For Online E-newspaper
The East African : June 9th 2014
The EastAfrican OUTLOOK JUNE 7-13,2014 Q &A WI T H P I E R CAR LO PAD OAN Italy to East Africa: We are here to invest and help expand industries Italy rarely, if ever, features on the list of countries with a big presence in the East African region. Not anymore. Italy’s Minister of Economy and Finance was in Kigali and spoke to The EastAfrican’s BERNA NAMATA on the renewed interest in the region. What is driving Italy’s seemingly renewed interest in the East African region? There is growing interest from Italy — we recently launched the Italy-African initiative to intensify ties and facilitate economic integration between the Italian economy and African economies. I’m very interested in the proc- ess of integration in East Africa – it is a fascinating experiment. What we know in Europe about integration is that it is a powerful driver of growth and it is taking place within economies that are already doing very well. My expectation is that with further integration this boost will continue. This will also be instrumental in facilitating integration of the African economy into the global economy. It is important that this is about trade and investment as well as monetary integration. What specific sectors are Italian companies targeting in East Africa? Italian companies are looking for opportunities for investment and market expansion. They are also flexible enough to integrate in the economies of East Africa, which are not only integrating but also transforming themselves. Italian companies have diverse expertise including investment tools, machinery and high value added goods. They can make the best of dynamic expansionary situations because of their specific comparative advantage — they are keen on doing this. Dynamic Italian companies are, for instance, specialised in machine tools so any process of industrial transformation would benefit from intermediate and capital goods coming in from those companies. But they are also capable of transferring management and production technology based on ICT that can be applied to African companies. Let me add that Italian com- panies also have a comparative advantage in energy sources, especially renewable energy, which could be of interest. One thing that can help this process would be to know more about the characteristics of the integration process and to learn more about this part of the world. Currently, the EAC is in the advanced stages of launching a monetary union. What lessons can these countries draw from the Eurozone crisis? There are a number of lessons – one is that having a good integra- tion of the real side of the economy in terms of labour markets, business environment so that companies can easily reallocate resources, will make the monetary union much stronger. What makes monetary union difficult to manage is rigidities in labour markets and lack of competition on one hand and difficulties in reconciling monetary stability with fiscal equilibrium on the other hand. It is also important to design macroeconomic rules and institutions in a way that allows convergence in a gradual but precise way. If the target is to form a monetary union, then ensure fiscal sustainability and growth at the same time. One of the problems that the Eu- ropean economies are facing right now is that there is lack of growth, making the functioning of the Eurozone particularly difficult. Africa is increasingly developing a number of ground breaking partnerships with the rest of the world, with China taking the lead. How do you view this development? This is a very important opportunity provided that the play- ing field on which this competition takes place remains level and transparent. Otherwise, there may be risks of becoming captive of some national policies that may in the long run not be so positive for the country. For instance, in some cases, countries may offer resources without looking at the environment in which those resources are invested. It is important to establish ties with other economies. It is equally important that while integration proceeds, alternatives are kept open. Integration should be global and not just bilateral to avoid being captive of certain countries with a lot of resources. What are the prospects the region? BIO CURRENT POSITION: Pier Carlo Padoan was appointed Italy’s Minister of Economy and Finance February 24. He is also the European Investment Bank Governor for Italy. PREVIOUS POSITIONS: Chief economist, OECD Deputy secretary-general, OECD Professor of economics, University La Sapienza of Rome Director of the Fondazione Italianieuropei, a policy think-tank on economic, social issues. Italian executive director at the International Monetary Fund, with responsibility for Greece, Portugal, San Marino, Albania and Timor Leste. (2001 to 2005) Economic adviser to the Italian prime minister, in charge of international economic policies (1998 to 2001) I’m convinced that Africa has a bright future — most of the African countries are on the right path and I hope this can be achieved with increasing integration plus stability from a political and social point of view. 31 Develop indust≥y o≥ pe≥ish, wa≥ns ≥epo≥t By ALEXIS AKWAGYIRAM Special Correspondent SEVERAL AFRICAN countries have enjoyed economic growth in recent years but a failure to develop manufacturing could prove costly. According to the United Na- tions Industrial Development Organisation, Africa has a meagre 1.5 per cent share of the world’s total manufacturing output, compared with the Asia Pacific’s 21.7 per cent, East Asia’s 17.2 per cent and North America’s 22.4 per cent share. “Economies that have sus- tained high growth over the long term have typically gone through a process of economic diversification, the spread of new technologies, rising productivity in agriculture, the expansion of the manufacturing sector, and the development of a skilled workforce,” notes a recent Africa Progress Panel report. “These have not been charac- teristics of growth in Africa... Put differently, there has been a lot of growth but little structural transformation,” the report concludes. Economists on Africa’s growth For example, despite Mozam- bique’s status as one of the fastest-growing economies in the world, more than 20 per cent of its population remains unemployed. That dichotomy, which can be found in other African countries, has led economists to question whether the growth seen across the continent will ever translate into more jobs and a greater distribution of wealth. Some experts say the current dearth of vibrant manufacturing sectors in Africa is a big factor preventing countries on the continent from cutting unemployment and spreading wealth. The Africa Progress Panel re- port states that fewer than one in 10 African workers find jobs in manufacturing. “Job creation is important for young people coming into the labour force. Natural resources don’t generate jobs — that’s the dilemma facing a number of countries. There was always a tendency for foreign direct investment to follow natural resources because that is where you get the fastest results. No country has developed without producing light manufacturing,” says the report. “We cannot achieve develop- ment unless we industrialise. We have the land, the people and the products. But we need to process more of our products in order to create jobs for the young people,” the report quotes Nkosazana Dlamini Zuma, chairwoman of the African Union Commission, as saying.
June 2nd 2014
June 16th 2014