits in many years. The trade deficits of these countries were in part accounted for by the increases in the import of manufactures and food. Also, deficits were further fueled by the decline in export commodities of some countries during this period. In the direction of trade, the indications are that most countries have not sufficiently diversified their foreign trade. For some countries, the number of foreign trade partners has increased. However, this notwithstanding, the preponderance of the metropolitan countries is still very significant.16 In the case of Benin for example, exports to France accounted for 22 percent of total exports in 1981; this fell to 8 percent in 1987 as exports to the United States and Germany increased. For Cote dTvoire, exports to France represented 19 percent in 1981 but declined slightly to 17 percent in 1987, when there were substantial increases in the exports to Germany, the United Kingdom, and the United States. In 1981, the United Kingdom accounted for 1 percent of the exports of Nigeria, but this rose to 3 percent in 1987. There were major export increases to both the United States, France, and Germany. The reason for this being that the United Kingdom, an oil producer, needs little or none of Nigeria's petroleum. Imports have, to a large extent, continued to be from the metropolitan countries. As may be observed, about 20 percent of the imports of Benin in 1981 came from France. But this declined slightly to 19 percent in 1987. The imports from Japan and Germany have risen significantly during this period. In Cote dTvoire, imports from France represented 31 percent of total imports in 1981, but this increased to 34 percent in 1987. Other major sources of imports were Germany, Japan, the United States, and the United Kingdom. In the case of Nigeria, the United Kingdom accounted for 19 percent of its imports in 1981, but this declined to 16 percent in 1987. This is partly due to the general governmental policy to cut down imports in the wake of the economic recession beginning from 1980. This notwithstanding however, countries such as Germany, France, the United States, and Japan emerged to be prominent trading partners of the country by the end of the 1980s. The practical problems of trade disengagement in West Africa have, to a large extent, been vividly illustrated in the case of Nigeria. The Second, Third, and Fourth National Development Plans sought reduction in the country's dependence on the external sector in general, including the petroleum sector.17 In the first place, this implied a decrease in the reliance on nonoil export receipts for national income. However, paradoxically, the government has at the same time underscored the role of foreign exchange in the process of economic growth and development. Thus, the Second Plan further clearly indicated that increased earnings of foreign exchange was critical, since the country in its growth process

120

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Table 4.7 Nigeria: Importation of Passenger Cars, 1967-1978 N Mills. Year

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

1 Value of Car Import

2 Value of Total Import

15.7 5.9 5.5 13.8 29.4 60.2 76.7 97.0 220.5 271.2 339.4 _

447.1 386.4 497.4 756.4 1075.4 990.1 1224.8 1737.3 3721.5 5148.5 6881.3 8151.7

I as a Percentage of 2 3.5 1.5 1.1 1.8 2.8 6.1 6.3 5.6 5.9 5.3 4.9

-

Note: - = Not available. Sources: Federal Republic of Nigeria, Economic and Statistical Review 1976 (Lagos: Federal Office of Statistics, 1976); United Nations, 7979 Yearbook of International Trade Statistics (New York: United Nations, 1979); and United Nations African Statistical Yearbook (Addis Ababa: UNECA, 1979).

depends much on the import of capital goods. In other words, disengagement was put into question because of the reliance on foreign capital and technology. Disengagement was therefore perceived more in the context of the reduction in the importation of luxury goods and goods for which local substitutes could be found. Even then, the attempts to reduce luxury imports have not been very successful. These reductions naturally led to large-scale smuggling that the government could not effectively contain as a result of the porosity of the Nigerian borders. For example, Table 4.7 illustrates the failures in respect to the import of passenger cars as a luxury item from 1967 to 1978. Regional Integration In its collective context, self-reliance has been demonstrated in increasing involvement in regionalism. The basic rationale for regional integration are, among other things, found in the large market that it will provide for the integrating states. The markets of most West African countries, apart from Nigeria, are very small to sustain rapid industrialization. A large West African market could ensure the right location and the establishment of industries at

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121

optimum level. When industries produce at the optimum level, this would procure production at the lowest cost per unit in output.18 Also, it has been observed that regional economic integration was a prerequisite for the foreign trade expansion of West African countries. These countries, like many developing countries elsewhere, experience considerable constraints in the export of goods to the industrially developed countries as a result of the latter's import restrictions. With the trade liberalization regime of regional economic integration, it would be easier for West African countries to expand their foreign trade. It is important to underscore from the outset that West Africa has had considerable experience in varying forms of economic cooperation, commencing, in particular, during the colonial times when the metropolitan countries devised these arrangements to ease the administration of the territories under their rule. At the moment, there are about 40 cooperative intergovernmental arrangements in the subregion dealing with different aspects of economic cooperation.19 However, the Economic Community of West African States (ECOWAS), established on May 28, 1975, has been the most important as its membership consists of all the sixteen anglophone, francophone, and lusophone countries in West Africa.20 The main purpose of the ECOWAS was to promote the expansion of trade among the member states; foster industrial and agricultural development among them; and assist in social, cultural and scientific cooperation for the overall development of the West African subregion.21 Along with the ECOWAS, special recognition may also be accorded to the West African Economic Community or Communaute Economique de 1'Afrique Occidentale (CEAO), established in 1973 and consisting of Benin, Burkina Faso, Cote dTvoire, Mali, Mauritania, Niger, and Senegal; and of Mano River Union (MRU), also established in 1973 and made up of Liberia and Sierra Leone. The objectives of these two groupings are identical to those of the ECOWAS and both have continued to operate after the formation of the ECOWAS. The community has, since its inception, taken a number of integrative steps aimed at achieving the objectives set in the treaty. Among other things, it has commenced on the development of infrastructure; adopted agricultural and industrial cooperation programs; established a program for the creation of a single monetary zone; and introduced the ECOWAS immigration program, visa-free travel program for the citizens of the community. These citizens also have the right to reside and settle in any country in the subregion. This notwithstanding, it is a well-known fact that these have not contributed in any remarkable manner to the process of self-reliant development in West Africa. The process of integration in the ECOWAS has disappointingly been constrained by a number of endogenous and exogenous factors. Many of these are well-known but it will be instructive to underscore here some of the most prominent ones. For example, as it is today, the legacy of national sovereignty affects the regional integration process. The ECOWAS member states tend to

122

Foreign Aid and Self-Reliance in West Africa

consider national interests first in all issues relating to subregional economic integration and development. Also, colonial experience continues to influence national institutions and attitudes in political, legal, educational, and administrative matters. Whereas, a more independent national outlook would facilitate the process of integration in the subregion. At another level, the ECOWAS is hunted by the question of domination. The smaller economically weak countries often suspect goals of domination in the genuine support for subregional development efforts by the economically stronger member states.22 These fears, often based on external influence, cannot in many instances be justified but have disappointingly removed the wind out of the sails of regional economic integration. Consequently, the integration process has tended to spill around the more the small member states covertly express reservations on integrative measures. The process of integration in the ECOWAS has also suffered considerably because of political upheavals within and among the Member States. The Liberian crisis, which has claimed hundreds of lives since its inception in 1989, has been a major digression from the process of integration. The crisis has engaged the full efforts of the interim government with little or no energies left for regional integration. Similarly, it has been a significant preoccupation of the community. The Summits of the Heads of State and Government have, since the beginning of the civil war, been more concerned with the reestablishment of peace and the prevention of the conflict from spreading to other neighboring countries. Such preoccupation would naturally leave less time for decisions on measures toward the consolidation of the ECOWAS. All of these factors put together have had adverse effects on the commitment to and consolidation of the community. Thus, peace and security are indispensable aspects of economic integration in the subregion. The community will, as a matter of urgency, need to ensure the implementation and adoption of the measures on trade liberalization and common external tariffs to move toward progressive integration. The failure to implement the decisions of the community has been another major setback in the drive toward self-reliant development in West Africa. Some measures, especially those on trade liberalization, free movement of persons, common external tariffs, nonaggression, and mutual defense assistance pacts, have not been effectively implemented by the member states because of perceived disadvantages to national interests or as a result of poor national administrative machinery for the implementation of the ECOWAS decisions. The prospects of self-reliant development could be enhanced if the member states implement the decisions of the community promptly. Furthermore, integration and self-reliance have run into difficulties while the community could not be guaranteed with strong and effective leadership. The community, like the state, requires leadership with vision on how best to achieve the goals of economic integration. Economic integration is a complex process.

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123

It is more difficult in the case of developing countries, where the community needs to face the task of the provision of basic infrastructures and at the same time confront limited financial resources. It follows, therefore, that careful choices must be made on each integrative measure and resource that could facilitate the attainment of self-reliant development. Nigeria has in the past attempted to provide such leadership through support for community programs and projects.23 A leadership role could entail some sacrifices in the short-run, and it is better enhanced when more countries act jointly to give direction and support to the community. In addition, it is important to also underscore that the contribution of the community to self-reliant development has been undermined partly because of the paucity of funds for its projects. Many member states have been unable to adequately support regional projects in which they are beneficiaries for lack of financial resources. Their ability to do so has been eroded as national projects and subregional projects have to compete for diminishing resources from foreign exchange earnings arising from the fall in the prices and demand for commodity exports. At the same time, as already noted, most of these countries are confronted with the obligation of servicing external debts. In this connection, it is important to stress that the implementation of subregional projects has not been made easy as a result of the recent "aid fatigue" by the aid donors. Without any doubt, all these require a reversal in the short run in order to ensure that the community plays an important role in the drive toward self-reliance in West Africa. CONCLUSION Self-reliant development is a dream yet to be realized in West Africa. Economic policies and specific sectoral areas of focus were clearly articulated in the early 1970s by many West African countries in order to attain this goal. But the achievements by the second half of the 1990s, as could be observed, are nothing to write home about. It is evident that there are a number of obstacles in the capacity to implement such policies. Also, progress in sectoral areas for self-reliant development ran into difficulties because of overwhelming endogenous and exogenous factors, some of which are beyond the control of West African countries, individually or collectively. Clearly a major and in fact foremost problem is the machinery for implementation of policies. In many countries the institutions, the government departments, are neither adequate nor well staffed. The paucity of sufficient and dedicated professional staff militated against a systematic implementation of the policies in most countries. In addition, the problems were compounded in some countries where these departments were operated by corrupt officials. It is obvious that the question of food self-sufficiency cannot be adequately solved in most countries if the problems of the mode of production are not

124

Foreign Aid and Self-Reliance in West Africa

imaginatively tackled. Sufficient weight would need to be accorded to mechanization in countries where the terrains encourage it. At the same time lasting solutions need to be found to the adverse effects of climatic conditions such as drought, desertification, flood, and soil erosion. As far as cash crops are concerned, the basic issues relate to the increases in the world prices for these commodities, increased demand, and better methods of production. In addition, the farmers in West Africa require better access to credits if they are to increase their production. It has been difficult to make significant advancement in industrial development where the issues of inputs could not be effectively solved. The poor level of internal savings of most countries in West Africa made it difficult for local entrepreneurs to have sufficient capital for investment. Foreign investments were not forthcoming, as foreign investors find most West African countries' investment codes unsatisfactory and become disillusioned about the prospects for economic growth. Self-reliance in technology suffered serious setbacks as the capacity for this undertaking was not adequate. The research institutions in West African countries are few, poorly equipped, and inadequately staffed by professionals. The West African governments do not adequately fund these institutions, and a significant part of the professional staff have left many institutions for the United States and Europe as the unabated economic recession continued to undermine incomes and create harsher conditions of living. But then, learning from imported technology has not been made easy. Many industries were forced to close down in the wake of the recession and the adverse effects of structural adjustment programs. Also, the importation of new technologies was not easy as a result of the lack of access to them and their high costs. The West African subregion is endowed with vast energy resources. Some of these are yet to be fully tapped. The move toward self-reliance in this area has suffered setbacks partly because of the failure to exploit these resources. At the same time, the exploitation of these resources requires the technological and financial support of the industrially developed countries. It has been difficult for West African countries to reduce dependence on foreign trade. The reasons for these are not far-fetched. The progress in industrialization has been slow. While this remains, West African countries have been obliged to continue to import both capital and consumption goods. West African countries would therefore need to strengthen the factors for accelerated industrialization in the production of consumption goods in order to reduce dependence on imports. This would, among other things, entail the development of human resources, better investment codes, increases in domestic savings, and the rapid development of infrastructures. Regionalism has not effectively influenced the course of collective self-reliance in West Africa. The principal integration arrangement in the subregion, the ECOWAS, would need to be strengthened in order to fulfill this function. This

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will require greater political commitment by the member states through the implementation of community decisions, payment of contributions, effective support of subregional projects, prevention of conflicts, and the support of the international community. These issues are critical to the future of economic development in West Africa. The pace of economic development in West Africa in the foreseeable future is likely to be determined by the extent to which solutions are found to these fundamental problems. It is for this reason that the next chapter of this study is devoted to the critical elaboration of some of these problems. NOTES 1. World Bank, World Bank Development Report 1993 (Oxford: Oxford University Press, 1993), p. 288. 2. UNDPAVorld Bank, African Development Indicators (Washington, D.C.: UNDP/World Bank, 1992), pp. 225-28. 3. FAO, Food Supply Situation and Crop Prospects in Sub-Saharan Africa: Special Report (No. 2, June 1992), p. 10. 4. Carthy L. Jabara, Structural Adjustment and Stabilization in Niger: Macroeconomic Consequences of Social Adjustment\ Cornell Food and Nutrition Policy Program, Monograph 11, June 1991, pp. 77-79. 5. These are utilities or firms involved in transportation and communication. Also, the government intends to retain control of the Ghana Cocoa Board and the State Mining Corporation. 6. Nigerian Institute for Social and Economic Research (NISER), The Technological Impact of Nigeria's Structural Adjustment Programme (SAP) (Monograph Series, No. 3, 1988), p. 1. 7. Ibid. 8. Statement by Nigerian General I. B. Babangida at the launching of the SAP on June 26, 1986. 9. A. Adubifa, Technology Policy Failures in Nigeria (Dakar: IDRC, 1987), p. 12. 10. Ibid., p. 14. 11. Ibid., p. 20. 12. National Office of Industrial Property (NOIP), Annual Report 1986 (Lagos: NOIP). 13. A. Adubifa, Technology Policy Failures in Nigeria. 14. O. Ojo, "Self-Reliance as a Development Strategy," in C. Ake (ed.), Political Economy of Nigeria (Lagos: Longman, 1985), p. 147. 15. UNDPAVorld Bank, African Development Indicators, pp. 63-64. 16. IMF, Direction of Trade Statistics 1988 (Washington, D.C.: IMF, 1988). 17. Federal Republic of Nigeria, Guidelines for the Fourth National Development Plan 1981-1985 (Lagos: Federal Ministry of National Planning, 1980), p. 20; Federal Republic of Nigeria, Second National Development Plan 1970-1974 (Lagos: Ministry of Economic Development and Reconstruction, 1970), pp. 33-37; and Federal Republic of Nigeria, Third National Development Plan 1975-1980 (Lagos: Federal Ministry of Economic Development, 1975), p. 30. 18. For details, see R. L. Allen, "Integration in Less Developed Areas," Kyklos, 3(14), 1961, pp. 315-334; G. M. Meier, International Economics: The Theory of Policy (New York: Oxford University Press, 1980); F. Andic, Suphan Andic, and Douglas Dosser (eds.), A Theory of

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Economic Integration for Developing Countries (London: Allen and Unwin, 1971); and P. Robson, The Economics of International Integration (London: Allen and Unwin, 1980). 19. Abass Bundu (Executive Secretary), ECOWAS and the Future of Regional Integration in West Africa, Paper presented at the IDRC-ECOWAS International Conference on West African Integration, Dakar, January 11-15 1993, p. 4. 20. The ECOWAS consists of Benin, Burkina Faso, Cape Verde, Cote d'lvoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo. 21. Article 2, Treaty of the Economic Community of West African States (ECOWAS), 1975. 22. Abass Bundu, ECOWAS and the Future, pp. 12-13. 23. R. Omotayo Olaniyan, "Nigeria and ECOWAS," in G. O. Olusanya and R. A. Akindele (eds.), Nigeria's External Relations: The First Twenty-Five Years (Ibadan: University Press Limited, 1986), pp. 130-133.

5 Critical Issues in Foreign Aid, Self-Reliance, and Economic Development

INTRODUCTION Deliberate efforts have been made by West African governments since the early 1970s to raise the standard of living of West African peoples. This was based on the recognition that it is the primary duty owed to the people and without which they could be severely handicapped in the comity of nations. The goal of economic development is not controversial; however, there were disagreements on how best to achieve it. Whatever strategies that were adopted, the nature and economic circumstances of these countries were generally the major determining factors. Considerable weight is given to the historical, political, and sociocultural development. What is the level of economic development? What factors are locally available for economic development? Also, in the adoption of the strategy for economic development attention is given to the understanding of the influence of the positive and negative factors. How could the positive factors be strengthened and promoted and the negative ones contained or eliminated in order to ensure development on a sustainable basis? Traditionally, West African countries have been recipients of foreign aid from the metropolitan countries during the colonial days. This practice continued after independence as the metropolitan countries endeavored to maintain and strengthen their influence in the former colonies. However, the poor economic performance beginning from the early 1970s, as manifested in part in the decline in foreign exchange earnings and poor internal savings, convinced West African political leaders that increased foreign aid should be sought not only from the metropolitan countries but also from other industrially developed countries.

128

Foreign Aid and Self-Reliance in West Africa

Foreign aid, as was calculated, would be beneficial in building infrastructures and the establishing institutions. At the same time, decisions were taken by the various governments on self-reliance as a realistic strategy for an accelerated economic growth and development. The international economic environment, as it was perceived, was such that would not guarantee the rapid economic transformation that was eagerly sought by the political leaders. This philosophy should enable them to harness internal resources, coordinate these, and build an internal momentum to propel the economy. However, it has been made abundantly clear in the preceding chapters that foreign aid and self-reliance are loaded with a number of constraints in the process of economic development. The disbursement and utility of aid are associated with several complex political, economic, and social issues. There are also difficulties in the extent to which self-reliance could be implemented given the fact that West African economies are export and import oriented and well-integrated into the world economy. The general problems associated with all these have been mentioned in the earlier chapters. While these have been the case, new developments in the world economy and the individual countries themselves brought new dimensions into the ways in which foreign aid and self-reliance should be perceived and what other development strategy options should be considered. In light of these experiences, therefore, the main purpose of this chapter is to examine more critically the basic issues that are fundamental to foreign aid, self-reliance and economic development of West African countries. On these issues, it is desirable to understand the contributions and limitations imposed by colonial hangover, donors' interests, foreign aid management, technology, human resources development, drought, foreign debt, commodity prices, and structural adjustment programs, among several others. Besides, special attention should be accorded to new development thinking: sustainable development with its goal of environmental preservation. What are the implications of this for West African countries? The prospects for economic growth and the development of West African countries would depend on the extent to which the positive elements are harnessed and appropriate solutions are found to the negative limitations. COLONIALISM For most West African countries, colonialism'continues to constitute an important influential factor in foreign aid, self-reliance, and economic development. Admittedly, colonial administration laid the foundation for several political and socioeconomic structures in West African countries. These, to a large extent, contributed to the uplift of the political and economic structures with the introduction of Western civilization, but questions continue to be asked

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on the sufficiency of these contributions in view of the economic growth in the metropolitan countries during this period. Besides, the more crucial questions have been on the implications of the political and economic links with metropolitan countries for economic development in West Africa. Except for Ghana in 1957, most of the countries in West Africa became independent in the early 1960s after almost half a century of colonization by the British, French, the Portuguese. However, sinccthen it has been easier said than done to evolve an autonomous approach for accelerated economic development. The political and administrative institutions of West African countries were largely, at independence, modeled after those of the British, French, and Portuguese. The British parliamentary system reigns in Nigeria, Ghana, Sierra Leone, and Gambia, while the French parliamentary system prevails in Benin, Burkina Faso, Cote dTvoire, Niger, and Mali, to name a few. The same applies with equal force in the case of the Portuguese and Guinea-Bissau. Similarly, West African economic systems are based on the market economic systems of the British, French, and Portuguese. In countries such as Guinea and Burkina Faso, where attempts were made to establish socialist systems, these programs encountered internal and external opposition. They could not be sustained and were ultimately scrapped. In Benin, the Kerekou regime, which came to power in 1972, achieved a shaky but unprecedented stability. The Marxist rhetoric introduced in 1974 culminated in repressive military rule in the late 1970s, but this had largely ceased by the early 1980s. In Burkina Faso, Captain Thomas Sankara took power on August 4, 1983 and set up a National Revolutionary Council, or Conseil Revolutionnaire National, with himself as the head of state. In the following year, he renamed the country (formerly Upper Volta) as Burkina Faso, meaning the "Land of Incorruptible People." He further ordered all government officials, including himself to open their bank accounts to public scrutiny. His government lasted until 1987 when he was overthrown by Captain Blaise Compaore. The urban dwellers objected to lower standards of living, while sections of the peasantry expressed unhappiness with ill-devised development schemes. Furthermore, the left accused the government of softening its anti-imperialist stance in order to secure foreign aid. Similarly, Nigeria's experiment with a presidential system, introduced in 1979, after nineteen years of parliamentary system, has remained controversial, as its operation has been effectively put in abeyance by successive military interventions and rule. In effect, the metropolitan political, administrative, and economic arrangements remained together with the influence of the British, French, and Portuguese. The system of interdependence between the former colonies and metropolitan countries continues to be nurtured and strengthened. The foreign trade of West African countries is basically with Britain, France, and Portugal. The only exception being Liberia, which was not colonized. For the French-speaking West African countries, this has been compounded with the creation of a common currency CFA franc, which is fully backed up by the French franc.

