World Development Report 2009 Symposium

WORLD DEVELOPMENT REPORT 2009 SYMPOSIUM WORKSHOP REPORT

DAY ONE - Thursday, 24th April, 2008

The conference was officially opened at 09:40 am

Welcoming remarks Welcoming remarks were given by Prof. Samuel Wangwe, Chairperson and an Executive Director for Daima Associates and Dr. B. Lunogelo, Executive Director, ESRF

Presentation of the Workshop Programme The presentation was done by the Chairperson, Prof. Samuel Wangwe

Round robin introduction See participant list for details

Summary of the World Development Report 2009 ‘Reshaping economic geography’ Selected Findings and Messages By Mr. Truman Packard, Senior Economist WB and WDR Team Representative

The main aim of the symposium was to give constructive criticism, advice and guidance about the WDR 2009

Current working title: Reshaping economic geography

The report proposed that:  The concentration of economic mass is inevitable and generally desirable  Persistent spatial disparities in welfare are neither desirable nor inevitable  The way to get both concentration and convergence is through integration – both within and between countries  When integration is fully implemented, countries will experience unbalanced growth and balanced development.

Economic Development can be looked at in three ways:  Economic growth is uneven; it happens in bumps  Economic growth happens in curves (from linear to non-linear). Spatial disparities in production and living standards are at first expected to rise and then fall  Development is usually not neat. Spills are always involved. Location and proximity to a prosperous place can be a key to development. Rising congestion leads to spillover of benefits to those nearby

Three spatial scales: 1. Area around a city. Large metropolitan area. For example Lagos. 2. Country level. For example Nigeria. 3. International-regional neighbourhood. For example the West African Region.

1 Proposal of the report The report is characterized by the spatial transformations that accompany development, at three different spatial scales:  Cities and Hinterlands: Density ( Economic concentration of people)  Leading and Lagging areas: Distance (economic distance between people)  Connected and Isolated Countries: Division (Borders)

Proposed policies for economic integration:  Urbanization: Better rural-urban and within-urban transformations  Territorial development: Linking lagging and leading areas  International integration: Connecting poor countries to world markets

The mentioned areas of policy instruments were: 1. Spatially blind institutions: Education, health, and tax mechanisms. 2. Spatially connective infrastructures: Ports, roads etc. Also information technology. When spatially connected infrastructure is in place, it lowers the economic distance between people. 3. Spatially targeted incentives: like slum resettlement projects, lagging area initiatives

Findings of the report: There are challenges to development, which manifest themselves geographically. The first two sets of instruments should be exhausted before shifting to spatially targeted incentives. The economic geography has got to be analysed in order to realise the applicability of distance, density, or division problem.

The structure of the report was laid as follows: Part one: Stylized facts Part two: Market forces Part three: Government policies Where each spatial scale has three chapters

Remarks on the process  Report Schedule:

May 2008: Gray cover draft June 2008: Board discussion

 Consultation and press:

February -April 2008: Regional consultations April 2008: EDs’ advisors meeting

There is time to make changes and to receive inputs, which are critical to the credibility of the report.

2 WDR 2009 - Findings and emerging messages on Urbanization By WDR team member: Chorching Goh, Senior Economist, WB

Urbanization refers to spatial scale 1: (i) Area: For example State, province or metropolitan area. (See chapter 1, 4 and 7)

With regard to Urbanization, the most important dimension of spatial transformation is Density. The second-most important dimension is Distance because of congestion (For example Traffic), and the third dimension is Division between formal and informal settlements.

Economic force: Agglomeration Key factor of production: Land (Immobile factor)

Main findings were:  Rising concentration of economic activity in urban settlements, then a leveling-off Today’s developing countries are said to not be different from early developers. Transformation is in two stages: first from agrarian to industrial (rural-urban), then post- industrial (urban-urban).  Wide, then narrowing, disparities in social welfare between settlements Today’s developing countries are not different from early developers  Cities and towns are bigger today What differs is the size and magnitude of Urbanization.

Sectoral and spatial transformations are linked  As economies grow from agrarian to industrial, the urban share climbs sharply  As economies grow from industrial to post-industrial, the urban share rises more slowly  As highly urbanized areas mature, economic activity starts to de-concentrate

Urbanization trends: Rising density Time series: Developing countries experience a similar spatial transformation as early developers Cross-section: Shares of population living in urban agglomerations rise with level of development Pattern: The current urbanization pace, compared to earlier urbanization of western countries, is not unprecedented, and the speed is not unprecedented. Difference: The size of urban population is larger, and it is driven by China and India. Urban and rural gap has always been significant. Urban-rural disparity, initially large, then Density converges with development. Similar patterns for non-monetary welfare measures. Likewise: Disparity in welfare services initially widens in urban areas, then in narrows.

Analysis and insights - What drives development?  As countries develop, they enter the realm of increasing returns (scale of economies)  Spatial transformation that accompanies development gives rise to a portfolio of places

3 Scale economies and a portfolio of places  Types of scale economies: One internal, two external (or agglomeration)  Internal economies come from large plant size  Localization economies come from increases in numbers of firms in the same industry and same place  Urbanization economies come from presence of large number of different industries in the same place. Towns and elites facilitate different types of scale economies

Revisiting the Urbanization debate  Urbanization debate has been about: – the speed of urbanization, the magnitude of rural-urban migration, and the size of primary cities

WDR 2009 proposes to focus the debate on efficiency The discussion is to whether the process from rural to urban is an efficient one.That is, optimizing between agglomeration benefits and congestion costs from concentration The debate should be about how government policies balance the costs and benefits of urbanization.

Areas of approach We should consider an intermediate spatial scale – an area: the province, municipality – Different sub-national areas urbanize at different speeds – Considerable heterogeneity in size and density across sub-national areas

Challenges multiply with an area’s level of urbanization Incipient urbanization (Density): Intermediate urbanization (Density and Distance). Advanced urbanization (Density, Distance and Division)

First set of instruments for the first dimension of the policy challenge This is the case of Tanzania: 1. Blind Dimension: Building institutions and basic welfare services, improve land markets and property rights.

2. Dimension: Build density, reduce distance. Blind (Institutions), and Connective (Infrastructure provision).

3. Dimension: Build density, reduce distance, and eliminate division. Blind (Institutions), and Connective (Infrastructure provision and targeted Slum relocation, place-specific crime prevention

Probably, several things have been taken care of, but more stress is required on blind institutions. Mostly, people jump directly to the targeted instruments, but is it necessary to look at the blind and connective dimension?

For example: • Areas with incipient urbanization— rural-urban linkages – one-dimensional policy challenge

4 – Use spatially blind instruments to build density – Improve land markets and property rights – Invest in basic and social services; Institute sound macroeconomic policies • Areas with intermediate urbanization—inter-city linkages – two-dimensional policy challenge – In addition to spatially blind instruments to build density – Use spatially connective instruments to overcome distance associated with congestion – Invest in trunk infrastructure to improve inter-city connectivity • Areas with advanced urbanization—metro area integration – three-dimensional policy challenge – In addition to spatially blind instruments to build density and spatially connective instruments to overcome distance – Use spatially targeted incentives to eliminate (social and economic) divisions. Targeted crime prevention; build social capital; address slum problems (e.g., subsidized mortgage, low-cost public housing

Discussion on the Urbanization Dimension – and the general overview of the WDR QUESTIONS / COMMENTS BY SCHOLARS  Do you mean that urbanization goes with development? Some reports from WB indicate that most growth from urbanization takes place in industrialized countries, such as Asian countries.  Concept of urbanization: Rural versus urban. Relationship between countries must also be considered, between developed to developing countries, resources drawn to developed countries. Have that point been taken into consideration?  What is the initial idea that urbanization is a good strategy? Malaysia initiated urbanization as a specific policy in order to achieve development. Sequential approach has been taken: the three D’s in the third: informal-formal aspect comes up. The formal-informal dimension must be taken into account throughout the sequences. Should we encourage people to come to the cities, to the slums like Kibera, Nairobi?  The spill-over effect; Most of the big cities in developing countries, congestion force has been high, but no spill-over effect takes place. More clarification please  How does this relate to the area of growth force and trickle down effect? Earlier, what was expected to trickle down did not take place. Are we going back to the trickle- down paradigm? Or are we revisiting it? There is an increasing change of backwards effect from urban to rural areas. What is the significance of that? We have not industrialized. What we have is people getting poorer in both rural and urban areas. What we see in Africa is that urban groups are small in relation to the rural areas, but they are more powerful and have more voice. 30 percent in Africa. This aspect of political imbalance should be taken into account in the report. We need to discuss the institutional challenges vis-à-vis the fruits of growth.

