Globalisation, which is not a new phenomenon, may be defined as the increasing interaction among, and the integration of, the activities- especially economic activities- of human societies around the world. This definition contains both descriptive and prescriptive aspects. The descriptive aspect refers to the expansion of the international flow of trade, finance, and information into an integrated global market whereas the prescriptive aspect refers to the liberalisation of national and global markets in the belief that free flow of trade, finance, and information will produce the best outcome for both economic growth and human welfare.
The most urgent goals that determine Africa’s approach to globalisation are accelerating economic growth and development and eradicating poverty, which is not only widespread but also deep and severe in some counties. At the beginning of the 21st century, poverty remains Africa’s most pressing problem, and economic growth is the sine qua non of poverty reduction. Thus, Africa needs to achieve, as quickly as possible, growth that is both sustained and rapid.
The overriding reasons why Africa should have greater integration with the global economy are Africa’s poor overall economic performance-, which is due to a number of factors, including colonial history, disadvantageous geography, heavy economic dependence on primary products, and macroeconomic policy errors- and the advantages Africa can derive from globalisation.
Africa’s economic marginalization, the result of its relatively isolationist policies and closed economies, explains why economic prosperity has eluded most of the continent. The appeal of a more open economy is based on a simple but powerful premise: economic integration will improve economic performance. Additionally, globalisation will offer new opportunities- such as expanded markets and the acquisition of new technologies and ideas- all of which can yield not only increased productivity but also higher standard of living.
Trade remains the main vehicle for Africa’s participation in, and full integration into, the global economy. Africa’s trade is, however, concentrated in a narrow range of primary commodities, and, within this narrow range, Africa’s market share has been shrinking. During 1960-69, Africas average share of total world exports was 5.3%, and of imports 5.0%. During 1990-98, however, these figures dropped to 2.3% and 2.2 %, respectively. These declines are attributed to, among other factors, the restrictiveness of Africa’s trade regimes, and slow growth of per capita income, high transportation costs, and the continents distance from major markets.
It is worth noting that Africa was arguably the first continent to become integrated with the world economy: a higher proportion Africa’s wealth is held internationally than of any other continent. Moreover, although the global level of private capital flow has increased, Africa has not been one of the main beneficiaries. Thus, Africa has also missed the benefits that accompany such flows, such as job creation and transfer of technology, management and organisational skills. Even though the net return on investment is high compared to developing countries, Africa has nevertheless failed to attract the capital flows it needs because of negative perceptions of the continents economic and political activities, its poor infrastructure, and an inadequate legal framework, particularly for enforcement of contracts. Foreign direct investment has greater potential to stimulate economic growth in Africa. Although FDI in developing countries has increased in recent years, Africa share of the total has remain as low as 3%. In an effort to attract more FDIs, many African countries have taken the following measures: expediting the approval process, removing restriction on repatriation of profits, providing liberal tax incentives, and allowing foreign participation of in the privatisation of state-owned enterprises.
The forces behind globalisation are not only the increasing ease of communication and transportation but also the falling cost of communications. The cost of telephone calls has dropped in most countries, and the number of telephones has increased in all regions except Africa. In Africa, the telephone sector is characterised by low network penetration rates, obsolete equipments, and long waiting lists for telephone lines. In 1996, there were only 2 lines for 100 Africans. The average expected wait for obtaining a telephone in Africa was 31/2 years, the longest in the world. Telecommunication insfrastructure is a conduit to the internet, which lies at the heart of the information technology necessary for market-based economy. Complete integration with the global economy requires a functioning, readily accessible and affordable telephone system.
If Africa continues to have the lowest teledensity and the lowest computers of any region in the world, it will remain marginalised and cut off from information and knowledge technology and, therefore, unable to compete in the global economy.
Globalisation is not a panacea or a silver bullet. It will not solve all of Africa’s economic problems. Integration with the global economy is necessary but not a sufficient condition for growth. Sustainable growth and poverty reduction depends on other factors as well, including macroeconomic stability, a high investment to GDP ratio, reliable accounting and legal systems, and responsible government institutions. Empirical evidence shows that countries that have grown faster are those that have invested a large share of their GDP and maintained macroeconomic stability. Africa must also anchor its growth prospects in the development of human capital, physical infrastructure, and strong institutions. It must foster the development of the private sector and macroeconomic environment needed for the private sector to be viable. Good governance that stresses accountability, transparency, and the development of institutions- the civil service, a strong banking system, and a trustworthy and independent judiciary- is also critical in this era of globalisation.
Given the differences in education, infrastructure development, and macroeconomic stability in individual African countries, the benefits of globalisation are not likely to be the same for all. Africa can learn a lot from Asia’s development strategy. Asia benefited from its openness to the entire world and achieved enviably stable per capita income growth of 5% and above, with few downturns, and a remarkable decrease in the incidence of poverty. The progress was due to the importance the Asian countries attached to education and technology, an export-oriented strategy, a sound macroeconomic environment, and high saving and investment rates.
In order to maximize the benefits from globalisation, African countries should embark on the following:
At the national level, Africa must make policy changes to become competitive and capable of venturing into new areas. Countries need to liberalize trade by removing trade barriers while protecting delicate markets in some countries, adopting appropriate exchange rate policies and diversifying exports.
At the international level, there are two strands of thought on where Africa should concentrate its efforts. Some believe it should concentrate on primary products, where it has comparative advantage. Others focus on the long run, arguing that a determined shift toward the promotion of manufacturing and export of manufactured products will be required for Africa to achieve rapid growth. A comparative advantage in manufacturing would be a launching pad into the global economy.
At present, however, the playing field in international trade is not level. The industrial countries should eliminate restrictions against imports of African products, while the African countries must develop a coordinated trade strategy and play a more active role in both demanding and making trade concessions in trade negotiations. Many African countries have adopted policies to attract foreign investors (i.e. liberalizing investment laws, offering fiscal incentives, easing restrictions on entry and profit remittances, and strengthening their banking and financial systems). Industrialised countries should reduce or eliminate the debt burden as well as promote more flow of private capital especially foreign direct investment that is crucial to Africa’s development.
Moreover, international institutions like IMF, World Bank and WTO should work together toward the single objective of making globalisation a process of integration and not one of exclusion. The recent financial upheavals in the world illustrate the pressing need to reinforce the consistency between the programs of these different institutions.
Finally, regional integration and increased economic cooperation are also important for ensuring Africa’s integration with the global economy. Indeed, at a time when globalization is predominant and regional grouping, whether political or economic, are the principal influential forces on the world scene, it is up to Africa’s leaders to further develop these mechanisms of integration, in particular by establishing vertical and horizontal links across the continent that overcome ethnic or regional sensitivities. Larger free trade zones and joint development projects are two examples.
The regional organisations must be viewed as instruments that can facilitate the integration of the African countries with the world economy by improving African producers’ access to the regional markets. They must neither limit themselves to protesting nor become protectionist fortresses against globalization, but rather must develop programs and strategies to further consolidate regional cohesion.
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