31 Jan 2009
The opening morning session of the World Economic Forum traditionally focuses on the "Global Economy." This year the forum is taking place in Davos from 29 January to 1 February 2009. The session is convened by Michael Elliot, the editor of Time International.
On the opening panel this year were Trevor Manuel, Finance Minister of South Africa; Justin Yifu Lin, Senior Vice President and Senior Economist at the World Bank; Ferit F. Sahenk, Chairman, Dogus Group, Turkey; Heizo Takenaka, Director, Global Security Research Institute, Keio University, Japan; and Stephen Roach of Morgan Stanley in Asia
The clip above is a recording of the entire session. However, what follows is a transcript of Trevor Manuel's response to the question put to him by Elliot.
Michael Elliot: Trevor Manuel, lets pick up some of those points. One of the issues that we noted at this session last year was that Africa had had, five years of historically high rates of growth. You could see some poverty reduction on the back of high commodity prices and growth in world trade.
What has the crisis done in your region and in other parts of the developing world?
Trevor Manuel: Thanks a lot Michael. I suppose that the debate last year was about decoupling. But now looking at Africa, its a risk of decoupling, derailment and abandonment together, because so much of the Africa project has been work in progress. And if we look at the conduct now in repect of the developed world, there's a much higher level of protectionism, especially as fiscal resources plough in.
Secondly, I think that there's a risk that Africa's markets will be flooded by the need to stimulate consumer demand somewhere and anywhere in the short term.
Thirdly, I think that we .... I know that we're seeing a retreat of some of the investments. In the Democratic Republic of Congo, there are some 48 different mining projects that are in various stages of abandonment now.
Its also important to take account of two other issues; and one is that countries that had taken the tough decisions of micro economic reform and then been able to access capital markets are now crowded out. The markets are effectively closed.
And lastly I think that there's an enormous risk that the ODA (official development assistance) committed is unlikely to flow. At last count we were already 240 billion US dollars behind the Gleneagles commitments. So I think that the short term prospects for Africa are exceedingly difficult and this is what we must respond to.
I think that the bigger challenge though is just how we read this and I know you said to Stephen that we shouldn't look back and I ... I disagree. I think we must. We must understand what has taken place. Not as though we are collectively "Lots Wife," but we need to understand exactly what has happened.
And I think that one of the biggest failures of the past era has been a failure of multilateralism. We've tended to treat states as debtors and creditors, rather than as 'co-responsibles' and that has to change and I think that this must be part of the emphasis going forward.
The other point and just to pick up on something that Justin had raised -- there is a risk that the hurried interventions on both the monetary and fiscal sides will lead to nought. We're seeing a kind of lemming like approach. Trying to get to the precipice first without any idea of what that money is going to buy and I think that you're going to end up with wealthy states exceedingly indebted in the future and not much to show for it and that I think is what we must try and avoid by cooperation that's quite different and perhaps more measured than what we've seen thus far.