5 COMMENTS BY TRUMAN  Comments on the general framework: Growth paradigm will be discussed by our expert on economic growth. You can probably find countries where urbanization does not fit our pattern. With regard to people who immigrate to cities not because of jobs, it will probably be found that people immigrate due to lack of land, lack of rural productivity in certain areas. But we had to come up with a certain pattern. Due to better hygiene, and lower infant mortality, more people live longer.  Is Africa unique or special with regard to urbanization and industrialization: It was surprising when we looked at urbanization in the western countries; the living conditions were much worse than in the rural areas. The differences between now and then is the volume. Africa is not a special case. It is instructive to look at history. I think we should encourage urbanization, like to Kibera.  Are my spatially blind institutions functioning well? If that is ok, then we should look at the infrastructure – is it functioning well? Issue of institutional capacity – is it taken into account? Yes, it is. We can be more explicit. It is leading to different conclusion. Low institutional capacity does not mean that one should jump to space-based initiatives. It is not efficient. It is the most difficult policy to carry out. Why? Looking at the conditions of the US when it carried out income-based tax system: people were generally poor. Rural-urban relations: unbalanced political power: We intend to add some analysis about that.  The informal aspect: informality can not be avoided. They are an issue of bad- functioning institutions.

COMMENTS BY CHORCHING GOH (QUESTIONS ON URBANIZATION)  First of all in Africa, data was a problem. There is no updated census. There were only ten countries with updated good data on population but the rest of the countries showed negative economic growth.  Comments on the issue of preconditions for urbanization to work: All countries with successful economies have had urbanization.  Comments on convergence do not automatically take place. Earlier empirical data shows that convergence has taken place upon economic growth.  New economic geography approach is applied. Attempts to understand why there are big cities.

6 Urbanization paper I: ‘Human Settlements, Urban Transition and Land Access in the Framework of Development Policies and Strategies in Tanzania’ Dr. F. Lugoe, Rector, DILAPS Focus on urban- rural linkages and government policies in Tanzania – 1960 - 2007

Generalities  Human settlements can be characterized by site or by situation  Conceptualization of site and situation  Characteristics of a village

Characteristics of earlier rural life in Tanzania Two broad sets of government-supported village settlement programmes were undertaken in Tanzania over the 15-years prior to the Arusha Declaration: (i) Supervised settlement schemes and (ii) co-operative farming settlements

Data on villages in Tanzania 1960’s and 1970’s Villages were created by the government policy in Tanzania.

Characteristics of a town/city In Tanzania, a town should have a population of approximately 30,000 people and at the same time be self-sustaining in budgets to at least 50%, a hospital, secondary school, 50 licensed shops, a police station etc. Main point: Currently, many of the TZ villages are in fact towns.

Town site and situation factor Some site factors naturally lead to a concentration of people in an area which then encourage the growth of trade and eventually industry. Resource sites include those of most resort or tourist towns. This is true also with mineral deposits.

Population zones are caused by: Similar cultural background, religious background, differences in income levels (For example: Squatters (cannot afford to pay rent) up to 480 persons per hectare), immigration.

Problems of rural immigration: Urban growth and decline Urban growth is the increase in populations of urban centres by rural-urban/rural migration in addition to natural increases. Majority of the migrants get employed in the informal sector.

Problems:  Urban growth is not necessarily a good thing. Problems of urban growth include unemployment, deterioration in social services, urban sprawl, traffic congestion and (air and water) pollution.  The growth of towns due to rural-urban migration is so high that the resources allocated for housing, water supplies, sanitation and waste disposal are inadequate.  Traffic congestion becomes more of a problem as towns grow due to increased ability to provide needed services.

7 Development of informal settlements in Tanzania  Tanzania officially acknowledged in-migration forces into towns as early as mid- 1960s  It was a recognition that Urban Growth was a problem and so were its effects that included squatting and poor services.  A policy to expand 10 towns as URBAN GROWTH CENTRES was passed in 1968 in Pres. Nyerere’s speech “To Plan is To Choose”

Rural – urban migrations causes  Colonialist divided the mainland into two major areas: Core (cash crop) and Labour Reserve Areas  Growing number of hired labourers for cash crop farmers. Those forces are still active.  People looked for better paid jobs in the urban centres, which were considered attractive

Rural – urban migration statistics  Between 40% and 70% of Tanzanians in main urban centres live in unplanned settlements.

Dar es Salaam in migration statistics  More than 100 squatter areas in Dar es Salaam today  Out of 500,000 housing units in Dar Es Salaam, about 400,000 i.e., 80% (2003) are found in the unplanned areas and about 70% of residents live there i.e. 350,000 households.

Outcomes of urban growth  Building in unplanned, unsurveyed and unserviced areas accounts for most of the new constructions in many urban centres  There is lack of secure tenure on the land and lack of basic social and infrastructure services.

Urban land access  In the 1960s, numerous re-settlement and housing schemes were initiated in most of the major townships of Tanzania for: Government High Density development and National Housing Corporation layouts.  Ministry of Lands was able to cope with the situation of increasing demand for land in all towns throughout the 1960s up to 1972.  It was governmental policy that land must be provided prior to development.

Demand for urban land parcels  Statistics show an accumulated demand for houses from 1972 and onwards

Real demand for urban land parcels  High level of construction work indicates a high demand of land  Increasingly high demand for land in urban areas, and low supply

Constraints on supply of urban land

8  Decline in the production of urban land parcels: lack of money to pay compensation and enable mass production of plots.  Budgeting: During “Madaraka Mikoani” there was no budget item for all surveys, let alone cadastral survey of urban plots, at the sector Ministry. Land delivery activities received little attention in the Regions.  Mindset: Land can be taken away by government without paying compensation  Prioritisation: Lands sector activities do not have priority in the economy even to this day.  Vision: Policies and Strategies of the time lacked continuity and focus – e.g., there were no efforts targeted at supplying urban plots in the 1980s, besides those provided to public corporations.

Alternative interventions Initiating the squatter clearance programs and later squatter upgrading as a means of introducing services; Sites and services scheme (SSS), assisted by the WB; The National Housing Corporation (NHC); The housing finance through the Tanzania Housing Bank (THB)

Policy statements …. “it is therefore Government’s intention to try and build up 10 urban growth centers by diverting suitable new factories and employment opportunities to selected towns. The aim is to help each of these growth centers reach the point where it is in itself an attraction to industry without special Government Intervention – to plan is to choose” – policy statement by J. K. Nyerere, 1968.

Interventions to redress squatting  20.000 plots project. Project was launched to address scarcity of urban land, and implement the sectoral poverty reduction and the anticorruption strategies Within a year project had created 21,800 plots, in addition to other sources, to a total of 25,865. This was the first time that the record surpassed the 15.000 plots from 1971. Created considerable revenue, yet momentum lost.  MKURABITA - the property and business formalization programme Goal is to empower the poor in the informal sector so that they can participate fully in the modern market economy through the use of the formalized properties and businesses, effectively contributing to the attainment of the MDG Targets.  MAZAGAZAGA - project to create urban land property register for economic empowerment of urban non-rich residents and

In conclusion  Tanzania is urbanizing fast at the influx of migrant populations in addition to natural increases and as a result of national population movements eastward.  Most policies had political motives and not focused on regulating urbanization or visionary enough as to see effects of certain interventions  All in all, urban dynamics have been affected by constraints in Government policies, land sector strategies, finance, capacity organisation, corruption, prioritisation, urban plot scarcity and mindsets on land ownership and land use.

Urban land access constraints has three clusters:  I: 1961-1972. Smooth increase in planned and surveyed urban land parcels (plots)

9 implying that demand and supply were in close agreement. Slums were a rear phenomenon.  II: 1973-2000. Affected by several policies and strategies namely; Villagelization and Madaraka Mikoani; budgeting; village land demarcations; neglect of the urban environment; underutilised human resources; ill-equipped and ill-facilitated; professionals in spite of rising numbers thereof; skewed mindsets; misdirection in policy such as free urban land delivery; infancy of local government machinery; corruption; retrenchment of skills under Local Government reforms; complacency and clear lack of vision let alone strategy.  III. 2002-2008: The period is overwhelmed by: budgeting; squatting levels; a dependency syndrome on grand projects; skewed mindsets; corruption; in-house project executions.

Urbanization paper II: ‘Urbanization and slum formation in Tanzania: Environmental and public health consequences’ M.A. Kishimba, Assoc. Prof in Chemistry, University of Dar es Salaam Introduction In developing countries, urbanization has neither been associated with industrialization nor with high economic growth rates. This situation has led to the formation of slums.

Global urbanization trends  In 2007, a human being either moved to or was born in a city  Slum dwellers crossed the one-billion mark  By 2030, 5 billion people will live in urban areas  Of these, 4 billion (80%) will be living in the developing countries of Asia and Africa.  ‘Metacities’, i.e. the massive cities of more than 20 million people above and beyond the scale of megacities, are gaining ground in Asia, Latin America and Africa  Despite of the megacities, the majority of rural-urban migrants will move to urban centres with less than 1 million inhabitants.

Urban population growth  Natural population increase, rather than migration, is becoming a significant contributor to urban growth  Inadequacy of infrastructure, such as roads, water supply and transportation and other facilities makes many cities less competitive and leads to a lower quality of life for their inhabitants

Developing world cities Will absorb 95% of urban growth in the next two decades poverty and inequality: urban growth will become virtually synonymous with slum formation in some regions Sub-Saharan Africa has both the highest annual urban growth rate (4.58 %) and the highest slum growth rate (4.53 %) In Africa, continued threat of conflict in several countries is a significant contributing factor in the proliferation of slums in urban areas

10 Slums Conceptualization: Tanzania: Informal settlements; unplanned settlements > fall into categorization of slums

The case of Africa  African cities have been expanding without economic growth—the necessary boost in production and employment opportunities for a long and disturbing period.  Lack of sufficient political will, decisive planning and reforms in a context of persisting poor governance hampered by conflicts.

