Governance and Leadership

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1 The views expressed in this paper are those of the author(s) and do not imply endorsement by the United Nations Institute for Training and Research (UNITAR) and the United Nations Development Programme (UNDP). Governance and Leadership UNDP RBA UNITAR Conference on Emerging Partners and Africa: Key Trade and Investment Issues December 13 14, 2011; Dakar (Senegal) By Peter Riechi Okara Introduction Africa appears to lag behind other continents on governance and leadership issues. In regard to trade and investment, governance issues that are of concern are related to the enactment of laws that facilitate trade and investment, preparing regulations that adequately support the relevant trade and investment laws, and formulation and implementation of policies that regulate delivery of services to consumers, both in public and private sector. In order for trade and investment to thrive in a given country or region, good governance is required which essentially is about fostering trust and ensuring the accountability of decisions makers. It is important to emphasise that good governance is a fundamental requirement for promoting development and the attendant eradication of poverty as indeed accurately articulated by the former UN Secretary General Kofi Annan, Good Governance is perhaps the single most important factor in eradicating poverty and promoting development. In order for good governance to be effective, governments and institutions that are entrusted with governance must be accountable to the people that they serve. In some countries, among them Kenya, good governance has been identified as a key component in the proper management of the affairs of the state, accordingly the Constitution of Kenya 2010, that was promulgated on August 27, 2010, has included, in its structure, the principles of governance. These principles include; transparency and accountability, democracy and participation of people, rule of law, equity and inclusiveness, good governance, integrity and sustainable development. While this list is, by all means not exhaustive, it nevertheless offers a major characteristic of good governance. Those given the responsibility to lead must do so in a transparent and accountable manner. Democracy without, integrity, equity, inclusiveness and the participation of the people is, but a mirage., and all citizens are equal before the law. It is further emphasized that development that is not sustainable is detrimental for current and future generations. Sustainable development should as per the United Nations meets the needs of the present without compromising the ability of future generations to meet their own needs (UN 2004). Part 1: Achieving equitable and sustainable growth in Africa: a leadership issue As stated above, sustainable development must meet the needs of the present without compromising the ability of future generations to meet their own needs. While each African country is expected to strive for this attainment, Africa's efforts to achieve sustainable development have, however, been hindered by conflicts, insufficient investment, limited market access opportunities and supply side constraints, unsustainable debt burdens, historically declining levels of official development assistance and the impact of HIV/AIDS (Ndulu 2007). Good governance, while it a necessary condition, it is however not sufficient if visionary leadership is lacking. Good governance and quality leadership are indeed inseparable for effective delivery of services 1

2 to both the public and private consumers. Superb articulation of governance issues may not achieve much if they are not accompanied by strong visionary leadership. Indeed a country needs leaders capable of facing challenges and able to deliver results in complex situations. To achieve that, it is therefore important that leadership is practiced at all levels by involving the people who strategically develop and operationally implement plans and policies in manner that is accountable and transparent. In order for Africa to manage trade and investment for the benefit of her people its needs good governance and leadership that shall also offer reasonable strategic direction, be capable of preparing effective plans and formulation of sound negotiation policies that will ensure systematic building of regional blocs that, will achieve results. Indeed, studies have indicated that the absence of, or the insufficient observation of minimum standards for the accountable governance and leadership limits the possibility of institutions or individuals offering quality services. It has been observed that to achieve equitable and sustainable growth in Africa, the cross country growth analysis suggests that progressive policies, good governance and visionary leadership matter a great deal for growth Ndulu (2007). Part 2: Towards a strategic framework for strengthening governance of trade and investment in Africa Emerging and traditional partners Africa s traditional partners include the European Union (EU), which accounts for more 40% of Africa s trade, almost three times that of China 1, Japan and United States of America (USA), while the emerging partners include, China, Brazil, India, Russia Malaysia, Singapore and South Korea. Traditional partners continue to be dominant Africa both in terms of trade and direct foreign investment (FDI) at 80% (AEO 2011). This being the case, Africa requires a well thought out approach in the negotiation that shall balance Africa s warming up to the emerging partners while at the time maintaining the traditional partners, in particular the FDI. The investment flows from emerging partners to Africa in not increasing as fast as trade. Africa is negotiating with traditional partners as well as emerging partners at the various levels; which include, World Trade Organization, (WTO), Economic Partnership Agreements (EPAs), and at several bilateral levels. World Trade Organization WTO negotiations started way back in 1986 and took close to eight years for the Uruguay Round negotiations to be concluded which cleared the way for the agreements to be signed in 1994, by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. The agreements effectively replaced General Agreement on Tariffs and Trade (GATT), as an international organization with WTO. The Uruguay agreements set in timetables for new negotiations on a number of topics. The new round of negotiations started in 1996 and continues to date. The negotiations under WTO are compounded by the fact that countries must agree with all the provisions of the agreement which is a primary concern to developing countries. Besides, during the negotiations that culminated in the signing of WTO agreement, developing countries were disadvantaged as they had not developed adequate negotiating capacity for a meaningful engagement in such complex matter. The interests of the most powerful nations greatly influenced the outcome of the negotiations rather than the concerns and interests of the weak developing and least developed countries. While Africa has not fully developed her negotiating 1 Africa Economic Outlook (AEO). Traditional partners remain key and keep growing. Last updated: July 22, Available at depth/africa and its emerging partners/africa pushesaside post colonialism/traditional partners remain key and keep growing/ accessed on November 21,

