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© 1997 International Monetary Fund

Design and production: IMF Graphics Section

Cataloguing-in-Publication Data

Deepening structural reform in Africa : lessons from East Asia / editor, Laura Wallace.— Washington, D.C. : International Monetary Fund, [1997]

p. cm.

“Proceedings of a seminar held in Paris, May 13–14, 1996, International Monetary Fund, Ministry of Finance of Japan.”

ISBN 1-55775-634-1

1. Structural adjustment (Economic policy) — Africa — Congresses. 2. Africa — Economic policy — Congresses. I. Wallace, Laura. II. International Monetary Fund. III. Japan. ˉOkurashˉo.

HC800 .D44 1997

Price: $20.00

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Preface

This volume covers the papers and proceedings of the seminar on Deepening Structural Reforms and Policies for Growth in Africa, held in Paris on May 13–14, 1996. The seminar was sponsored by the Japanese Ministry of Finance and jointly organized by the latter and the IMF, in consultation with the World Bank. The seminar was the third of its kind, after the seminar on Policies for Growth in Africa in 1994 (in Tokyo) and on External Assistance and Policies for Growth in Africa in 1995 (in Paris). As in previous seminars, the 1996 seminar brought together senior officials from almost 20 African countries, experts from several Asian and European countries, and senior staff of the IMF, the World Bank, and the OECD.

The seminar’s objective was to analyze progress and obstacles for structural reform, derive lessons for Africa from the East Asian experience, and explore ways to accelerate reforms to foster growth in Africa. After years of being battered by terms-of-trade shocks, economic mismanagement, and civil and political turbulence, including recent moves to democracy, many African countries are finally achieving higher growth rates. There is general agreement that macroeconomic stabilization has played a key role in this reversal and that sound and stable macroeconomic policies—budget discipline, relatively low inflation, and realistic exchange rates—as well as open markets are an essential prerequisite for successful reform and sustained growth. However, the question is why the growth response to the improved macroeconomic environment and liberalization of markets has not been stronger and faster. Growth must be much higher to close the gap between Africa and much of the rest of the world within a reasonable time. Most observers agree that the African economies have by and large been successful in implementing the “early stage” of structural reforms, that is, liberalizing exchange systems, opening up trade and payments systems, removing price controls and quantitative restrictions, and liberalizing production and marketing systems, especially in agriculture. But most also agree that the record on the more difficult reforms—involving revenue mobilization, public enterprise restructuring and privatization, and financial sector reform—has been much more uneven. The seminar was therefore cast around the theme of how to accelerate reforms in these three areas, providing policymakers an opportunity to share their hands-on experiences in Africa and Asia and draw lessons for future policies.

In the seminar presentations and discussions, several cross-cutting themes emerged. One was the sequencing and pacing of sectoral reforms, with some participants emphasizing the costs of going too fast, but many others—including most African participants—preferring a faster pace of reform toward market-based monetary, exchange, and financial systems, but with political commitment, coherence, and attention to the supporting institutional and legal changes.

A second theme was the need for a broad political and social acceptance of change and reform; for this, participants agreed, it is essential that policymakers communicate and discuss the costs and benefits of policy options (in particular, the costs of inaction and existing inefficiencies) with all involved, including through a dialogue with the private sector, nongovernmental organizations, and other parts of the civil society. Raising public awareness of the advantages is particularly important for privatization. It is essential to secure both short-term results to sustain the reform process politically as well as long-term results in terms of sustainable reductions in poverty.

A third theme was the need for transparency and accountability in economic management—an important element of good governance—which is seen as socially desirable, favorable to economic growth, and supportive of national ownership of reforms. Good governance is also becoming a more and more important element for donors who, with aid budgets under severe pressure, are seeking an efficient use of their taxpayers’ monies through greater selectivity in aid allocation. Finally, continued attention must be paid to how to tailor stabilization and structural measures to individual country circumstances. This implies continuous debate among policymakers, civil society, and external actors on how and how quickly to proceed with reforms and ensure the right institutional environment.

Jack Boorman

Director

Policy Development and Review Department

International Monetary Fund

Acknowledgments

This seminar was organized by Masato Matsui, Hitoshi Shimura, and Takayuki Yahata of the International Finance Bureau of the Ministry of Finance of Japan; Yoshiyuki Tahara of the Office of the Executive Director for Japan in the International Monetary Fund; and Hiroyuki Hino and Arend Kouwenaar of the International Monetary Fund. Help with the logistical arrangements in Paris was provided by Irene de Heurtaumont of the IMF’s Paris Office. I would like to thank Marina Primorac of the IMF’s External Relations Department for her skillful style editing and for preparing the volume for publication.

Laura Wallace

Editor

Glossary

Contents

• Preface

• Acknowledgments

• Glossary

• Contents

• Overview

  • Laura Wallace

• I. Progress and Challenges in Structural Reform

• 1. Opening Remarks

  • Hideichiro Hamanaka

• 2. Obstacles to Continued Reform: An African Perspective

  • Kwesi Botchwey

• 3. Obstacles to Continued Reform: Indonesia’s Experience

  • Dahlan M. Sutalaksana

• General Discussion

• II. How to Accelerate Reform

• 4. Strengthening Revenue Mobilization Efforts in Sub-Saharan Africa

  • Peter S. Heller

  • Comments: Shahid Yusuf

• 5. Financial Reform in Central Asia: Lessons from the Kyrgyz Republic

  • Tetsuji Tanaka

• 6. Speeding Up by Slowing Down: A Market-Building Approach to Financial Sector Reform

  • David C Cole and Betty F. Slade

  • Comments: Basant Kapur

    • Patrick Downes

    • Tadahiko Nakagawa

  • General Discussion

• 7. What Next for African Parastatal Enterprises?

  • John Nellis

  • Comments: Yasuo Yokoyama

• 8. Parastatal Reform and Privatization in Côte d’Ivoire

  • Jean-Claude Brou

• 9. Parastatal Reform and Privatization in Mali

  • Soumaïla Cissé

• General Discussion

• III. Enhancing the Effectiveness of External Assistance

• 10. World Bank– and IMF-Supported Programs: A Burkino Faso Perspective

  • Zéphirin Diabré

• 11. World Bank- and IMF-Supported Programs: A Zambian Perspective

  • Jacob Mwanza

• 12. Improving Overseas Development Assistance: The Broad Sector Approach

  • Michael Foster

  • Comments: Peter Warutere

  • Masako Ii

• General Discussion

• IV. Future Role of Governments and Donors

• 13. Panel Discussion

  • Mark Baird

  • Richard Carey

  • Ravi Kanbur

  • Hiroyuki Hino

• 14. Tour de Table

• 15. Concluding Remarks

  • Jack Boorman

• List of Participants