Urbanization in TZ  Tanzania is less urbanized than both the global and developing world average  Of the total population of 38 million, some 24%(slightly over 9 million people) live in urban areas  Urban population is growing rapidly at over 3.6% per annum, twice the national rate of population growth.

History of urbanization in TZ  The location and distribution of major urban centres in Tanzania is the product of German and British colonial decisions in the late 1800s and early 1900s  Predominant proportion of urban growth after 1960 was attributed to the rapid expansion of a class of African urban poor which was restricted from urban settlement during colonial period

Recent and current urbanization trends  Decline in formal employment and increasing role of the informal sector  Increasing urban poverty and lack of security of tenure.  Many urban areas have poor drainage systems, poor sanitation, and lack access roads, poor housing condition and deteriorating spatial qualities.

Dar es Salaam: Recent and current urbanization trends  Fast increase in built-up areas in the 1970’s, 80s and 90s in unplanned areas  Infrastructure is currently designed for less than a 30 percent of the population in Dar es Salaam

Unguided urban densification and change of use of space and buildings  Consolidated compact settlements inhibits efforts of upgrading and poses a number of risks to residents and their properties  housing density in both unplanned and also planned consolidated settlements are alarming  Plot coverage exceeding 50% is associated with limited outdoor space and minimal setbacks between buildings and thus undermining spatial qualities such as cross ventilation and lighting - Important conditions for reducing health as well as environmental related risks.

Urban uncontrolled horizontal expansion  Causes increased needs and costs for supplying infrastructure. Allowing for uncontrolled expansion creates more problem.

11 Status of urban environment  Urban pollution and sanitation  Water pollution, air pollution and improperly disposed solid waste  Waste management systems  Urban agriculture hence dangers of pollution due to pesticides and other agrochemicals

Tanzanian urban centres  Urban population growth is far from being matched by the social services and infrastructure needed to facilitate environmentally sound management of municipal wastes (MW).  Almost 70% of the population of Dar es Salaam live in unplanned squatter areas, mostly away from MW management systems!

Water pollution and sanitation in Dar es Salaam Water quality is often reduced by back-siphoning as a result of leaking pipes within polluted high water tables

Liquid waste management Pollution of underground and surface water systems by pit latrines Cesspit and pit latrine emptying Squatters are affected by high water tables As a result, pit latrines and septic tanks are nowadays constructed in such a way that they can be emptied by gravity during. A practice which has increased the incidence of dysentery and cholera during the rainy seasons.

See map of waste stream model, 1997

Pollution due to agricultural activities Emergence of urban agriculture in response to economic hardships Agrochemicals: survey showed that organochlorines (DDT family and similar compounds were being used Long term effects of agrochemicals: Demasculinization of males

Recommendations  Community infrastructure and slum upgrading programmes have to be expanded and sustained  Urban authorities should emulate what has been done in similar situations in South Africa, China, etc., especially on housing for the urban poor.  Proper planning and management practices should be strictly enforced to prevent further mushrooming of slums and informal settlements in cities and towns

12 Plenary discussion about the two Urbanization papers Discussant: Dr. Fanuel Shechambo, Associate Director, Institute of Resource Assessment University of DSM Main remarks by the discussant: Topic: Rural – urban linkages and urbanization Geographical and economic approaches connect in the policy arena. MKUKUTA: (i) Income, growth, and reduction of poverty; (ii) Improvement in the quality of life (Education, sanitation etc.); (iii) Good governance and accountability Where does the growth in income take place? How is the distribution in social services? The structure of the report: Informative: Facts on the ground, what are the market forces, what needs to be done. The importance of a policy shift in order to address those gaps. Looking at various developments at various scales. Whether it should be in the village or in the city. Prof. Kishimba analyzed the trends in global urbanization, and urbanization in Tanzania. The presentations looked at the consequences of urbanization. What is new is the size of the urbanization, especially in developing countries, where it is not associated with an increased work market. These are informal developments. Urban growth rates are high, and the increase in urban population becomes determinant to the increase of economic growth. Increased urban agricultural production, pollution, inadequacy of the sanitation system, and the waste water management system.

Important issues that should be discussed: > How to address the urban biased development gap? > The question of whether to invest in rural development in order to avoid urbanization? > Are there lessons to be learned from other developing countries?

QUESTIONS / COMMENTS BY SCHOLARS  What is the prominent economic production in the different urban areas? In Tanzania, to what extent are the squatters really in unplanned areas.  How can we intervene in the urban areas in order to avoid an uncontrolled development?  In his presentation, Dr. Lugoe showed how there were some governmental policies to regulate land and urban-rural relations in the 1970s. With regard to Kishimba, there is a lot of problems in the governance sector. We cannot expect development without employment.  Agrees to the fact that squatters have settled in unplanned areas.  When you used the population size to decide the village and town size in TZ, it can be realized that the challenges in our country are due to population growth, grows faster than the sources of livelihood. Does the population policy acknowledge that the population growth is among the highest in Africa?  Dr. Shechambo said that history is repeating itself. If the fact is that developed countries have been through the same process, what is it that we have to do in order to get out of where we are? I believe we need stronger mechanisms of distribution. What kind of recommendations do you have for areas which are not even affected by urbanization?  Specifies that the case is not that the land is not planned, but it is planned for other purposes, hence the constructions are illegal.  Dr Lugoe: Clarification is needed on the urban planning issue: Clarification: When you say that people live in unplanned areas, means that the areas where houses are built should not be used for residential purposes? It was planned as a conversation

13 area, for instance. Yes, there were governmental policies to regulate rural-urban linkages, since the 1960, it was realized that urbanization is a force. Our villages are not natural villages because people were forced to go there. We have to move from small-scale to large-scale agricultural production.  Why are we treating Africa as any other region of the world? Circumstances are somehow different: you have the shift from primary production to industrial growth. The big difference in Africa is that people willingly move into town. So Africa is different. Then you have got the globalization. The prices in the villages are higher. The result is that in a cattle-village, the prices of meat have gone up. The globalization is reducing the attractiveness of the urban areas.  Is it not a contradiction that prices go up in the rural areas, but there is no economic growth and development there?  The market forces would never rectify the living conditions of the urban squatters.

COMMENTS BY TRUMAN  There are two big statements that have been floating around. We agree on the facts. Our research is appointing on a different diagnosis as to what is driving the process, that is, the clustering of people. Urban, informal sectors, unemployment, there is an informal environment in urban areas, which is true. There are rules that are unwritten, and when they are written, they are not enforced. Fundamentally, we have a land use problem. The slums are just a manifestation of the land market not working as well as it should be working. Our report says: We shall not be afraid of the migration, it is not unproductive, and the immigrants are economically productive. There is large evidence on that. Just that the sector is not informal, it does not mean that it is not productive. These people are productive. In the case of Europe during industrialization, there was also informal work. Instead of hampering the urbanization, it tried to provide services, new regulations, so that the activity could be controlled, regulated, and taxed. That issue I think is different from the comments in this room. These slums may be the growing pains of development. Second, there is this piece of fiction floating around here that urbanization happens here without economic growth. There is no causal link that there is negative economic growth, and urbanization. We have some data from some countries showing that less negative economic growth is correlated with higher levels of urbanization. If Africa is very different, is merits commenting on it in the report. We don’t think there is.

QUESTIONS / COMMENTS BY SCHOLARS

Dr. Lugoe: We are talking about slums being a manifestation of markets forces not working as good as they should. What land market are we talking about here? The laws do not leave any room for expansion. How does A sell that land to B? Situation in Tz, problems in governance, and finance, things are different here, do not stop migration, surely, we have to prepare for them coming, in all the urban areas. In the 1960s the government prepared for them coming, in the 1970s, these policies were left out, by emphasising on rural production they thought that urbanization would not happen. We also have to take into account that there are other problems following urbanization. Here we are only focusing on the production factors, so we have to look at the other issues as well. With all these problems being brought in due to urbanization, we need to look at them. We need funding of big infrastructure programmes.

14  I agree with Mr. Truman about the positive impacts of urbanization. But when comparing it with European development, is it not possible to alleviate the problems of urbanization instead of taking the same trajectory. Second, the issue of remnants, it is declining, less and less people are sending money back to the villages. We have to look at instruments that can alleviate the situation so that the same thing does not happen as in Europe.

COMMENTS BY TRUMAN AND CHUN  Truman: What you say is that you have regulations that put constraint on development. The three D’s can resolve the urbanization challenges. You can identify and make a diagnosis of the situation, and then elaborate policies to resolve the problems.  Politics matter. We need to take that into account. We also need to clarify how the informal economy fits into our story, because I think we have not addressed frontally what happens when rules are not adequately enforced.  Methodology and economic approach: what is new about all this is increasing revenue to the state. Urbanization and growth: the new thought is that with the new clustering of people, you will have external beneficial.