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Besides, there is also financial dependence: the metropolitan countries provide a substantial part of the funds for development in most countries of the subregion. This is particularly the case for a number of francophone West African countries with weak financial resources, whose implementation of annual budgets depends, to a large extent, on the subventions from the French government. The dependence on these countries has, in recent years, been increased as a result of their poor economic performance in the aftermath of the unabated global economic recession. While colonial hangover has impact on the direction of aid and the extent to which individual self-reliance could effectively serve as a strategy for economic development, its greatest problems appear more to be in the domain of collective self-reliance. In its context of regional economic integration, collective self-reliance requires trade expansion among the member states. It requires the steady creation of industries in the member states and their allegiance as well as the surrender of part of their sovereignty to the supranational authority. As it is today, regional economic integration in West Africa, especially in the ECOWAS, in part suffers from the lack of these attributes. The loyalties of the member states to this organization are not very strong. National interests and strong ties with the metropolitan countries have made the operations of the regional economic integration scheme problematic. Regional economic integration has in effect tended to spill around because of the diverse political and administrative backgrounds and feeble loyalties of the member states. In order to make regional economic integration meaningful, therefore, adequate efforts must be made to reduce the foreign trade preponderance of the metropolitan countries and other developed countries. Regional economic integration should ensure the rapid consolidation and establishment of manufacturing industries. Special consideration should be accorded to the industries involving machinery and transport equipment, which constitute major imports from the metropolitan and other developed countries. It is through these tactics that the extra-subregional trade dependence could be reduced. An international culture of administration should be evolved, which should be an excellent harmonization of all past administrative experiences of the member states. In other words, an economic integration arrangement should remove all colonial hangovers in order to make collective reliance a reality. However, given the global changing economic circumstances and their implications for each country and the general decline in the volume of foreign aid to West Africa in recent years, the basic questions are on what could be expected in the foreseeable future from the metropolitan countries and other traditional sources. DONORS' INTERESTS

The interests of donors as determined principally by international and national economic development will play a critical role in the volume of foreign

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aid flows to West Africa in the future. These have played a significant role in the past and will continue to assume a preeminent position in the flow of aid to the subregion as circumstances change in the political and economic spheres at both national and international levels. For a number of aid donors, the assistance to developing countries is not based on the needs of these countries. As already noted in Chapters 2 and 3, the rationale for aid flows to developing countries, among other things, include economic growth promotion of the donor countries, their political influence, and the strategic importance of the recipient countries. Of these three determinants, the first two are likely to play a more powerful role in West Africa in the foreseeable future. The case for strategic interests has been weakened following the collapse of the former Soviet Union in 1990. With the collapse of the Soviet Union and the weakening influence of socialism worldwide, the East-West ideological rivalry that characterized international relations in the cold war years has been relegated to the background in global politics. The broad focus of the United States and the international community at large now is the promotion of democracy, conflict resolution, international peace, security, and development. The economic growth interests of the donor countries will continue to be a primary consideration while many of them endure the process of world economic recovery. The promotion of economic recovery for them, among other things, entails increasing investments and the creation of more employment opportunities at home while taking the measures to reduce the rate of inflation. There is a strong link between the economic growth of the donor countries and the flow of foreign aid to West African countries. The other motives of aid notwithstanding, the performances of the economies of the industrially developed countries are very important determinants of the pattern of aid flows. The pattern of aid flow in the past indeed strongly supports this proposition. Table 5.1 illustrates the trend of bilateral aid flows from the OECD countries to low-income countries, many of which include West African countries, over the period 1965 to 1990. It is clear from the table that foreign aid as a percentage of donor GNP declined from 0.20 percent in 1965 to 0.07 percent in 1985, but rose slightly to 0.09 percent in 1990 for the OECD countries as a whole. The major declines occurred in the United Kingdom, Belgium, Germany, the United States, and Japan. But France and Canada tended to maintain their level of disbursement. Whereas Italy, the Netherlands, Austria, Denmark, Finland, Sweden, and Switzerland increased their disbursements to the low-income countries. It is a development that appears to correlate with the growth rate of the OECD countries from 1970 to 1991, as illustrated in Table 5.2. The average annual growth rate of the GDP of the OECD countries fell to 2.9 percent in 1980-91 from 3.1 percent in 1970-80. The table shows that Belgium, Germany, the United States, and Japan experienced a decline in growth rate. Also, increases in the average annual growth rate of the GDPs of Austria, Denmark, Sweden,

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Foreign Aid and Self-Reliance in West Africa

Table 5.1 OECD: Total Bilateral Flows to Low-Income Economies As a Percentage of Donor GNP

Country Ireland New Zealand United Kingdom Australia Italy Netherlands Belgium Austria France Canada United States Germany Denmark Finland Norway Sweden Japan Switzerland

I TOTAL

1965

. -

1970

, -

1975

_

0.23 0.08 0.04 0.08 0.56 0.06 0.12 0.10 0.26 0.14 0.02

0.09 0.00 0.06 0.24 0.30 0.05 0.09 0.22 0.14 0.10 0.10

0.04 0.07 0.13 0.02

0.12 0.12 0.11 0.05

0.14 0.11 0.10 0.01 0.24 0.31 0.02 0.10 0.24 0.08 0.12 0.20 0.06 0.25 0.41 0.08 0.10

0.20

0.13

0.11

-

-

1980

1985

1990

0.01

0.01 0.01 0.01 0.07 0.00 0.32 0.13 0.11 0.06 0.13 0.06 0.07 0.17 0.03 0.28 0.26 0.12 0.07

0.03 0.00 0.07 0.04 0.06 0.23 0.13 0.05 0.11 0.14 0.06 0.13 0.26 0.09 0.34 0.24 0.10 0.11

0.00 0.05 0.05 0.09 0.25 0.09 0.01 0.13 0.10 0.05 0.10 0.24 0.17 0.37 0.25 0.10 j 0.11

0.08

0.07

0.09

Source: World Bank, World Development Report 1993 (New York: Oxford University Press. 1993), p. 275.

and Switzerland appear to justify their increases in the disbursements to the low-income countries. The decrease in the average annual growth rate of the GDP of the OECD countries has much to do with the global economic recession of the early 1970s caused by the first oil price shock of 1973 .This generated a high rate of inflation, increased unemployment, and depressed economic growth in many OECD countries. Since then, a number of these countries have managed to arrest the recession and stabilized growth, but it has been difficult to procure a higher rate of economic growth as full recovery is yet to be restored in the world economy. Thus, in 1992, the overall real growth in GDP among the twenty-four OECD countries was at an all-time low of 1.6 percent. Unemployment rates increased by more than 8 percent during the year. In the United States, the growth rate of the GDP reached 2.1 percent, but unemployment continue to increase, reaching 7.3 percent in 1992. In Canada, unemployment moved to 11.2 percent as against 10.2 percent in 1991. Furthermore, until recently, recovery in the United Kingdom remained elusive as economic activity eased by 0.6 percent and unemployment rose to 9.9 percent as against 8.7 percent in 1991. In Japan, although falling interest rates and the fiscal-stimulus package of August 1992 (with a larger one proposed in April 1993), are expected to help contain recessionary forces, substantial uncertainties—including those about the dura-

Foreign Aid, Self-Reliance, and Economic Development

133

Table 5.2 OECD: Average Annual Growth Rate of GDP Percentage 1970-1980

1980-1991

Ireland

4.9

3.5

Israel

4.8

3.7

Country

New Zealand

1.9

1.5

Spain

3.5

3.2

Hong Kong

9.2

6.9

Singapore

8.3

6.6

United Kingdom

2.0

2.9

Australia

3.0

3.1

Italy

3.8

2.4

Netherlands

2.9

2.1

Belgium

3.0

2.1

Austria

3.4

2.3

France

3.2

2.3

Canada

4.6

3.1

United States

2.8

2.6

Germany

2.6

2.3

Denmark

2.2

Finland '

3.1

Norway

4.8

Sweden

1.9

2.3 3.0 2.7 2.0

Japan

4.3

4.2

Switzerland

0.5

2.2

TOTAL

3.1

2.9

Source: World Bank, World Development Report 1993 (New York: Oxford University Press, 1993), p. 241.

tion of the dampening effects of the asset deflation—remain. In the case of Germany developments were dominated by the increased strain procured by the expansionary fiscal policy that followed unification and the tight monetary policies that were subsequently adopted. Domestic demand was restrained by high interest rates, which, along with cost pressures, also weakened the exportoriented manufacturing sector. In France, economic growth was weak, 1.3 percent for 1992. Inflation was at record lows, and although the export sector showed improvement early in 1992, indicators of consumer confidence re-

134

Foreign Aid and Self-Reliance in West Africa

mained weak, and unemployment rose to an historically high level of 10.2 percent compared with 9.4 percent in the previous year.1 In other words, while full recovery remains elusive in most OECD countries, major governmental efforts should concentrate on ensuring the implementation of monetary and fiscal policies that would stimulate the economy to increase job opportunities. Under these circumstances, West African countries cannot necessarily count on real increases in aid flows from the OECD countries. It therefore follows that aid-tying would continue to pose problems to West African aid recipients. As already noted in Chapter 2, approximately 67 percent of British aid to West Africa is tied. Also, the bilateral aid from the former West Germany to West African countries is tied by about 80 percent. This implies a sizable loss to the West African recipient countries. An untied aid would give them the option to purchase goods at cheaper alternative sources. In fact, as T. L. Hutcheson and R. C. Porter noted in their study of U.S. aid to the developing countries, most of the aid is spent in the United States; in effect, a substantial proportion of aid comes back to U.S. business as profits. The tying of aid is calculated to raise prices from 10 percent to 40 percent more than comparative goods from other countries.2 Tied aid artificially increases the capital costs of aid-financed projects, since goods obtained under tied aid will tend to be significantly more expensive than similar goods obtained at world prices. Also, it will tend to increase the operating costs of aid-financed projects, since tied aid is likely to lead to a continuing flow of relatively expensive imports in the form of spare parts and ancillary equipment complementary to the aid-financed imports. In effect, all these will reduce the competitiveness of recipient countries to alter the pattern of investment and lower productivity as well as reduce the rate of growth below what otherwise could have been obtained. Thus, while bearing in mind the interests of the donor countries, it is important that the value of aid given to West African countries is enhanced in order to ascertain its more meaningful contribution to economic development. Bilateral donors to West Africa would go a long way in assisting development efforts the more they reduce the proportion of tied aid. However, political influence will remain a secondary determinant of aid flow to West African countries. The metropolitan countries, Britain, France, and Portugal, will continue to strengthen their relations in the face of competing interests among them and with other industrially developed countries that seek to have a foothold in the potentially large market of the subregion. Even then, it must be acknowledged that politically motivated foreign aid has its limitations while it is essentially targeted at grandiose projects to reestablish the image of the donor country. The more foreign aid is directed at elephant projects, the less would be its contribution to the alleviation of poverty and the promotion of economic development in West Africa. Beyond these, however, what has even

Foreign Aid, Self-Reliance, and Economic Development

135

raised more questions is the way foreign aid has been managed by both donors and recipients. FOREIGN AID MANAGEMENT The management of foreign aid constitutes a critical factor on the effectiveness of foreign aid in economic development in West African countries. As already mentioned in Chapter 3, foreign aid has developed from a transitory phenomenon involving a few donors in any given country to an elaborate and virtually permanent system taking on board, along with the government, several agencies in the economies of the recipient countries. For a number of the least-developed countries in West Africa, foreign aid is substantial in the public development budget and has provided invaluable balance-of-payments support. In fact, the occurrence of substantial public investments has been dependent on the availability of aid finance. The operation of existing facilities in some countries is contingent upon donor support for recurrent import requirements. While the needs of many West African countries for aid are substantial, the greatest concern has been on how the available funds have been managed for meaningful development. It has been noted that there is considerable deficiency in the institutional arrangements for foreign aid implementation that has seriously negatively affected the contribution of aid to the development of West African countries. In a number of countries, the governments have established departments, ministries of external affairs, trade or commerce and sometimes with the cabinet, through which donor sources and spending agencies are coordinated. The size of many programs have been enormous with attendant difficulties in implementation by the several agencies. Besides, it has been noted that a coordinating agency rarely has adequate capacity to establish or enforce tight aid priorities. In most cases, an official in the relevant coordinating ministry typically takes responsibility for liaisons with one or more agencies, but he or she is often without the full authority or knowledge to assert a view over the range of sectoral interests represented in a donor's project portfolio. In addition, many aid projects suffer because of the frequent changes in local personnel in the ministry. Consequently, the possibilities of building up a body of knowledge and a set of working relationships around the aid program tends to be nonexistent. Even though one ministry plays a dominant role in coordination, the initiative in the promotion of projects is located throughout the gamut of the government system. In order to enhance the possibilities of financing their own projects, the implementing agencies in many cases maintain intensive direct relations with donor representatives. Consequently, the personalities of top officials in ministries and agencies play an important role in the success of the resulting lobbying process. For this reason, aid coordination by the recipient government is weak.

736

Foreign Aid and Self-Reliance in West Africa

On the other hand, the organization of the donor varies substantially. In the first place, the staffing of the local office varies from a one-person bureau to US AID, with several staff members. The management requirements of the large number of donors and their great diversity are immense. Each donor has its own charter that determines the kind of development activities it can pursue. Each has its own project preparation requirements, its own project implementation procedures, and its own reporting requirements; and each is responsible to its own governing council. There is a commitment to coordinate in principle on the part of the donor. However, this is tempered by the desire to accelerate program implementation, and to work with particular parts of the system in the pursuit of objectives attractive to the particular agency. Furthermore, given these administrative limitations, donors seek ways to facilitate implementation by developing their own connections with key personnel in the system, by training manpower for their own projects, and in some cases by financing local costs for their projects. The attempt to improve management and coordination by both the donors and recipients has resulted in a variety of coordination arrangements meeting different purposes: macro/multisectoral of the sort characterizing World Bank consultative groups; country level information exchange among donors and host governments; joint operations; sectoral policy and operational coordination; and conceptual or intellectual coordination of donors with respect either to geographic or functional fields, usually detached from a particular country setting. The commitments of West African governments to the idea of consortia or consultative groups for fund raising have not been very significant. In 1985, for example, consultative groups were established for the first time for Mauritania and Senegal. The formal consultative group for Senegal has its aim at agreement between Senegal and its principal aid donors on ways to reorient part of that country's investment program toward urgent rehabilitation efforts. Apart from this, the consultative group for Ghana was reactivated in November 1983 in support of that country's recovery program. But these groups later became increasingly built around a policy dialogue with developing countries in connection with structural adjustment and other broad, policy-oriented lending in support of a mutually agreed investment and expenditure program, often complementing the IMF stabilization agreement.3 The UNDP organizes round tables for least-developed countries as a followup to the UN Conference on Least-Developed Countries held in Paris, September 1981. A condition for organizing a round table is that it should be requested by the government concerned. The recipient provides the chairman and the UNDP assists in organizing the meeting.4 These meetings are occasions where aid seekers are able to present their requirements to donors as a group. Also, donors use the opportunities offered by these meetings to familiarize themselves with the

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development problems and aid needs of the countries concerned and to enter into an active dialogue. Although the UNDP-sponsored round tables have increased considerably for the least-developed countries, nevertheless, such meetings have not been very substantial for West African countries. Since the motivating force for holding round tables is the recipient country itself, UNDP's role as the provider of services to these countries has been passive: the organization has merely performed the task of an honest broker on behalf of the recipient country toward the donor community. As a result of this, round tables have suffered from weak chairmanship. Furthermore, enough attention has not been paid to adequate preparation of all partners for policy dialogue. Hence, there has been lack of focus on major development issues at these meetings.5 Apart from these, it should also be noted that coordination in recipient countries has been subjected to a number of difficulties. At the moment, there is a wide range of coordination activities carried on at the "local" level in most developing countries, including those in West Africa. Such activities, largely informal, have been tailored to the special circumstances of the individual countries. Generally, the UNDP resident representative prepares an annual report on donor aid activities, providing important baseline data for use in planning programs. A variety of "technical teams" from the World Bank, EU, UN agencies, regional banks, and donor countries undertake joint studies or reviews at all levels of the economy with particular emphasis on the sector and project levels. These undertakings involve contacts with other members of the donor community, but mainly with the recipient government development agencies. Since 1985, the emergency relief area has been the most extensive and effective area of aid coordination. In some cases, bilateral donors are taking on responsibility to play a lead or supportive role in selected areas. Thus, for West Africa for example: local coordination arrangements have been institutionalized as a continuous process in countries such as Mali (the Cereals Marketing Reconstruction Project, NGOs) and Senegal (Food Aid); permanent steering committees, joint monitoring committees, local consultative groups or similar arrangements are operating in Benin ("Comite Mixte") and Ghana (Joint Monitoring Committee); agreement has been reached in a number of countries on initiating or widening the scope of in-country aid coordination, for example in Mali (health and population, nonproject aid, recurrent costs and structural adjustment), Niger (desertification control, transport, livestock), Senegal (agriculture, water supply and sanitation, maritime fisheries and

138

Foreign Aid and Self-Reliance in West Africa

industry, education and tourism) and Togo (infrastructure projects, social sectors, nonproject financing); in a number of cases, agreements have been reached or recommendations have been made at consultative group or round table meetings regarding the need and modalities to strengthen aid coordination at the local level, for example in Ghana; and in Burkina Faso, (water supply and sanitation), bilateral donors have taken the lead in organizing or doing major support work for the country consultations.6 Albeit, much still needs to be done in order achieve more effective coordination. A large number of sectoral meetings or consultations that have been held locally have not been satisfactory. In many instances, project concerns predominate, and followup measures by the recipient governments and donors have been inadequate.7 Furthermore, basic problems have emerged from the quality of donor presentation in the recipient countries: perceived political risks and staffing and budgetary problems that acutely hinder the ability of donors to prepare and participate in local aid coordination adequately and effectively; inadequate communication between headquarters and the field; insufficient delegation of authority to local staff; an excessive number of participants in local meetings (particularly UN agencies); and differences in donor aid procedures.8 Thus, for foreign aid to be more meaningful in the development process in West Africa, it is imperative that solutions be found to the bottlenecks in aid coordination and management. As the first step, donor policies should be adequately harmonized in order to facilitate coordination with the economic policies of the recipient West African countries. Secondly, there should be a single, designated focal point, a ministry, in the recipient West African country solely authorized for the coordination and management of foreign aid. The ministry, with a well-trained staff, should liaise with donor agencies on all aspects of the cycle of foreign aid: project appraisal, implementation, monitoring, and evaluation. Thirdly, for greater effectiveness of aid in development, donors would be helpful to the development process by directing aid to priority areas designated by the recipient West African countries. The more this is practiced the better the prospects for West African countries' development. Fourthly, assistance should be given to institutional capacity-building of recipient West African countries, the training of manpower, and providing administrative infrastructures that would enable the countries deficient in these areas to be able to cope effectively with aid coordination and management. This alone, it must be acknowledged that the overall economic development in West African countries primarily rests on a stable political environment. At this point, one

Foreign Aid, Self-Reliance, and Economic Development

139

may underscore that this has been a rare commodity for a number of countries in the subregion from the 1970s to the 1990s. POLITICAL STABILITY

When the general development of West African countries is put in perspective, political stability constitutes an important critical variable. As a matter of fact, the ideal thing for economic development is a complementary political system that develops progressively without major conflict within and among its institutions. The political parties and pressure groups as well as other political institutions should become more articulated and consolidated to enable the smooth transition from one government to the other. This would guarantee the atmosphere in which development issues could be continuously and effectively addressed. However, very few countries in West Africa enjoy political stability. Beginning from the second half of the 1960s, many West African countries have experienced varying forms of political instability. The cases of a number of countries have been very illustrative. In 1966, the army intervened in Nigeria in an attempt to create a unitary government. This precipitated regional rivalries and in the following year, Igbo officers from eastern Nigeria declared a secessionist republic of Biafra. After three years of warfare the federal government of General Yakubu Gowon liquidated Biafran independence. Gowon tried to prevent future secession attempts by enlarging the number of regional states to twelve (increased to nineteen in 1976 and latter to thirty during the Babangida administration), but his government lost support because of its perceived reluctance to surrender power. Gowon was toppled in 1975 by a coup led by Brigadier Murtala Ramat Mohammed, who was himself assassinated in 1976. The army continued to be in power under General Olusegun Obasanjo, who instituted measures to restore Nigeria to civilian rule. In 1979, multiparty elections led to the formation of the Second Republic under President Alhaji Shehu Shagari, who in mid-1983 won a second term. By then, the revenues generated by Nigeria's oil boom in the 1970s were drying up. There was a widespread assumption that Nigeria's oil wealth had been corruptly squandered, and at the end of 1983, the Second Republic was replaced by a military regime under Major General Mohammed Buhari. In 1985, Buhari was replaced in a military coup by General Ibrahim Babangida, who promised to return Nigeria to civilian rule in 1992. He did not do this, however, until he was forced out of office after annulling the result of a general election in June 12, 1993. It was widely reported that a wealthy southerner, Chief M.K.O. Abiola won the election. In August 1993, General Babangida handed over the government to Chief Shonekan, who served with him in his transitional government. Three months later, Chief Shonekan was toppled by General Sanni Abacha.

