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)| false Bhattacharya, Amar, Peter Montiel, and Sunil Sharma, 1997, “Private Capital Flows to Sub- Saharan Africa: An Overview of Trends and Determinants,” in ( Z. Iqbaland R. Kanbur eds.) External Finance for Low-Income Countries( Washington: International Monetary Fund).
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An earlier version of this paper was presented at the Meetings of the American Economic Association, Chicago, January 3-5, 1998. The authors are grateful to many colleagues in the Fund for helpful comments.
The group consists of Angola, Benin, Botswana, Côte d’Ivoire, Equatorial Guinea, Ethiopia, Guinea Bissau, Lesotho, Mauritius, and Uganda. These countries have achieved real per capita GDP growth of more than 2 percent in each year from 1995 to 1997. Other SSA countries that have experienced per capita growth of more than 2 percent on average in that period, albeit not in every year, are Burkina Faso, Chad, Mali, Malawi, Rwanda, Senegal, and Togo.
Some countries have begun to broaden their tax bases and raise the efficiency of their tax systems and have achieved very large increases in the ratio of revenue to GDP since the beginning of the 1990s (for example, Benin, Cape Verde, Ghana, Lesotho, and several oil exporting countries). At present, the level of these ratios ranges widely among countries—from more than 40 percent in some resource-rich countries such as Angola and Botswana to less than 10 percent in the Central African Republic, the Democratic Republic of Congo, Madagascar, and Sudan.
According to the Development Assistance Committee of the OECD, gross bilateral ODA disbursements to SSA fell from US$13.9 billion in 1990 to US$10.7 billion in 1996.
In some economies, natural resource endowments are so large that a fall in transactions costs will not suffice to make manufacturing viable, but it will improve the productivity of the natural resource sector and therefore increase real income. Sachs and Warner (1997) have argued that abundant natural resources are associated with a poor policy environment and low growth. But there are notable exceptions in SSA, such as Botswana and Namibia. Moreover, Collier suggests that, to some extent, it is the bad policy environment that induces concentration in natural resources, a sector that is less vulnerable than manufacturing to high transactions costs.
Indeed, investment is one of the few variables in growth regressions that holds up consistently across a vast range of specifications; see Sala-i-Martin (1997).
International comparisons of data on private investment must be interpreted with caution because investment by public enterprises is included for some countries—e.g., including most countries in SSA—but excluded for others—e.g., in Latin America.
Until recently, evidence on the higher risk of investing in Africa was mostly anecdotal. However, Collier (1997) points out that on the basis of the Institutional Investor risk ratings, Africa in 1995 was the most risky region in the world. A recent empirical study for 53 developing countries suggests that the risk of expropriation, insufficient civil liberties and the low quality of bureaucracy tend to have a large and statistically significant, negative effect on private investment (Poirson, 1998).
It is therefore particularly encouraging that the 10 recent strong performers in SSA have succeeded in raising their aggregate domestic saving rate from a range of 11 to 12 percent in the early 1990s to an average of 18 percent in 1996-97.