 Chun: We need to work more on the policy chapter. We need to conclude more clearly the sequential process, make the argument more clearly.

The first day of the conference was officially closed around 5.15 pm.

15 DAY TWO: Friday, 25th April, 2008

The Conference was officially opened at 9.35 am

Welcoming remarks The second day’s welcoming remarks were done by Dr. B. Lunogelo, Executive Director of the Economic and Social research Foundation (ESRF)

Summary of the programme A new chairperson was appointed for the day, Engineer Meraji O.Y. Msuya, Deputy Executive Secretary, Lake Victoria Basin Commission. He took the members through the programme for the day

Recap The recap of the first day’s discussion was done by Ms. Monica Hangi, Research Assistant, ESRF

Decentralization and Regional Development Findings and emerging messages on Territorial Development, WDR 2009 By Mr. Truman Packard, Senior Economist WB and WDR Team Representative

Recall the following about the WDR 2009:  Concentration of economic mass is inevitable: how to alleviate spatial disparities in living standards  The key to get both concentration (of production) and convergence (of welfare) is through integration. Hence, there are benefits from being next prosperous neighbors. Proximity matters.

Sum-up of the big challenges: • A billion in slums – According to UN-Habitat, three quarters of the urban population in least developed countries are in slums – But absolute numbers in informal settlements are larger in middle-income countries • A billion in fragile lagging areas – According to WDR 2003, about a billion people in distant arid, rugged and forested lands – Mainly large countries that have grown • A billion in countries at the bottom of the global hierarchy – According to Paul Collier, in 60 countries, mostly in Sub-Saharan Africa and Central Asia – Mainly small countries that have not grown.

Development in 3Ds – we want you to look at the three dimensions on development: • Density—economic output or total purchasing power per unit of surface area – Market potential, highest in large settlements where economic activity is concentrated

16 • Distance—ease of access to markets – Areas within a country that are far from economically dense centers are more likely to lag behind • Division—barriers to market access – Most relevant in an international context, where impermeability of borders can be a problem

Structure of the report: We are going to look at chapter 2, 5 and 8 of the report.

Policy should be seeking to promote unity in terms of living standards, not uniformity in terms of production across the country in the nation. Refers to world constitutions, that stress unity, not uniformity.

Main points: • With development, differences between leading and lagging areas in economic mass become sharper, while those in social welfare becomes blurred • Labor mobility is the strongest natural mechanism to enhance agglomeration economies and facilitate convergence. Single strongest mechanism both enhances concentration, and convergence of welfare standards. For example Education, health, and water services: you cannot be patient about disparities in these services. • Policies are needed to reduce differences in living standards between lagging and leading areas – Policies that integrate lagging and leading areas will help to unify countries; – But, forcing uniformity in economic production will be expensive as well as an elusive policy objective.

Economic activities concentrate spatially while living standards converge with development • Spatial disparities in welfare are big, especially in developing countries – For the U.S., Canada and Japan, the income gap between lagging and leading regions is about 20 percent. – For a sample of 75 low and middle income countries, the gap is about 70 percent • Economic activities are spatially concentrated, and more so in developed countries – China’s coastal areas produce 50 percent of its output, on 20 percent of its land – Greater Tokyo has 40 percent of Japan’s output on just 4 percent of its land. Consistent with the idea that economic development being uneven and lumpy

Defining distance: Most important in this part of the report, the economic distance, not the geographic distance, is important • Physical geography is not the only determinant – Economic: time and monetary costs to reach markets can be reduced by improved infrastructure (see India slide) – Social aspects: psychic costs can be reduced by human capital investments • Destination of interest – Dense economic mass or markets – Distance-to-density: Accessibility to markets

Distance to Density: • Leading areas: Dense economic mass

17 – Thick markets of labor, capital, goods, services, and ideas – Networks of linkages among producers, workers, input suppliers, traders, and consumer • Lagging areas: Distant from density – Higher poverty ratios, low productivity, high unemployment – Generally lower growth Concentration • Within most countries in the world, economic mass is spatially concentrated – 25% of nations, e.g., Botswana, Brazil, Norway, Russia, Thailand produce half + GDP on 5% land – 50% of nations, e.g., Argentina, Saudi Arabia, Slovenia, Zambia, generate a- third+ GDP on 5% land • Spatial concentration of economic activity increases as countries develop – Evidence from time series – Evidence from cross-section • Administrative areas (national accounts) • Statistical areas (household survey data) • Geographic areas (Nordhaus’ geo-physically scaled economic data)

With development, spatial concentration of economic activity rises, then levels off: Evidence from time series: Initially steep, then it levels off. Evidence from a cross section of countries: Similar pattern: Initially steep, then it levels off.

Spatial disparities in income widen and remain high, before converging slowly, some evidence: Historical evidence from several western countries. And from Canada and France; disparities remain for two generations.

Most developing countries are experiencing income divergence: Hence, they have not reached the level were disparity is levelling off.

Positively, our evidence shows that we have increasing disparities, but they are in the form of racing to the top.

Non-monetary welfare measures converge: Examples from Malaysia

What is different today? The size of the global market: Globalization. • World Trade as a share of Global GDP today is more than 15 times that in 1820 • Successful development relies, more than ever, on an outward-oriented strategy which works with the market by focusing on leading areas to compete and trade. • Rapid growth and transformation of internal economic geography implies that spatial disparities will likely be greater than in industrial countries during comparable stages of development.

Same set of policies which were highlighted on yesterday: • Three sets of policies for integration – Spatially blind policies (institutions) – Spatially connecting policies (infrastructure) – Spatially targeted policies to support growth in specific regions (incentives) • Fiscal incentives and subsidies

18 • Special economic zones • Industry location regulations, investment climate

Tailoring policies to overcome country specific challenges • Main challenge: overcoming distance between lagging and leading areas • Success in bringing distant areas closer to markets requires adapting to country circumstances – Density: How sparse or densely populated are the lagging areas? – Division: How weak or strong are market forces of factor mobility?

Comment: How densely populated is the area, and how divided are the people (religious, ethnic etc. cleavages).

Examples: In China there are high rates of social mobility versus Brazil where the poor regions are densely populated. In India, lagging regions are densely populated with high rate of heterogeneity in terms of cleavages.

Proposing taxonomy of countries: • Sparsely populated lagging areas (Russia, Indonesia). • Densely populated lagging areas in united countries (Brazil, Mexico). • Densely populated lagging areas in divided countries (India, Nigeria).

Reducing distance: An instrument per challenge (i) Sparsely populated lagging areas: Look at spatially blind institutions (ii) Densely populated lagging areas. Institutions and infrastructure. (iii) Check new presentation

Information Pre-requisites: “Know thy economy” At home we have heard that investing in institutions are very hard, we argue that it is the easiest. • Invest in information on area-specific comparative advantages – natural, human and infrastructure endowments – Perceptions of entrepreneurs on local bottlenecks • Identify how different industries value market access, localization, and urbanization economies – Relocation of economic activity that value agglomeration and market access will need large scale investments and involve spatial equity-efficiency tradeoffs

Conclusion: Invest in activities that produce the highest returns. • In leading areas, countries should prioritize investments in places. – Emphasize durable investments (e.g., transport and telecom) that accelerate national economic growth – Tilt investments to increase productivity of firms • In lagging areas, countries should prioritize investments in people. – Emphasize portable investments (social services -- basic education, health, water and sanitation) that accelerate poverty reduction and stimulate mobility. – Tilt investments to improve living standards of families.

19 Plenary discussion on WDR- territorial development Chaired by Meraji O.Y. Msuya, Deputy Executive Secretary, Lake Victoria Basin Commission QUESTIONS / COMMENTS BY SCHOLARS  Lagging areas requires Investment in education. But the infrastructure aspect has been left out. Infrastructure is also needed in lagging areas. Labor mobility has also been mentioned; I would like to ensure that it is between countries, and not from lagging to leading areas.  Presentations on China were made and even though incentives were shown to be provided for production along the coast, China has a different approach. It has a planned economy and government policies are enforced. Africa is a different case due to different private – public relations.

COMMENTS BY TRUMAN  Truman on the first comment: The language used can be refined. We can include the roads that you have talked about, namely roads so that farmers can take their goods to the markets in town. The connective infrastructure only refers to heavy infrastructure. But in terms of priority, I think that blind institutions outweighs infrastructure.  Truman on the second comment: The labor mobility talked about is the mobility from lagging to leading areas, and back again. This report refers to migration within and between countries. With regard to evidence, we tend to be more pro-international migration.  Truman on the third comment: An example from Africa is very important. Household survey includes a number of African countries, between 15 and 17 countries. There is no empirical evidence to show that Africa is not exemption to the path to development. Spatial scale: We look at sub-national areas: Data from African countries are not easy available.

QUESTIONS / COMMENTS BY SCHOLARS  People in Kenya are leaving their settlements: Instead of people going back, an idea would be to make townships, instead of having people scattered allover, then it would be easier to provide services.