3 capacity, the continent s negotiators have, however made reasonable progress regarding the continent s requirement. With a more enhanced capacity development, along with appropriate strategies, a more balanced negotiated out come might be achieved. What Africa needs is the development of a mechanism that shall facilitate the identification and determination of the continent s priorities, strengths and weaknesses, in order to enhance the benefits of participating in the negotiation and at the same time minimize the cost of such participation. This should be done bearing in mind that inadequate negotiating strategies, particularly for poorly resourced African countries could proof to be counterproductive. Negotiating with traditional Partners Traditional partners remain key and keep growing. Africa s traditional partners include European Union, who negotiates with Africa under EPAs, the United States of America that does business with Africa under AGOA, others are Japan and Canada. Among the traditional partners, EU is an exception as it has a structured negotiating mechanism dating back to the signing of the Lome Convention in The Lome Convention was succeeded in 2000 by Cotonou agreement whose central objective is poverty reduction. The Cotonou Agreement that was signed between 79 countries from Africa, the Caribbean and the Pacific (ACP) and which was to end in 2007 is the most comprehensive partnership agreement between African countries and the EU. However, this EU ACP trade regime was found to be in conflict with multilateral trade rules as the arrangement allowed the EU to favour ACP countries in manner that could not be justified under any other WTO procedures. Arising from this, negotiations on Economic Partnership Agreements, (EPAs), which are expected to be successor to the Cotonou Agreement between the European Union (EU) and the African Caribbean Pacific (ACP) countries commenced in The EU ACP is hence negotiating a new trade regime, EPAs, that is expected to be WTO compliant. Ultimately, the EPAs negotiations intend to create a free trade area between the European Union and African, Caribbean and Pacific group of states in response non reciprocal and discriminating preferential trade agreements offered by EU that are WTO incompatible. The EPAs negotiations are being conducted on several fronts with the objective of making the end result WTO compliant. These fronts are; 1. Competitiveness It has been observed that the African economies must fundamentally be competitive, irrespective of the market access arrangements. Africa must be able to offer products which can face international competition, including in their own markets, and to surmount all kinds of non tariff constraints. The envisaged competitiveness will largely be dependent on other factors such as, the economic environment, the performance of the private sector, investments, production and marketing capacity aimed at high value added products, the size of captive markets, among others. 2. Regional disintegration Regional integration was one of the objectives of the EPAS negotiations as a way of creating a free trade area and eventually a customs union that will facilitate the flow of goods between the EU and the respective economic bloc. This has faced challenges due the fact countries in the grouping are hardly comparable in terms of economic development: some are relatively advanced while others belong to the worlds poorest who rely heavily on tariffs for fiscal revenue. 3. Trade liberalisation: the exclusion list and timeframe The EU guidelines for the EPAs state that at least 80% of trade should be liberalised. For the remaining percentage of trade, the developing country needs to create an exclusion list on which they list all the products that they want to protect. 3