140

Foreign Aid and Self-Reliance in West Africa

In the case of Ghana, the army toppled the government of Kwame Nkrumah in 1966. In 1969, under military tutelage, the Second Republic was instituted under Kofi Busia. In 1972 the army again intervened, but the successive regimes of Generals Ignatius Kutu Acheampong and Frederick W. K. Akuffo failed to resolve Ghana's deepening economic crisis. The military reluctantly promised a return to civilian rule in 1979. In June of that year, however, a group of junior officers under Flight Lieutenant J. J. Rawlings carried out a coup, purged senior figures in the army, and held elections. But the Third Republic, headed by Hilla Limann, proved incapable of reversing Ghana's economic decline, and in 1981, Rawlings led another coup. In the 1980s the government pursued broadly socialist programs of democratization. At the same time it tackled Ghana's long-term economic decline and concluded a wide-ranging structural adjustment program with the IMF and the World Bank. These experiences have been well-repeated in varying forms in Sierra Leone beginning from 1967 when the army installed Siaka Stevens; in Liberia in 1980 after the coup led by Samuel K. Doe; in Niger in 1974 when the army removed Hamani Diori; in Burkina Faso in 1983, when Captain Thomas Sankara assumed power; in 1978 in Mauritania, when Moktar Ould Daddah was overthrown through a coup; and in Guinea in 1984 after the death of Ahmed Sekou Toure. There have been about three military interventions in Togo since 1960. Also, Benin has experienced about five military coups after its achievement of independence. The several military takeovers in West Africa have been attributed, in the eyes of the coup leaders, to the failures of the civilian regimes to promote economic growth and development. However, it is doubtful if all these coups could be justified in the face of continuous poor economic performance across the subregion. In most of the countries with series of military coup d'etats, there has been the aggravation of poverty. For example, the GNP per capita of Nigeria in 1990 was US$266 compared with US$1,029 in 1980; that of Togo fell to US$392 in 1990 from US$414 in 1980. In the Gambia, it fell from US$348 in 1980 to US$260 in 1990.9 In fact, in many of the these military regimes, the waste of resources had reached unprecedented levels while corruption had assumed unimaginable proportions. The emergence of several millionaires among the ruling elites is a sign that the interests of these ruling elites are elsewhere. These are strong indications that the military regimes have not been efficient in implementing the appropriate economic policies and in arresting the tide against economic development. Furthermore, the policies of the military regimes in West Africa have become increasingly controversial and problematic, as they often lack sufficient understanding of the role of the international community for development. The summary trials and executions of presidents, ministers, and political activists as illustrated in the administrations of Rawlings in Ghana, Doe in Liberia, and recently of Abacha in Nigeria (with the hanging of Ken Sarowiwa and eight other political activists), seem to indicate a lack of

Foreign Aid, Self-Reliance, and Economic Development

141

priority to international cooperation for development. The answers to the development issues in West Africa would lie more in the toleration of constructive criticisms from both within and without and the cultivation of international partnership and the observance of international standards that they are all already commited to implement. At best, military regimes have promoted discontinuity in economic policies. The rapid turnover of ministers in Nigeria, for example, has led to massive failures in the implementation of well-formulated economic policies. These developments at the same time sent wrong signals to foreign investors. Uncertainties in the economic policies of West African countries under military regimes have led to the drying up of much-needed foreign investments. Political stability should be accorded highest priority in order to ensure progressive development in the subregion. Ironically, the Summit of the Heads of State and Government of the ECOWAS in 1991 declared their commitment to the ideals of democracy and good governance. This commitment should be speedily implemented and the principle of accountability entrenched in the political process. West African countries cannot be left out of the mainstream of global development process. Frequent coups are signals of inconsistencies in economic policies as new regimes tend to alter the previous administration's policies that do not conform to its orientation. As already noted by Professor C. H. Dodd, military regimes are reformist in nature. The case for their intervention can only be justified if it promotes development and creates the political institutions and infrastructures for progressive political development.10 Let us now look at the major economic policies that have been the main instruments of the military and nonmilitary governments for economic development in many West African countries from the mid-1980s to the mid-1990s. What have been the main assets and limitations of these policies? And what should be done in policy terms in the near future to ensure enduring growth and development. THE STRUCTURAL ADJUSTMENT PROGRAM (SAP)

Although the main objective of the structural adjustment program in West African countries is to promote economic growth, the program appears not to have included the basic dynamics of economic growth in its application in the subregion. It therefore follows that the adjusting countries continue to search for the missing link. The structural adjustment program (SAP) has been the most singular economic policy that had profound impact on foreign aid, self-reliance, and economic development in West Africa in the 1980s. In the wake of the recession in the early 1980s, many West African countries, after the advice of the World Bank and IMF, basically came to the conclusion that structural adjustment programs were desirable in order to overcome economic recession and to establish the basis for sustainable economic growth and development. The assumption was that most of the previous economic policies

142

Foreign Aid and Self-Reliance in West Africa

of West African countries, like those of other developing countries, have been inadequate and poorly implemented. Since these programs have, to some extent, shifted focus from self-reliant development, there are considerable doubts about their positive impacts on economic recession and the promotion of growth and development in the subregion. Partly because of this, the degree of commitment to the implementation of the program varies from one country to another. And as scholars of West African development have generally observed, the programs have to a large extent generated a number of undesirable and unintended economic and social problems while attempting to promote economic growth. In West Africa, Ghana, Nigeria, Cote dTvoire, Senegal, Niger, and Gambia, among others, have embarked on various forms structural adjustment programs. Generally, structural adjustment programs in West Africa have the hallmark of conventional Keynesian economics. The broad objective is to promote economic growth while maintaining external balance: that is, the maintenance of the level and rate of growth of economic activity at a high rate while ensuring balance of payments at least in the medium term. * * Although there is a common agreement on what the objectives of structural adjustment programs should be, the strategies adopted toward reaching it often vary nevertheless. In spite of these variations, however, some common approaches may be identified, namely: deregulation and privatization, trade liberalization, foreign exchange price flexibility, financial structure reforms, and international cooperation. The SAP prescribes for the deregulation of utility prices in order to achieve cost recovery in the public supply of water, energy, transportation, and communication as well as other utilities. It is assumed that excessive regulation of public utility prices constitutes an important source of budget deficits. Deregulation will reduce budget deficits. But then, it should be pointed out that one fundamental problem of cost recovery is the inevitability of negative political and social effects. The principle of equity will be lost because this will reduce the supply of basic needs to the vulnerable groups in society. Trade liberalization implies tariff rationalization, discontinuation of import licensing, and the elimination of marketing boards.12 Higher tariff and nontariff barriers generate the high effective protection rates that make domestic production inefficient and noncompetitive against foreign products. The rationalization of tariff will promote efficiency in domestic industries. The discontinuation of the system of import licensing will remove the channels for corruption, but the elimination of marketing boards will generate fresh problems.13 Foreign exchange rate represents the core of adjustment program for most countries in the subregion. This is, for example, well illustrated in cases of Gambia, Ghana, Sierra Leone, Mauritania, and Nigeria. It has been central to the demand management policy. The measures suggested avoid the periodic shocks of currency devaluation in favor of smooth market-oriented currency depreciation resulting in market-determined exchange rates through Central

Foreign Aid, Self-Reliance, and Economic Development

143

Bank auction or forex bureaux, in which commercial banks and private vendors purchase and sell foreign exchange on the free open market.14 It is calculated firstly that if foreign exchange flexibility is achieved, it will, among other things, attract the inflow of remittances and other foreign transactions away from the parallel market and reverse capital flight. As regards the supply-side price incentive, the flexible exchange rate permits the raising of producer prices to stimulate production and supply of export products which, all things being equal, should lead to increased export revenues, lower import costs as demand for imports falls, and therefore of improvements in the balance of payments. The financial structure reforms would, among other things, involve the expansion of rural branch banks and the introduction of mobile banks to the weekly run rural market days and the integration of the credit unions and cooperatives into the formal financial system. But as regards interest rates, all deposit rates would be raised above the current or expected inflation rate to yield positive real interest on deposits, for this is the only way to attract savings into the financial system. The relatively higher costs of credit would ensure that only projects with higher social rates of return are undertaken. The cooperation of the international community constitutes an important part of the reform package for West African countries. The paucity of capital has generally been a limitation to the implementation of economic development programs in the past. But increased financial resources would be required as new projects would be proposed in the productive sectors under SAP. The cooperation of the international community is expected in the promotion of better prices for commodity exports to increase the foreign exchange earnings of the adjusting countries and assist in foreign debt reduction. However, the general survey of West African economies has indicated that the program has, on the whole, had very little positive impact on economic growth and development since 1985. Table 5.3 illustrates the pattern of growth of the GDP of adjusting countries in West Africa. It is clear from the table that although for most of the "strong adjusting" countries in West Africa there were increases in the growth of the GDP in first three years after 1985, nevertheless, growth declined for almost all thereafter. In fact for a number of them the growth rates in 1990 were worse off than what was obtained at the height of the economic recession in 1980. This is illustrated, for example, in the cases of Mauritania, Niger, and Togo. For the "weak adjusting" countries, the growth of the GDP has not been significant compared to those of the strong adjusting countries. Mali has significant growth in 1986 but declined in the following year. Growth rose to 9.2 percent in 1989 but fell precipitously to 0.3 percent. The reasons for these are very obvious. In the first place, as far as exchange rate policy is concerned, the standard conditions of domestic supply and demand, as well as foreign demand, which must hold to make devaluation successful, are often not satisfied. This is especially so because the entrenched

Table 5.3 Growth of GDP of Adjusting West African Countries, 1980-1990 Percentage Annual Change COUNTRY

1986

1980

1981

1 1982

-0.9

4.3

1.6

-1.2

-1.0

3.7

3.7

9.8

10.2

12.8

-5.3

3.0

0.6

2.8

1983

1984

1985

1989

1990

1987

1988

-0.2

1 -1.8

1-1.3

6.0

8.0

4.7

4.5

STRONG ADJUSTING COTE DTVOIRE GAMBIA

\

-6.1

GHANA

0.6

-2.9

-6.5

-4.5

8.8

5.1

5.1

4.6

6.2

6.1

4.1

[GUINEA

.

0.7

1.8

1.2

-2.7

5.1

7.1

3.0

5.9

4.3

4.7

-18.8

18.8

5.5

4.3

-1.0

6.0

6.8

5.0

3.1

MAURITANIA

4.0

3.8

-2.1

4.9

-7.3

2.8

5.6

3.1

3.7

3.4

0.3

NIGER

4.8

1.2

-1.2

-1.8

-16.9

3.1

6.4

-2.4

5.0

-3.5

3.1

NIGERIA

3.4

-5.7

-0.2

-6.2

-7.3

8.7

2.0

-4.6

4.8

5.8

5.3

SENEGAL

-2.7

-0.5

14.8

2.5

-4.7

3.8

4.6

4.1

5.1

-1.5

4.5

TOGO

14.7

-3.4

-3.7

-5.2

5.9

3.2

3.4

1.5

5.0

3.7

1.9

|| Subtotal

-0.5

2.7

2.2

-1.9

-1.7

4.0

4.0

2.1

4.9

2.7

2.5

GUINEA-BISSAU

4.5

-3.2 j

WEAK ADJUSTING BENIN

20.9

9.0

6.8

-2.0

2.0

6.4

-1.7

-3.9

1.2

2.4

1.1

-0.1

4.5

10.0

0.8

-1.8

9.8

10.0

1.8

7.4

-0.2

1.7

-4.5

-1.2

-2.0

-1.6

-2.1

-0.8

-1.7

-1.0

.

.

MALI

-1.3

4.6

6.7

-4.5

1.3

-0.4

17.9

1.4

2.4

9.2

0.3

SIERRA LEONE

15.2

8.7

0.0

-3.1

2.3

-3.4

1.9

5.4

0.0

-0.7

2.6

1 Subtotal

6.0

5.1

4.3

-2.1

0.3

2.3

4.5

0.7

2.2

2.1

1.1

TOTAL

1.7

3.5

-2.1

-1.0

3.5

4.2

1.7

3.4

2.5

2.1

1 BURKINA FASO LIBERIA

2.9

Note: - = Not available. Source: UNDPAVorld Bank, African Development Indicators (Washington, D.C.: UNDPAVorld Bank. 1992), p. 31.

Foreign Aid, Self-Reliance, and Economic Development

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technological structures do not easily permit the substitution of local inputs for imported ones. In the case of countries whose main exports are primary commodities that are subject to quotas and whose prices are externally determined and/or whose imports are essentially (petrol, capital goods, spare parts, medicine, etc.), devaluation can only have a negligible effect on the improvement of the balance of payments.15 Secondly, the justification of trade liberalization derives basically from the classical theory of comparative advantage, that is not compatible with situations in which import elasticities far exceed export elasticities. In the context of the present West African situation, excessive trade liberalization is not a feasible policy in view of the protectionist practices of the industrially developed countries against exports from Africa. Besides, the excessive reliance on markets and prices as allocative mechanisms in stabilization and adjustment programs in West Africa is based on the assumption that markets are competitive and that resources are perfectly mobile.16 It is for this reason that SAP recommends liberalization, deregulation, and the minimization of the role of the state in resource allocation. However, in West Africa, the existence of widespread market imperfections and structural rigidities make such assumptions invalid. Most government's excessive reliance on the price mechanism underestimated the necessity for selective governmental interventions that may be absolutely essential when a country experiences structurally induced shortages and skewed income distribution. Thus, since the measures in SAP in West Africa are fraught with several limitations it was inevitable that they would generate a number of unintended problems. In particular, poverty has been aggravated in many adjusting countries in West Africa. In most countries of the subregion, this is not just a phenomenon in the rural areas but an overwhelming situation in the urban areas, where the middle class has been completely wiped out of the social strata because of the devaluation of local currencies, spiral inflation, cuts in public expenditure, and privatization and commercialization. The latter two issues have served as major sources for the aggravation of the problem of unemployment. Table 5.4 illustrates the trend in poverty in West Africa with dependent population as an indicator. Although the average for the subregion as a whole showed somewhat of a decline in dependent population during the 1980s, this does not however represent the true picture for most countries that experienced a significant increase in dependent population. As may be observed, in Benin, Burkina Faso, Cote d'lvoire, Ghana, Guinea-Bissau, Mauritania, Senegal, and Togo the number of dependent population increased substantially. The others have slight decreases, for example, Cape Verde and Nigeria. The menace of these problems has drawn the attention of the World Bank which responded by supporting specific actions to mitigate poverty in the adjusting countries. The measures taken by the World Bank, among other things, include: (1) protection of the most vulnerable groups; (2) compensatory actions

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Foreign Aid and Self-Reliance in West Africa

Table 5.4 Poverty in West Africa: Dependent Population

COUNTRY

Number of Dependent Population per 100 Persons of Working Population 1980

1985

1990

BENIN

96

98

101

BURKINA FASO

88

90

95

CAPE VERDE

111

100

97

COTED'IVOIRE

102

105

105

GAMBIA

84

82

87

GHANA

91

98

99

GUINEA

-

90

95

80

87

87

GUINEA-BISSAU

91

93

92

MALI

95

98

99

MAURITANIA

88

88

92

NIGER

99

95

99

NIGERIA

102

99

100

SENEGAL

89

97

98

86

83

87

TOGO

91

100

105

TOTAL

93

94

91

| LIBERIA

1 SIERRA LEONE

Source: UNDP/World Bank, African Development Indicators (Washington, D.C.: UNDPAVorld Bank, 1992) p. 316.

and transitional arrangements; (3) measures to ensure that the poor effectively participates in the growth process; and (4) protection of the long-term interests of the population. These actions may be part of a structural adjustment loan or a sectoral adjustment loan, or have as their vehicle other projects and instruments.17 A number of West African countries have benefited from these actions. As far as the protection of vulnerable groups is concerned, the most vulnerable groups in the society are the poor generally, and women and children specifically. The key services they benefit from need to be protected from the possible adverse effects of budget cuts. This is done primarily through shielding public expenditure on key health, education, nutrition, and other basic welfare services. In Senegal in fiscal 1990-92, an education sector loan supported the

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147

reorientation of government expenditures and investments in the sector.18 Other countries supported during this period include Burkina Faso, Mali, and Niger. In compensatory actions or transitional arrangements, compensation may be necessary for individuals who face substantial costs in adjustment, for example, redundant civil servants can receive a severance pay. In some cases special privileges, for example food or subsidies, may be required or fixed-income individuals in the wake of devaluation. Under this heading, Guinea has a system of severance payments for laid-off public servants and has introduced bonuses for voluntary departures from the public sector. In Senegal, there is a retraining and rural resettlement scheme for laid-off civil servants and extension workers, while a comparable fund has been established for laid-off workers in the manufacturing sector. In Gambia, retraining and job counseling for laid-off civil servants is supplemented by a line of credit to fund new cooperative ventures. In Ghana, there is a system of severance payments for retrenched public sector workers and bonuses for voluntary departure from public service employment. Also, Mauritania has introduced food-for-work programs with better targeting of food distribution to the neediest groups and also has a system of temporary reassignment for banking sector employees to be laid off in the course of streamlining. As regards the participation of the poor in the growth process, it is important that opportunities be given to them to participate in the economic growth process through enhancing their access to assets and increasing returns to those assets already in their possession. Land reforms, resettlement schemes, special credit opportunities, and training programs are immediate types of interventions. In terms of specific interventions, Cote dTvoire has a smallholder credit scheme in the rubber sector, improved agricultural extension for small farmers, increased water supply connections to poverty areas, a rural roads upgrading and rehabilitation program, and an informal sector micro-credit scheme. Senegal has taken steps to ensure access for the landless to the ownership of lands becoming available under irrigation projects. In Ghana, the government is implementing a program of rehabilitation and construction of basic rural roads to facilitate access to markets from remote rural areas and to encourage the development of informal sector micro-market schemes. In Gambia, a small- and medium-enterprises (SME) operation has a special component focusing on the role of women. In Mauritania, a similar SME project provides a line of credit for artisans. In the same vein in Guinea, the government has devised informal sector micro-credit mechanisms (with NGOs), and there is an emphasis on the local administration of the renovation and construction of educational facilities. In addition, the World Bank, in conjunction with the UNDP, ADB, and other donors, have embarked on actions on Social Dimensions of Adjustment Project. The main goal here is the better comprehension of the social aspects of adjustment programs and monitoring of the shifts in socioeconomic conditions experienced by particular population groups. Also, the program aims to

148

Foreign Aid and Self-Reliance in West Africa

strengthen the institutional capacity of governments to integrate the social dimension into the design of future structural adjustment programs.19 In this respect, project activities have been initiated for twenty-five countries in sub-Saharan Africa. However, the fact that the West African subregion continues to experience serious economic difficulties suggests that structural adjustment programs, along with the other measures by the international financial institutions, organizations, and donors, have not been effective in arresting the recession in the subregion and promoting economic growth. Structural adjustment as a policy package needs to be reviewed and fine-tuned to take into full consideration the structures and market situation of West African countries. Among other things, it is obvious that the measures on trade liberalization cannot be meaningful unless diversification into the export of industrial products is immediately carried out by West African countries. For it is through this that West African countries could significantly stabilize and increase foreign exchange earnings. Also, the success of SAP in West Africa will hinge on improved managerial capability of West African governments. Efforts must be made to improve internal tax collection and the scarce funds available must be judiciously spent. While the response of the international community has been laudable with respect to the adjustment efforts of West African countries, it is obvious, however, that more cooperation is required for an authentic economic growth and development in the subregion. Additional flows of funds would be required for the implementation of projects and programs under structural adjustment programs. There should be an increase in foreign investments in response to the new more generous investment codes adopted by West African countries. But an important element that appears to have acquired more significance in the adjusting countries is the paucity of trained manpower. This was manifested in all sectors of West African economies and constitutes a major hiatus between policy and economic growth. HUMAN DEVELOPMENT