COMMENTS BY TRUMAN AND CHUNG  Truman: I would hesitate to create density, and policymakers have been very bad at that. Second option, send people to where there are settlements already. But I would hesitate to support non-economic migration. They would likely add to the congestion costs. The best thing is to let people go where they would like to go.  Chung: We have a new survey of government that has tried to create new cities. In places where the market forces are very strong in signaling where opportunities can be found. Where government have set up infrastructure in order to facilitate it has worked.  Truman: There has been mixed experiences concerning the new territorial policies. To say that they all failed everywhere would be wrong. There are probably exemptions. It is however notable that the new approach to territorial development in EU is participatory, different from the top-down governmental policies of the past. It is a very different approach. Experiences that exist are fairly new, so that there is still no proof that they include a lot more local information.

20  Chung: Integration policy from EU: International convergence. QUESTIONS / COMMENTS BY SCHOLARS  Investment in human resources was mentioned as a way of improving mobility. Taking Uganda into consideration, the introduction of primary education has increased. Education in Northern Uganda is lagging. The reality for us is that while the introduction of education increased enrollment, there is still a lot of drop-offs, especially of young girls. It goes beyond infrastructure; there is value, gender, food issues. Doesn’t a specially-targeted incentive in addition to blind institutions needed? There is a region where pastures move around, especially during the dry season; don’t we need specially targeted-incentives then? Land rights: We are currently going through a privatization of land reform. There is a lot of discomfort, especially in community-owned land. Farmers have concerns related to credits. So don’t we need specially-targeted incentives then for lagging areas?

COMMENTS BY TRUMAN

 The issue raised is very important. It exhibits a lot of problems in lagging areas. Is it a specially-targeted project that is needed? With regard to schools, don’t we want all girls to go to school? For example: A spatial blind institution would be that all children should have the right to education. The programs could depend on the areas, and the regions. Hence, programs should be encompassed in the national legislation.

Paper on decentralization and regional development By Audax B. Kweyamba, Lecturer, Dept of Political Science and Public Administration, University of Dar es Salaam

This paper is examines the potential and actual role/impact of decentralization on regional development (in terms of spiral over effects, trickle down levels, causal relations on such issues as delivery of public services, poverty reduction etc.).

Background and perspectives:  Perspectives on prerequisites of development: state-centric; democratizing development to neo-liberal, revolutionary- (civil society/people-centred democracy movement). In Tanzania, we need good governance. Examples from TZ on state-centric development: Ujamaa-villages.  There have been many initiatives made by African countries toward realization of development in the post-colonial era. Development attempts in the 1960s to early 1980s were largely anchored in ‘Western’ modernization paradigm  These were also coupled with increased centralization of governance process (at best through single party authoritarian rule and at worst through military dictatorships).  End of Cold War led to emergence of Globalization as an overriding development paradigm  Globalization suggests unilinear approach to development.  Alternative to globalization-’localisation’ e.g. calling for decentralized governance & fair play in development initiatives such as PRS,NEPAD,MDGs, APRM.  Operational Definition of regional development: Africa as a region with a focus on three spatial levels (sub-national, national and Africa region).

21 Decentralization: Meaning and type:

 Decentralization could either be de-facto or de-jure: Informal (de facto) or by law (de jure)  In the context of governance and regional development decentralization involves relinquishing some power from central government to local governments/units

Types of Decentralization include: a) Administrative decentralization It has the following sub-types: Deconcentration: Some administrative authorities/responsibilities handed over to lower units in the hierarchy (e.g. set regional/district offices of the central Govt). It involves minimum power transfer. Delegation: Relatively more extensive than deconcentration. Central Govt transfers some responsibilities to semi-autonomous organization. These are not whole controlled by Central Govt but are accountable to it. For example: Public Universities. Devolution: Involve de-jure transfer of power and responsibility to local govts/units. It is usually (at least in principle) associated with political decentralization. It is comprehensive as it covers many aspects of local governance.

b) Fiscal Decentralization: Involves transfer of responsibilities from Central Govt to local Govts/units in regard to financial matters (mobilization of revenue and expenditures). Many Central governments hesitate to execute this.  Economic or Market Decentralization: Involves shifting of responsibilities/functions from the public domain to the private sector. Under it there is privatization and deregulation. Main challenge to Govt is to what extent should it privatize or deregulate it public domain? There is a tendency that in Africa you privatize too much. The state cannot withdraw completely.

Decentralization: Political decentralization is the most important in order to grant political power to the local governments. Main arguments:

 Political decentralization aims to give citizens or their elected representatives more power in decision-making.  It involves transferring of political power and administrative autonomy to local government units with locally elected politicians.  It is commonly linked with devolution. The negative side of this type of decentralization is that it can lead to dominance by local elites and to regional imbalances between areas rich in rich resources and those poor in resources.  Needs to strike a balance between legitimate local interests on the one hand and legitimate national interests on the other. This balance can be effectively addressed through needs based revenue transfers from central to local governments.

There is a need to undertake a good balance between these types of decentralization in order to achieve development.

22 Decentralization for Regional Development:

Rationale and Potential Benefits:

 Decentralisation is an important element of democracy and development.  Democracy, sustainable development and poverty reduction are not only compatible but are indivisible (Bujra 2002)  “ Development” happens when people meant to benefit from the process actively participate in designing and executing the various ventures intended to improve their welfare (Msambichaka et al,1994)  World Commission on Environment and Development (1987) listed as the first prerequisite for sustainable development “a political system which secures effective citizen participation in decision making”.  Decentralization has benefit of nurturing citizen-related attributes ( civic virtues (social responsibility, social solidarity and civic competence)

Apart from these general statements about the benefits of decentralization, it can also contribute to social responsibility: you give the ability to people to contribute to development.

Decentralization gives a sense of partnership, and empowerment.

 Effective and democratic decentralization brings decision making powers closer to the people  Decentralization of whatever form, intensity or extensity brings about co- responsibility between key actors in the governance and development initiatives ( sense of partnership)  Decentralization is an empowerment mechanism. For example decentralization can result in inculcation of creativity, innovativeness, self-reliance, entrepreneurship, etc to the empowered community and other communities (the spiralover effect). In comparison to the 60 and 70s, when you had a state-centred approach, and the citizens were only implementing the government’s policies.  Decentralization promotes bottom – up approach in the governance and development process  Decentralization promotes social justice and a commitment toward it

Decentralization for (African) Regional Development:

An Assessment from a Practical Point of View

 An overall verdict: generally no good record of effective and democratic decentralization for Development  The immediate post-independence period (1960s-1980s) in Africa witnessed a trend toward increased centralization of the governance and development process by ruling elites  While the state led model of development initially was able to expand services for the poor (e.g. in Tanzania in 1970s through socialist programs); there were a number of problems that led to its decline by early 1980s.  The state spent more that it earned. Ultimately it lacked the ability to sustain provision

23 of services and even pay its employees. This led to decline of its legitimacy  Grassroots democracy and participatory democracy in general were constrained. Median and civil society also. This did not bring about decentralization.  Domestic as well as external factors compelled many African countries to embark on cost containment SAPs- early 1980s+ (suffocation of civil society, end of Cold War, pressure from donor countries/institutions)  The impact of SAPs on African governance and development in general was negative (Gibbon 1993; Msambichaka et al 1995; Shivji, 2006). It was undertaken in Africa through a bottom-up approach by IMF/World Bank and other donors’ pressure. Did not benefit, especially not in the social indicators of development.  Gibbon (1993) shows that even the modest achievements of the nationalist and/or developmentalist period were lost or undermined because the results of SAPs included decline of social indicators such as education, medical care, health, nutrition, rates of literacy and life expectancy. These were followed by increased de- industrialization and redundancies  1990s+ saw intensification of ‘globalization’-further reforms for democratization and development (multipartism, pluralism, privatization, Local Government reforms, NEPAD, APRM, PRS, MDGs, search for ‘fair play’ in global governance and development- e.g. UN, WTO, etc).  Local government reforms were also introduced in many African countries in 1990s+ as part of these sweeping reforms  Since local governments were part of the governance model from 1960s-1980s in Africa; they were therefore also victims of the centralist/top-down governance model.  The reform measures in local governance aim to decentralize powers and autonomy in governance and development  A comprehensive assessment on the impact of local governments’ reform in Africa as a whole is not yet done but preliminary assessments indicate that there is still a long way to go despite some strides that have been made. In terms of having effective governance, and participation of local governance.  Challenges to local government (governance) reforms include balance of decentralized tasks and responsibilities in finance, personnel and capacity matters; Limited local capacities to manage decentralized tasks and responsibilities; decentralization and spatial differences (need for affirmative action?); lack of genuine political will (from Central Government and development partners) to decentralize (more rhetoric)- constraining legal/institutional framework. We still need to have a very comprehensive approach to decentralization, in order to create development.

Concluding Remarks and the Way Forward

The main argument: If there is no political will, it is not possible to implement decentralization policies.

