OVERCOMING FRAGILITY IN AFRICA Forging a new European approach Presentation of the ERD 2009 Stockholm, 22nd October

1. OVERCOMINGFRAGILITY IN AFRICAForging a new European approach Presentation of the ERD 2009Stockholm, 22nd October 2009 Giorgia Giovannetti European University Institute, Robert Schuman Centre and University of Firenze

2. Need to reassess EU development policy towards SSA fragile countries • The framework: 2008–09 crisis • The crisis has hit the budgets of the EU: huge debt overhangs, unemployment and social problems. • The crisis has hit fragile countries, despite low financial integration: high social costs, halt to progress. • SSA’s dire socioeconomic situation calls for a renewed commitmentbut EU domestic concerns may displace attention and funds. • The EU must keep/strengthen its commitment: cost of disengagement are too high (internally and for fragile countries). So is the cost of inaction. • But need for efficient policies.

3. The European Report on Development • The 2009 European Report on Development analyses: • the costs and characteristics of fragility • the capacity of fragile countries to cope with negative shocks (2008-09 financial crisis), • the EU’s current engagement with fragile countries • the potential for EU development policy to assist national stakeholders in enhancing resilience. • The focus is on Sub-Saharan Africa: a region which is lagging behind in the sphere of state consolidation; • Sub-Saharan African countries account for most fragile states, no matter how measured.

4. Which Sub-Saharan African countries are fragile for the ERD analysis?

5. Why a focus on countries in situation of fragility? Fragility is a cost in itself: most fragile countries are in the last quintile of HDI Indices and lag behind in most MDGs In fragile countries there are forms of violation of basic human rights to life and security Fragile countries are a fertile land to organized crime and illicit trafficking The interaction of fragility with the crisis increases the likelihood of breakout of conflicts

6. “ bad neighbor effects” • Economic channel: forgone economic growth • Political instability • regional markets for weapons • cross-border movement of refugees • illicit flows Threat to global security: External factors crucial in the initial revival of piracy (allegiances of over-fishing and dumping of toxic waste against foreign trawlers);controversial relationship between fragility and terrorism in Sub-Saharan Africa.

7. Common structural weaknesses • Inabilities to mobilize domestic resources and dependence on external sources • Low levels of human development (especially for women) • Bad governance • Low population density and low level of urbanization, but young population • Export very concentrated and dependent on natural resources • Weak soft and hard infrastructure (and investment environment)

8. But also wide heterogeneity • Historical factors (colonization, institution building pattern etc) • Economic growth rates and levels of income per capita • Life expectancy • Capacity to attract FDI • Level of foreign reserves • External Debt

9. Low capacity to cope with shocks Resilience: low in most fragile countries

10. Time to care about implementation • Need to narrow the implementation gap between the theoretical framework and the design of specific interventions. • Need to work with recognized informal institutions to understand the local context • Need to adapt the principle of ownership to deal with incapacitated or illegitimate state institutions. • Need to exploit the comparative advantage given by large range of EU policy instruments but being aware of possible indirect effects (security interferes with aid….).

11. Aid is only a part of development policies in fragile countries • EU trade policy should be more responsive to the specific needs of SSA fragile states. • There is a need to shift from responsive to preventive interventions. • Such a shift could require moving towards a regional approach to fragility, because the bad neighbour effects could jeopardize state building and social cohesion. • The security development nexus has to be properly handled.

12. ERD suggests 5 key priorities to “narrow the gap” • Support state-building and social cohesion. • Overcome the divide between short-term needs and long-term resilience. • Enhance human and social capital. • Support better regional governance, including regional integration processes • Promote security and development in the region

13. EU comparative advantages • Large array of policies: trade, agriculture, fisheries, security, migration, climate change, environment, social dimension of globalisation, employment, research and development, information society, energy, and governance • Large experience providing a very useful “toolkit” to deal with fragility: during its own history of enlargement, the EU faced problems of transition from military dictatorship to democracy (e.g. Greece, Portugal and Spain in the 1970) and integration of very different countries. • While can help building infrastructures, its comparative advantages lies in developing human capital and institutions

14. To have an impact, the EU should: • Speak with one voice • Be committed to long-term policies,avoid shifts in policy objectives, since fragile countries have structural and persistent problems, and a pervasive aspect of fragility is the inability to follow long-term objectives. • Find the right partner to implement the policies. Donors and recipients may not be in a position to best implement programmes. It might be appropriate to separate policy formulation from fund allocations • Understand that state building and social cohesion in Sub-Saharan African countries are long evolutionary processes, taking new, diverse and unpredictable forms at the country and regional levels. Such processes require constant attention and the right institutional support on the ground.