The promotion of economic development in West Africa requires in the first instance the effective promotion of human development. Human development has been defined as the process of enabling people to have wider choices. These choices include income, health, education, good physical environment, and freedom of action and expression. It stresses the need to develop human capabilities and how the capabilities are used, especially by people who can participate freely in social, political, and economic decision making and who can work productively for development.20 Like other developing countries, West African countries have, to some extent in recent years, improved their capabilities. In life expectancy and basic

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149

education, they have closed the gap between them and the industrially developed countries. However, in other areas the gaps are widening, particularly in higher education, technology, informatics and labor productivity. Since 1960 West African countries, like many other African countries, have had their infant mortality rate reduced by 37 percent, and life expectancy has increased from forty years to fifty-two years. Adult literacy increased by two-thirds between 1970 and 1985.21 But over half the population has no access to public health services. About two-thirds lack safe drinking water. Tropical diseases afflict a high proportion of the population, including sleeping sickness and malaria, which kills hundred of thousands of young children each year. Furthermore, in recent years AIDS has devastated many families. Urgent action is therefore needed in public health services. Besides, since 1980, the lack of job opportunities at home has led many of the better educated to emigrate in search of work. This has been very significant in the cases of Nigeria and Ghana, which have lost hundreds of highly specialized medical personnel and university professors to the industrially developed countries because of better remuneration. These cases have, to a large, extent constituted a major drain to the economy and a serious handicap to the effective promotion of economic growth and development. Given the importance of human development to overall economic growth and development, it is a primary issue that West African countries must urgently promote. The priority areas of the multidimensional problems of human development should be ascertained. The goals on these issues should be clearly defined and appropriate strategies for achieving them stipulated. While the specific needs and priorities of each country may differ, there is no doubt that it is imperative for all countries to consolidate the gains that they have made in human development in the 1970s through the 1990s if the goals of self-reliant development are to be ultimately attained. The modest gains here are in the area of education: primary, secondary and university, and health, both in the preventive and curative aspects. But special efforts are required to promote advanced skills in new technological frontiers. The East Asia industrial "Tigers'1 have widely demonstrated their relevance to economic growth and development. The way in which these objectives are achieved would, however, in the first instance depend on the priorities given to them in scheme of things and the availability of funds. Governments differ greatly in how much of their spending goes to social areas like nutrition, health, and education. For many countries in West Africa, the trend in social spending has been disturbing. For example, in the case of Burkina Faso, expenditure on education and health increased by 34.7 percent between 1973/75 and 1985/87. But a drastic decline was recorded for Liberia during the same period: 16.2 percent between 1973/75 and 1979/81 and -14.0 percent between 1979/81 and 1985/87.22 Many governments in the subregion were confronted in the 1980s with the urgent task of overcoming economic recession. The focus of most governments was more on the revival

150

Foreign Aid and Self-Reliance in West Africa

and promotion of growth in the agricultural and industrial sectors. But for some others experiencing or perceiving internal or external threat to security, expenditures on arms have been substantial. It was also clear that many countries' capacity to finance human development eroded considerably in the 1980s as they continued to experience decline in their foreign exchange earnings. At the same time considerable strain has been placed on the financing of human development because of the need to service external and internal debts. All of these problems will need to be resolved in order to increase expenditure on human development. While the need to mobilize internal resources is vital, the external resources represent a very useful source in the short run for many West African countries. The aid to the social sector for human development in West Africa will need to be increased. Aid social-sector ratios have fallen in recent years as far as many developing countries are concerned. For example, health, population, and education accounted for 24.5 percent of total bilateral aid to developing countries in 1979. However, this fell to 17.4 percent in 1989. Aid to the social sector has fallen as a result of the current general "aid fatigue." Aid donors are therefore likely to assist West African development more meaningfully if they reassess their aid priorities and commit themselves more to the support of human development. It is essentially through this that genuine self-reliant development could be attained in the short run in the subregion. At the same time however, it is equally imperative that West African governments steadily increase their budgetary allocations to human resource development. This may entail reductions in expenditures in other areas such as defense. The latter has, in recent years, turned out to be superfluous for many countries where there are no immediate threats to territorial sovereignty. At the same time the cost of military hardware has risen considerably, partly as a result of global inflation. The governments of West African countries should increase their commitments to the effective implementation of policies on human resource development without which genuine development could prove elusive. A not too distant question to human development is the issue of technological advancement in West Africa. Progress in this area hingesfirston human development, in particular, of broad based education and increased concentration in the sciences. It is an area in which the dreams and promises of West African countries are yet to be fulfilled. TECHNOLOGY

It is clear from the analysis in Chapter 4 that poor technological advancement constitutes a major bottleneck in the process of self-reliant development in West Africa. Technology has apparently negligible input into the process of development in West Africa. Also, there is a dearth of relevant policies and a deficiency in local technological culture. West African countries appear gener-

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151

ally to lack the prerequisites for technological advancements, in particular of the capacity to import, adapt, and improve on technology for local conditions. Today, there are various mechanisms for the transfer of technology to developing countries, namely: (1) Technology transfer through a general exchange of information; the traditional type of communication and information concerning technological data. (2) Technology transfer through trade; takes place through international trade. (3) Technology transfer through patents and licenses. (4) Technology transfer through direct investment; those of transnational enterprises. (5) Technology transfer through technical assistance. All these notwithstanding, it must be underscored that technology transfer through direct investment appears to be the most important. Technology flows to Africa in the 1980s did not make appreciable progress. Technological flows in the area of capital goods declined to US$18 billion in 1989 from US$23 billion in 1980. In the area of foreign direct investment, there was an increase to US$4.3 billion in 1989 from US$0.3 billion in 1980. Also, in technical cooperation, there was a rise from US$3.1 billion in 1980 to US$5.0 billion on 1989. But it is clear that Asia and Latin America continue to be the destination of most of the technological flows to developing countries, particularly in capital goods and foreign direct investment. For example, the flows to Asia rose to US$96 billion in 1989 from US$57 billion in 1980. Similarly, the flows in foreign direct investment rose from US$3.3 billion in 1980 to US$16.7 billion in 1989.23 Flows of foreign direct investment to developing Asia surged especially during the second half of the 1980s, by which time this region surpassed Latin America as the major recipient of foreign direct investment among developing countries. The main beneficiaries in recent years have been Singapore and Hong Kong and, more recently, Malaysia and Thailand, which, by the end of the decade, had joined the former two countries on the list of the ten largest host countries for such flows. The rapid growth in Asia, their concentration on manufacturing, good export performance, and their relatively undervalued currencies, coupled with a skilled and low-cost workforce, have acted as a powerful magnet for the attraction of foreign direct investment. On the contrary, in the case of Africa, the debt crisis and the deterioration in commodity markets weakened the region's ability to import technology. Throughout the 1980s, imports of capital goods declined in nominal terms. Foreign direct investment has been concentrated in a relatively small number of oil-exporting countries. Algeria, Cameroon, Egypt, Nigeria, and Tunisia absorbed over 90 percent of all capital inflows during the first half of the 1980s. But by 1989, only two countries, Egypt and Nigeria, accounted for 86 percent of such flows to the region. Foreign investment flows to nonoil sub-Saharan countries, many of which are least-developed countries, have remained below US$0.5 billion since 1981, despite the enactment of legislation favorable to investment. The least-developed countries continue to be unattractive. Commer-

752

Foreign Aid and Self-Reliance in West Africa

cial technology flows to them as a group, including those in West Africa, have remained unchanged during the decade.24 There are several problems associated with the transfer of technology to developing countries that are directly related to the conflicting interests of the foreign investors and the host countries. Although transnational enterprises differ in goal orientation, there are some generally valid primary goals that guide their operations. These are growth, security, and profit maximization. Thus, the prime motivation is commercial, and the foreign investor expects return from his or her investment.25 In this context, therefore, foreign investors attempt to apply as well as exploit the technological and commercial organizational know-how specific to their business to the greatest advantage. The technologies made available in the mother country and the know-how acquired there are transferred without significant modifications and thus without considerable additional costs to the subsidiaries in the developing countries. In this way, foreign investors gain a competitive edge vis-a-vis other enterprises, especially local firms. In effect, the efficiency potential tied to these products, production methods, and technical-organizational know-how, and transferred via direct investment, is oriented toward the socioeconomic requirements of the mother countries. To West African countries this form of technology is characterized by high capital intensity, high consumption of energy, heavy use of raw materials (partly with nonrenewable resources), and the replacement of labor by capital (mechanization, automation). West African countries, like other developing countries, have generally found themselves in weak bargaining positions in the negotiations on these issues. They have, in part, been handicapped by the lack of adequate knowledge concerning technological developments and the absence of adequate knowledge on the components that are frequently tied in a package in which the specific technological content is integrated.26 As opposed to the diminishing volume of technology transfer to developing countries in recent years, international technology markets have become more diversified and open. The forms of technology transfer more commonly applied and of the sources of supply have both been widened. This has been a significant development for developing countries, as it has increased the range of options available to technology-receiving firms and allowed them to assume a greater involvement in design construction and the operation of investment projects. The most obvious has been the trend toward nonequity or minority-ownership forms of technology transfer, as compared to that through majority-owned affiliates. These forms include joint ventures, licensing and know-how agreements, machinery imports, management contracts, leasing and countertrade arrangements involving technology transfer. This trend has been influenced by several factors. Firstly, the policy and legal measures adopted by host-country governments in the 1960s and early 1970s relating to foreign direct investment encouraged joint ventures and new forms of transfer of technology. Secondly,

Foreign Aid, Self-Reliance, and Economic Development

153

the relative importance of Japan and Western Europe, as compared with US-based, firms as suppliers of technology to developing countries has grown. The former have had a relatively greater propensity than the USfirmsto share ownership with local partners and to supply technology to nonaffiliated enterprises. Thirdly, it is likely that there has been a reaction by potential foreign investors to the uncertainty created by the economic slowdown in the developed market-economy countries and the high volatility of foreign exchange markets. A tendency to shift from long-term investment commitments to a greater reliance on other mechanisms for exploiting technological advantage in developing countries involving a shorter time perspective, was probably seen as a way of reducing financial exposure. Fourthly, there has been rapid internationalization of a variety of services ranging from advertising and accounting to car rentals, hotels, and fast foods. In these service activities, the common technology transfer arrangements involve management, marketing and technological assistance contracts, and, in particular, franchising and licensing of trademarks without any direct or only minor equity participation. Fifthly, since the early 1970s, there has been an emergence of small- and medium-sized enterprises from developed market-economy countries, as well as firms from developing countries that act as technology suppliers in international markets with a more diversified approach to technology transfer than in the past. What is important to underscore, however, is that technology flows to developing countries are influenced essentially by macroeconomic conditions, technological capabilities, and government policies. Government policy reforms aimed at revitalizing flows have not been successful. The financial constraints of West African countries represent a critical limitation. Besides, there is the question of absorptive capacity or technological dynamism; the ability of countries to absorb and efficiently deploy new technologies, adapt them to local conditions, improve upon them and ultimately create new knowledge. Many West African countries have yet to possess the technological dynamism for technological advancement. The most successful of the developing countries, such as the Republic of Korea, have promoted local equipment manufacture selectively, while importing large amounts of foreign equipment to retain export competitiveness. Some, like Argentina, Brazil, and India, have pursued stringent import-substitution in capital goods, thus creating a broad domestic capability in design and manufacture. The domestic production of capital goods has a special significance for technological dynamism because of the central role of machinery manufacture in generating and diffusing technology. Most sub-Saharan African countries have low domestic equipment manufacturing and rely largely on foreign capital goods. The low level of skills and technological ability hinders their ability to deploy their capital stocks efficiently. Also, their ability to import in recent years has been reduced because of economic shocks.

154

Foreign Aid and Self-Reliance in West Africa

The accumulation of physical capital in manufacturing cannot be efficient if it is not accompanied by the creation of new skills, the import of new technologies, and the launching of domestic technological effort. The skills needed for industrialization are diverse. At the lowest level, literacy helps the labor force to be productive and is an important determinant of labor productivity in very simple industries. Secondary education, and in particular vocational training, becomes increasingly important for shop-floor skills as industry grows more complex. Tertiary-level skills, especially in the science and engineering fields, are needed for all industries, but they increase sharply in significance with growing industrial complexity. In this connection, however, it is important to stress that the skill base must be effectively combined with adequate incentives, institutional development and linkage to world technologies in order to ensure national technological advancement.27 FOREIGN INVESTMENT

As already noted, foreign investment is a key issue that needs urgent attention in the effort to promote self-reliance and economic development in West Africa. Although self-reliance to many West African countries implies less and less dependence on the external world, nevertheless, the role of foreign investment from the start was seen as inevitable if development were to make any head way. The reservations of West African governments on unfettered foreign investments have, to a large extent, been based on the perceived massive repatriation of profits and the large-scale exploitation of labor as well as the plundering of natural resources without significant benefits to the host countries. However, given the fact that most countries in the subregion have not been able, to increase their levels of savings to appropriate levels for desired investments, and are not likely to be in the near future, the various governments have recognized and shown keen interests in foreign investment. The desire for increases in the inflow of foreign investments has further been strengthened with the economic decline of West African countries since the beginning of the 1980s. The commitment of West African governments to the encouragement of investment inflows was further illustrated in various forms of improved foreign investment codes that they introduced as part of the measures to complement the successful implementation of structural adjustment programs. In spite of all these measures, as already noted, there have not been significant increases in the inflow of foreign investments to West African countries in recent years. This suggests that there are important problems to be understood and resolved in order to ensure the contribution of foreign investments to economic development in the subregion. Let us now look at some of the important aspects of the new investment policies for some selected countries. In Ghana, after the overthrow of Busia, the government's policies discouraged foreign participation in the economy. Foreign debts were repudiated and

Foreign Aid, Self-Reliance, and Economic Development

155

majority ownership was acquired in foreign-owned timber and mining operations, including the Ashanti Goldfields. Business indigenization laws as well as exchange-rate distortions and delays in repatriation of capital virtually isolated Ghana from international capital flows. While Hilla Limann attempted to encourage foreign investment, net capital continue to flow outward during his brief leadership. Domestic investment was also discouraged by the nationalizations under Acheampong as well as by the difficulty in obtaining foreign exchange for investment goods. However, since 1983, the Ghana government has introduced a number of new measures with the objective of enhancing the inflow of foreign investment. Among these are the accelerated depreciation allowance, investment tax allowance of 7.5 percent to 10 percent, income tax rebate on tree crops and livestock activities, waiver of import duty on imported machinery, duty drawback, income tax rebate ranging from 25 percent to 75 percent, tax holiday up to five years, and 100 percent deductibility of research and development (R&D) expenditures.28 In Nigeria, up to 1988, the foreign investment policy had tended to encourage limited areas of activities for foreign investors. The Indigenization Decrees of 1972 and 1979 clearly defined the specific industries in which foreign investors could operate. In the wake of the oil boom in 1971, the Federal Military Government assumed that it was necessary to encourage the evolvement of local investors in order to ensure that Nigerians benefit substantially from the growth of the economy. However, after the adoption of the structural adjustment program in 1986, there were pressures from the private sector for a more liberal foreign investment policy. In response, the Nigerian government introduced a new industrial policy with major and increased incentives in 1989. In the context of the new industrial policy, companies granted pioneer status are entitled to tax holidays on corporate income for a period of three years in the first instance, and an extension of two years thereafter. During the period of exemption, the companies accorded pioneer status29 would be expected to seek and achieve an acceptable level of productivity and a reasonable degree of profitability.30 A unique feature of the pioneer status under the new industrial policy is that the aforementioned incentives apply to both public and private limited liability companies, whereas these applied only to government-owned companies in the past.31 The tax holiday years should provide reasonable returns on invested capital by the pioneer industries. Any company that carries out R&D activities in any given year would be entitled to a tax-deductible allowance that would amount to 120 percent of the cost of research. Where the R&D involves local raw materials, the company receives a higher tax relief of 140 percent of the amount expended.32 This incentive aims at the promotion of the development of locally sourced inputs and the creation of linkages between industry and other sectors of the economy.

156

Foreign Aid and Self-Reliance in West Africa

Further vital incentives to foreign investors took the form of customs concessions. Within this framework, import duties paid on raw materials used for producing export goods are to be repaid in full. The incentive is enhanced by the opportunities of investors to retain all export proceeds in a domiciliary account.33 In spite of these varying forms of incentives in several West African countries, foreign investments have not increased significantly to assist in the process of development. Table 5.5 illustrates the pattern of the flow of foreign direct investments to West Africa from 1980 to 1990. The table shows that there was a general decline in the inflow of foreign direct investment to the subregion except in 1989, when it rose to US$2,037 million compared to US$1,036 million in 1980. This was particularly due to an exceptional rise in foreign direct investment to Nigeria in that year. Foreign direct investment to West Africa fell to the lowest level in 1984 with a total inflow of US$327 million. It rose thereafter, reaching US$710 million in 1990, but which was far below the figure for 1980. The West African totals do not compare favorably well when viewed vis-a-vis the flows to North African countries during the same period. For the North African subregion, total inflows rose from a mere US$45 million in 1980 to US$ 1,528 million in 1986, but declined to US$ 1,167 million in 1988. The Arab Republic of Egypt and Libya were the principal beneficiaries of foreign direct investment in North Africa during this period.34 In the West African subregion, Benin, Cote dTvoire, Mauritania, Liberia, Niger, Sierra Leone, Senegal, and Togo suffered substantial reductions in foreign direct investment during this period. The reduction ranged between 50 and 70 percent for these countries by 1990 compared with the figures for 1980. In contrast, there appeared to be some little increase for a handful of countries, especially as illustrated in the cases of the Gambia and Mali. Although there was a drastic fall in the case of Ghana to US$2 million in 1983 and 1984 as against the three previous years when US$16 million each was invested, it picked up again in the following year and rose to US$15 million in 1989 and 1990. This figure was still less than what was received in 1980 but still shows improvement thanks to the introduction of economic reforms. Liberia, it would seem, had suffered a major setback since the escalation of its internal conflict in 1988. In Nigeria, the figure for 1990, US$588 million was far below US$740 million for 1980. The decline in foreign direct investment in Nigeria obviously has much to do with the economic and political uncertainties about the future of the country under the grip of military regimes. The general decline in foreign direct investment in West Africa in the 1980s was due to a number of factors that need immediate attention. Firstly, there is the problem of poor economic growth of most of the countries. In spite of structural adjustment programs, economic growth has not picked up in many West African countries. The high rate of inflation and the erratic rate of

Table 5.5 Foreign Direct Investment in West Africa, 1980-1990 USSMills., Current Prices and Exchange Rates 1988

I

1

1

1

1

2

2

1

3

6

.

.

.

.

3

0

1

2

47

38

22

29

71

88

56

78

48

2

.

.

1

2

6

1

1

15

9

16

16

2

2

6

4

5

5

15

15

0

0

0

0

5

5

7

10

11

_

.

.

_

.

.

.

0

1

.

. 6

BENIN

4

2

1

BURKINA FASO

0

2

2

CAPE VERDE

.

.

.

95

33

GAMBIA

.

GHANA

16

GUINEA

34

COTE DTVOIRE

1987

1985

1981

1983

1986

1984

1982

1980

COUNTRY

1989

1990

1

1

2

2

2

2

LIBERIA

. .

_ . .

35

49

36

15

17

39

MALI

2

4

2

3

10

3

8

6

1

15

MAURITANIA

27

12

15

I

9

7

3

1

1

3

7

NIGER

44

7

25

0

1

10

.

.

.

.

740

546

433

344

200

478

167

603

377

1882

588

13

20

10

36

27

19

13

3

0

10

8

23

5

3

_

8

2037

710

GUINEA-BISSAU

NIGERIA SENEGAL SIERRA LEONE

19

8

5

2

6

31

140

39

TOGO

42

10

16

2

10

17

7

7

1036

662

607

480

327

619

445

807

TOTAL

474

Note: - = Not available. Source: UNDPAVorld Bank, African Development Indicators (Washington. D.C.: UNDPAVorld Bank. 1992), p. 70.