 There is a link between decentralization, democratization and regional development  There are many prerequisites of Dvt (Dvt motivation-n-Achievements); state-centric; democratizing dvt-neo-liberal, revolutionary- (civil society/people-centred democracy movement); ‘the democratizing dvt thesis’ is more relevant for effective & democratic decentralization for (African) regional devt  Effective and democratic decentralization for dvt in Africa was constrained during the state-centric model of governance in 1960s-1980s.  SAPs implemented in Africa beginning 1980s lacked spirit of effective and democratic

24 decentralization for dvt  As a result SAPs had negative impact esp. on social welfare in Africa  Likewise decentralization via on-going reforms in local governance still leaves a lot to be desired in terms of effective and democratic decentralization for (African) regional development  Problems and challenges emanating from local governments themselves and those from the central Government need to be addressed so to realize effective & democratic decentralization for regional development. They must be addressed by central government and other stakeholders.  A Clearly Articulated Decentralisation Policy and institutional framework is needed (e.g. (unambiguous constitutional/legal basis). Allocation of Responsibilities and Financial Resources between Central and Local Governments must be well spelt out. Funding of local government is very important.  There should be Design of Appropriate Central and Local Organs.  More effective intervention is needed in Management of Local Government Personnel. Local government is still part of the central government  There is need for Linkage of Political and Economic Reforms to Decentralisation Programme  There is need for effective Framework for Partnership in Grassroots Development.

Other initiatives:  Other partners in the decentralization for (African) development such as regional organizations and donors can intervene in a number of ways to promote effective and democratic decentralization. These include:  Research  Specialised Training  Awards to Outstanding Local Governments or Decentralisation Programs of National Governments.  Decentralisation Missions. Local and central government can go and learn in other countries how efficient decentralization can be done.

Plenary discussion on the Decentralization and regional development paper QUESTIONS / COMMENTS BY CHAIRMAN  Decentralization is the key: In Kenya, 10 percent of the population owns a majority of the resources. What was not in the paper was the issue of capacity. QUESTIONS / COMMENTS BY SCHOLARS  The message is a desire to decentralize. There is a feeling that there is too much centralization. Certainly central governments and local governments are needed for things that have been done there. For the case of TZ, there have been four phases of local government reform. Hence, are the attempts to decentralize or centralize being seen?  To what extent are governments in East Africa providing space for civil society? This should be included in the World report.  Another perspective on decentralization was expected. In Tanzania, we had the move from the urban areas to rural areas. It is another type of deconcentration. It should be included in this debate.  Uganda has gone through a process of decentralization. Challenges faced were

25 such as financial problems and aducation. Hard for local governments to find sources of income, in particular in rural areas. One of the criteria for allocation is level of services. It must be taken into account there are small districts, which receive very little money. Another aspect is corruption. Northern Uganda is the lagging part of the country, a lot of donor support to this area, but there is a lot of corruption.

Regional Integration and Globalization WDR Findings and emerging messages on Regional Integration By Souleymane Coulibaly, Senior Economist, WDR team What the report proposes – Revisit Truman’s presentation about the WDR 2009 for general information

The focus in on cooperation between countries. We know that it is possible economically, but politically it will be tougher.

Main points: • A country’s neighborhood matters for its development prospects. • Instruments like trade, labor and capital mobility are channels allowing growth to spill over a neighborhood. • Regional and global integration are complementary: regional integration helps to scale up supply - global integration helps to scale up demand. • Basic principles in pursuing regional and global integration: (i) Think Global; (ii) Start Small; (iii) Compensation mechanism: Compensate the least fortunate members. You cannot rely on your local market, you have to think about the global market. There will certainly be some winners and losers, so you have to think about compensating the losers.

Persisting divisions: Increasing number of borders. 1940 to 2000: increasing number of borders. The very issue is division.

Persisting divisions: some borders restrict flow of goods, people, and capital more than others. Africa: High thickness of borders: Increase the challenges of integration.

Main argument: We have to think about how to make the borders as thin as possible in order to facilitate movement of labor, goods, and capital between countries.

Evidence: Persisting divisions: Countries with thick borders have low per capita GDP.

Spatial transformations: Grouping countries in neighborhoods. Proposed categorization: See map

Spatial transformations: Economic activities are concentrated globally: No big economic centres are concentrated in Africa.

Spatial Transformation: The convergence process in non-linear and takes time

26 Drivers of concentration and convergence: Transport and communication costs • Decreasing communication costs intensify intra-industry trade by reducing the cost of customer-producer interaction on product characteristics. The more you trade, the lower the transport cost will be. • Decreasing communication costs facilitate the vertical disintegration of production processes, outsourcing and foreign direct investment. If your communication costs are high, it will cost a lot to communicate with HQ, for instance. • Decreasing transport costs induce a cumulative process of intensified trade and decreasing transport cost

Drivers of concentration and convergence: Countries are trading more and more on an Intra-Industry base 1962 – 2006: African countries primarily produce primary goods, therefore, less international trade. Hence, they need to think about cooperation with their neighbours, and how to get involved in trading these kinds of goods.

Other Drivers of concentration and convergence:  Lack of dense maritime traffic is detrimental for developing countries  African countries must think about how to collaborate with their neighbors.  Lack of dense ICT connectivity is detrimental  Threshold to pass before reaching global competitiveness. The more you trade with your neighbors, the more you change you have of economic growth. South Africa is beyond the threshold, Countries close to the threshold: Cameroon, Cote d’Ivoire, Ghana, Kenya, Namibia, Nigeria, Senegal, South Africa, Tanzania, Uganda, Zambia

Policy Implications: Proposing a taxonomy of world neighborhoods

Different categories: 1. Neighborhoods close to world markets Regions close to the clusters of economic activity: first group. 2. Neighborhoods with big countries distant from world markets States, countries that are facing distance to the markets, but are leaders at a regional level: Brazil, South Africa, India 3. Neighborhoods with small countries distant from world markets States, countries that face distance to the markets (Most of the African countries): Need to address the distance to markets, the smallness of their countries, and the division between the countries.

Policy options for neighborhoods with big countries far from large world markets South Africa is in this group: • Maximize their size and production-cost advantages by concentrating on activities with increasing returns to scale to become globally competitive • This will need both institutional cooperation and regional infrastructure investments that connects lagging to leading countries

Policy options for neighborhoods with small countries far from world markets • Since they face the stiffest challenges to economic growth, strive to be “winners without borders” with external help: Have to see how to collaborate with your

27 neighbors. • The strategy should include institutional cooperation, regional infrastructure, and coordinated incentives

For African neighborhoods, we propose a “contract with Africa” • The governments of East, West and Central Africa would commit to: – Establish “African Economic Areas” to tie the economic interests of leading and lagging countries; – Allow and maintain the free movements of labor, capital, goods and services within these areas; – Maintain and protect access routes between land-locked countries and outlets for trade. • In exchange for these bold actions, bilateral and multilateral development partners would commit to: – Invest in People in lagging countries (improved social services and other life- sustaining infrastructure); – Invest in Places in leading countries (growth-sustaining infrastructure—ports, transport links, information and communication as well as infrastructure linking to lagging neighbors); – Preferential access for Sub-Saharan Africa’s exports to the markets of high- income countries, without strict rules of origin that impede rapid growth of trade in intermediate inputs with other developing countries in Africa and Asia.

Plenary discussion on WDR- Regional Integration QUESTIONS / COMMENTS BY SCHOLARS  Synthesis of the report: valuable. When talking about trade costs, the question of the cost of doing business. Apart from the infrastructural measures, of course we have to connect. But with regard to the cost related to communication etc, there are of course institutional issues, but also cultural constraints, how are such going to be addressed from the policy side?  Even when after Globalization of markets has been pushed forward, the African share of global market has not expanded. The specific share of the market of specific countries, the market share of the European market for instance, the regional market has taken over, we see a bit of withdraw from the global market. This contradicts the findings of the report that regional integration will expand the global share of the market.  Quality standard – Developed countries have a comparative advantage there.

COMMENTS BY SOULEYMANE COULIBALY  We classify the costs of doing business in the institutional class: standardization, regulation where everything is included in ‘Institutional cooperation’. If your neighbours can be encouraged to do the same, then the region will be more competitive on the global market.  When we look at the research paper by Rodrick; It shows that each type of goods has the potential of specialization within the same region. Shows that primary goods do not give any value-added opportunities, when you can afford to move away from that, it is easier to diversify. We have looked at the potential of diversification, the current structure of production; we have looked at how they

28 can diversify their economies as a group.  Concerning trade restrictions in developing countries: the core idea is that there are some consumer standards, and the quality of goods, it is difficult to do this adjustment by your own. You need some special infrastructure if you want to have access to the market, you need to have the quality of the market. COMMENTS BY TRUMAN  There is a need to propose a new strategy: What is proposed is politically very different: to give up political sovereignty, in order to gain access to market.

COMMENTS BY CHAIRMAN The issue of sovereignty: Currently even two neighbouring countries are very conservative about merging borders.

Paper II on Regional Integration and Globalization: Drivers of Regional Integration: The Eastern and Southern Africa Perspective Dennis Rweyemamu, Researcher, Research on Poverty Alleviation (REPOA)

This paper reviews the main forces driving the push for regional integration, and what these underlying forces tell us about the rationality of the process and therefore the chances of success from the perspective of Eastern and Southern Africa region.

In the past three decades, a great deal of effort has been made by most African countries to establish regional co-operation and integration arrangements.

