Address to the Commonwealth Club, World
Affairs Council and US/SA Business Council Conference,
24 May 2000
San Francisco, USA.
Michael Edwards, in his book 'Future Positive', captures
the essence of the dilemmas of the current economic
relations between the rich and poor countries, where
the process of globalisation has brought benefits to
mainly developed countries of the North, while the developing
countries of the South are still struggling to survive
within this integrated world economy. He says:
"Over the last 50 years, the record of international
co-operation has been disappointing....It has failed
to get to grips with the fundamental challenge of our
times: reshaping global capitalism to spread the benefit
of economic growth more evenly across societies, reduce
its social and environmental costs, and achieve a basic
level of security for everyone"
I am certain that most of us agree that the process
of globalisation has brought about many possibilities
for rapid advancement of humanity, for poor and underdeveloped
countries to take advantage of this process to take
a quantum leap and close the huge technological and
economic gap.
I am also certain that few amongst us will disagree
when we assert that a global society presents us with
the opportunities to collapse both time and space, so
that a village health worker in Uganda could perform
some of the most difficult medical procedures with the
assistance of a surgeon sitting in her office in San
Francisco.
To be able to do this, it requires of the people in
a poor country such as Uganda to have access to education,
to have access to satellite technology, and for the
doctor and nurse in Uganda to be up to speed with the
latest telemedicine technology. It further requires
that Uganda itself must be able to develop generally,
sufficient capacity in order to benefit from this technological
revolution.
In other words, the world and particularly the developing
countries have an opportunity to advance faster than
would have been the case previously.
The tragic and unfortunate irony is that developing
countries continue to be spectators in the globalisation
process, a process that is undoubtedly irreversible,
with devastating results for the millions of people
of such countries. This marginalisation of poor and
developing countries needs an urgent and comprehensive
response.
Noting this continuing marginalisation of the developing
countries, despite the huge possibilities offered by
globalisation in the fight against poverty, James Wolfensohn,
President of the World Bank, in a speech to the Tenth
Ministerial Meeting of UNCTAD in Bangkok on 16 February
2000, said:
"In Sub-Saharan Africa the number of people living
below $1 a day level has grown,... And the prospects
for future reduction in the numbers of those living
in poverty do not look bright. Recent World Bank estimates,
based on a 'business as usual' scenario of continuing
slow growth and recurring crisis, show that by 2008
the same number of people may still be living on under
$1 a day.... In fact, the numbers rise in Sub-Saharan
Africa by nearly 40 million."
He concludes that these figures "call into question
the ways in which the world has been doing development....
Poverty remains intractable despite economic growth
in many countries."
The negative outcome of this global economy is aptly
described by Michael Edwards in Future Positive:
"During the 1990's, workers in South Wales celebrated
the benefits of large-scale inward investment in manufacturing
industry, especially from East Asia. Late in 1997...the
celebrations in South Wales were cut short, providing
a useful reminder that globalisation carries risks as
well as opportunities."
The South Wales problem, itself an unfortunate consequence
of the stock market and banking collapses that swept
the East Asian economies, is one of the many illustrations
of this increasingly interconnected world of cause and
effect, where problems in one country have an adverse
effect on neighbouring countries.
The USA is currently experiencing one of its longest
economic growth periods in many years, thanks mainly
to the ingenuity and enterprise of the people of this
country and the impact of technology. This happens at
the same time as we witness significant improvements
in the global economy and forecasts for continued growth
are indeed positive.
At the same time, we note that this impressive economic
performance has not yet resonated in developing countries,
as it should have. Indeed, the many problems and conflicts
that characterise some of the developing countries impact
negatively on the processes that are essential for these
countries to join the current economic progress.
However, notwithstanding some specific problems in
some developing countries and especially African countries,
there are many among these countries that have and continue
to have stability and are at peace with themselves,
countries that have responded positively, even under
very difficult circumstances, to the prescriptions of
both the prospective investors as well as the multi-lateral
organisations.
Many of these countries have created the necessary
climate conducive to investment for example by liberalising
their trade, privatising state owned enterprises, reforming
their tax system and generally adhering to the prescribed
injunctions, all done in an attempt to attract the necessary
investments.
The response from the developed countries, to these
attempts by especially many African countries to stay
within the confines of the rules, has been to treat
the African continent as one country, and therefore,
to punish a country on the one end of the continent
for the deeds of another on the other end.
In our own country, we have been assured that our economic
fundamentals are correct and sound. We have developed
a stable and effective financial and fiscal system.
We have reduced tariffs to levels that are comparable
to the advanced industrial countries. We have reformed
agriculture to make it the least subsidised of all the
major agricultural trading nations. We have restructured
our public sector through privatisation, strategic partners
and regulation. We have an equitable and sophisticated
system of labour relations that is continually adjusting
to new developments. We play an active role in all multilateral
agencies in the world.
Yet, the flow of investment into South Africa has not
met our expectations while the levels of poverty and
unemployment remain high.
Part of the reason for this state of affairs is the
failure to restructure the global economy so that it
also benefits developing countries and addresses the
concerns repeatedly raised by developing countries.
In the same speech that we have already referred to,
Wolfensohn states that:
"In order to have a balanced and inclusive world
trade system, we need to pay special attention to developing
countries' current problems with the design and implementation
of the rules of the game in international trade."
He continues that:
"Developing country membership in the World Trade
Organisation has risen rapidly in recent years. 110
of them are now members. But membership does not equate
with influence. Many developing countries have limited
or non-existent representation in Geneva. And where
the rules have already been set - for example in the
case of customs valuation procedures - they have often
been based on developed country models, which can be
inappropriate and prohibitively expensive for poor countries.