158

Foreign Aid and Self-Reliance in West Africa

exchange of local currencies were sources of worry for foreign investors. Foreign investors have been generally reluctant to increase their investments as the prospects for economic growth in the near future appear not to be bright. Internal demand for production can only be enhanced if steady economic growth is ensured. Economic growth would enhance demand capacity for locally produced goods. Besides, the continuous fall in the rate of exchange of local currencies for some countries, for example Ghana and Nigeria, represent a serious disincentive to foreign investors. The margin of profits and dividends is significantly eroded with the fall in exchange rates. It is therefore important that West African governments should seriously address the question of stable exchange rates. This is even more important especially in the francophone countries of West Africa that devalued the CFA by 50 percent in January 1994. The prospects of foreign investment in these countries depend much on the extent to which they could maintain a stable exchange rate. Moreover, it is important to state that the foreign investment codes of most countries will still need to address further other areas of incentives for foreign investors without compromising national interests. For example, export-free zones should be created in many areas of West African countries to encourage foreign investors. This has been done in Indonesia, Malaysia, and Thailand, to mention a few. For example, in Malaysia there are eight export-processing zones located mainly along the west coast that offer tenants tariff assistance. Besides, West African countries should, like the Southeast Asia countries, provide capital incentives to foreign investors. This could be through the provision of infrastructures to support large projects. All these are very important in order to lure foreign investors into the subregion. International comparison of incentives tends to direct foreign investors to countries where better incentives would enhance higher profits. FOREIGN DEBT

In the short run, the attainment of self-reliant development in West Africa would much depend on the extent to which solutions are found to the problems of foreign debt. Many West African countries have the problems of domestic debt. Nevertheless, foreign debt has, in the 1980s, been a major constraint to the promotion of development in spite of several national and international efforts. Table 5.6 illustrates the extent of external debt of West African countries in 1980 and 1989. The numbers show that the external debt of the subregion rose from US$24.3 billion in 1980 to US$70.2 billion in 1989. A substantial part of the increase has occurred in the area of multilateral borrowing. The concessional multilateral assistance for the subregion rose from US$1.9 billionin 1980 to US$7.5 billion in 1989. The nonconcessional rose to US$7.7 billion in 1989

Table 5.6 The Structure of External Debt of West African Countries USSMills., Current Prices and Exchange Rates

Private

Multilateral

Bilateral

Total

COUNTRY Concessional 1980

1989

Nonconcessional 1980

1989

Concessional 1980

1989

Nonconcessional 1980

Guaranteed

Other 1989

1989

1989

1980

116

285

75

121

417

1178

1980

1989

1980

BENIN

82

256

24

74

100

404

20

38

BURKINA FASO

89

101

30

18

150

464

9

67

8

34

47

72

333

756

3

34

0

10

17

67

0

13

0

3

0

3

20

130

CAPE VERDE

351

827

355

2046

160

206

428

2315

1556

600

2997

9416

5847

GAMBIA

32

67

0

19

45

188

13

30

16

6

31

31

137

GHANA

624

549

60

72

234

1615

150

627

115

172

131

45

1314

3080

GUINEA

598

905

208

406

93

523

72

100

163

63

83

178

1117

2175

56

124

5

74

29

193

I

16

34

25

7

26

132

458

LIBERIA

179

371

50

109

73

200

147

522

57

65

180

494

686

1761

MALI

453

1231

8

41

194

762

19

55

35

13

24

54

733

2156

MAURITANIA

404

1002

54

194

135

445

52

163

120

38

79

167

844

42

140

70

289

130

594

29

86

60

1

532

468

863

COTE D'lVOIRE

GUINEA-BISSAU

NIGER

15410

341

2009 1578

NIGERIA

413

454

21

11630

131

111

440

3057

380

10342

7549

7238

8934

32832

SENEGAL

221

1376

169

752

232

1090

166

423

327

135

353

364

1468

4140

SIERRA LEONE

103

128

42

122

71

190

50

87

110

88

53

440

429

1055

TOGO

155

101

210

294

118

488

33

87

307

221

201

1044

1186

TOTAL

3805

7666

1206

16150

1912

7540

1629

7686

3404

11867

12362

19318

24318

70245

AFRICA

23757

47508

12182

56615

7974

24976

7360

27003

23324

36495

34562

57560

109159

250157

15

Note: - = Not available. Source: UNDPAVorld Bank, African Development Indicators (Washington, D C : UNDPAVorld Bank, 1992), p. 160.

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Foreign Aid and Self-Reliance in West Africa

from US$1.6 billion in 1980, with far-reaching consequences for economic growth and development. In the bilateral area, there was a substantial increase in the nonconcessional aspect: from US$1.2 billion in 1980 to US$16.1 billion in 1989. Also, the concessional bilateral debt more than doubled during the decade. But private external debts presented major difficulties. Guaranteed private debt increased fourfold during the period, while other private debts had a leap of about US$7 billion. Thus, the critical problem areas in external debt by the end of the 1980s were bilateral nonconcessional and all forms of multilateral and private external debts. However, what has been important to note is that the total West African debt does not show the difference among countries, as may be illustrated in the cases of those countries most seriously affected. The countries in this category include Benin, Burkina Faso, Cape Verde, Cote dTvoire, Ghana, Guinea, Guinea-Bissau, Nigeria, Senegal, and Sierra Leone. For most of these countries, the increases in foreign debt has occurred essentially at the multilateral and private levels. As far as the West African countries are concerned, the critical problem in external debt has been the debt service ratio. Debt servicing as a proportion of export earning rose to very high levels toward the end of the 1980s. For the subregion as a whole, this was 38 percent in 1989. However, many countries, as illustrated in Table 5.7, are above this average. The cases of Cote dTvoire, Guinea-Bissau, Niger, and Nigeria are very illustrative. The release of this proportion of foreign exchange earnings to debt servicing reduces, substantially, the amount of funds available for development purposes. Such proportions cannot be sustained if these countries are to attain self-reliant development in the short run. Several reasons have been adduced for the phenomenal growth of African countries' external debt. Of these, however, the most prominent include the expanded access to the sources of lending and the second oil shock in the 1980s. After the 1972-77 oil shock, the international banking system was in the position to recycle the huge OPEC surpluses.35 Thus, the Euromarket became an important source of financing for a number of governments that had never borrowed in it before. For example, Senegal, Togo, and Liberia; only Cote dTvoire had used the Euromarkets previously, but for much smaller amounts.36 Major Euromarket borrowings were also undertaken by private entities, primarily mining companies, as in Guinea and Niger. Although certain financial credits were used for general budgetary support (for example, Liberia in 1977), most commercial bank lending in the 1970s was directly linked to major public projects. For project financing during this period, the distinctions between bank, supplier, and other credits are not easily made, as banks, suppliers, and official export promotion agencies began putting together more coordinated project packages. Suppliers' creditors often extended beyond the traditional small individual credits into large credits with the supplier acting as financial intermediary. Since the demand in the industrialized

Table 5.7 External Debt and Debt Service Ratios of West African Countries, 1989 USSMills., Current Prices and Exchange Rates

Country

Debt-GDP Ratio Concessional

Nonconcessional

Total External Debt/Capital, US$

BENIN

39

31

264

BURKINA FASO

22

7

CAPE VERDE

36

10

COTE D'lVOIRE

11

154

1370

GAMBIA

115

39

415

GHANA

41

17

GUINEA

52

27

GUINEA-BISSAU

187

83

.

.

LIBERIA

Percentage of Debt Disbursed

Debt-Service Export Ratio

Debt-Export Ratio Concessional

Nonconcessional

Ex ante

Ex post

73

199

156

27

6

89

60

211

71

21

13

369

69

150

43

16

8

93

33

457

78

41

71

152

52

11

10

220

71

243

103

27

49

403

71

192

101

36

15

487

69

1229

547

105

32

731

97

.

.

.

.

MALI

96

8

270

79

577

47

13

18

MAURITANIA

144

56

1078

78

297

116

38

19

NIGER

36

41

219

81

199

229

49

31

NIGERIA

2

109

298

90

7

283

72

21

SENEGAL

53

36

592

82

196

133

30

28

SIERRA LEONE

34

78

269

82

263

610

31

3

TOGO

44

45

351

84

120

122

13

17

TOTAL

61

49

464

78

271

205

38

21

AFRICA

27

65

446

84

104

253

48

Note: - = Not available. Source: UNDPAVorld Bank, African Development Indicators (Washington, D C : UNDPAVorld Bank, 1992), p. 163.

-

162

Foreign Aid and Self-Reliance in West Africa

countries was slack for many of the suppliers' products, such financing remained readily available throughout the 1970s. Thus, from 1972 to 1979 suppliers' credits increased at an annual rate of 19 percent to the African continent.37 The export credit agencies played a large role in the debt evolution. The majority of export credit was either directly extended through official bilateral agencies or officially guaranteed by export credit agencies, where the latter can be converted to official credit in the event of arrears or rescheduling.38 Also, most of the nonconcessional credit from the DAC countries can be assumed to be export-related. Much of the external borrowing went to finance large public investment projects that spanned the range of economic efficiency. Nigeria, in particular, engaged in massive public expenditure and investment programs. There were a number of examples of public investments in nonproduction categories whose external financing was burdensome. Large-scale commercial borrowing was used tofinanceconference centers, administrative buildings, new capitals, and university centers. In the "productive" sectors, many of the externallyfinancedprojects, proved to be economically unviable. Ill-conceived projects include luxury hotels, oil and sugar refineries, and steel mills. Certain major agricultural projects proved inviable because of weak administrative framework. World price trends have also weakened the viability of many projects in both the agricultural and mining sectors. Ambitious infrastructural projects were often externally financed at terms much shorter than the profile of returns. These include hydroelectric projects, airports, and highways. New global developments in the early 1980s also contributed significantly to the aggravation of the foreign debt crisis in West Africa. The oil price increase in 1979-80 contributed to the sharp drop in the terms of trade for oil importers. With limited short-term flexibility in the volume of imports, the second oil shock sharply increased their oil import bill and their current accounts deficits. On the other hand, the expectations of continued oil price strength allowed oil exporters, especially Nigeria, to continue their ambitious investment programs, and their external debt grew as a result. Unlike the first oil shock when export commodity price booms offset some of the balance-of-payments difficulties of the oil importers of the subregion, the second shock was not accompanied by any such offset. Rather, the world recession beginning from the late 1970s and extending into the early 1980s contributed to a decline in export earnings. The terms of trade for oil importers in West Africa fell by an average of 11 percent between 1980 and 1982. The current account pressures of these purely exogenous factors led to the expansion of external debt in the early 1980s. International real interest rates rose from low levels in the 1970s to over 8 percent in the early 1980s. For the whole of sub-Saharan Africa, all loans rose

Foreign Aid, Self-Reliance, and Economic Development

163

from -7 percent to over 6 percent in 1982 and 1983; for nonconcessional loans from -5 percent in 1979 to 10 percent in 1982.39 The high-interest impact was felt immediately through loans carrying variable interest rates, primarily international bank lending, and through short-term loans. The countries mainly affected were Niger, Liberia, Senegal, and Cote dTvoire. As the adverse impact of the external debt crisis became more acute in the mid-1980s, African countries and the international community have shown considerable concern to find solutions in order to ensure economic growth and development. At the United Nations, for example, discussions at the General Assembly have led to international impulses for new policy departures in several international fora. The international community has sought to alleviate the immediate debt-servicing burden of countries in debt crisis and reduce the "debt overhang" that impedes a return to normal access to international finance in the three principal areas of African debt, namely, commercial debt, bilateral official debt and multilateral debt. In the area of commercial debt, the attempt has largely been to reduce the burden of interest payments to release resources for debtor African countries. In this case, each debtor African country has been dealt with separately, depending on its economic situation and the disposition of the creditor banks. Generally, commercial banks select from menus that have employed three main categories of options (not all are necessarily available in each case): debt reduction, debt-service reduction, and new loans. Debt reduction can involve buybacks at discounts or swaps of debt for bonds with a lower face value than the original loans (discount bonds). In both cases, the discounts largely reflect the market value of the debt at the time of negotiation, as indicated by the discount prevailing in the secondary market for such debt. Debt-service reduction, normally in the form of interest-reduction bonds, has been offered in three ways. The first is below-market fixed-rate bonds. The second is the so-called "step-down/step-up" arrangements, where a very low interest rate is paid in the first year, but it gradually increases in a prearranged schedule. The third is temporary interest-reduction bonds, where interest rates start from a very low level and rise over several years, followed by payment of a variable interest rate calculated as a floating international base rate plus a fixed margin. Finally, new loans (called the "new-money" option) can be offered with or without conversion bonds. The discount bonds and par bonds were generally made more attractive to the creditors with the purchase by the debtor of collateral in the form of zero-coupon US Treasury securities that would mature on the same day as the debtor-country bond (equivalent securities from other countries could be used to cover nondollar bonds). However, in order to assist low-income countries, additional international measures are often needed. For example, the World Bank established a Debt Reduction Facility for low-income countries in 1989, set to last until June 1992,

164

Foreign Aid and Self-Reliance in West Africa

to which the bank contributed US$100 million. Nevertheless, the initial utilization of the facility was slow, owing to difficulties faced by the debtor countries in pursuing their structural adjustment programs and in concluding negotiations with the commercial banks. Thus, by March 1992, when the life of the facility was extended through June 1994, only two countries had carried out buyback operations (Niger in March). Nevertheless, the facility was broadened at the time of the extension to cover, for example, consultation fees to prepare for the debt-reduction operations and to cover short-term debt. Since then, Seirra Leone and other African countries, for example Sao Tome and Principe and Zambia, have engaged in the process of buyback operations under the facility.40 Apart from these, debt conversions have also taken place through many forms of swaps of debt for equity in a local enterprise or on a smaller scale for local government commitments to environmental or other expenditures. Also, debtor countries have bought back their debt on the secondary market.41 International debt reduction strategies at both bilateral and multilateral levels have had limited effect on the debt growth and burden of West African countries. For example, the Trinidad Terms (proposed by the governments of the United Kingdom of Great Britain and Northern Ireland) would cancel two-thirds of the entire stock of eligible debt. The remainder would be rescheduled at market rates over twenty-five years with afive-yeargrace period. An assessment of the impact of alternative rescheduling terms may be carried out by measuring the reduction in the present value of debt-service obligations they are expected to produce. This measure captures the outright debt forgiveness and the larger degree of concessionality of rescheduled debt resulting from lower interest charges. The impact is expressed by the ratio of the present value of debt exports. When simulations were made to assess the impact of alternative terms on the severely indebted low-income countries, it was found that even after the application of the Trinidad Terms and assuming the forgiveness of all bilateral concessional ODA loans, the debt-to-export ratios remain unsustainable for a number of African countries.42 However, the summit meeting of the seven major industrialized countries held in Tokyo, Japan, in July 1993 could not reach agreement on the implementation of these terms. Hence, the heads of state and government urged the Paris Club to consider extending further debt relief to the low-income heavily indebted countries, noting, in particular, the matter of the stock of debt. The debt owed to multilateral financial institutions is the only category of developing-country debt that has no formal framework of restructuring. Indeed, any rescheduling of debt-servicing obligations is expressly forbidden. Some countries became unable to make their payments and have accumulated arrears to these institutions, particularly to the IMF. As of the end of January 1993, US$4.6 billion in debt-service obligations owed to the IMF by ten countries were overdue six months or more.

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165

Thus, it is clear that the external debt of West African countries still constitutes a major impediment to their process of economic growth and development. These countries are denied the resources that are essential for the revamping of their economies while they are compelled to use them for debt-servicing. West African economies continue to face considerable difficulties in the sector as a result of the unfavorable international economic environment. The decline in the prices of commodities in the 1970s and 1980s continues to undermine severely the possibilities for higher earnings of foreign exchange for economic development. Also, as already noted, foreign investments have declined over the years in spite of their economic reforms and the introduction of more generous foreign investment incentives. Furthermore, West African countries have, in the 1980s, been experiencing a decline in the real value of foreign aid while doubts are being expressed by the developed donor countries about the effectiveness of additional financial aid. However, it is very obvious that a more imaginative approach to the question of external debt would, in a long way, ease the difficulties of the debt-distressed West African countries. This will call for an intensification of efforts at both national and international levels. The debtor West African countries will need to ensure that their present economic reforms are reviewed while taking adequate care to overcome the undesirable adverse social effects generated by them. The industrial and agricultural sectors must be rejuvenated and growth promoted. They must also make more efforts to ensure that higher levels of industrialization are attained while they engage in the process of the diversification of commodity exports. At the international level, there will be the need to ensure better prices for the commodities of West African countries in order to enable them to have increases in their foreign exchange earnings. These taken together with increases in foreign investments would enable West African debtor countries to build up the capacity within their economies to address, on a long-term basis, the question of external debt. Furthermore, at the international level, there will be a need for the adoption of a more effective strategy to cope with the immediate adverse impacts of external debt on African countries. A creditor and debtor conference may provide an appropriate forum to spell out clearly the formula to apply for the unloading of the commercial bank debts, bilateral debts, and multilateral debts. As far as the commercial debts are concerned, better arrangements should be devised not only for the reduction of interest payments but for a significant reduction in the capital without jeopardizing the interest of the commercial banks. On the bilateral official debts, this calls for more political will on the part of the creditor countries. The low-income, heavily indebted West African countries would require the write-off of a substantial part of their external debt in order to be able to promote economic growth and development. Furthermore, international financial institutions should ease the external debt of West African

166

Foreign Aid and Self-Reliance in West Africa

countries with the adoption of better terms for interest payments and increased inflow of concessional finance. COMMODITY In order to promote authentic self-reliance and economic development in West Africa, it is imperative that solutions should be found to the problems of commodity. As already noted in Chapter 4, commodity exports such as cocoa, coffee, cotton timber, bauxite, oil, iron ore, groundnut, and rubber, to mention a few, account for over 85 percent of total exports. In effect, they constitute the main source of foreign exchange earnings. Over the years West African countries, like other African countries, have experienced a marked decline in earnings. For example, leaving aside fuels, commodities earned US$18 billion for Africa in international markets in 1988. This was 26 percent lower in real terms than in 1980 and 35 percent lower than in 1970.43 There are many reasons for the decline in export earnings of African countries. At the national level, the causes are to be found essentially in low productivity and uncompetitive production. There are also the limitations imposed by ill-advised government policies, the paucity of agricultural scientists and extension officers, and the limited knowledge of international markets. Other causes are lack of investment in transport and other infrastructures necessary for effective competitive production. Given all of these causes, it has been difficult for West African countries to ensure an increase in output of export commodity. Beyond these however, the problems of commodity exports of West African countries have been more profound at the international level. The prices for most primary commodities of the subregion have fared poorly compared with those for manufactured goods. The terms of trade for nonfuel commodities with respect to manufactured goods have fluctuated and have on the whole declined since 1960; they have been lower than at any time since 1960 from 1987 to 1990.44 At various times in the past, several International Commodity Agreements (ICAs) functioned satisfactorily and played a useful stabilizing role. However, because of the inadequacies of the structure of many of these agreements, the lack of adequate support by participants, and the lack of financial support, the price mechanism has not been satisfactory: it has been characterized by severe imbalances between supply and demand. Thus, there is an urgent need for commodity cooperation between consumers and producers regionally and globally. All these problems should be more imaginatively approached in order to promote self-reliance and economic development in West Africa. Among other things, West African governments should elaborate on a commodity strategy within overall process of economic development. This should take into account

Foreign Aid, Self-Reliance, and Economic Development

167

the macroeconomic environment, resource needs, requirements for human resources development, and research and technological development. In addition, their macroeconomic policies and social policies (notably exchange rate, taxation, price, and other policies affecting producer incentives) should be geared toward giving more impetus to the commodity sector. These policies should, as a matter of necessity, be backed up by improved administration. Also, along with these, it is important that West African governments should establish within the commodity policy package measures aimed at improving the efficiency of the marketing chain. Although production is the essential starting point, marketing is nevertheless the key to competitiveness. It should therefore be central in the commodity policy package. In order to tackle these problems effectively, there will be a need for diversification into nontraditional exports to world and African markets. These could include new commodity or commodity-related products such as minor crops, fisheries, and forestry products; and in some cases labor-intensive manufactures. The world market may not continue to absorb increased expansion of traditional exports. If the diversification program is successful, this would reduce the vulnerability of West African economies to the instability of export receipts and extend the commodity sector's economic links to other parts of the economy. At the subregional level, West African governments should cooperate in research and education, both of which are vital for the future development of the commodity sector. Such cooperation should be intensified within the framework of the ECOWAS. The costs of the development are likely to be lower for each country in the context of regional economic integration arrangement. In the face of difficult and competitive international economic environment, there is a strong need for greater commodity cooperation between consumers and producers. It is important that agreed price levels should be market-related and compatible with dynamic market conditions. Provisions should be included for adjustment to changes in market situations. Where possible, such provisions would be advantageous if they were automatic or semiautomatic. In this connection therefore, international efforts should be increased to ensure the establishment or reestablishment of price stabilizing international commodity agreements for major West African commodities especially coffee and cocoa. The barriers to some of West Africa's exports are significant and in many cases constitute major disincentives to reform and diversification in the subregion. Besides, as West African countries grow, expand the range of the products they export, and generally diversify their exports, limits to market access could become more inhibiting than they are for traditional commodities. It is therefore important that the industrialized countries should, among other things, accept as afirmlonger-term objective the abolition of quantitative limits of commodi-