Conceptualization: Integration versus cooperation. Cooperation: Broad concept encompassing any agreement for mutual economic, social or political benefit. Integration involves the bringing down of common borders with respect to movement of goods and services, factors of production.

Motivation for regional integration Political arguments: Range from regional security to bargaining power. On economic grounds, the overriding motivation for regional integration has been to reduce some of the disadvantages of small size. Countries get together to enjoy economies of scale, which would allow them to increase, diversify their output and ultimately boost growth.

Hence, economics and not politics are the underlying reason of this integration.

Development Catalysts: Trade and FDIs Conventional wisdom has it that poor countries suffer from a development “vicious circle”:

“ Predominant subsistence production inhibits accumulation of savings; low savings means low investment; and because investment is low economic growth is stagnant.”

This scenario can be applied to Eastern and Southern Africa, where economies are typically small, subsistence-based, and there is a low level of accumulation.

However, there is an intellectual inconsistency with the notion of a “vicious circle”.

Counter argument:

29  Peter Bauer argues that the starting points of African states were similar to those contemporary African states face. He asserts that capital is the product of development, rather than it’s prerequisite. Hence, it is possible for African states to get out of poverty.  Central to his perspective is the role that trade plays in linking poor societies into the global economy.  Injection of external investment: In the conventional view external financing alleviates balance of payments constraints by supporting the current account. It is also critical to boosting domestic savings and investment thereby inserting the economy into a higher growth plane.  Aid inflows, the dominant source of external financing for many Eastern and Southern Africa countries, are not without problems.  First, aid can create a vicious circle of dependence, thereby defeating its own objectives.  Second, large inflow of aid can generate a “Dutch disease” effect of exchange rate appreciation thereby undermining domestic industrial development.

The issue is how to access external resources on a sustainable basis, in a manner that complements domestic development strategies.  Private foreign capital flows is an alternative, and most economists agree on this point.  There are 3 main types of Private foreign capital flows - FDIs, portfolio investment and bank lending.  FDIs is the least volatile flow and is considered, by far, the most effective for enhancing growth

How is the continent fairing in terms of FDI and trade?  On the trade front Africa is by and large incorporated into the global economy as an exporter of commodities, primarily to the European Union, and importer of manufactures and services.  Domestic markets remain small, dispersed, and primarily subsistence-based.  Africa attracts marginal FDI flows compared to the rest of the developing world, consistently in the region of 2 to 3 percent of total outward flows.  FDI inflows into Africa are predominantly resource seeking, reinforcing commodity- dependent export profiles. UNCTAD notes that this lends FDI into Africa a peculiarly enclave character, whereby predominantly green fields and capital-intensive investment is de-linked from the domestic economy and profits are not reinvested.

Integration efforts in Eastern and Southern Africa are necessary and desirable.  Most of the African economies are small and marginal players in global trade.  The countries have low incomes and their production structures are weak.

Hence, Regional Integration is perceived as a necessary strategy for generating faster growth and development by overcoming the “smallness” in production, investment and trade.

 But there are also costs involved. Regional integration arrangements can create winners and losers, making it essential that members assess the prospective benefits and costs of regional integration to boost gains and minimize losses.  In the Eastern and Southern Africa, region, the EAC, COMESA and SADC are the prominent blocs.

30  The East African Community (EAC): The sequence of events towards full integration of East Africa: Establishment of a Customs Union, followed by a Common Market, a monetary union and ultimately a Political Federation.  The most applauded achievement of the EAC integration agenda is the completion of negotiations of the Customs Union Protocol (Came into effect on 1 January 2005). However, the fast tracking agenda is a sensitive one not only to the nationalistic groups within the Community but in its own as a process.  The Common Market for Eastern and Southern Africa (COMESA): The largest regional economic grouping in Africa. COMESA Free Trade Area (FTA) was achieved in 2000. COMESA forms a major market place for both internal and external trading. The expansion of the COMESA FTA will be one of the major challenges as the region prepares to create a Customs Union by 2008 and a common market in 2014.  The Southern African Development Community (SADC): The purpose of transforming SADCC into SADC (1992) was to promote deeper economic cooperation and integration to help address many of the factors that make it difficult to sustain economic growth and socio-economic development, such as continued dependence on the exports of a few primary commodities.  The SADC ambitious goals and objectives, as captured in its Regional Indicative Strategic Development Plan (RISDP): Targets: FTA by 2008, CU by 2010, CM by 2015, and MU by 2016

Factors Influencing Pace and Direction of the Integration Process  Integration process can be influenced by external and internal factors, positively and negatively.  Homogeneity and Asymmetry in Economic Size, Income and Trade Structure  National sovereignty issues  Compensation issues  Overlapping Membership Arrangements  Economic Partnership Agreements (EPA) Negotiations  Globalization

Challenges with SADC integration

Skepticism SADC countries are too diverse in levels of economic development and timeframe is too tight  High Income Countries – South Africa, Botswana, Mauritius, & Namibia  Low Income Countries – Malawi, Mozambique, Zambia, and Tanzania

Optimism  Almost all SADC countries are experiencing economic growth (except Zimbabwe and DRC)  Some level of MEC has already been attained.

Trade Patterns  SA represents 70% of the SADC GDP  SA runs substantial trade surplus with each of its regional trading partner (large exporter while remaining a small importer). This trade imbalance has become a source of tension.

31  Trade potential in SADC is low – countries remain concentrated in similar products - same comparative disadvantages especially in manufactured products  Only SA can produce adequate manufactured goods.

Investments  SA investments expanding in the region  Is this a good thing? theoretically, yes (job creation, upgrading of infrastructure, technology transfer, tax revenue, increased consumer choice etc)  Concerns of countries hosting SA investors: More to do with behaviour of firms (violation of labour rights, arrogant behaviour, companies not sourcing from host countries), and political concerns associated with perceptions of “re-colonization”.

Hence, SADC Integration poses a huge challenge particularly to smaller countries

In conclusion  Economic factors (particularly the constraint of size to growth and development) are the primary drivers of regional integration in the Eastern and Southern Africa region.  In the region, given the nature of countries, this concern of size does not come as a surprise, and RI is therefore seen as a viable option.  However, although the region now enjoys some factors that favor the integration process, a number of many other factors still constrain efforts.  Thus, there can be no illusions about the expected gains and success of regional integration as the process poses a huge challenge particularly to smaller countries.

Paper III on Regional Integration: Globalization and Regional Integration On behalf of Dr. Majule, DR. Fanuel Shechambo, Associate Director, Institute of Resource Assessment University of DSM

Definition of globalization  Key characteristics of globalization: liberalization of international trade, expansion of Foreign Direct Investment (FDI). Last two decades: rapid integration of financial markets  Underlying factors: policy decisions to reduce national barriers to international economic transactions, and the impact of new technology, especially in the sphere of information and communications.

Trends in globalization  Expansion of trade; Foreign Direct Investment (FDI); The Information and Communications technology (ICT) revolution; Financial flows:  New technology changed international comparative advantage by making knowledge an important factor of production.

Inter-relationships Changes in trade, FDI, financial flows and technological diffusion are increasingly part of a new systemic whole

Is globalization beneficial?

32  Growing exclusion and deprivation  Can it speed up development and the reduction of poverty? And will it ensure sustainability?  Ex: Importation of harmful technologies in Tanzania, like the Mgololo Paper Mill Company in the southern highlands.

Attempts on Regional Integration  Prior to independence: the East African Community and the Federation of Rhodesia and Nyasaland  Post-independence: Establishment of the Economic Community of West African States and a number of smaller economic, monetary and special purpose, multi- country organizations.  Integration is not a new phenomenon.

Regional cooperation as a vehicle for non-discriminatory liberalization of multilateral trade and integration into the globalized economy

 Regional integration offers many advantages for developing countries: Closer trading links > strengthen their capacity to participate in the world trade; Enable them to overcome obstacles related to small markets; Stronger bargaining power in the international arena; regional surveillance and the dialogue between the various partners help reduce the risks of macroeconomic slippage

What are the conditions for sound regional integration?  Regional organizations must be seen as effective vehicle of the integration  Regional organizations should not be perceived as mechanisms for defending certain established interest groups

What is needed to achieve these objectives?  Political will; Resolute effort to achieve greater institutional, and economic policy convergence; Strong, efficient regional institutions are required

Some new developments? Activities developed in four main sub-regions: Western, Central, Eastern and Southern Africa

East Africa Cooperation: In practice they have played a very limited role in advancing EAC integration, which has relied primarily on trilateral negotiations, while the supranational organizations have remained weak and under funded.

Nile Basin Initiative: Developments in Eastern Nile and Nile Equatorial Lakes

Southern African Development Community (SADC) Main strategies:

Recent developments have led to a restructuring of SADC institutions: Creation of a centralized Secretariat and four Directorates: Trade, Industry, Finance and Investment (TIFI); Infrastructure and Services; Food, Agriculture and Natural Resources (FANR); Social and Human Development and Special Programs.

33 Some benefits of integration Requirement: State in managing the process of integration into the global economy, and in ensuring that it meets both economic and social objectives.

