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30 Years of economics for development

Underdevelopment, Transition & Reconstruction (UTR) in SSA

Project name/title
Underdevelopment, Transition & Reconstruction (UTR) in SSA
Year:
1998
Theme:
Africa's Economic Development
Abstract:
The development prospects in SSA are particularly problematic in those countries which adopted Soviet style planning in the 1970s, i.e. Angola, Congo, Eritrea, Ethiopia, Guinea, Guinea-Bissau, Mozambique, and Somalia. The policies of these countries emphasized state intervention in agriculture (including collectivization, the nationalization of land, and state farms), capital-intensive industrialization, and macroeconomic management through price and trade controls. These countries also experienced extreme levels of political violence and destruction as a result of either internal tensions or the politics of the Cold War. Economic progress in this group of countries thus faces three distinct, but related, problems: (i) Underdevelopment (due to limited human capital and physical infrastructure and widespread poverty). (ii) The transition to the market economy offers the opportunity to move away from the remnants of ineffective state intervention. As elsewhere, however, there are many difficulties. (iii) The reconstruction of economic infrastructure in these countries is likely to be a costly and lengthy process. Very often policies adopted to deal with one of these problems are inconsistent or even openly contradictory with the solution of one of the other two problems. For instance, the transition has often entailed highly restrictive fiscal policies which are inconsistent with the provision of public funds to match the donor resources assigned to reconstruction projects. Similarly, there are trade-offs between the pressing tasks of demobilization, de-mining, and the restoration of law and order and the need to direct resources to infrastructure and long-term development. Governments clearly face unresolved challenges in overcoming these problems in the proper sequence and in a balanced and mutually reinforcing way. Thus, an explicit, distinct and pragmatic strategy is essential if UTR countries are to achieve growth and human development within a realistic time frame. Areas where specific measures are likely needed are: (i) the proper sequencing of transition policies (so that liberalization, state restructuring and privatization contribute to the reduction of under-development and reconstruction from war); (ii) the development of macroeconomic frameworks (different from the standard IMF model) consistent with the financing of reconstruction and investment in human development; (iii) the protection of the access of communities and poor people to productive assets, particularly land and natural resources (which are increasingly being purchased by foreign investors as part of the transition process); (iv) the identification by bilateral and multi-lateral donors of consistent policies for the specific conditions of UTR countries so as to avoid a situation in which the disbursement of bilateral aid is hindered by multilateral policy conditionality or in which donor policies themselves cause inflation and other economic problems.
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