768

Foreign Aid and Self-Reliance in West Africa

ties important to West Africa, and in the meantime commit themselves to liberalizing such controls substantially. Also, other barriers consist of administrative protective measures that reduce substantially the gains that West African countries might otherwise obtain from the preferential arrangements under the Lome Convention. Restrictive rules of origin measures, and voluntary export restraints as well as antidumping measures have affected West African exports such as textiles. There is therefore a need for the review of administrative protection and economic organizations in the developed countries to ensure that this does not hinder diversification efforts in the subregion. DROUGHT Climate conditions are strong determinants of the future course of self-reliant development in the subregion. Many of the countries in West Africa lie in the Sudano-Sahelian region, which is constantly affected by drought, desiccation, and dryland degradation. Of all these however, the impact of drought appears to pose a major threat to economic development. There have been two distinct droughts since 1960. The nadir of the first drought was in 1970. The second drought, which was more severe, was in 1984. The recovery between these droughts never reached the rainfalls of the 1950s of 1960s. The period since 1984 has witnessed a steady recovery in rainfalls in most areas until the late 1980s when it ebbed. The recovery was somewhat modest in Burkina Faso, Mali, and Niger. The effects of these droughts have been devastating on cultivated crop yields and pastoral production.45 Although the great Sahelian drought started in the western Sahel in 1970, the first major response at the subregional level did not occur until 1973 through the establishment of the Permanent Interstate Committee for Drought Control in the Sahel or Commite Permanent Inter-Etats de Lutte contre la Secheresse dans le Sahel (CILSS). With its headquarters in Ouagadougou, its original members besides Burkina Faso were Chad, Mali, Mauritania, Niger, and Senegal. Cape Verde and Gambia became members in 1977, and Guinea-Bissau in 1986. One of the main objectives of CILSS is to achieve subregional food self-sufficiency by the year 2000. It organizes many subregional forums on drought and acts as an animator for subregional projects on efficient woodburning stoves, butane promotion, pest control, seed banks, and soil erosion control, to mention a few. In 1976, major aid donors established, under the OECD auspices, the Club des Amis du Sahel, committed to supporting CILSS's objective through the mobilization and coordination of aid to the Sahel. Both agreed that their joint goal should be in "food self-sufficiency and ecological equilibrium." There would be an acceleration of the growth in the production of both the traditional food crops and livestock to a rate higher than the rate of population

Foreign Aid, Self-Reliance, and Economic Development

169

growth, achieving a much higher rate of growth in rice production to meet the requirements of increasing urban populations and slowing the migration of people from the rural to the urban areas. Moreover, it was envisaged that the intensification of agricultural and rural development should be accomplished while halting the erosion of the fragile Sahelian soils and the deforestation resulting largely from overgrazing and the large demand for fuel in the form of wood. It is worth noting that the studies and policy dialogues by the CILSS and Club des Amis du Sahel secretariats and by individual donors and international organizations have elaborated the principles and functional elements of a more systematic effort to achieve the food and ecological objectives. However, this subregional consultative arrangement was not designed to address all aspects of Sahelian nations' policies and operational systems affecting food supply and nutrition in their individual country settings, nor was it to coordinate all aid at the country level. Consequently, from the outset, there was a gap between the CILSS-Club des Amis du Sahel aspirations and the means to achieve it.46 By 1982, more than one-third of the aid was allocated to the operation and maintenance of the economies, institutions, and facilities of the Sahel; some 9 percent was allocated to rainfall crop projects and 1.5 percent to forestry. As far as regional organizations are concerned it is important to state that they have shown keen interests in the drought problems of the West African countries. Both the Organization of African Unity (OAU) and the United Nations Economic Commission for Africa (UNECA) have worked closely with the Sudano-Sahelian countries as a whole, and CILSS and the United Nations Sudano-Sahelian Office (UNSO) on drought and desertification problems in the subregion. Both played leading role in the implementation and monitoring of the United Nations Program of Action for African Economic Recovery and Development (UNPAAERD), especially the chapter on desertification and drought.47 In the same vein both are currently cooperating in the negotiations of an international convention on drought and desertification as recommended from the Rio de Janeiro Agenda 21. At the national level, drought strategies include monitoring, food storage, drought contingency planning, and improved infrastructure. However, these are still not adequate when viewed against the magnitude of the problems. For example, poor infrastructure constituted a major barrier to solving drought difficulties. The roads that could take heavy vehicles were insufficient. Roads were impassable in the wet seasons. There was insufficient capacity at the ports. There were insufficient storage facilities, poor boat transport in the Cape Verde Islands, and poor maintenance and spare-parts services for vehicles, to mention just a few. Thus, while difficulties still prevail in the efforts to address the question of drought at both international and national levels, the bouts of drought continue to pose serious problems to self-reliance and the development of the Sahelian

170

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countries in West Africa. Moreover, the difficulties are more disturbing the more the growth rate of the population continues to outstrip the growth rate of food production. Consequently, there should be a more comprehensive design and long-term pursuit of coherent national food strategies to address training, technical research and institutions, infrastructure, and finance. Also, there is a growing recognition that the original concept of the Club des Amis du Sahel needs to be reaffirmed by donors and the Sahelian governments should reaffirm their commitment to the preference for long-term development through which a lasting solution could be provided on the main problems of drought in the subregion.48 REGIONALISM

It is important to state that the poor advancement in regional economic integration constitutes one of the weakest factors in the process of economic development in West Africa. Regionalism on the whole has suffered considerably for several reasons. The difficulties of regionalism as already noted ranged from competition for the same resources by different economic groupings to a number of historical, political, and socioeconomic limitations. However, as it is today, the ECOWAS remains one of the foremost integration arrangements for collective self-reliance in the subregion. But it can only fulfil this purpose through effective consolidation. The nineteen years of existence of the ECOWAS has, in spite of a stated gradualist approach, indicated that there has been very little commitment to the strengthening of the community. The member states will need to pay special attention to the question of implementation community decisions among the several factors militating against the progress of the community. Decisions of the Authority of the Heads of State and Government and of the Council of Ministers constitute the legal bases for the implementation of the provisions of the treaty. They also form the structure for additional measures to enable the ECOWAS to cope with new political, economic, and social demands as integration proceeds. The salient aspects of the ECOWAS treaty cover the common market provisions. These consist of trade liberalization, common external tariffs, the harmonization offiscalincentives, and monetary integration. Regional integrators have, from the outset in 1975, been very selective as to which of these provisions should be implemented given the economic situation of the member states and the need to build the necessary momentum into the process of integration. Within this context, decisions and protocols have been adopted at different times, notably those on the free movement of persons, trade liberalization, nonaggression, and a mutual defence pact, to mention a few. However, these have not been promptly implemented at the national level with the result that the protocols do not have the subregional development impact that they are

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intended to have. In other words, regional economic integration remains weakened and directionless. The former executive secretary of the community, Abass Bundu, effectively underscored this when he said, "with ECOWAS, certain difficulties have been encountered over the years which adversely affect the regional integration process. Among these problems are the slow rate of implementation of Community Acts and Decisions, delays in reacting to requests for information from Member States, [and] poor attendance at ECOWAS meetings."49 In other words, this is an important bottleneck that regional integrators should pay due attention to in order to ensure meaningful integration in the ECOWAS. Several problems are associated with the poor implementation of community acts and decisions. The most prominent of this has been the slow legislative procedures in the member states. In the member states with democratic institutional arrangements, the review and adoption of acts and decisions by the legal department and both arms of parliament entail a very long process because of their cumbersome administrative process. In order to overcome this limitation, it is important that the heads of state of the member states give deadlines to their administrative organs for the ratification of adopted acts and decisions. Besides, improved performance of these administrative organs would also require improved administration, both of manpower and in administrative techniques. Secondly, there are difficulties at the level of implementation. The various governmental departments that are to supervise the implementation of the acts and decisions of the ECOWAS are not fully geared toward the ideals of the community. There are problems of inadequate staff without proper knowledge of the workings of the community. There is also a gap in the dissemination of ECOWAS information—the integrative measures to the general public, especially to the private sector. Also, information to other government departments not directly connected with the negotiation of acts and decisions are in some cases nonexistent. But this is very important given the fact that economic integration is all-embracing in the process of economic growth and development. The third important reason for the slow implementation of acts and decisions is to be found in their short-term economic implications. In situations in which Acts and Decisions are perceived to lead to the loss of revenue and erosion of sovereignty, as in the trade liberalization program and common external tariffs, the member states have been reluctant at implementation, especially when complementary compensatory measures are calculated as inadequate. This aspect is significant to many countries because duties on imports are important sources of state revenue. Thus, while acknowledging the relevance of other impeding factors, it is assumed that the implementation of acts and decisions should be given the highest priority by the member states. It is basically through this that the

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ECOWAS could be effectively related to self-reliance and economic development in the subregion. Regional economic integration without prompt and effective implementation of acts and decisions would at best stagnate. SUSTAINABLE DEVELOPMENT

"Sustainable development," yet to acquire a universally accepted definition, poses some challenges and opportunities to the overall development in West Africa. The major challenge for the world community in the 1990s and beyond is the promotion of sustainable development. With the adoption of Agenda 21 in Rio de Janeiro, the international community agreed that global development in our time should be environmentally sustainable.50 In this context, the economic policies of individual countries and international economic relations have vital roles to play. To fully ensure this, national economic policies should be effectively supported by an appropriate international economic policy on the environment. Within this thinking, the three broad issue areas in sustainable development therefore related to: (1) social and economic dimensions, (2) conservation and management of resources for development, and (3) strengthening the role of major groups.51 Thus, the global program on sustainable development is all-embracing, dealing with all aspects of development for both developed and developing countries. For West African countries, this has widened the scope and dimensions in the concept of self-reliance for development with far-reaching implications on financial resources. To some extent, the program is complementary in some aspects to some initiatives already taken at the subregional level on development issues especially in the areas of desertification and drought and the dumping of toxic waste. The program is also useful as it stresses global partnership and cooperation in external issues such as foreign trade, external financial assistance, and the transfer of technology to developing countries. For example, the several issues to be tackled under the conservation and management of resources for development would require enormous funds even though the cooperation of the international community is envisaged. Agreement was reached on the Convention on Desertification and Drought in early 1995. Furthermore, the Global Environmental Facility (GEF) has been reorganized to act as an important catalyst in the integration of global environmental concerns into national development goals.52 The GEF draws collaboratively on the experience and expertise of three existing international agencies: the UNEP, the UNDP, and the World Bank. The UNEP provides the Secretariat with the Scientific and Technical Advisory Panel, offers environmental expertise for the facility, and supports research and information dissemination. The UNDP is responsible for technical, operational, and capacity-building activities and is charged with managing the Small Grants

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Program for NGOs. The World Bank on its part chairs and administers the pilot facility, manages the trust fund, and is responsible for investment projects.53 However, in view of the fact that the GEF was not originally designed for Agenda 21 and again because of its pilot nature, questions have been asked on how it could effectively play a catalytic role in integrating global environmental considerations into the regular development assistance programs of bilateral and multilateral agencies. In West Africa, poverty is a complex multidimensional problem with origins in both national and international domains. The main objectives of the program at the national level, in this regard, include: (1) the opportunity to earn a sustainable livelihood; (2) the implementation of policies and strategies that promote adequate levels of funding and focus on integrated human development policies; (3) the development for all poverty-stricken areas integrated strategies and programs of sound and sustainable management of the environment, resource mobilization, poverty eradication and alleviation, employment, and income; and (4) the creation of a focus in national development plans and budgets on investment in human capital, with special policies and programs directed at rural areas, the urban poor, and women and children. The actions of national governments for the realization of these objectives are very fundamental even though the support of the international community is anticipated. The first national action is in the empowerment of communities. Women should be empowered for full participation in decision making. Also, it would entail the establishment of a network of community-based learning centers for capacity-building and sustainable development.54 In management-related activities, the government, with the assistance and in cooperation with appropriate international, nongovernmental and local community organizations, is expected, among other things, to generate remunerative employment and productive occupational opportunities compatible with country-specific factor endowments, on a scale sufficient to take care of prospective increases in the labor force and to cover backlogs and implement mechanisms for popular participation, particularly by the poor.55 However, the prospects for the implementation of this aspect of Agenda 21 appear gloomy because of the weak autonomous financial capacity of West African countries. Thus, to effectively tackle the problems of poverty in the context of sustainable development in West Africa, there is a need to strengthen external financial resources as well as the earning capacity of the countries in the subregion. Another important issue of concern to West African countries is technology. Technology is both the source of assaults on the ecosystem and the potential solution to the apparent conflict between increased material prosperity for all and improvement in environmental quality. Sustainable development program requires that technology should be environmentally sound.

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However, the promotion of the use of environmentally sound technology in developing countries raises several problems. In the first place, the conditions for the successful transfer, application, and development of such technology in developing countries are much the same as those for technology generally. The greater a country's existing knowledge and skill base, the greater the ability of its enterprises to select, make efficient use of, and adapt and modify imported technology, including the hardware component of more environmentally benign technologies. Thus, as far as West African countries are concerned, this would require the acceleration of human resource development. Secondly, as West African countries are beset by the immediate pressing needs of young and rapidly growing populations, by financial instability and sociopolitical turbulence their leaders and planners have a relatively short time perspective that limits their attention to those environmental problems having immediate consequences for the health or livelihood of their citizens. Thus, to promote environmentally sound technologies, they will require additional financial resources.56 Thirdly, and in connection with the aforementioned factors, the resource requirements of West African countries will have to be highly concessional in order to support the added cost of importing environmentally benign technology. In particular, the additionality of concessional financing such as that provided by the GEF is crucial if West African countries are to divert resources to attacking the more universal problems of ozone layer depletion, global warming, loss of biodiversity, and the pollution of international waters. Fourthly, accessibility to environmentally sound technology presents a critical problem. Although clean technologies are available and generally part of the public domain, information about them is not universally accessible. More effective arrangements (including the possibility of an international register) for the dissemination of information on existing environmentally sound technologies and on the environmental risk of technologies currently on the international market, including information about comparative costs, productivity, and so on, are needed in order to guide decision making in West African countries. CONCLUSION There are critical issues that need urgent solutions if West African countries are to secure increased foreign aid and promote economic development. In the first place, aid recipient West African countries should strengthen their absorptive capacity in order to enhance the inflow of foreign aid. In this connection, special attention should be accorded to aid coordination and management by West African governments in order to ensure that the aid inflow is effectively utilized for development. Foreign aid donors on the other hand would need to cooperate with the recipients in the disbursement of aid. The recipients would

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benefit more if aid were directed to the areas of priority in national development. While acknowledging the interests of the donors, misdirected aid would serve no purpose in the efforts at the promotion of economic development. For most West African countries, the critical areas where foreign aid is urgently required is in human resource development and infrastructural development. Both are basic requirements for sustainable and self-reliant development. In order to promote economic development, the problems of drought should be effectively tackled to reduce and eliminate incessant food shortages and erratic reduction in foreign exchange earnings. The implementation of development plans and annual budgets suffers considerably with irregular and unpredictable earnings in foreign exchange. In the same vein, the cooperation of the international community is desirable on the commodity problems of West African countries. The diversification of exports is very fundamental for economic growth. Also, growth and development in West Africa would be enhanced with better prices for their export commodities at the international market. Structural adjustment programs, which are basic instruments for economic growth, have produced very little positive impact on development in West African countries. The unintended negative effects have on the whole removed the dynamics in the growth process of the adjusting countries. There are problems in policies if they generate inflation, increase unemployment, and lack appreciable capacity to promote growth in key economic sectors. Thus, a major review of structural adjustment programs is desirable if the aggravation of poverty is to be averted in the subregion. Sustainable development has broadened the concept of self-reliance and economic development in West Africa. While its requirements are very complementary to the requirements of development in West Africa, there is however no doubt that it is not without additional cost to the weak economies of West African countries. It will entail competition with urgent priority development issues of West African countries. To cope with these preconditions and the prescribed financial demands at the national level in areas of poverty and technology application, it would be desirable that the international community pay special attention to the countries of the subregion. The need for this is underscored by the fact that a significant part of the forty-one least-developed countries in the world are in West Africa. NOTES 1. World Bank, The World Bank Annual Report 1993 (Washington, D.C.: World Bank, 1993), pp. 25-28. 2. T. L. Hutcheson and R. C. Porter, The Cost of Tying Aid: A Method and Some Colombian Estimates, RED Reprints New Series, No. 29, 1972. 3. J. C. Wheeler, Development Co-operation: Efforts and Policies of the Members of the Development Assistance Committee (Paris: OECD, 1987), p. 113.

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4. R. M. Poats, Development Co-operation: Efforts and Policies of the Member of the Development Assistance Committee (Paris: OECD, 1983), p. 132. 5. Wheeler, Development Co-operation, p. 116. 6. Ibid., p. 121. 7. Ibid. 8. Ibid. 9. UNDPAVorld Bank, African Development Indicators (Wahington, D.C.: UNDPAVorld Bank, 1992), p. 32. 10. C. H. Dodd, Political Development (London: The Macmillan Press, 1972), pp. 50-54. 11. S. Please, The Hobbled Giant: Essays on the World Bank (London: Westview Press, 1984), p. 18; E. Osagie, "Problems of Structural Adjustment in West African Sub-region," in A. O. Philips and E. C. Ndekwu (eds.), Structural Adjustment Programme in a Developing Economy: The Case of Nigeria (Ibadan: Wernilore Press, Ltd. and NISER, 1987), p. 233. 12. Osagie, "Problems of Structural Adjustment," p. 236. 13. Ibid. 14. P. K. Quarcoo, "Structural Adjustment Programs in Sub-Saharan Africa: Evolution of Approaches," African Development Review, 2(2), December 1990, p. 13. 15. UNECA, African Alternative Framework to Structural Adjustment Programs for SocioEconomic Recovery and Transformation (AAF-SAP), E/ECA/CM.15/6/Rev.3, p. 19. 16. Ibid., p. 20. 17. Ismail Sarageldin, Poverty, Adjustment, and Growth in Africa (Washington, D.C.: World Bank, 1989), pp. 49-50. 18. World Bank, Implementing the World Bank's Strategy to Reduce Poverty: Progress and Challenges (Washington, D.C.: World Bank, 1993), p. 20. 19. UNDP, Regional Program for Africa: Fourth Cycle-Assessment of Social Dimensions of Structural Adjustment in Sub-Saharan Africa Project, No. RAF/86/037/A/01/42, World Bank, Washington, D.C., April 1988. 20. UNDP, Human Development Report 1992 (New York: Oxford University Press, 1992), p. 13. 21. UNDP, Human Development Report 1991 (New York: Oxford University Press, 1991), pp. 35-36. 22. Ibid., p. 46. 23. UNCTAD Secretariat, UNCTAD VIII: Analytical Report by the UNCTAD Secretariat to the Conference, TD/358, New York, 1992, p. 132. 24. UNCTAD, Transfer and Development of Technology in Least Developed Countries: an Assessment of Major Policy Issues. Report by the UNCTAD Secretariat in cooperation with L. Krieger Mytelka, Carleton University, Ottawa and LAREA/CEREM, Universite de Paris. (UNCTAD/ITP/TEC/12), August 1990. 25. For a detailed discussion of the theories of foreign direct investment, see John M. Dunning, "The Determinants of International Production," Oxford Economic Papers, No. 3, November 1973, pp. 289-330. 26. J.E.A. Manu, "Problems of Technology Transfer in ECOWAS," in A. Orimalade and R. E. Ubogu (eds.), Trade and Development in Economic Community of West African States (ECOWAS) (New Delhi: Vikas Publishing House PVT Ltd., 1984, pp. 283-290. 27. Other countries with ample human resources may have suffered from inappropriate incentive structures, inadequate technological effort, or institutional weaknesses as illustrated in the cases of Eastern European countries where there was long in existence an ample stock of human capital and technical skills. UNCTAD Secretariat, UNCTAD VIII, p. 146. 28. World Bank, Ghana 2000 and Beyond: Setting the Stage for Accelerated Growth and Poverty Reduction (Washington, D.C.: World Bank, 1993), p. 65.