Link between globalization and economic development of a country  Increasing flows of trade  International migration

Impacts of globalization and its impacts on economic development Accompanied by the concept of capitalism But most of developing countries like Tanzania, the deeper they integrate the more they become structurally weakened and marginalized. The more they liberalize their economies and policies, the more they become structurally excluded from dynamics of global investment flows, expanded trade, information technology and vibrant security arrangements.

In developing countries  Growing divide between a formal, global economy on the one hand, and a growing informal local economy on the other hand.  People involved in the informal economy, are excluded from directly participating in markets and globalization on a fair and equal basis  Add. Most important part of the slide  Trade in manufactures is liberalized, while agriculture remains protected.  Goods and capital move much more freely across borders than people do.  In times of crisis, developed countries have wider options for macroeconomic policy, while developing countries are constrained by demands for adjustment.  International policies are too often implemented without regard for national specificities.  Unbalanced global rules can reinforce initial inequalities. The rules of world trade today often favor the rich and powerful, and can work against the poor and the weak, whether these are countries, companies or communities.

In conclusion:  The benefits of globalization have been unequally distributed, both within and between countries.  There is growing polarization between winners and losers.  The gap between rich and poor countries has widened.  In sub-Saharan Africa and Latin America, more people lived in poverty at the end of the 1990s than at the beginning of that decade.

Regional Integration and Spatial Transformation Prof. Samuel Wangwe , Chairperson, Daima Associates & ESRF

Vision and mission of EAC:

Vision: Prosperous, competitive, secure, and politically united East Africa

34 Mission: Widen and deepen economic, political, social and cultural integration, to improve the quality of life of the people in East Africa through increased competitiveness, value added production, trade and investment.

Regional Integration is multidimensional  Economic concerns: trade, investment and financial flows, technology, competition, regional production and distribution and policies.  Social and cultural concerns: poverty and inequality, employment.  Political concerns: loss of sovereignty

As economists, we tend to think that integration is driven by economics. But, it is driven by politics. So we have to begin with politics, to make sure that regional integration comes about.

Political and socio-economic developments  Positive developments: Positive progress towards democratization and stability. So the crisis in Kenya should be seen as “a bump” in the progress towards democratization.  Convergence of macro-economic variables- positive developments o GDP growth o Inflation o Current Account deficit o Currency convertibility o Harmonization of exchange rates, interest rates and fiscal policies. o A positive sign towards integration, and a single market:  Intra-EAC trade has increased but imbalances persists  Poverty remains high in all the three countries, concern about poverty is high

Challenges:  Economic structures still dominated by agriculture  ‘Low cross border investments – it is important than investment flow within the region – we have a long way to go.  Trade: Imbalances, structure and statistics. Trade: Imbalances between the countries can not be sustainable. Statistics are very bad: the cross-border trade is not captured by the statistics.  Poverty still high and human development low  Infrastructure is poor (roads, energy, ICT)

Addressing divergences and imbalances  Sustainability of regional integration deserves high priority if the declared goals are to be achieved.  Failure to adequately address economic and social disparities have historically led to conflicts, insecurity or even break-up of unions  The demise of the first EAC - Failure to address inequalities (real or perceived) in sharing benefits and costs of integration contributed.  Lessons learned from EU: Convergence can be achieved by deliberately putting in place appropriate policy instruments  The convergence within the EU has largely attributed to faster growth of the low- income member countries.

35  The poorest partners within the EU have tended to do relatively better, a situation, which has resulted in convergence.  Four factors have contributed to convergence within the EU: (i) Investment was made in infrastructure in the relatively more disadvantaged parts; (ii) Economic and political stability, sound infrastructure, encouraged the flow of investments even to the less developed areas: (iii) Decision to concentrate resources in agriculture, which was the dominant sector in the last developed region; (iv) Costs that emerged from the process of integration were addressed openly and objectively guided by analytical work and establishing special funds to deal with disparities.

Five areas where action is needed in order to effectively address economic and social disparities in the region:  Create conditions that allow for investments and technology flows to permeate the region more widely  Investment in infrastructure in order to improve conditions for private activity to take place more broadly within the region  Reducing the costs of making business in the region.  Policy reforms at national level must be coordinated and complemented with policies at the regional level  Mechanisms for enhancing analytical work on anticipated benefits and costs of various regional integration initiatives are needed as a basis for addressing economic and social disparities

Closure

The Conference was officially closed at 4.45 pm with Vote of thanks from the Executive Director of the Economic and Social Research Foundation (ESRF), Dr. B Lunogelo.

36 PARTICIPANT LIST:

S/N NAME DESIGNATION INSITUTION & E-MAIL ADDRESS

1. Raphael G. Mwai President Ass. Of Profiessional [email protected] 8. Societies in East Africa (APSEA) Professional Centre, Nairobi 2. Stina Petersen Research Assistant CMI – ESRF [email protected] 2 P.O. Box 96183 DSM

3. Samwel Wangwe Chairperson Daima Assonates & [email protected] 2 ESRF P.O. Box 31226 DSM 4. Dr. Furaha Lugoe Consultant Dar Institute of Land [email protected]. 1 Admn. & Policy Studies – [email protected] DILAPS P.O. Box 35424, DSM 5. Dr. Cosmas H. Senior Lecturer & Dept of Geography, [email protected] 2 Sokoni Head of Dept. UDSM, Box 35049

6. Rose Tino Otim Programe Officer – Development Research & [email protected] 1 Research & Policy Training [email protected] P.O. Box 1599, KAMPALA, UGANDA 7. Dr. Oswald Research Fellow/ ERB /ESRF [email protected] 7. Mashindano Consultant P.O. Box 31226 DSM. 8. Semboja Haji Research Fellow ERB, UDSM. [email protected] 1 P.O. Box 35096 DSM.

9. Dr. H.B. Lunogelo Executive Director ESRF [email protected] 1 P.O. Box 31226 DSM.

1 Lisa Nixdorf Intern: International ESRF [email protected] 0. trade P.O. Box 31226 DSM. 2

1 Kazi Vivian Researcher ESRF [email protected] 1. P.O. Box 31226 DSM. 2

1 Rukia Nikitas OMS ESRF [email protected] 2. P.O. Box 31226 DSM. 2

1 Monica Hangi Research Assistant ESRF [email protected] 3. Globalization and P.o.Box 31226 International trade 1 Irene alenga Reserach Assistant; ESRF [email protected] 4. Commissioned P.o.Box 31226 I studies 1 Dr.Primi Mmasi Consultant: Regional Independent consultant [email protected]

37 1 and International Trade 1 Dr. Robert Lecturer Institute of Dev. Studies [email protected] 6. Mhamba University of DSM 2 P.O. Box 35169 DSM

1 Mr Hussein Lecturer Institute of Finanance [email protected] 7. Nassoro management 3 1 Hussein Nassoro Lecturer / Institute of Finance [email protected] 8. Researcher Management 3 P.O. Box 3918 DSM.

1 DR. Fanuel Associate Director Institute of Resource [email protected] 9. Shechambo Assessment z 2 University of DSM P.O. Box 35097 DSM 2 Dr. Amos Majule Senior Research IRA [email protected] 0. Fellow P.O. Box 35091 DSM 2. 2 Meraji O.Y. Msuya Deputy Executive Lake Victoria Basin [email protected] 1. Secretary Commission 1 P.O. Box 1510, KISUMU

2 James S. Economist Min. of Natural Resources 2. Lugaganya & Tourism 4. P.O. Box 9372 DSM. 2 Margareth Statistician Ministry of East Africa margarethminango@yahoo 3. Minango Cooperation .com 3 P.O. Box 9280 DSM.

2 Jasson Bagonza Principal Economist Ministry of Finance & [email protected] 4. Economic Affairs 5. P.O. Box 9111, DSM. 2 Ahimidiwe J. Economist Ministry of Industry, [email protected] 5. Asseri Trade & Marketing 1 P.O. Box 9503, DSM.

2 Justin Shoo Principle Town Ministry of Lands, [email protected] 6. Planner Housing & Human 1. Settlements Development P.O. Box 9132 DMS. 2 Dennis C. Researcher REPOA [email protected] 7. Rweyemamu P.O. Box 33223 1

2 Mr. Elly Manjale Senior Consultant Strategic Consultants Ltd. [email protected] 8. 2

2 Chorching Goh Senior Economist The World Bank [email protected] 9.

38 3 Souleymane Economist The world bank [email protected] 0. Coulibaly 1818 H Street, NW rg Washingto DC 20433 3 Dr. Truman Sr. Economist, The World Bank [email protected] 1. Packard WDR 2009 MIIBANK TOWER, 12th 3. FLOOR, LONDON SWIP4QP 3 Audax B. Lecturer University of DSM [email protected] 2. Kweyamba P.O. Box 35042 DSM 2

3 Mr. Hanif Tuwa Assistant Lecturer University of DSM haniftu@yahoo. Com 3. (DUCE) 1 P. O. Box 71229/ 35091 / 2329 3 Dr. Ali Likumbage Senior Research University of DSM. [email protected] 4. Kilindo Fellow P.O. Box 35096 DSM. 9. 3 Prof. Michael A. Assoc. Prof in University of DSM. [email protected] 5. Kishimba Chemistry P.O. Box 35061 DSM z 1