In fact many WTO signatories have been unable to comply
with agreements negotiated under the Uruguay round."
Not only are developing countries disadvantaged by
lack of capital flows, but also by rules and regulations
that make the world trading system unbalanced and biased
against the very countries that need a fair trading
system so that these countries, which represent the
majority of humanity, benefit from international rules
of trade.
We need to create a situation where developing countries
are themselves part of the rules-making process and
that the rules take cognisance of the specific realities
of the developing countries, rather than approach the
rules from a 'one size fits all' perspective. We agree
with Wolfensohn, that we should ensure that the implementation
of these rules does not place unreasonable financial
and technical burdens on developing and poor countries.
There can be little doubt that in this century there
is a fundamental need to ensure that we overcome the
challenge of development and eliminate poverty. However,
to do this requires that we ensure a massive resource
transfer into the developing countries. At present there
is no concerted and co-ordinated attempt to deal with
this problem. The result is that more and more developing
countries slide ever further into poverty.
It is also the case that the developing countries must
take responsibility for their development. However,
they can only do this successfully if the barriers to
any real accumulation and growth that now stand in their
way are dealt with. The main areas are:
The need for more and better managed aid so as to deal
with the basic needs that will have to precede any form
of development in certain areas.
There is an urgent need to facilitate flows of Foreign
Direct Investment into the developing countries, something
that requires a complete structural change in the current
conditions. There has to be reforms in developing countries
that will surt investment. But there also have to be
major reforms in the way in which decisions are made
about development.
There needs to be a reduction of debt or cancellation
in many cases. Without this there will be no development
in most of the developing and poor countries.
The world trade system will have to be adjusted within
the framework of the WTO so as to eliminate imbalances
against the interests of developing countries. This
needs to be achieved through a broad-based and balanced
development round in the Was soon as possible.
Given the deterioration of the social infrastructure
in many developing countries that has often resulted
from the structural adjustment programs, the need to
rebuild this infrastructure is vital.
Many essential micro economic reforms that have to be
made in regions, communities and sectors to combat poverty
and to generate development cannot be carried out because
of the basic constraints caused by this imbalance in
the structure and governance of the world economy. At
present, the political and economic power of the developed
countries mean that they continue production in products
that are more competitively produced in the poorer developing
countries.
Chairperson
Since our arrival in the USA on Sunday, our belief
in the possibility of success in addressing all these
challenges has been strengthened by the fact that there
is a very close and important working relationship between
our countries as well as between our peoples. Our economic
links have also been growing and I hope that our visit
and interaction with the different sections of the American
society will further enhance and consolidate these mutually
important ties.
Currently two-way trade between our two countries is
R36 billion or about $5 billion. In 1995 it was R19
billion or just under $3 billion. In the period from
1994 to 1999 the USA contributed the largest inflow
of foreign investment into South Africa with a total
investment of some R21,5 billion. This is some $3 billion.
There is a tendency to think of our visits as always
being something new where we have to convince each other
that this relationship has to continue. The relationship
will continue - what we are talking about is the intensity
and the quality of that relationship.
The South African Economy
The size of the South African economy, ranking in the
top thirty in the world and the largest on the African
continent, has given it a prominence for many decades.
In addition, its mineral wealth is unsurpassed and its
industrial capacity considerable. But in 1994 it was
one of the many overly protected and inefficient developing
economies that were almost entirely dependent on the
vagaries of the world's primary product markets.
In the year 2000 the situation is significantly different.
The South African economy is emerging as a very competitive
manufacturing economy. We are moving towards a fully
free trade agreement with the European Union economies.
We are about to conclude negotiations for a free trade
agreement with other 13 members of the Southern African
Development Community (SADC). We have started negotiations
with Brazil and Nigeria as precursors to links between
SADC and Mercosur and Ecowas respectively. We also concluded
a Trade and Investment Framework Agreement (TIFA) with
the USA. The TIFA will no doubt develop in time into
further liberalisation between our economies.
By any measure these are signs of a confident and dynamic
economy. The reasons for this confidence are the results
of hard and consistent work to reform our economy and
the excellent relations we have built with both the
business and labour constituencies.
Like any economy we have our ups and downs in the economy.
Like all developing countries we are buffeted by the
world markets - but we have survived these storms as
well as, if not better, than most.
Our greatest challenge is to improve the lives of our
people. The levels of poverty and unemployment are too
high. The costs of apartheid have been high and it is
for this reason that we are still a developing country
despite the modernity of our economy and infrastructure.
We have approached this fundamental challenge in a very
strategic and considered manner. It was clear that unless
we reformed our economy and engaged successfully with
the world economy then it would not be possible to grow.
Accordingly, this was the first task that we embarked
upon. This was not an easy choice as it entailed job
losses in the uncompetitive sectors. So whilst we have
succeeded in generating hundreds of thousands of new,
better quality jobs we have lost more inefficient ones.
This process has now largely come to an end and our
task now is to generate new jobs in the new more efficient
sectors. We are also addressing poverty relief and rural
development. Our prudent fiscal policies have meant
we can provide extra resources to these needs without
taking on additional fiscal risk.
The democratic system in our country is an established
reality, underwritten by a constitution which strongly
protects and advances human rights.
Using all the possibilities we have, we are also playing
our role, together with other African countries, to
contribute to the creation of the situation in which
we bring to an end the violent conflicts, wars, instability
and denial of human rights that have characterised a
large part of our continent.
We will succeed in this regard as well as in the struggle
to end poverty and underdevelopment in our country and
continent, provided we can count on the kind of support
you gave us as we fought together to end the system
of apartheid.
|