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29. The pioneer status represents an important cornerstone for the encouragement of new investments. It was based on the Income Relief Act of 1958, which was amended in 1971 by Decree No. 22. 30. Federal Ministry of Industries, Industrial Policy of Nigeria: Policies, Incentives, Guidelines and Institutional Framework (Abuja: Federal Ministry of Industries, 1989), pp. 8-9. 31. R. Omotayo Olaniyan, Private Foreign Investment and Nigeria's Economic Recovery: Problems and Prospects for Increases in Inflow, mimeo, A study for the Social Science Council of Nigeria, 1990, p. 22. 32. Federal Ministry of Industries, Industrial Policy of Nigeria, pp. 22-23. 33. For details, see Olaniyan, Private Foreign Investment, pp. 19-26. 34. UNDPAVorld Bank, African Development Indicators, p. 70. 35. P. A. Volcker, The Recycling Problem Revisited (New York: New York University, March 1980). 36. K. Larrecq, Foreign Borrowing in the Mid-Seventies and the Role of International Commercial Banks, Report No. 2239-WA, World Bank, October, 1978. 37. K. L. Krum, The External Debt of Sub-Saharan Africa: Origins, Magnitude and Implications for Action, World Bank Staff Working Papers No. 741, p. 10. 38. Ibid. 39. Ibid., p. 14. 40. World Bank, Financial Flows to Developing Countries, Quarterly Review, July 1993, p. 19. 41. UN General Assembly, External Debt Crisis and Development: The International Debt Strategy as of Mid-1993, Report of the Secretary-General, A/48/345, September 9, 1993. 42. World Bank, World Debt Tables 1992-93, p. 32. 43. UNCTAD Secretariat, Africa's Commodity Problems: Toward a Solution, A Report by UN Secretary General's Expert Group on Africa's Commodity Problems, UNCTAD/EDM/ATF/1, 1990, pp. 15-16. 44. Ibid., p. 29. 45. P. M. Newhouse, Les conditions de croissance dans les pays saheliens et les pays de Vouest coders de I'Afrique occidentals Food and Agriculture Organization of the United Nations (FAO), Rome, 1987; R. T Wilson, R. N. de Leeuw and C. de Haan, CIPEA Rapport de Recherche, 5, Centre International pour l'Elevage en Afrique, Addis Ababa, 1983, pp. 19-23; UNSO, Assessment of Desertification and Drought in Sudano-Sahelian Region 1985-1991 (New York: UNSO, 1991), pp. 28-29. 46. R. M. Poats, Development Co-operation, pp. 17-18. 47. UNSO, Assessment of Desertification, p. 59. 48. Poats, Development Co-operation, p. 20. 49. Abass Bundu, ECOWAS and the Future of Regional Integration in West Africa. Paper presented at the IDRC-ECOWAS International Conference on West African Integration, Dakar, January 11-15, 1993. 50. UNCED, Adoption of Agreements on Environment and Development, A/CONF.151/4 (Part I), April 22, 1992, p. 4. 51. Ibid. 52. World Bank, The World Bank and the Environment: Fiscal 1993 (Washington, D.C.: World Bank, September 1993), p. 112. 53. Algeria, Austria, Belgium, Brazil, Canada, China, Cote d'lvoire, Denmark, Egypt, Finland, France, Germany, India, Indonesia, Italy, Japan, Mexico, Morocco, the Netherlands, Nigeria, Norway, Pakistan, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

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54."UNCED, Adoption of Agreements (Part I), pp. 21-22. 55. Ibid., pp. 23-24. 56. UNCTAD, UNCTAD VIII, p. 156.

6 Conclusion

There is tremendous potential for accelerated and sustainable economic growth and development in West Africa. The subregion is blessed with abundant natural and human resources that should be the basis for a sustainable rising standard of living of West African people. Since the mid-1970s, West African political leaders have made major efforts to promote economic development, overcome the aggravation of poverty, and improve the social conditions of the people. These efforts have been anchored to a number of diverse economic policies that were deemed appropriate for the achievement of these goals. The national efforts of individual country and the collective efforts at the subregional levels have also been complemented by international assistance at both bilateral and multilateral levels. However, as it is today, these set goals have remained largely elusive. Poverty is all-pervasive in the major strata of the society, in particular in the low- and middle-income strata of West African countries. The growth rate of the GNP of most countries in the subregion has declined in the last decade while there has been an increase in the growth rate of the population. With a population growth rate of about 3.5 percent in the 1980s, the standard of living in the subregion fell precipitously. Generally, the central issues in economic growth and development for most countries have largely remained unresolved. Industrial and agricultural development have not progressed satisfactorily. West African countries, as they are now, are broadly at the level of import substitution industrialization in an age when a number of developing countries in Southeast Asia and Latin America have advanced into mainstream high-technology industrialization.

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Agricultural development has not satisfactorily solved the problem of food production in many countries in West Africa. Also, in this sector many questions are still left unanswered on the expansion and diversification of commodity exports. West African countries are presently, on the whole, confronted with the problems of rising rates of inflation and unemployment. Most West African governments have not succeeded in providing the basic social amenities that are the fundamental primary conditions for progressive advancement in economic development. Hospitals and schools are grossly inadequate in many West African countries. The supply of electricity and water are still disappointingly inadequate for both human consumption and industrial requirements. The economies of many countries are characterized by poor infrastructural development, insufficient communications systems, inadequate networks of roads and railways. Air transportation in most countries is poorly developed for both domestic and international travel. Also, inland waterways have not been properly developed in countries where large rivers should be a good medium for the transport of bulky goods within and between countries in the subregion. All of these problems suggest that there have been considerable difficulties in the implementation of measures and strategies adopted over the years to tackle development problems. The measures and strategies must be reexamined in the light of new economic circumstances in the subregion and in the world economy. Also, the chronic economic development problems of the West African countries will need to be addressed with a fresh approach in order to ensure sustainable economic growth and development. Complementary measures and strategies should be introduced on a timely basis in order to achieve this objective. Foreign aid will therefore continue to constitute an important component of the inputs for economic development in West Africa. There is a need for an increase in the real value of both bilateral and multilateral aid flow to most of the countries to supplement their meager and rapidly diminishing national revenues. However, to ensure an increase in the flow of aid, it is important that West African countries in the first place combat the growing aid fatigue of the donor countries, which derives from donors' disillusionment with the results of aid. West African governments should, as the first step, coordinate foreign aid more effectively. They should take appropriate actions to ensure that disbursed foreign aid is properly expended on earmarked projects. Appropriate actions should be made to eliminate all corruption and mismanagement of funds associated with foreign aid utility in the past. It is also important, however, that there should 6e a better understanding of some of the critical constraints on the increase in foreign aid to West Africa even though it is obvious that an increase in aid has been highly manifested in recent years. One important question is the growth of the donor countries. Slow economic growth coupled with balance-of-payments difficulties have generally undermined the capacity of the donor countries to increase aid disbursements

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to developing countries. West African countries would therefore be likely to have the benefits of increased aid with improvements in their economic growth. And as a matter of fact, as already noted, such improvements would hinge on the pursuit of sound economic reforms by West African governments. In addition, there is an increase in the global demand for foreign aid as a result of developments in the world economy in the second half of the 1980s, whereby the collapse of the Soviet Union led to the emergence of a number new states. Most of these new states are economically weak and they have increased demand for financial support from the international community. Thus, the developed countries and the multilateral financial institutions are in the 1990s confronted with new demands. Ironically, however, the resources of many donor countries or multilateral financial institutions have not increased significantly in recent years to allow them to cope with the increasing demands. It therefore follows that West African countries could perhaps only expect some increases in the fast-growing countries or those not substantially affected by recession, for example, Japan or the oil-producing countries, such as Saudi Arabia, Kuwait, and so on. Major increases in assistance from the UNDP may not be expected in the foreseeable future because of the current drying up of the voluntary contributions of the donor countries and the restructuring and revitalization of the UN system. While major increases may not be anticipated in the near future, it is crucial that the available volume of foreign aid should be well-targeted to the priority areas of development of West African countries if it is to have a positive impact on their process of economic growth and development. In particular, donor countries should harmonize their aid and ensure that it is directed to the priority development projects of recipient West African countries. Political considerations should play a lesser role in the disbursement of aid to make it more meaningful to the development of recipient West African countries. In addition to this, the donor countries should reduce the proportion of aid-tying so that aid could contribute more to the promotion of economic growth and development in West Africa. Above all, the recipient West African countries should evolve more sound and credible institutions for the coordination, implementation, and monitoring of bilateral and multilateral aid. A Ministry of Foreign Aid with a well-trained staff familiar with the knowledge of the art and administration of aid is very important for the effective use of foreign aid and the implementation of aid programs. The ministry should work closely with the officials of foreign aid agencies located in the country and harmonize aid disbursements with the development priorities of other government departments, such as the ministries of health, social development, education, economic development, environment, and so on, which largely utilize foreign aid. With a ministry of foreign aid, a systematic pattern of aid implementation would emerge, better foreign aid

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policy would be articulated, and the impact of foreign aid would be more positive on the development process of West African countries. Self-reliance and economic development as strategy and objective are complex processes. Both, in practice, require the creation of the right political climate and an effective mobilization of internal and external resources. In principle, West African countries have accepted the philosophy of democracy as the basis for political development. The main platforms of governance would be political parties, and governments would be responsive to the demands of political institutions and pressure groups, the people, and, in general, the main practices of democratic processes. However, this is still far from the case in a number of countries in the subregion, where the rule of the military still prevails in many of them. The military should relinquish political power as soon as possible to democratically elected governments in such places as Benin, Burkina Faso, Gambia, Ghana, Nigeria, and Sierra Leone, to name a few. Governance by the military should be discouraged, as their constant interventions in political processes have been a major source of political instability. The constant interventions have negatively impacted the evolution of durable democratic systems through learning. In most cases, they have failed to promote economic development and national unity. With poorly conceived and implemented economic policies as well as failures in the arrest of mismanagement and the eradication of corruption, military regimes in most West African countries have ended up leaving economies in worse situations than what they were when they first seized power. Also, their failures to come to full grips with national questions, broadening the base of participation and the promotion of equitable development, have in most cases led to civil wars that have threatened the existence of these countries. Examples abound in cases such as Nigeria's civil war (1967-1971), and the ongoing civil war in Liberia. The more the prevalence of political instability, the less are the chances of increased foreign financial assistance. Political instability creates a mountain of uncertainties about the effectiveness of foreign aid in the recipient countries. As it is, most West African countries still lack the critical internal mass for self-reliance and economic development. There is a need for well-articulated domestic economic policy based on the realities of the domestic and international economic situations. The domestic economic policy should be well-focused to address critical microeconomic and macroeconomic issues that would spontaneously lead to cumulative economic growth and development. Examples of growth targets could be accelerated food and agricultural production or of increased industrial expansion based on specific identified products. There is also a need for a more rigorous and disciplined approach to the implementation of economic policies. A number of well-intended policies have failed in the past partly as a result of the attitudes of the bureaucrats and a lack of sufficient information on the nature and objectives of the policies to both the public and private sectors. The success of most of the newly industrializing

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countries in Southeast Asia are partly due to the excellent and disciplined approach to economic policy implementation. A sound, effective, honest, and efficient bureaucracy is a basic prerequisite for meaningful economic development. In this connection, it is obvious that the structural adjustment programs embarked upon by most of the countries in West Africa have been less beneficial to overall economic growth and development. Any microeconomic and macroeconomic policies in the future should take into full consideration the social implications. Besides, it is equally important to underscore that the foreign investment policies of West African countries should be more liberal and made more comparable with those of the other developing countries as well as those of the economies in transition, since West African countries are inevitably in competition with them over scarce resources in the industrially developed countries and in the same international financial institutions. It is natural that international capital would move to countries that offer maximum returns on profits. At the same time, maximum efforts should be made by West African governments to ensure higher levels of domestic savings in order to increase the level of domestic investment. Human development constitutes an important area that should be accorded high priority in the agenda for self-reliance and economic development in West Africa. It is important that adequate provisions are made for all levels of education without which the skills necessary for development may not be available. Universal primary education should be provided and strengthened where they now exist. Better high schools should be provided with modern facilities to enhance the quality of education before admission into the universities. The universities of West African countries should be well-structured to meet the demands of the different economies. In particular, special attention should be paid to the training of West Africans in technical fields. An emphasis in this area is vital in order to put West African countries in the mainstream of global technological advancement. West African countries should strive to evolve a sound technology policy upon which the culture of West African technology could be built. In this connection, the relationship between population and development should also be brought into focus. Clear population policies should be formulated and effectively implemented by West African countries to ensure the control of population growth. The standard of living will continue to be undermined the more the rate of population growth, currently at 3.0 percent per annum, continues to outstrip the growth rate of the GDP, currently estimated at 2.5 percent per annum. At the international level, a better international economic environment is a prerequisite for the promotion of self-reliance and economic development in West Africa. The absorptive capacity of foreign investment of West African countries should be strengthened through increased financial assistance from multilateral financial institutions such as the IDA, ADB, Arab Development

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Bank, and so on, for the improvement of transportation and communications systems in West African countries. The effective development of both systems is currently very difficult to carry out within and among West African countries because of high costs and the decline in their revenue earnings. While attempts are being made to consolidate transportation and communications, a change in the attitude of the multinationals on investments in the subregion is desirable. Increased investments are needed to rejuvenate the industrial sectors of West African countries, most of which have suffered reversals in the aftermath of the structural adjustment programs. The greater the increase in foreign investments, the better are the opportunities for economic recovery and the promotion of growth. Foreign debt represents a serious bottleneck in the process of economic development of most indebted West African countries. The burden of debt service obligations to the tune of over 30 percent of export earnings for most countries seriously undermines their capacity for the implementation of development projects in annual budgets and development plans. Also, the frequent rescheduling of debts in the London and Paris Clubs has generally drained the meager financial resources of these countries while at the same time consuming the energies that might have been concentrated on national recovery efforts. The creditor countries and international financial institutions would give a tremendous boost to West African development by writing off the debt of the distressed least-developed countries of the subregion and by working out arrangements much better than the Trinidad and Tobago terms. Besides, it is important also to note that the external debt of West African countries has also served to reduce the inflow of foreign investments. The greater the external debt of countries, the lower ratings for the receipt of foreign investment, as this would entail higher debt burden obligations to be shared by all economic actors. Also, continuous debt burden inadvertently militates against the securing of more lines of trade credit by West African countries as the ability to repay at deadlines would be put to question. In order to address the problems self-reliance and economic development fully, the international community should, as matter of urgency, assist in finding appropriate solutions to the problems of commodity. West African countries are essentially exporters of primary commodities. For some, a few of these, one or two constitute the main export products. Primary commodities have in recent years suffered considerable price decline. Also, the demand for some have declined where substitutes have been found in the developed countries. Because of these developments most West African countries have experienced a decline in foreign exchange earnings with the result that there has been a constant erosion of the ability of West African countries to promote economic growth and development. The international community would go a long way in assisting West African development by ensuring appropriate increases in the

Conclusion

185

price of commodities. This could have a significant multiplier effect on West African economies as well as raising the income from exports. Sustainable development should of course be perceived in the overall development process of West Africa. This global concept of development requires the preservation of the ecosystem in order to preserve this planet for future generations. The ozone layers must not be unduly depleted as a result of rapid industrial processes. Natural resources should be utilized with due regard to the future and its implications for the environment. As far as West African countries are concerned, their immediate concern is the arrest of desertification and the overcoming of drought. There are no immediate concerns for the cleaning of the atmosphere arising from pollution due to heavy industrialization. However, as industrialization progresses in West Africa, the countries would be compelled to make the choice of environmentally sound technology. In all these aspects additional funding may be required. West African countries would therefore need an increase in international assistance on these issues if self-reliance and economic development processes are not to be derailed. In its collective approach, self-reliance is a basic condition for an authentic economic development of a number of mini-states in West Africa. The logic of industrialization requires that these countries should come together to take advantage of a larger market made available through economic integration. The desire for regional economic integration has not been lacking in West Africa: the subregion is one with the most concentration of economic cooperation arrangements. However, the progress in them, especially the all-embracing ECOWAS, remain very intangible. Several historical, political and socioeconomic factors in West Africa account for the lackluster performances of these integration schemes. There are also external political and economic impediments arising from colonization and foreign interests. But all these will need to be surmounted if the ECOWAS were to make significant contributions to the process of economic growth and development of the member states and of the subregion as a whole. The subregional integrators themselves should constitute the basic lever for integration. They must provide the momentum for integration through the strengthening of their political will and the rapid implementation of integrative measures.

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Index

Abacha, Sanni, 139 Abiola, M.K.O., 139 Acheampong, Ignatius Kutu, 140 Africa, 14; accelerated growth, 21; economic development, 19, 82; import substitution, 16; relevance of structural theory, 19 African Development Bank (ADB), 64, 69, 73, 74, 75, 76, 92, 93; aims and policies, 66-67 African Development Fund (ADF), multilateral assistance, 69, 70, 72 Agenda 21, 6-8, 169, 172; functions of organizations, 173; impediments to, 173174; mechanisms of, 172-173; objectives of, 173; role of governments, 173 Agriculture: cash crops, 101; cocoa production, 62; coffee production, 62; collectivization, 32; cooperatives, 42, 46; development, 100-106, 179, 180; development of irrigation, 52; development problems, 100, 106, 123-124; food importation, 101; food production and selfsufficiency, 52,' 168-169, 170; food shortage, 73; growth rate, 100; impact on other sectors, 9; major food crops, 100; phosphates output, 62; preponderance of, 34; reduction in output, 57; sub-

sidies, 41-42; support for, 90; transformation of, 9, 32; trend in output, 101— 103 Akuffo, Frederick W. K., 140 Algeria, 151 Arab aid, 42, 48, 50-52, 59, 64 Arab Bank for African Economic Development, 74; multilateral aid for cocoa industry, 73 Argentina, 153 Asia, 14, 151 Austria, 131 Babangida, Ibrahim, 139 Baer,W., 18 Belgium, 47, 69, 131 Benin, 2, 140, 160, 182; bilateral aid, 3032; dependence on agriculture, 30, 32; dependence on foreign aid, 30; Donors Conference, 69; economic measures, 70; foreign exchange earnings, 30; major institutions, 69; major sources of foreign aid, 30; MarxistLeninism, 32; multilateral aid, 69-70; nature of bilateral aid, 30-31; obstacles to development, 70; performance of bilateral aid, 30; poverty alleviation, 30; volume of exports, 2; volume of flow, 69

198

Index

Bilateral aid, 9, 30-64; aid tying, 84; constraints in, 94, 138-139; destination of, 38,40, 45; donors' interests, 30; environmental considerations, 89,90; food aid, 38, 45, 48, 50, 62; grant element, 33, 34, 37, 40, 52, 89, 90; program assistance, 40, 42, 57; relevance to productive sectors, 37, 42; social and administrative infrastructure, 42, 57; support for low-income countries, 90; support for women in development, 90, 91; technical cooperation, 38,40, 42, 48, 54, 59, 64, 83, 84 Brazil, 153 Buhari, Mohammed, 139 Burkina Faso, 2, 40, 138, 140, 147, 160, 168, 182; agricultural policy, 105; bilateral aid, 32-34; economic reforms, 71; foreign trade deficit, 34; grant element of bilateral aid, 33; multilateral aid, 7 0 71; predominance of agriculture, 34; volume of exports, 2; weak economy, 34 Cameroon, 151 Canada, 40, 42, 48, 53, 57, 60; aid untying, 88; foreign aid policy and human resources development, 88; grant element, 88; poverty alleviation, 88; project implementation, 59; reorganization of Canadian International Development Agency (CIDA), 88; support for multilateral aid, 74 Capital: accumulation, 18, 21, 153; movement, 23. See also Foreign investment Cape Verde, 160, 168; bilateral aid, 34; end use of multilateral aid, 71; multilateral aid, 71-72; trend in the flow of multilateral aid, 71 Cardoso, E, 18, 19 Chad, 168 China, development of plantation and cane mill, 62 Colonialism, 128-130; economic linkage, 129-30; political linkage, 129 Commodities, 166-168,175,184-185; better prices of, 143, 165; decline in earnings, 166; demand for primary commodities, 24, 27, 151; diversification, 167; international commodity agreements, 166; international problems of, 166; Lome Convention, 71,

168; price stabilizing arrangements, 167; role of policy, 166-167. See also Agriculture Compaore, Blaise, 129 Cote dTvoire, 2, 40, 57, 107, 142, 147, 160, 163; bilateral aid, 34-37; economic performance, 34; export diversification, 2; grant element, 37; gross domestic product, 2, 100; import substitution industrialization, 2; improved relations with donors, 37; multilateral aid, 72; relations with France, 34; relevance of technological cooperation, 37; role of the World Bank, 72; volume of exports, 2 Council for Mutual Economic Assistance (CMEA), 42, 91 Daddah, Moktar Ould, 140 Democracy: encouragement of, 77; transition to, 81 Denmark, 131; cooperation with multilateral institutions, 91; foreign aid policy, 91; Plan of Action for Danish Development Assistance, 91 Dependence theory, 18-20 D'Estaing, Valery Giscard, 32,44,71 Developmentalism, 9; importance of capital accumulation, 17; problems of, 24; role of terms of trade, 17; theory of, 1718 Development Assistance Committee (DAC), 39,40,42, 60, 83, 84, 87, 89, 90, 93; contributions to program assistance, 62; decline of flow, 63-64; technical cooperation, 45, 50 Diori, Hamani, 140 Dodd,C. H., 141 Doe, Samuel, 46,76, 140 Donors: aid-tying, 31; donor-oriented theories, 16—17; Donors Conference, 69; donors' policies, 81-92, 94, 168, 169, 170, 175; international relations theories, 17 Dos Santos, T, 18 Drought, 32, 38, 48, 50, 52, 53, 73, 168170, 175; effects on food production, 46; impact on agricultural production, 55, 57; institutions for, 168-169; Permanent Interstate Committee for Drought Control in the Sahel or Commite Perma-