4 4. More than WTO compatibility: Most Favoured Nation, Rules of Origin and Export Taxes Clauses The EPAs include rules of origin and Most Favoured Nation (MFN) clauses. The rules of origin clause entail that only goods originating from a country that signed an EPA are allowed on the EU market. This implies that products containing inputs from other countries cannot access the EU market. The rules of origin clause thereby counter the EUs stated objectives to broaden market opportunities and to foster regional integration of developing countries. Emerging partners The emerging economies include Brazil, China, India, Malaysia, Russia and South Korea. Trade between emerging partners has increased substantially in the last two decades from USD 8.8 bn in 1990 to USD 148 bn in 2007 (Haman 2010) and between 2003 and 2009, China debt owed by 31 African countries, USD 2.57, was forgiven. The emerging partners main exports to Africa consist of manufactured goods while Africa s exports to the emerging partners are in the form of unprocessed raw materials. The imports to Africa from the emerging markets are in the form of low priced consumer goods that have hurt domestic goods that have not been found to be competitive. If this trend continues, Africa s manufacturing sector will suffer as little employment, if any will be generated. It has been observed that while some emerging economies have a strategy for Africa, Africa does not have a strategy towards the emerging economies, says a recent report, Africa s Cooperation with New and Emerging Development Partners: Options for Africa s Development, prepared for the UN s Office of the Special Adviser on Africa (OSAA). The 2006 China Africa summit in Beijing, India Africa summit, New Delhi in 2008, and the China Africa summit held in Egypt in 2009 are case in point. These summits are perceived as a scramble for Africa resources that these emerging partners desperately need. In addition, it is important to note that unlike EU, the emerging partners are not homogenous group thereby necessitating Africa to negotiate with each emerging partner separately. Learning and adaptation Whether African countries are negotiating with traditional partners or emerging partners, Africa should evaluate its position in terms of engagement with these partners by balancing her own objectives and those of her partners. This policy decision should be arrived at by taking into consideration obligations that shall arise out of the international agreements. In this regard, as Page 2002, observes, African countries will be obliged to adopt a common negotiating framework, lose flexibility to respond to national interests, bear the increased costs of negotiation and other demands of African countries resources. When this is clear, accepted and understood as Africa s strategy as her engagement with the rest of the international community, it will then be in a better position to constructively pursue its objectives in the negotiations process, whether bilateral, regional or multilateral. It may therefore be reiterated that it is only after Africa has clarified her own objectives that it can be able to appraise what it needs to negotiate in particular negotiations Africa lacks a properly structured negotiating framework. The EAC countries of Kenya, Uganda, Tanzania, Rwanda and Burundi are in the process of establishing a negotiation framework that may serve as model negotiating framework for other regions. EAC partner states through EAC Trade Negotiations legislation, 2008, are in the process of establishing a commission known as the East Africa Joint Negotiations Commission that shall coordinate negotiations by EAC countries. The legislative framework states that the negotiating Mandate of the Commission shall be in writing and shall be issued from time to time by the Summit acting through the Council of Ministers. The East Africa common position on any issue for negotiation shall be developed by the commission from the national positions of partner states. Accordingly East Africa shall establish a single delegation for trade negotiation. Prior to concluding any 4