15. The challenge is responding to crisis while solving Long Term weaknesses • Short term policies have to be compatible with long term objectives • The best for fragile African countries will be “do it alone”: mobilizing domestic resources, tap domestic saving, exploit regional integration • Given dysfunctional state institutions, this is difficult, hence there is a role for donors • Low resilience and short term answers to problems mean just “surviving”

16. Land investments for agricultural production in fragile countries Source: World Investment Report 2009, UNCTAD

17. In enhancing their resilience, SSA fragile countries should account for internal and external dynamics INTERNAL DYNAMICS: • Generalized move towards better governance and institution transparency • Important role for African Union • Establishment of Free Trade Areas • Infrastructural works: corridors (financial resources) • Fragile countries have limited capacity to cope (low fiscal space and no safety nets) • Likelihood of conflicts (social unrest) increases with a decline in income EXTERNAL DYNAMICS: • SSA is back to be at the centre of interest of different international actors. • New emerging actors (China), particularly active • New approach to development from EU, member countries, US etc. (less conditionality, principle of ownership)

18. A possible role for EU • Help fragile countries to lengthen the time horizon of their policies. Short term policies do not allow to overcome fragility • Dealing with fragile countries means interacting with illegitimate, unrepresentative or weakrulers: difficult for aid to reach the poorest and to operate in a long term perspective. Hence, it is important to interact with informal (recognized) institutions • Inaction has very high costs to: contributes to persistence of development gaps

19. In summary • Overcoming State fragility is a priority, especially in the current context of crisis. • The EU and other donors should not reduce engagement in fragile countries, though fragility tends to limit aid effectiveness. • Engagement should take into account forces which can amplify or reduce fragility. • Common characteristics of fragile countries allow to identify policy priorities of fragile countries and for the EU’s interventions • Given the high heterogeneity among fragile countries, moving from priorities to specific prescriptions and guidelines for intervention requires deeply rooted knowledge of the ground and sometimes to find the appropriate partner for implementation.

20. Thanks! ERD2009 Team

21. Low levels of human development HDI: Of 179 countries, fragile countries rank between 128 for Sao Tome down to 179 for Sierra Leone, with the average HDI for fragile countries at 0.459 in 2006 Source: ERD elaboration based on UNDP Human Development Report (2008) and African Economic Outlook (2009).

22. Exposure to the worst forms of violations of basic human rights Conflicts: Collier (2007) estimates that of people in the countries of the bottom billion, a proxy for the list of fragile countries, 73% have recently experienced or are in a civil war. Heavy impacts especially on most vulnerable groups such as women. Food insecurity: 18 of 36 countries in food crisis requiring external assistance from FAO are fragile Source: ERD elaboration on African Economic Outlook (2009) and FAOSTAT

23. Progress towards MDGs is disappointing... Countries in situation of fragility in grey

24. A telling pyramid EU-27 Fragile countries

25. Difficult investment environment:Ease of Doing Business Rank of SSA Fragile countries are at the bottom of the over 180 countries

26. Economic factors may help/hinder fragile countries • Trade openness: potential gains from trade but possible disputed rents from trade. • FDImay improve the efficiency of the allocation of domestic resources, but without appropriate incentives, can contribute to bad governance and corruption. • Natural resource wealth:taxes from resource extraction contribute to most government revenues in fragile states. But fragile states are also likely to fall into vicious circles linking bad resource management to fading state capabilities—the resource curse. Resource abundance has a positive effect on growth in countries with good institutions (Botswana), and a negative effect in those with poor institutions (Zimbabwe). • Food security management: the occurrence of a food crisis can produce an adverse impact on state fragility, exacerbating the perceptions of the state’s incapacity or unwillingness to address chronic food insecurity or to protect its citizens from food shocks.

27. Vulnerability: no clear pattern