Index nent Inter-Etats de Lutte contre la Secheresse dans le Sahel (CILSS) and the Club des Amis du Sahel, 168-169; problems of, 169; role of regional organizations, 169; trend of, 168 Economic Community of West African States (ECOWAS): basic mechanisms, 22; commitment of members, 22; implementation of protocols, 22; lack of infrastructures, 22 Economic Community of West African States Ceasefire Monitoring Group (ECOMOG), 80 Economic development, 1, 37, 166, 168, 179, 182; defined, 14; external dependence, 48, 107, 110; function of capital formation, 8; goals of, 97; impediments to, 10, 37; integrated approach to, 7; nature of, 18; private sector, 182; relevance of economic infrastructures, 42; role of domestic economic policies, 7; rural development, 49; socialism and, 32; underdevelopment, 9. See also Agenda 21; Capital Economic development process, 1; economic tools and concepts, 1; role of technology, 1; essential ingredients of, 172; partnership with developed countries, 7, 141; role of savings, global recession, and sustainable development, 6-7, 172-174, 175, 185. See also Agenda 21 Economic growth, 21, 27, 28, 37, 71, 74, 131, 165, 179; autonomous, 24; growth models, 15-16; impediments to growth, 15; self-sustaining growth, 15, 22, 23, 141, 179; stages of growth, 15-16 Economic policies, 27, 28, 71, 72, 73, 74, 75-76,78, 165, 182; demand management, 142; fiscal adjustments, features of, 81; implementation of, 123, 141142, 150, 175, 180, 182-183. See also Structural adjustment program Economic recession, 21, 74, 78, 141, 142; worldwide, 97 Egypt, 151 Energy: forms of, 114; importance of, 114; requirements of, 114-116, 124 European Union, 69, 71, 72, 76, 90, 137; multilateral aid under STABEX arrange-

199

ments, 73; role of European Development Fund (EDF), 74; role of European Investment Bank, 74 Exports, 2, 46; composition of, 3, 116; direction of exports, 119; export industries, 16; obstacles to exports, 3; oil-exporting countries, 151; trend in, 116-118. See also Foreign trade External debt, 3, 57,90,151, 158-166, 184; structure of, 158-160 External debt and international efforts, 163-166; concessional bilateral assistance, 160; concessional multilateral assistance, 158, 159; commercial debt, 163-164; debt conversions, 164; debtor conference, 165; debt-reduction facility, 163-164; debt service ratio, 160, 161; effect on foreign investment, 184; effect on foreign trade, 184; Export credit agencies, 162; guaranteed private debt, 160; ill-conceived projects, 162; interest-reduction bonds, 163; most affected countries, 160; multilateral borrowing, 158, 159; nonconcessional loans, 163; nonproductive use of, 162; role of Euromarket, 160; Trinidad and Tobago Terms, 164, 184 External debt burden, 3, 55, 160, 184; constraints of, 7, 27, 34; growth of, 62, 160, 162-163; reduction of, 7; relief of, and Paris Club, 81, 184 External financial assistance, 27, 98 Eyadema, Gnassingbe, 64 Faletto, E., 18 Finland, 131 Foreign aid, 2; absorptive capacity, 28, 94, 174, 184; conditions of, 8, 15, 180-181; consultative groups, 136-137; coordination of, 28, 80, 136-138, 174; defined, 13; donor objectives, 16; donors' foreign aid policy, 82-92; donors' foreign policies, 28; donors' interests, 30, 130135, 181; effectiveness of, 9, 28; emergency relief, 137-138; implications of aid tying, 134; implications for savings, 5; influence of donors' domestic policies, 28; institutional constraints, 135136; institutional development, 181-182; management, 135-139; Marshall Plan, 8; origin of, 14; performance

200

Index

on target, 4-5; priority projects, 8; prospects for, 181; for public sector development, 5; rationale for foreign aid, 5; rejection of, 21; relationship with foreign trade policies, 5; relevance to economic growth, 5; rural development, 32; skepticism, 27; sources of, 28; as supplement for savings, 15; support for social sector, 150; target of, 4, 134; utilization, 28, 94. See also Donors Foreign exchange, 21, 30, 60; reduction of earnings, 63, 76, 127, 143 Foreign investment, 1, 20, 124, 151, 154158; diversion of, 3-4; export-free zones, 158; infrastructures, 158; institution of, 18; role of, 154; negative transfer of resources, 7; obstacles to inflow, 156, 158; policies for, 154-156; relationship with foreign aid, 13, 14; role of exchange rate, 156-157; trend in inflow, 156, 157, Foreign policy, 71 Foreign trade, 1, 116-120, 124, 16; balance of trade, 118-119; deficit, 34, 48; direction of trade, 119; problems of disengagement, 119-120; role in development, 116; tariff and nontariff barriers, 20,22,23, 142 France, 38, 40, 44, 48, 50, 55, 64, 69; aidtying, 30; budgetary support, 83; debtrelief, 83; economic interest, 28, 53; grant element of bilateral aid, 33, 37, 42, 47; influence, 28, 134; preeminent position of, 57; strategic interests, 53; strengthening financial capacity, 82-83; structural adjustment loans, 83; technical cooperation, 59, 83 Frank, A. G„ 18 Furtado, C , 18

ment, 37, 40,42, 47; performance in foreign aid target, 4; support for economic reforms, 86; support for rural projects, 60; tied aid, 134 Ghana, 2, 136, 137, 138, 140, 142, 147, 154, 160, 182; agricultural policy, 105; bilateral aid, 39-40; economic performance, 39-40; end use of multilateral aid, 73; grant element, 40; gross domestic product, 2, 100; industrialization, 107, 110-111; major sources of bilateral aid, 40; multilateral aid, 73-74; rate of inflation, 2; trend in the flow of multilateral aid, 73; volume of bilateral aid, 40; volume of exports, 2 Global Environmental Facility (GEF), 172, 173,174 Gowon, Yakubu, 139 Great Britain. See United Kingdom Guinea, 147, 160; bilateral aid, 4 1 ^ 4 ; economic performance, 41-42; free-market enterprise system, 44; grant element, 42; multilateral aid, 74-75; problems of economic development, 42; relations with France, 42-44; socialist orientation, 42; trend in multilateral aid, 74 Guinea-Bissau, 160; agricultural cooperatives, 46; bilateral aid, 44-46; corruption, 46; economic features, 44; food aid, 46; growth rate, 100; industrial development, 44; multilateral aid, 75; political instability, 46; problems of corruption, 75; technical cooperation, 46

Gambia, 142, 147, 168, 182; bilateral aid, 37-39; destination of bilateral aid, 38; economic performance, 37; food aid, 38-39; impact of drought, 38; major sources of bilateral aid, 38; multilateral aid, 72-73; obstacles to economic growth and development, 37-38; volume of bilateral aid, 38 Germany, 4, 38,48, 50, 53, 56,60, 64, 131; debt relief, 86; foreign aid policy, consolidating capacity, 85-86; grant ele-

Imports: cost of imports, 3; food import, 9, 34, 60; import-substitution, 52; protectionism, 9; rise in global price of oil, 3; sources of, 119; volume of imports, 3, 118 India, 153 Individual self-reliance, 21; international negotiations, 21; problems of, 98; process of reassociation, 21; relevance to West Africa, 21-22, 24. See also Self-reliance

Haberler, G., 17 Hirschman, A. O., 14 Hong Kong, 151 Houphouet-Boigny, Felix, 72 Human rights, 76

Index Industrial development, 106-111, 179, 180, objective of, 106. Industrialization, 9, 14, 37; capacity utilization, 18, 55; economies of scale, 18; effects of protectionism, 18; import substitution, 14, 17, 22, 24, 55, 107, 153; new industries, 22; role of capital, 18; role of entrepreneurship, Ig; technical cooperation, 24 Industrialization, progress in, 107; intermediate and heavy industries, 107; manufacturing, 107; problems of, 110-111 Industry, acceleration of, 22, 124 Inflation, 4, 55; in developed countries, 28; global inflation and development, 5; role of SAP, 4 Infrastructures, 28, 35, 37, 38, 40, 42, 50, 180, 184; economic infrastructures, 50, 57; social and administrative, 46, 48, 52,57,61-62 International Development Association (IDA), 64, 69, 72, 76, 83, 93; aims and policies, 66; low-cost loans, 70; multilateral assistance, 69, 74; support of credits, 77; support for stabilization program, 78 International economic development: advancements in science and technology, 23; interdependence, 23; international division of labor, 23; primary commodities and decline in price, 24; sustainable global development (Agenda 21), 82; world economic recession, 81-82 International economic policy, 22 International Financial Corporation, principle and policies, 65-66, 74 International Fund for Agricultural Development (IFAD), 74, 76 International Monetary Fund (IMF), 20, 64, 69, 89, 91, 93, 140, 141, 164; activities, 65; policies, 65; role in multilateral aid, 75; stabilization agreement, 136; support for stabilization program, 78; support through standby credits, 77, 81. See also Structural adjustment program Investments, 23, 24; nationalization of, 43, 155. See also Foreign investment Italy, 38, 44,48, 53, 57, 131 Japan, 38, 40, 42, 44, 47, 53, 55, 60, 69, 131, 153; foreign aid policy, strengthen-

201 ing institutions, 87; foreign aid policy, untying of aid, 87-88; role of Japan International Development Organization (JAIDO), 87; importance of Tokyo International Conference on Africa's development, 87

Kerekou, Matthew, 32, 129 Korea, Republic of, 153 Kuwait, 59; Kuwait Arab Economic Development Bank, 74; technical assistance in, 51 Lagos Plan of Action, 21 Latin America, 14, 19, 23, 151; import substitution, 16, industrialization, 17, 18; role of market in development, 17 Liberia, 2, 140, 160, 163; bilateral aid, 4648; end use of bilateral aid, 48; gross domestic product, 2; major sources of bilateral aid, 47; multilateral aid, 7576; politics and economy, 46; program assistance, 47, 48; technical cooperation, 48; trend in multilateral aid, 7576; volume of bilateral aid, 47 Libya, provision of subsidies, 51 Limann, Hilla, 140, 155 Malaysia, 151 Mali, 2, 137, 147, 168; aid from Arab countries, 48; balance of payments deficits, 48; bilateral aid, 48-50; costs of infrastructural development, 50; destination of bilateral aid, 48; external dependence, 48; gross domestic product, 2; industrialization, 107; Institute of Rural Economy, establishment of, 49; multilateral aid, 76-77; program assistance, 50; rural development, 49; sources of major bilateral aid, 48; sources of major multilateral aid, 76; structure of the economy, 48; technical cooperation, 50; trend in multilateral aid, 76; volume of exports, 2 Mauritania, 136, 140, 142, 147, 168; bilateral aid, 50-52; characteristics of the economy, 50; multilateral aid, 77; trade deficits, 50; war against Polisario, 50 Mikesell, R. F, 16-17 Mohammed, Murtala, R., 139 Momoh, Joseph, 60, 62

202

Index

Multilateral aid, 9, 183-184, 185; influential factors, 64, 67; pattern of flow, 6 7 69; policies, 92-93; problems of, 80 Netherlands, 38, 40, 44,48, 89; cooperation with multilateral institutions, 90; foreign aid policy, 90-91 Niger, 2, 137, 142, 147, 163, 164, 168; agricultural polices, 104-105; bilateral aid, 52-55; economic policies, 52; features of the economy, 52; importance of Uranium to the economy, 52-53; multilateral aid, 78; self-sufficiency in food production, 52; uranium industry, 2; volume of exports, 2 Nigeria, 2, 60, 79, 139, 141, 142, 151, 155, 160, 162, 182; agricultural policies, 103-104; bilateral aid, 55-57; development plans, 119; development of technology, 112-113; economic features, 55; factors in economic recession, 55; foreign aid policy, 55; growth rate, 100; industrialization, 107; industrial policy, 155-156; multilateral aid, 78-79; presidential system, 129; principal bilateral aid partners, 55-57; problems of agricultural programs, 103-104; protectionism, 22; rate of inflation, 2 Nigeria Trust Fund, mode of operation, 67 Nkrumah, Kwame, 18, 140 Norway: foreign aid policy, 89; support for least-developed countries, 89; support for SAPs, 89; support for women, 89 Obasanjo, Olusegun, 139 Official Development Assistance (ODA), 4,37,83,84,87,88,89,90,91 Organization for Economic Cooperation and Development (OECD), 4, 168; economic growth, 132-134; performance in aid target, 4; promotion of export industries, 16 Organization of African Unity (OAU), 5, 21,60,169 Organization of Petroleum Exporting Countries (OPEC), 5; Development Fund, 69; performance in foreign aid, 5 Overseas Development Fund (ODF), 52, 53-54, 57; commitments to production sector, 64; program assistance, 59; support for debt reorganization, 62; support

for economic reforms, 59; technical cooperation, 59, 60, 64, Political development, 127, 128-129, 141; civil war, 182; governance, 141, 182; national questions, 182; role of the military, 182 Political instability, causes of, 16; problems of, 46, 75, 79, 139-141; promotion of, 24 Population growth, 145, 146, 150, 170, 173,179 Portugal, 129; political influence, 134 Poverty, 1, 173; alleviation of, 24, 27, 91, 145; degeneration of, 34, 179; eradication of, 7; vicious circle of, 1 Prebisch, Raul, 17, 18 Protectionism, 23, 24; of developed countries, 145, 167-168 Rawlings, Jerry, 74, 140 Regional integration, 10,24,120-123,130, 170-172,185; Caribbean Community (CARICOM), 22; Council for Mutual Economic Assistance (CMEA), 22; Economic Community of Eastern and Southern African States (COMESA), 22; Economic Community of West African States (ECOWAS), 17-18, 121; erosion of sovereignty, as instruments of economic policies, 22; European Community (EC), 22; impediments to integration, 121-123,124125, 171-172; Mano River Union, 121; progress in ECOWAS, 121,170-171; rationale for, 120-121; relevance of political will, 24; research and development, 167; role of regional integrators, 185; Southern African Development Community (SADC), 22; West African Economic Community (CEAO), 121 Resources, mobilization of, 5, 98, 128, 173, 174, 182, 185; budgetary allocations, 150; definition of, 148; human development of, 98, 124, 148-150, 179, 183; improvement in, 148-149; problems of, 149, 150; promotion of, 149-150; role in technological advancement, 153 Rostow, W.W., 14,15-16 Russian Federation (former Soviet Union): foreign aid policy, 91-92; interest in, 59; role of loans, 8

Index Sankara, Thomas, 129, 140 Sao Tome and Principe, 164 Saudi Arabia, 59 Savings, 21, 124, 143, 154, 183. See also Resources, mobilization of Self-reliance, 5, 120, 121, 122, 123, 130, 150, 154, 158, 166, 168, 182; collective self-reliance, 21; defined, 13; as development strategy, 5, 23, 97, 128; disengagement from world economic system, 20; importance in national development plans, 5; mobilization of internal resources, 5; origin of, 5; reduction of dependence on the international economy, 5; reduction of international economic transactions, 20; restructuring economic transactions at national and international levels, 21; theory of, 20-23. See also Individual self-reliance; Regional integration Senegal, 136, 137, 142, 147, 160, 163, 168; bilateral aid, 57-60; industrial growth rate, 107; multilateral aid, 79; problems in economic development, 57; rural development, 59; strong ties with France, 57 Shagari, Alhaji Shehu, 139 Sierra Leone, 2, 140, 142, 160, 164, 182; bilateral aid, 60-62; diamond export, 2; issues in development, 60; multilateral aid, 79-80 Singapore, 151 Smuggling, 62 Southeast Asia, 23, 82, 183 Stephens, Siaka, 140 Structural adjustment program (SAP), 4, 28, 55, 78, 90, 97-98, 141-148, 154; aims of, 4, 142; characteristics of, 80; deregulation, 142; financial structure reforms, 143; foreign exchange rate, 142— 143; impact on technological advancement, 113; international cooperation, 143; measures of, 98, 142; performance of, 4, 143; problems of, 78, 79, 143-145; problems of devaluation, 143, 145; role of banks, 143; role of concessional flow, 4; social dimensions of, 147-148; social effects, 183; strong adjusting countries, 144, weak adjusting countries, 144; structural adjustment/sectoral adjustment loan,

203

146-148; support for, 77, 84, 86; supportive actions, 145-148; trade liberalization, 142 Supplemental theories, 15-16 Sweden, 44, 131, foreign aid policy, 89-90 Switzerland, 40, 131 Technology, 14,21, 150-154; characteristics of, 152; definition, 111; development or adaptation of, 20; dynamics of, 153-154; environmentally sound, 173-174; flow of, 151-152; forms of transfer, 152-153; importance of domestic effort, 153; importance of technological cooperation, 37; influencing conditions, 153; market of, 152; mechanisms of, 151; policy, 150-151; problems of, 152-153; promotion of, and problems, 112-114, 124; role in self-reliance, 112; technological know-how, 23; transfer in services, 153 Terms of trade: deterioration, 24, 73, 162; improvement in, 98 Thailand, 151 Togo, 138, 140, 160; bilateral aid, 62-64; decline in coffee output, 62; demand for phosphates, 63; destination of bilateral aid, 64; foreign debt, 62; issues in the economy, 62; multilateral aid, 80-81; preponderance of phosphate, 62; trend in bilateral aid, 63-64, Toure, Sekou, 43, 140 Transnational corporations, 9; objectives, 152 Transnational enterprises, 18; and local economy, 19; vertical integration, 19. See also Transnational corporations Tunisia, 151 Underdevelopment, 9, 14 United Kingdom, 38, 40, 44, 57, 60; economic interest, 28, 134; external financial support, 8; foreign aid policy and high concessionality, 84; influence of, 28, 134; sustainable development, 83; technical assistance, 84; tied aid, 134; support for Njala University, 60 United Nations, 4, 65; agencies, 137; Conference on Least-Developed Countries, 136; promotion of development, 4

204 United Nations Conference on Trade and Development (UNCTAD), problems of international development, 19-20 United Nations Development Programme (UNDP), 65, 147; multilateral assistance, 69, 70, 72, 74, 76, 93; round tables, 136-137 United Nations Economic Commission for Africa (UNECA), 5, 14, 21; and the Trans-African Highway, 62, 169 United Nations Economic Commission for Latin America and the Caribbean (UNECLA), 14, 18 United Nations Environment Programme (UNEP), 172 United Nations Sudano-Sahelian Office (UNSO), 169 United States, 4, 38, 40, 42, 44, 47, 48, 50, 57, 60, 64, 131, 153; congressional review of foreign aid legislation, 85; emergency needs, 53; foreign aid policy, absorptive capacity, 84-85; foreign aid target, 4; political and development objectives, 85; role of Export-Import Bank, 85; role of loans, 8; role in multilateral aid, 75; strategic considerations, 58-59, 85, support for Njala University agricultural extension, 60-61 Vary, Joan Bernard, 46 West Africa: balance of payments difficulties, 162; budgetary deficits, 142; com-

Index mitment to democracy and good governance, 141; corruption, 140, 182; defense expenditures, 150; economic growth, 2; export components, 2; exports, 2; external dependence, 8-9; factors affecting exports, 3; gross domestic product, 2, 98-100; implementation of Agenda 21, 6-7; important minerals, 8; import substitution, 22; improvements in balance of payments, 143; industrialization strategy for development, 17; inflation, 2; landlocked countries, 2; least-developed countries, 2; limitations of self-reliance theory, 24; limitations of the theory of comparative advantage, 145; military leaders, 16; mismanagement, 182; oil price shock, 27; problems of privatization and commercialization, 145; relevance of development theories, 24; relevance of foreign aid theories, 23-24; standard of living, 98; tribal division, 16; volume of imports, 3 World Bank, 64, 91, 92, 93, 136, 137, 140, 141, 145-148, 163-164; activities, 65; policies, 65, 72, 73, 89; provision of structural adjustment lending, 81; rural development project with IDA and USAID, 76; support for Kpong hydroelectricity, 74 World Food Programme (WFP), 74, 76 Zambia, 164

About the Author R. OMOTAYO OLANIYAN is currently Economic Adviser to the Permanent Observer Mission of the Organization of African Unity to the United Nations. Dr. Olaniyan has co-edited four books on economic development, and has published articles in scholarly journals on international development issues.