5 negotiated agreement, the commission shall consult with the council of ministers who shall approval the final text of the agreement. The Commission shall be guided by the following objectives: Facilitate the promotion of regional and international trade for the sustainable development of partner states Establishes a mechanism for joint negotiations of EAC partner states in bilateral, regional and multilateral trade The Community shall develop and adopt a common trade regime and cooperate in matters of trade policy The Partner States shall negotiate as a block in all matters relating to regional and multilateral trade Every Partner state may establish a national trade negotiations committee which shall prepare a national position on each and every issue or item for negotiation at the regional or multilateral level If all regional blocs are persuaded to adopt this model negotiation framework, then it will be much easier for Africa to bring together various commissions for the purpose of preparing Africa s position for the purpose of international negotiations, be it be between Africa and a single countries such as China, USA, Japan or with a regional block such as EU or at multilateral as with WTO. Part 3: National, regional and global governance issues relating to trade and investment Safeguarding Africa interests in relation to trade and investment The emerging economies mainly Brazil, China, India, Malaysia, Russia and South Korea have developed an aggressive interest in trade and to a little extent investment with African countries. These emerging countries have a strategy for Africa while, regrettably, Africa appears to have none. In pursuant to the realization of their strategies, a number of summits between Africa and some of these emerging countries, namely China and India have taken place, China Africa summit in Beijing, 2006, India Africa summit, New Delhi in 2008, and the China Africa summit in Egypt, In order for Africa to come up with a trade and investment negotiation strategy with its partners, it has to undertake housekeeping first. Africa will be in a position to safeguard her interests in relation to trade and investment if it achieves the following; 1. Inclusiveness African negotiators largely consist of government officials leaving out other crucial stakeholders such as citizens, the private sector and their representatives, members of parliament. These stakeholders should be involved when national positions are being developed in order to ensure that the issues that will affect certain interest groups are addressed during negotiations. In addition the national position should either receive parliamentary and/or cabinet approval as this will give the negotiations the requisite legitimacy. Finally negotiators should be accorded some flexibility within which to negotiate and consult the capitals for further direction as negotiations proceed and prior to concluding the agreement. 2. Good governance What Africa needs is the promotion of democracy that will facilitate the election of visionary leaders. To this effect, AU should take leadership by ensuring that those who lead are elected in fair and free elections. There is a high likelihood that Africa will have leaders of integrity if people elect their leaders freely. Good governance will lead to political stability that will in turn create a conducive environment for investment. Instability in one country within a region will undoubtedly affect regional investment. Other governance issues that Africa needs to address include corruption and paying special attention to trade facilitation. 3. Regional integration Majority of regional blocs have taken a little too long to move from market led integration strategy to 5

6 policy driven strategy, is the creation of a full fledged customs union and common market and the eventual establishment of a political union. The political will to drive the process is wanting and as Adebayo (2002) argues, the political process is required to assist economic integration and economic cooperation and political integration must be pursued simultaneously. The main handle is essentially on the difficulties that African countries have in regard to the ceding some of their sovereignty for the good of Africa. Consequently, a number of African countries are not able to adequately pursue open, liberal and transparent investment policies that will significantly contribute to their economic progress in future. Hence the concept of sovereignty as exclusive control of a definite territory may illustrate one way in which the interaction of ideas of the state with economic negotiations may produce results which go against economic objectives of the state (Page 2002). Accordingly Africa shall adequately safeguard its interests in relation to trade and investment negotiations if African countries are prepared to cede their sovereignty and pursue the agenda of strengthening the integration regional blocs that will eventually merge to create a single entity for purpose of leading the entire continent in regional and multilateral negotiations. 4. Investment codes Regional blocs should have investment codes that will guide investments in the respective region and which is applicable to all countries in that regional bloc. Eventually regional blocs should harmonise their investment codes to pave way to Africa investment code. To achieve this, respective partner states should harmonise their investment laws and policies as a systematic way of charting out actions towards the realization of the goals of regional integration and development. 5. Establishment of a structured negotiation framework Negotiations at Africa level as well as negotiations within regions are likely to be more effective if they are carried out in a structured manner. For this to happen there is need to establish regional negotiations framework that shall harmonise national positions in the respective region and this should be followed with an Africa negotiation framework, to be established by African Union (AU) that shall harmonise regional positions and lead the negotiations with the full mandate of the African states. When this is achieved, Africa shall then be in a position to negotiate from a position of strength. 6. Establishment of a pool of negotiators Negotiation is a very powerful and delicate process that can make or break a deal. Therefore those spearheading the negotiation process should be carefully selected from a pool of seasoned African negotiators. The process should start with each regional integration bloc establishing a pool of negotiators and from this pool, an African Union negotiating pool of negotiators will be established, consisting of AU experts and experts from various regions. The experts from various regions will be officers employed and working for their respective countries but who will be called upon to work with the AU experts to prepare Africa positions when the need to do so arises. Countries from where these experts are drawn will commit themselves to release these officers to assist AU as and when required. This formal institutional arrangement will provide information and analysis on amore systematic basis on how bilateral or multilateral negotiations might affect or benefit national and ultimately 7. Capacity building for negotiators During negotiation, words used are carefully selected to convince the other party to agree to a deal that is intended to benefit the party that uses persuasive words. Since negotiation is normally a long process where both parties try to satisfy each other demands, the party with sharp and highly skilled negotiators will get a better deal while the other party will get the short end of the stick. It is hence very important that negotiators are equipped with adequate negotiating skills and be knowledgeable in the subject matter. It is for the reason that the African negotiators should be well trained in order to accurately articulate national/regional/ Africa position. 6

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